Enterprise resource planning (ERP) systems are designed to automate and add efficiency to repetitive business process in order to connect processes in real-time. The hospitality industry often has multiple applications to serve its customers and ERP systems can aid in integrating data in to a single database with a single interface, resulting in time savings for operators. ERP systems come in all sizes and serve hospitality companies of all shapes and sizes.
Although an ERP system can lead to increased savings and profits, it can be quite an investment. The procurement of business software is not something a company does frequently, and because of that, one can be ill-prepared. For most companies, the ERP selection process seems overwhelming. Many organizations find that the time required to research each option is too much and that they are constrained to having to do their ERP research during their normally busy day.
There are a plethora of different ERP systems out on the market and some are better suited than others to accommodate the demands of the hospitality industry. To help organizations navigate the choices, here is a short how-to guide on selecting the right ERP system.
Dig into the Motives Behind Selecting a New ERP System
When considering an ERP implementation, the most important question to ask is: Why has the decision been made to change the current ERP software, or implement one for the first time?
Whatever the motive is, the ERP solution selected must ultimately satisfy the needs of the organization. Here’s a high-level list of things to consider during an ERP evaluation process:
- Does the company prefer to use a local server environment or cloud-hosted technology?
- Does the company have internal IT support?
- Does the company need integration between solutions, or will data be copied manually from one system to another?
- Does the company only need core functionalities or are there special needs?
- Does the company need a highly customizable solution or is it okay to modify some of the current business processes?
- Can the company draft high-level requirements for each business unit?
With these answers, the search for ERP vendors that meet an organization’s unique needs can begin.
Key Considerations for ERP Selection
In addition to the bullets listed above, when selecting an ERP system, there are four important areas of consideration to be aware of.
Employee Skill Level
Are the employees tech-savvy? Are they able and willing to adjust to a new system, or do they require a straight-forward user interface? What level of training will they need? If the employees are used to and enjoy using a previous system or program and do not wish to adapt to too many changes, look for an ERP system that’s structured similarly to what is already in place.
The budget is a crucial factor in the selection process. Selecting and implementing a new ERP solution can be a heavy investment, however, there are often other expenses in addition to the initial costs. Add-ons and the ability to connect other applications/programs to the ERP can cost money and time. Before making a final decision, make sure the cost being evaluated is the total cost.
The marketplace and society are changing quickly, and the company and its software need to be able to adapt. It is important to ensure that the ERP solution selected updates with a reasonable amount of frequency to avoid being left with an old and outdated system in a few years.
Find out if a potential ERP vendor offers a guaranteed response time for any issues or any support plans. Make note of the quality of service provided by the vendor so the company knows what to expect, which can save frustration down the road.
Best in Breed vs Best in Class
Establishing the right mix of “Best in Breed” vs. “Best in Class” software can be daunting for companies to balance. Best in Breed products are designed to address a specific niche or functional area. These types of applications perform specialized functions and are typically better than those in an integrated system. The Best in Breed solution usually requires multiple solutions that are then connected through integration services to provide all of the necessary processes an organization will need from their technology. This solution is often the best choice if a company’s business requirements are so specific that a single ERP cannot address their unique set of business conditions.
Conversely, the Best in Class ERP solution combines the core functions of an organization into a single, integrated, enterprise-wide software suite. There is tight integration between functions, linking finance, sales, reservations, POS, maintenance, and other functions in a single universe.
What to Look for in an ERP Solution Provider
Marketing language tends to blur the lines between ERP solution providers and makes it harder to distinguish actual capabilities. Everyone claims to have rapid and agile implementation methodologies, but not all do. Some things to look for include:
- Average actual implementation times say a lot about a solution provider and their approach. Data from an independent source on this can be more reliable.
- Frequency and duration of business disruptions after implementation.
- Guidance given by the solution provider during the evaluation period – does the provider truly understand the business and industry? Are they acting as a strategic partner?
- Industry-specific blueprint approach – if the provider claims to have a pre-configured industry-specific blueprint, ask to see it and explore what effort will be required to make it work.
- Agile approach during the sales cycle – does the provider quickly turn around a demo of what the implemented solution will look like? Ask them what work will need to be done upon go-live to achieve what is shown in the demo.
Why It’s Beneficial to Outsource the ERP Selection Process
Drafting a high-level ERP requirements document can take a significant amount of time. Company resources are likely already overburdened and may not have sufficient time to devote to ensure success. One way to ensure this is done right the first time is to engage an experienced ERP selection consultant to act as your facilitator.
An ERP selection consultant can outline the limitations and capabilities of available ERP solutions and find the best fit for the organization’s needs and budget. Do not leave key strategic decisions completely in the hands of overburdened staff. Below are three reasons why outsourcing the ERP selection process will make the process more successful and your organization more profitable.
Consultants provide a fresh perspective
Organizations involved in ERP selection, or any business application, know their own business and processes and recognize they have a need that’s not being met. Outside consultants may not know the specific business as well, but they do know the specifics of ERP products and the industries they support. The ‘outsider’ has seen alternate ways to meet organizational needs in more efficient software deployment. This fresh perspective allows consultants to continually ask the ‘why’ question. Why is this process done? Why is this report needed? What information and insights is this specific data providing? Not being involved in the internal politics of an organization also makes it easier for an outsider to potentially identify any gaps and/or bottlenecks and unearth inefficient and/or broken processes.
Consultants understand how to navigate the cloud-first approach
Most ERP needs can be completely met through cloud technology. In the mid-2000s, many organizations balked at cloud ERP solutions for fear that business continuity was at risk, or that their data was unsecure. As we now know, business continuity is far more secure when software is hosted by a solid vendor. A ‘solid vendor’ is defined as an organization that makes its financial results public. This is important since you do not want the selected ERP cloud provider to go out of business without warning. Public reporting gives a company fair time to change providers if necessary. The security risk has been demonstrated not only to be a red herring, but the contrary is true. In most cases, an individual company cannot compete with the security levels of ERP cloud vendors.
ERP provider organizations cannot tolerate any security breaches, as it would immediately drain their customer base. Most individual organizations cannot match cloud vendors’ security spending. Typically, a ‘cloud-first’ approach delivers more value for ERP spending: less expensive to procure, quicker to deploy, faster recoup of investment and better ROI.
Consultants have a specific product and industry expertise ERP selection consultants are experts in their domain and provide the following value to the process:
- They know how to interpret the nuances in marketing messaging.
- They are familiar with the various vendors and their systems architecture and functions.
- They know what to ask for during demos.
- They understand the role of the Sales Reps.
- They have intimate knowledge of vendors’ various strengths and weaknesses by industry.
- They understand the software licensing contracts and know-how and when to buy.
The decision to implement a (new) ERP system is a critical one. It is a significant investment of company capital and team member time. Proper planning, evaluation and budgeting is crucial in the success of the implementation.
About Withumsmith+Brown (Withum)
Withum is a forward-thinking, technology-driven advisory and accounting firm, committed to helping clients in the hospitality industry be more profitable, efficient and productive in the modern business landscape. For further information about Withum and the Digital Advisory Team, contact Lena Combs (LCombs@Withum.com) at (407) 849-1569, or visit www.withum.com.