Selecting the right ERP is a powerful step toward transforming your business, especially in a specialised industry like construction. For most companies, the decision-making process can take up to six months and even longer for enterprises. That alone speaks volumes. Committing to one vendor is a long-term business partnership that shapes how your company operates, scales, and evolves.
To make this evaluation easier, we have put together key considerations of ERP selection criteria involved, especially from the lens of construction companies, where operational complexity and cross-functional coordination demand more than just basic software.
While putting this together, we also referred to SelectHub’s research report, “ERP Buyer’s Profile for Growing Companies,” which offers deep insight into how companies approach ERP selection. Many of the patterns identified in the report, from decision timelines and stakeholder involvement to the reasons behind switching system hold true in the construction industry as well.
In this article, we’ll walk you through the essential ERP selection criteria to consider while choosing a construction ERP software backed by practical logic and relatable industry trends.
Here’s a quick overview of the 9 ERP selection criteria we’ll cover in this guide:
1. Aligning ERP selection with your business strategy & priorities
Before checking off features on your list, you need to take a step back and align your decisions with business requirements.
According to SelectHub’s ERP Buyer’s Profile for Growing Companies, companies that succeed in ERP implementation are the ones that begin their selection process by clearly aligning the software choice with their overall business strategy and priorities.
This step may seem obvious, but it’s one that many businesses rush past in their eagerness to find a solution.
Unlike other industries, construction businesses don’t just run on accounting and HR. They operate across dynamic project environments, coordinate multiple teams on and off site, manage procurement cycles, subcontractors, equipment, materials, compliance, and much more while staying accountable to timelines.
If your ERP doesn’t support your specific strategic direction, be it expanding into new geographies, taking on larger projects, streamlining site-to-office coordination, or improving financial visibility across jobs, it may only add another layer of complexity instead of simplifying it.
Your ERP should be a reflection of where you’re headed, not just where you are now.
So, start by asking the bigger questions:
- What are your top 3–5 strategic priorities over the next 2–5 years?
- Are you scaling operations or entering new markets?
- Are inefficiencies slowing down project delivery or cash flow?
- Do you want more control over cost forecasting, subcontractor management, or procurement?
Only when you define what matters most to your business, can you evaluate whether an ERP aligns with it, and whether the investment is truly purposeful.
Many businesses make the mistake of trying to replace one system with another popular one, instead of using a structured ERP selection process to reimagine how their business could operate more efficiently and intelligently.
2. Involving the right stakeholders, not just the decision-makers
Once your business priorities are clear, the next step in the ERP selection journey is assembling the right people at the table. And that doesn’t just mean senior decision-makers, it means the people who will actually use the system every day.
According to SelectHub’s ERP Buyer’s Profile for Growing Companies, most ERP selection processes are led by finance (23%) and IT departments (23%). Independent consultants and operations managers come next (17% each), while CEOs and presidents are involved in only 12% of cases. Surprisingly, project managers and business analysts – the very people who often end up working directly with the system – make up just 5% of selection participants.
That’s a problem.
For construction businesses especially, ERP software isn’t used by one team in isolation, it touches nearly every aspect of the business:
- Site engineers and project managers tracking work progress and budgets.
- Procurement and inventory teams managing vendors and materials.
- Finance and accounting teams processing payments, forecasting costs.
- Operations and contracts teams handling client-side communication, subcontractor performance, and compliance.
- Leadership making decisions based on real-time projects and financial data.
When ERP selection is led in a silo, for example, by finance and IT alone, it can easily lead to a mismatch between what’s bought and what’s actually needed in the field.
The most successful ERP selections are collaborative, they listen to end-users, not just executives.
It’s especially important in construction where:
- Site teams need mobile-friendly tools that work in low-connectivity zones.
- Procurement and finance need real-time integration to avoid material delays.
- Project managers want visibility across all jobs, not just one.
Every workflow is interconnected. So, excluding one group during evaluation can lead to costly inefficiencies post-implementation.
And yes, while bringing in consultants can be helpful; which 1 in 6 companies do — their role should complement, not replace, internal voices. External experts can guide the process, but only your internal teams can speak to the real day-to-day challenges.
The goal should be to build a cross-functional team from IT to procurement to on-site ops who can help assess software not just for what it promises, but for how well it solves your business’s pain points.
3. Functionality comes first but it’s not just about features
When it comes to selecting a new ERP, one word consistently tops the list: functionality.
In the ERP Buyer’s Profile for Growing Companies report, nearly 40% of businesses interviewed cited functionality as the most important factor in the software selection process. But it’s important to unpack what that actually means.
Functionality is no longer about a checklist of features; it’s about how well those features enable your teams to do their jobs.
In construction, this becomes even more critical because your ERP’s usability needs to stretch across many moving parts:
- Can project managers get real-time updates on-site progress?
- Can procurement teams place orders straight from the system?
- Can finance track job-wise costs and automate billing workflows?
- Can leadership forecast margins based on live project data?
If the answer is no or partially, then the ERP isn’t functional for your business no matter how advanced it seems on paper.
