ERP Selection Criteria: Key Factors to Consider for Your Business

Selecting an ERP system is table stakes when it comes to ensuring your future success — and, if we’re being realistic, your future survival.

It’s incredibly expensive. There are a million different options, billions of potential stacks, and infinite ways to customize and combine them to your liking. Obviously, this is great on so many different levels.

It’s just that, infinite options don’t only unlock big wins, new markets, and fat margins. They also introduce some serious risks. We’re talking: regulatory non-compliance, security gaps, and the endless list of problems caused by bad or missing data.

We’re not trying to be dramatic here. But, we do want to emphasize that choosing the “wrong” ERP or failing to build a cohesive stack that covers every single requirement on your list could have devastating effects on your business, employees, and customers for years to come.

Still, the best way to avoid crippling losses — financial, legal, reputational, whatever — is preparation.

So here, we’ve outlined a few key things you’ll need to get in order before you even think about entering Google queries, reading reviews, or sharing actual contact info so you can access some white paper you’ll never read.

1. Get Real Clear on Your “Why” and “What” When Selecting an ERP

When choosing a new ERP, the first question you should ask is “why are we doing this?”

Obviously, you need to be able to leverage digital technologies to compete in both our current and future economies.

But – there’s a lot more to it than forcing a full-fledged cloud migration on your team – and investing in all of the shiniest ERP bells and whistles you read about in some industry report. There’s a big difference between knowing you need to upgrade and knowing what needs to change and why.

For example, at Velosio, we get a ton of inquiries from business leaders asking us to help them replace legacy tech with the latest and greatest cloud ERP platforms. They know something has to change. And, they know that their old school tech is a barrier – to success, relevance, predictable cash flow, and so on.

The problem is, many of these decision-makers can’t really explain why they need help, what’s wrong with their old system, or what they hope to achieve with the proposed upgrade.

Sales Director Ben Bolte says, “they’re reading about AI, automation, and that perennial favorite, “removing silos,” but aren’t there yet. A lot of times, that’s fine, because their competitors aren’t there yet, either.”

Really, it’s about helping clients figure out why current solutions are holding them back and how ERP investments can get them where they need to go.

Ben explains that it’s not worth leading with how great Velosio is or what Dynamics Business Central can do. He could spend his time rattling off specific features – say, quoting or predictive forecasting. But, there’s no guarantee the prospect cares about those features, versus other capabilities more aligned with current priorities.

If he doesn’t know what clients are looking for, he can’t explain how BC (or whatever solution) will help them.

With that in mind, here are a few questions you’ll want to make sure you can answer before starting your search:

What challenges are you trying to overcome?
What specific use cases are you targeting? Empowering your mobile workforce? Automating production processes? Improving cybersecurity practices? Streamlining HR workflows? Identifying these initial priorities will help you figure out which ERP modules belong in your final stack.
Are you looking for a general system or an ERP with industry-specific functionality?
What do you expect the new ERP to do for your business? For example, are you looking for advanced financial features? Do you need something that supports complex supply chain operations? Are there regulatory requirements that need to be considered?
What is your budget? This includes the initial implementation costs, licensing, as well as recurring costs like long-term support, customizations, and continuous improvement.
What resources are available? Do you have seasoned IT pros, data scientists, and developers on your team?
What does your partner network look like? Basically, you’ll want to make sure that you end up with an ERP system that everyone can use.

These are just a handful of examples you might use to gather requirements, though your actual list will likely be much longer. Ultimately, though, the goal is asking the questions that force you to dig deeper.

2. Build from the Core (Financials)

At Velosio, we typically advise clients to start their search by looking for solutions that align with their financial needs. Then from there, we’ll help them evaluate and implement the right solutions.

Per Ben, when choosing a solution, you should always start with the “core.” So, for ERPs, it’s about looking first at the financial needs of the prospective client and finding a solution that aligns with those particular needs.

While ERPs have expanded beyond their traditional role as “finance and operations” system for industrial orgs, everything still points back to finance and accounting.

But, there are small differences that add up. Some platforms include features like automated billing for subscriptions or other billing models, project accounting, support for multi-currency transactions, and so on. But, that all comes into play later.

For now, your main goal is filtering out bad-fit solutions.

You’re looking for a system that can meet your financial needs. Like, does it support subscription billing? Does it offer flexible billing models? Can you automatically calculate regional tax rates or invoice customers in their native currency? These are all important questions to consider when selecting an ERP solution for your org.

3. Support for Critical Business Functions

Like Ben mentioned in the last section, finance must always remain at the core — regardless of size, sector, available resources, or big-picture ERP goals.

At the same time, systems that focus solely on accounting and finance aren’t true ERPs. Instead, you should think of your core financials as the foundation that supports everything else — sales, security, customer service, HR, marketing, etc.

Recent data from Forrester revealed that businesses typically build IT ecosystems that are inefficient, expensive, and bloated with features they don’t need.

