How to buy an ERP system

A lot of us have been at this crossroads before, right?

Your business is scaling and it's time to move away from its current operating systems. But what is the right replacement?

You might reach out to people within your network for recommendations; or you do a Google search for other systems and a bunch pop up. At first glance they all look shiny and seem to solve all of your problems—but how do you pick one?

Maybe you go through a few demos, make a pros and cons list, compare prices, talk with your team about what they like and… just pick one.

After the initial excitement and relief has worn off, now comes the expensive bill and the long implementation process. All the while hoping there are no disruptions to your current workflow.

I have been there.

I have experienced the full range of emotions that goes in to changing and implementing a new system. And then realizing it is not what you were expecting, in fact it was worse than you thought it would be.

Maybe you should have stuck with QuickBooks, but you also know that was not working for you either. After having gone through the process myself, I think most ERP systems are broken and not worth the time or money invested for the average business—which is one of the reasons I joined Prismatic.

Here are 5 things to consider when looking at ERPs:

1. Cost

This is one of the biggest drivers in the decision making process of implementing a new ERP system, and for good reason.

Modern ERPs can range from $15,000 - $50,000 on the low end to $1,000,000+ for enterprise instances.

Implementing an ERP system can be prohibitively expensive, with costs often exceeding initial estimates due to customization, training, and ongoing maintenance.

Sure, we are willing to make the investment to improve our efficiency and data reliability, but are we getting our money’s worth out of the systems.

Many businesses face unexpected overruns in terms of time and budget, as projects get delayed or require additional resources to meet organizational needs.

A lot of times we are being sold a system with features we may never use or need.

2. Implementation and Integration

ERP implementations are notoriously challenging.

Gartner cites by 2027, more than 70% of recently implemented ERP initiatives will fail to fully meet their original business case goals.

Crazy. But why?

Many companies underestimate the complexity of integrating an ERP into their existing processes, leading to delays, scope creep, and budget overruns. You also run the risk of having an implementation team that lacks the accounting or financial acumen to successfully transition from one system to another.

I experienced the lack of accounting knowledge from the vendor first hand when I implemented an ERP system. This caused our implementation to take almost a year because we opted to do it ourselves and save the 6-figure implementation cost.

Many organizations struggle with integrating ERP systems with other critical software or newer technologies because they often have custom built software that only their business uses.

As businesses grow and adopt additional tools, legacy ERP systems may not support seamless integration, leading to data silos, duplication of work, or inefficiencies in information flow.

Companies should look to new ERPs that offer no-code integrations and shorter implementation timeframes.

3. Inflexible

Your businesses needs are as individual and unique as you are but ERPs are often rigid and difficult to customize to meet the specific needs of different businesses.

Every business is different and operates separate operating models, tools, systems, technology and cultures.

This is why businesses build their own software stack using various vendors in order to achieve their goal.

The "one-size-fits-all" approach can force companies to adapt their processes to fit the system rather than the other way around. This lack of flexibility reduces the ERP's effectiveness in supporting dynamic business operations.

4. Ease of Use

ERP systems are known for being highly complex, which can make them difficult to implement, use, and maintain. Their interfaces often lack user-friendliness, leading to a steep learning curve.

The last system I used was very robust and feature rich. Actually, it had more features than we really needed.

The complexity and unintuitive interfaces of many ERP systems lead to poor user adoption. This causes both an overwhelming feeling of being able to actually use the system and an incredible time commitment on our part to learn the system inside and out.

Employees may resist using the system if they find it difficult to navigate or understand, which undermines the overall effectiveness of the ERP solution and can lead to inconsistent data usage.

5. Pressure to Buy—fear of failure

Remember, the people selling you the system are sales people.

They’re going to make you feel like the number one person in the world. They are going to dangle the carrot of “better efficiency and data analytics” for you to bite at, but don’t be quick to bite.

If you don’t bite at the carrot, are you afraid you are putting your business at risk by not implementing their system? In my experience, once the deal is done, you are on your own.

Bonus: 6 Questions to ask in your ERP buying process:

1. What kind of support will I have 6 months after implementation? Do I have to pay for this support?
2. How are integrations with third-parties handled? Are they supported past the implementation?
3. How many customers do you have that operate the same type of business as mine? Can I speak with them?
4. What is the average yearly price increase?
5. Are there any user support groups?
6. What kind of AI features are on the roadmap?

If you feel like you have outgrown your current systems, and a larger ERP system is what your business is needing, just try to keep these points in mind. Take your time, explore all of your options, and pick a provider that will invest the time and resources in to your business.

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Josh Summerford, CPA