And functionality is often just the beginning of deeper problems. From the same survey data and common buyer patterns, these were other major red flags that drive businesses to seek new ERP systems:
1. Legacy software that’s simply too old
Many companies still use outdated systems that were built for a different era. These systems lack mobile access, cloud functionality, or industry-specific tools. In construction, that translates to poor site-to-office coordination, limited visibility, and slow decision-making.
2. Lack of scalability or flexibility
If your ERP can’t scale with your growing project portfolio or adjust to different contract types and compliance needs, it becomes a bottleneck, not a solution.
3. No integration capability
Disconnected systems mean repetitive work like; entering the same vendor invoice in the procurement system and then again in the accounting system. To avoid this, implementing a robust ERP system is essential. For construction firms, integration with estimating tools, document control, payroll, accounting, and scheduling platforms is vital.
4. Too manual, no automation
Manual processes kill efficiency. Whether it’s raising a purchase order or generating a progress report, your ERP should enhance usability by eliminating repetitive work. Automation can no longer be seen as a fancy term, it’s a necessity.
5. Expensive to maintain
Older or highly customised systems often require constant patches, vendor support, or in-house IT support just to keep things running; draining budgets without adding value.
6. Poor user interface
If your team avoids using the ERP because of its poor usability, clunky interface, or outdated user experience, it doesn’t matter how powerful it is, it will not be successful. Adoption drops, and so does productivity.
7. Vendor retirement
Some businesses are forced to switch ERPs simply because their vendor has stopped supporting the software. Without regular updates or compliance support, using retired applications becomes risky.
8. Bad support
A great product still needs great support. If your ERP vendor takes too long to resolve issues or worse, doesn’t understand your industry then a problem can easily turn into a project delay.
In construction, functionality should mean ease of execution across all departments: from the jobsite to the boardroom.
This is why, in ERP selection criteria, functionality should always be measured against your workflows. If a system can’t flex to your way of working, it’s not built for your business.
4. Your ERP must support all the functions that matter
While flashy features and a modern UI may draw attention early in the evaluation process, and is an important factor; none-the-less the real strength of any ERP lies in its ability to support core business functions in sync.
ERP systems ultimately differ in how well they can handle the complexity of your operations across departments, teams, and evolving needs.
According to the ERP Buyer’s Profile for Growing Companies report, 89% of companies rated accounting as the most critical ERP function. Within that, the top priorities were:
- General Ledger (GL)
- Accounts Receivable (AR)
- Accounts Payable (AP)
- Budgeting
- Financial Reporting
It isn’t surprising that finance is the backbone of every business. For construction firms especially, ERP needs to go deeper than generic accounting:
- Can it handle job-costing per project and track committed costs in real time?
- Does it align with the way your teams manage subcontracts, retentions, or change orders?
- Can you consolidate financials across multiple entities or SPVs?
- Does it ensure compliance with tax codes across regions where you operate?
If your ERP isn’t built to mirror the financial intricacies of a construction business, you’ll always be stuck adapting your process to fit the software and not the other way around.
It doesn’t stop at finance
As your construction business grows, complexity multiplies. You take on more projects, subcontractors, vendors, materials, locations, teams. So, your ERP must stretch beyond finance and provide robust support for:
- Customer Relationship Management (CRM) to manage pipeline, bids, and client communications.
- Inventory & Procurement to streamline material tracking and prevent site delays.
- Contract & Document Management to avoid versioning chaos across RFIs, drawings, BOQs.
- Workforce & Payroll to align with project-based labor deployment and compliance.
- Equipment Management to track asset use, location, and servicing.
And that’s just the surface.
5. Don’t rush the selection process
Construction companies are constantly managing timelines but the one you shouldn’t fast-track is your ERP selection criteria.
Many businesses, especially small to mid-sized ones, feel the pressure to wrap up software decisions quickly. In fact, most companies aim to finish the vendor evaluation process in under six months. Its understandable teams are lean, projects are ongoing, and no one has the luxury to sit in demos for months.
But speed often comes at the cost of clarity.
When construction companies rush the ERP selection process without carefully considering ERP selection criteria:
- They skip product demos.
- They don’t engage deeply with vendors.
- They miss the chance to properly map business needs to system capabilities.
And that’s a problem, because the ERP system will impact everything: from how you manage projects and procurement to how your teams collaborate on and off site.
An ERP built for construction is an infrastructure. And infrastructure needs careful planning.
What can go wrong?
We’ve seen it before, rushed ERP rollouts that fail to support the business, forcing teams back to spreadsheets just to keep up.
Without enough time:
- Core users aren’t brought into the decision.
- Field needs are overlooked.
- The wrong modules are prioritised (or worse, forced into workflows they don’t suit).
Give it the time it deserves
Instead of forcing a decision in a few months, build a selection timeline that works for your business maturity. That could mean:
- Starting with one or two critical modules
- Running phased demos with shortlisted vendors.
- Getting feedback from project managers, site supervisors, and finance teams before signing off.
In construction, you don’t rush laying the foundation and ERP is no different.
