How to Choose an ERP System: A Practical Selection Process

Choosing an ERP is one of the most consequential technology decisions a growing business makes. You'll live with the choice for a decade. Yet many selections are driven by a single impressive demo, a recommendation from a peer in a different industry, or the lowest licence quote.

Here's a process that leads to better decisions.

Step 1: Define what you need — and why

Start with outcomes, not features. What should be different in two years? Faster order processing, accurate inventory, a shorter close, visibility across sites?

Then document requirements by process: order to cash, procure to pay, plan to produce, record to report. For each, note:

• What happens today and where it breaks
• Volumes (orders per day, SKUs, users)
• Must-have versus nice-to-have
• Industry-specific needs (lot tracking, job costing, rentals)

Keep it short enough that people actually read it. A focused fifty-item list beats a five-hundred-line spreadsheet.

Step 2: Understand constraints

• Budget — five-year total, not just year one.
• Deployment — SaaS only, or self-hosting options?
• Integrations — which existing systems must connect?
• Internal capability — do you have IT staff, or will you rely on partners?
• Regulatory — localisation, statutory reporting, industry rules.

Constraints eliminate options quickly and save evaluation time.

Step 3: Build a long list, then a shortlist

Identify five to eight platforms that serve your company size and industry. Eliminate those that clearly fail constraints. Aim for two or three serious contenders.

For SMB and mid-market, common candidates include Odoo, ERPNext, Microsoft Dynamics 365 Business Central, NetSuite, SAP Business One, Sage products and industry-specific systems. Our comparison pages cover several of these.

Step 4: Run scripted demonstrations

This is where most selections go wrong. Don't let vendors run their standard demo. Give them three to five scripted scenarios based on your processes, using your sample data:

• A typical order with your pricing rules
• A difficult case: partial delivery, backorder, return after price change
• Your month-end close steps
• Your industry-specific process

Score each vendor on the same criteria. Involve the people who will use the system.

Step 5: Model total cost of ownership

Compare five-year costs including:

• Licences or subscriptions, with expected growth
• Implementation services
• Customisation and integrations
• Data migration
• Training
• Hosting and infrastructure
• Support and upgrades
• Internal staff time

See ERP implementation cost for how each component behaves.

Step 6: Evaluate the implementation partner

The partner matters as much as the platform. Check:

• Experience in your industry and company size
• References you can call — ask what went wrong, not just what went right
• The actual team proposed, not just the sales team
• Their approach to data migration, testing and training
• Post-go-live support model

Step 7: Decide, then validate with discovery

Make a provisional choice, then commission a short paid discovery to validate fit and produce a reliable estimate before signing a full implementation contract.

Build vs buy

For most businesses, an established ERP platform is the right choice. Custom ERP makes sense when your core process is genuinely unique and central to your competitive advantage. We discuss this in custom ERP vs off-the-shelf.

Red flags during selection

• Vendors unwilling to demo your scenarios
• Estimates given before understanding your processes
• No references in your industry
• Pressure to sign before quarter end
• Vague answers on data migration and integrations

A good selection process takes a few months. That's time well spent compared with years living with the wrong system.