ERP Vendor Selection - How to Select Potential ERP Vendor

Choosing an enterprise resource planning (ERP) software is one of the most important decisions a business can make. However, there are so many ERP software from which to choose, many of which are not well known. The lesser-known ERP software are often designed for a specific industry. The question is which systems should you include in your ERP software selection project. A critical step is to carefully select an ERP vendor that aligns with your business needs and industry requirements. Effective ERP vendor selection ensures that the chosen system not only fits your operational needs but also scales with your business growth.

But first, we need to identify the types of ERP software based on company size (tier) and by target market.

ERP Types

	Tier 1	Tier 2	Tier 3
Customer revenue	> $200M	$25M – $200M	< $25M
Customer employees	> 500	100 – 500	< 100
Annual License fees	> $200K	$50K – $200K	< $50K
Implementation fees: Annual License fees	> 3:1	> 1.5:1	<= 1.5:1

There’s no point in considering ERP software from Tier 1 for small companies. However, the Tier 1 vendors like SAP and Oracle will say that their software is applicable not just for Tier 1 but also for Tier 2. This may be true if the company has complex business processes or expects significant growth.

ERP vendors can also be classified based on their target market:

Vendors with solutions for multiple industries. These vendors offer tier one systems, and it’s not surprising that they are more complicated to setup because of all the industries they support.
Vendors that offer a solution for a specific industry.
Vendors that offer an extension developed by a 3^rd party for a specific industry. These vendors provide the 3^rd party developer with not just the software/platform to develop solutions, but will also market these solutions worldwide making it worthwhile for the 3^rd party developers.

When you select an ERP vendor with vertical solutions or extensions, you may encounter small vendors that appear to be a risky choice. However:

Small companies can be successful.
They may have the best fit at the right price
The 3^rd parties are certified by the larger ERP vendors
There are benefits of being a big fish in a small pond.

However, stay away from small vertical vendors even if they have a great fit at a great price if they:

Are using old technology and not investing in new technology
Don’t have enough resources to support the implementation or ongoing support
Are not able to give you good references
Are not able to demonstrate their financial stability

A strategic ERP vendor selection process ensures that the chosen solution not only meets current operational needs but also supports long-term growth and adaptability.

ERP Vendor Selection – How to Identify Potential ERP Vendors

Check out our ERP Vendor Selection Tool which provides listings of systems broken out by tier, industry and application
Internet searches
Contact colleagues
Contact industry associations
Look at trade journals for articles and advertisements
Attend trade shows
Contact exhibitors from trade shows
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But the ERP vendor may not be the implementer. — it also requires a strategic approach to select an ERP vendor that aligns with your business needs. However, the ERP vendor may not be the implementer. The success of an ERP implementation depends equally on the software and the implementer. The implementers of ERP software systems are often from smaller companies, but the risks are reduced if:

The ERP vendor has certified them
They have demonstrated their knowledge, industry experience and ability to support an implementation
There are many alternative implementers

ERP Implementers Selection – How to Identify Potential ERP Implementers

Check out our ERP Implementer Selection Tool, which also includes the implementers of the ERP software systems
Contact the ERP vendor for their recommendation which should primarily be based on their experience in your industry
Internet searches
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Recommendation

We recommend casting a wide net of potential ERP vendors. A thorough ERP vendor selection process ensures that you are not overlooking any suitable systems. You don’t want anyone in your company suggesting an additional system that appears to be appropriate when you have completed most of the selection journey.

We also recommend considering both large and small vendors, but don’t waste your time unnecessarily or that of the vendors. You should have a relatively easy process to screen the systems. Our approach is to ask the vendors only to respond to the critical requirements in an RFP, and we aim for 20% of the ERP requirements to be deemed critical.

A well-executed ERP vendor selection process, combined with a thoughtful evaluation of implementers, increases the chances of a successful implementation and long-term business value.

Goodluck and don’t hesitate to contact us.

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