Choose the Right ERP System Using the Eight Dimensions of Vendor Fit

As part of Solutions Review’s Contributed Content Series—a collection of articles written by industry thought leaders in maturing software categories—Jonathan Gross, the Managing Director at Pemeco Consulting, outlines the eight “dimensions of vendor fit” companies should consider when selecting an ERP provider.

It’s easy to take technology purchases for granted, whether for personal or business use. When we buy gadgets, software, or services like streaming platforms, we often base our decisions on factors like price and feedback from others (i.e., reviews or word-of-mouth recommendations). Similarly, in the business world, we often simplify the process of acquiring hardware, applications, network connectivity, or cloud solutions by ensuring they meet the required specifications at the best possible price. 

However, selecting an Enterprise Resource Planning (ERP) system is not as simple. A decision based solely on cost may meet short-term budget goals but might lead to expensive financial implications—particularly if the solution fails to meet long-term goals, or the project is poorly implemented. Similarly, selecting an ERP system because it is considered “the best” based on awards and accolades could cause your company to acquire a system that fails to meet its day-to-day needs.

After more than 40 years of matching companies with the right technology solutions, we’ve distilled the multitude of evaluation criteria into eight categories so you can efficiently perform side-by-side analysis of multiple solutions against critical decision-making dimensions. These 8 Dimensions of Fit are described below. 

Dimension of Fit #1: Functionality 

As they say in the industry, “functionality is king.” Fundamentally, the ERP system has to meet your business’ critical requirements for operational business processing, financial management, and the underlying data requirements to support transactions. When assessing functionality, you must determine the candidate ERP systems’ abilities to support and augment your strategic business needs. It’s also crucial that the system delivers meaningful business process improvements. So, when evaluating a system’s functional capabilities, it’s essential that you do so against your future-state business processes and not against your legacy processes.  

Dimension of Fit #2: Vendor Viability and Stability 

An ERP system is a critical business application tightly integrated throughout the organization. It cannot be easily replaced; that would be akin to uprooting a tree that has already spread its roots and then planting a new one. Thus, choosing a vendor is essentially entering into a long-term partnership. That’s why you must evaluate the financial strength and stability of the ERP vendor candidates. Study their financials, including profitability, liquidity, and debt ratios. Also, assess the competence, integrity, and stability of their executive teams. Finally, consider their vision, growth plans, and potential mergers or acquisitions.  

Dimension of Fit #3: Software Development Roadmap 

A software development roadmap provides insight into the vendor’s plans and timelines for software enhancements. It helps you look beyond the software’s short-term ability to meet your needs. It allows you to see and assess whether the software and underlying technology will meet your needs over mid- and long-term ownership periods. Of course, the lack of a well-defined technology roadmap should serve as a red flag.  

For those who want to prioritize this dimension, involve your Chief Technology Officer and other IT decision-makers early in the selection process to benefit from their expertise and insights. 

Dimension of Fit #4: Technology 

If you’re unfamiliar with ERP systems and their inner workings, it’s easy to assume they are all the same because they appear to serve a similar purpose. However, when choosing an ERP system, it’s crucial to open the “black box” of underpinning technology to understand its capabilities and how it fits your business needs.  

When assessing the technical aspects of the system, it’s essential to evaluate the development platform, middleware, integration architecture, infrastructure, and performance. Can it seamlessly integrate with your existing systems? Is it hosted in the cloud, and if so, what are the vendor’s service level agreements (SLAs)? How does the software perform, and how does it address security, privacy, and compliance concerns? 

Dimension of Fit #5: User Experience 

Nobody wants a white elephant. The most advanced, sophisticated ERP is worthless if it’s too difficult to use. When assessing the user experience, consider the system’s interface, navigation, help resources, personalization options, search functionality, and self-service capabilities. Is the system simple and intuitive to use? How readily available is assistance for users? Can users customize and personalize their experience? 

Dimension of Fit #6: Total Cost of Ownership and Return on Investment 

The total cost of ownership of an ERP system is more than the costs of the software, vendor support, and implementation. Other dependent costs often include staffing—do you need to create and fill new roles? Do you need to backfill core team members in their day jobs during the implementation? Also, there might be other hardware and infrastructure requirements. Do you need to acquire label printers or handheld scanners?  

The costs of the system, its implementation, and ongoing support are expensive. It’s crucial to justify those costs with an analysis of the project’s return on investment by considering the costs and the benefits likely to be realized. The benefits can come in the form of operational efficiencies and reduced waste, canceled IT contracts, and, in some cases, revenue uplift. 

Dimension of Fit #7: Supportability 

Supportability refers to the ecosystem of talent required to implement, support, and continuously improve upon the solution and its implementation. There’s a vendor component and a general talent availability component. For the vendor component, it’s important to understand the depth, availability, and capabilities of implementation consulting talent directly with the vendor, its channel partners, and even in the independent consulting market. Having said that, your talent needs don’t stop at implementation. Digging into the vendor’s support organization for ongoing customer and technical support is also essential.  

If you’re like many companies, you might want to recruit application-specific talent so that your business can drive improvements with internal staff. When assessing the talent ecosystem, it will be worthwhile to learn whether there is a strong pool of recruitable talent. 

Dimension of Fit #8: Implementation 

Though many project managers wish it were so, implementing an ERP system is never as simple as plugging in a machine and switching it on. It requires a multi-phase plan and significant work from both the vendor and your side. Even before signing on the dotted line, take the time to analyze the software and vendor-specific implementation methodologies, complexities, and accelerators. How will implementation tasks be distributed? How long will each phase take? What business interruptions, if any, should we anticipate? Is there a need for third-party support? Understanding the implementation process is crucial for a smooth path to go live. 

A Multi-Dimensional Decision-Making Approach 

In today’s fast-paced and highly competitive business world, it can be tempting to make quick decisions without considering all the repercussions. However, companies must take a thoughtful and strategic approach when it comes to ERP systems. By viewing the 8 Dimensions of Vendor Fit, you can develop a balanced methodology for ERP vendor selection that can help you make the best technology decision for your company.