See, historically, digital technologies have been sold by category — bundling together features based on these really broad groups of users. Think – departmental “stereotypes” or generic use cases that apply to “all” sales, marketing, or accounting teams. Or, solutions that target entire swaths of industry – field service, distribution, healthcare, manufacturing, or other “niche” markets.

But, there’s always been a ton of overlap between categories and variation between vendors, making it hard for IT leaders to find a solution that matches their org’s unique set of requirements.

On top of that, experts argue, legacy apps often make things worse. In many instances, companies are stuck with these all-or-nothing monolith platforms they can’t easily adapt to meet ever-changing requirements.

Instead, Forrester experts recommend taking a “function-first” approach to tech selection. The gist of it is, you’ll want to start with a specific business problem you need to solve (yes, one at a time).

Source

From there, you’re trying to identify what capabilities you need to solve that problem. Basically, you want to define what, exactly, you’re looking for.

Then, once you’ve narrowed down what capabilities you need to solve X problem, you’ll want to start identifying potential solutions.

Maybe it’s software that does A, B, or C. Maybe it’s partnering with the right experts. Or, maybe it’s teaming up with an outsourcing company or hiring talent with “future-ready” skills.

4. Partners & Partner Solutions

Choosing the right technology partner is an important first step toward selecting —and, eventually, implementing and optimizing — the right ERP. However, you do need to have a general idea of where your business stands today — and where you’d like to be a year — or five, ten, 20 — down the line.

Our ERP practice focuses entirely on Microsoft Dynamics and NetSuite solutions. Meaning, you’ll want to do some research to determine whether either of those options might be a good fit before reaching out.

Still, “specializing” in your ERP of choice isn’t enough. If a provider only supports out-of-the-box platforms, they’re ill-equipped to help you carve out a competitive advantage. Some niche platforms might “speak” to more specific needs straight from the box. But – they might lack the robust partner networks, accelerators, ISV apps, or even the hands-on support you’ll get from those that work with more “general” solutions like D365, NetSuite, or SAP.

See, even big-name ERPs were built to cast a wider net with their all-in-one, catch-all solutions, the flip side is, they also offer more in terms of accelerators, customizations, and support.

For example, Microsoft works with a vast network of partners to develop niche solutions – industry accelerators for sectors like healthcare, non-profits, auto dealers, etc. MS partners (like Velosio) develop ERP add-ons and integrations themselves. They know the D365 ecosystem, their clients, and the hyper-specific industries where said clients do business.

NetSuite, SAP, Sage, etc. have similar programs – each takes a slightly different approach, but the idea is the same.

Ben says, “NetSuite offers partner solutions like Microsoft, but those solutions are branded as SuiteApps. This creates a general sense that all NetSuite ERP add-ons and accelerators were designed as one holistic ecosystem.”

Now, there’s nothing wrong with this approach. It’s just something to be aware of as you start building out your stack. If modules are sold under the guise of being “compatible” with your core ERP, but were developed by a 3rd-party in isolation, you could face unanticipated hiccups sometime down the road.

5. Leave Room for Future Possibilities

Finally, when selecting an ERP you’ll want to make sure that you invest in a solution that can accommodate future growth – and offers enough flexibility to pivot in the face of disruption and evolve alongside customers and market conditions.

Most solutions on the market right now (well, at least the good ones) are composable. They’re literally designed in a way that makes it easy to swap out specific modules, customize a certain feature, or take your ERP system in a whole new direction.

But — that doesn’t mean every solid ERP that’s out there is equipped to carry your business into the next decade. Some platforms might work great for your company right now, but maybe they’re not so compatible with your future plans — whether you know it yet or not.

Maybe X or Y ERP seems really great. It supports all your most pressing needs, and it stands to help you knock out several rounds of high-level business goals (and their associated milestones) like it’s no big deal.

But, it’s also important to note that, while most solid cloud ERP solutions are designed with uncertainty in mind, there may be other obstacles for orgs that fail to think beyond their current situation.

Or – the many ways external forces – climate disaster, AI apocalypse, the “next COVID,” or even something as banal as changing consumer trends – might force business leaders to rethink entire strategies (and the tech that supports them).

The other big issue is capacity limits. As an example, Dynamics 365 Business Central might be a great fit for now. However, if your company is on the verge of expansion, or exploring more complex business models, you’ll probably outgrow BC faster than you think.

So, it might be a better bet to shell out for D365 F&O, which while more expensive, offers more flexibility and customization options that may save you more money over time – and fuel growth, expansion, and a diverse mix of revenue streams in the long-term.

Final Thoughts

Selecting an ERP is one of the most important business decisions you’ll ever make. Your choice — and everything that comes after — will impact every user, process, partner, and customer connected to your org.

Velosio is an award-winning technology partner that boasts a deep bench of Microsoft D365 and NetSuite ERP experts, and 30+ years in the trenches with clients, embedded in industry-specific ERP projects, and continuously honing our skills.

Key Considerations for Choosing an ERP System