6. Type of deployment – cloud, on-premises, or hybrid?
Choosing how your ERP is deployed – in the cloud, on-premises, or through a hybrid model is a strategic decision that directly impacts cost, scalability, and team collaboration. For construction firms, where projects span locations and field teams need real-time access to data, cloud-based ERP solutions often feel like a natural fit.
But deployment isn’t a one-size-fits-all decision.
While a Gartner report notes that 95% of companies across industries are now open to cloud deployment, construction firms still show a mix of preferences. Companies with deep investments in IT infrastructure, or those with conservative leadership, often gravitate toward on-prem or hybrid setups especially if they prioritise in-house control over data or compliance.
“We’re open to cloud, but not fully ready to let go of our internal systems yet.” A common sentiment among mid-size contractors.
What construction firms should consider in ERP selection criteria
- Cloud ERP enables teams to work from job sites, share updates in real time, and reduce dependence on physical servers or IT staff. It’s especially useful for growing companies that want to avoid large upfront infrastructure costs.
- On-Premise ERP may suit firms with complex IT environments, strict compliance needs, or leadership that’s more cautious about cloud adoption.
- Hybrid Models offer a balanced approach allowing construction firms to move certain operations (like finance or procurement) to the cloud while keeping others (like document control or payroll) in-house.
Ultimately, your deployment choice should consider business requirements and align with both your current capabilities and your long-term goals. The key is flexibility: as your business scales, your ERP deployment should evolve with it.
7. Purposeful implementation, adopt what you need, when you need it
When it comes to ERP, you don’t need to adopt everything all at once. In fact, you probably shouldn’t.
A more effective approach and one increasingly seen in industries like manufacturing is what’s referred to as a purposeful implementation: rolling out software in stages, aligned with your company’s operational maturity and evolving priorities.
Rather than taking an “all-or-nothing” leap, companies often start with just one or two core modules like accounting or procurement while still using spreadsheets or point solutions for everything else. As operations scale and transactions become more complex, they phase in additional modules like inventory, payroll, or project management.
As one article describes it, it’s about “managing software adoption as a series of sprints in a well-planned program” not a rushed, full-suite implementation.
This approach makes perfect sense for construction businesses, too.
Early-stage contractors may only need basic financial tools, while more established firms might begin integrating subcontractor management, procurement, and inventory. The key is that nothing is forced. Each phase of implementation is purposefully driven by real needs, not assumptions.
Why purposeful implementation works for construction:
- Scales with your business: Start with essential tools, like accounting, and bring in new capabilities when they actually matter.
- Avoids disruption: You don’t need to upend your operations overnight. ERP can co-exist with your current tools and gradually take over.
- Supports better adoption: Teams are more likely to embrace change when it’s introduced in manageable, relevant stages.
- Fits your budget and bandwidth: Spreading out the implementation process helps with costs and capacity.
Purposeful implementation ensures your ERP system evolves with you, not ahead of you, and never behind.
8. Total cost of ownership for evaluating the real cost of your ERP
While upfront license or subscription costs are often the first numbers construction firms look at, they only tell part of the story, especially when considering the ROI of your ERP investment. A smarter ERP selection criteria process involves evaluating Total Cost of Ownership (TCO) – the complete cost of acquiring, implementing, and maintaining the system over time.
For construction businesses operating on tight project margins, understanding TCO is essential to avoid long-term overspending or financial surprises.
What construction firms should consider when evaluating TCO
TCO includes both direct and indirect costs associated with the ERP. Here’s what to factor in:
- Licensing or Subscription Fees: Whether it’s a one-time license (on-prem) or recurring subscription (cloud).
- Infrastructure Costs: Servers, storage, backups, networking, mostly applicable for on-premises deployments.
- Implementation and Customisation: Includes configuration, integrations, process mapping, and data migration. This cost increases significantly with generic ERPs that need to be tailored for construction use.
- Training and Change Management: Time and resources needed to train users and support adoption across field and office teams.
- IT Support and Maintenance: Internal or external IT staff, regular updates, bug fixes, and infrastructure upkeep.
- Upgrades and Scalability: Costs of scaling the ERP as your business grows or upgrading to newer versions down the line.
Cloud vs On-premise: TCO differences
Cloud ERP solutions tend to have a lower TCO in the long run. They eliminate the need for infrastructure, reduce IT overhead, and include automatic updates, backups, and support in the subscription cost.
On-Prem ERP may seem cost-effective upfront but often requires significant long-term investment in hardware, dedicated IT staff, manual upgrades, and security layers, all of which add to TCO.
How to calculate TCO?
To make an informed decision, construction firms should estimate:
TCO = Initial Costs (License/Setup + Infrastructure + Implementation) + Ongoing Costs (Training + Support + Maintenance + Upgrades) over 5–10 years
Consider running side-by-side TCO projections for each ERP under consideration especially comparing generic vs construction-specific solutions, and cloud vs on-premise deployment.
9. Choosing the right vendor, not just the right product
Another crucial takeaway from the survey of ERP selection criteria isn’t just about the functionality it offers today but the partnership it offers for tomorrow.
A vendor relationship doesn’t end when the deal is signed, it starts there.
You need a vendor who:
- Understands the construction industry.
- Regularly updates features based on market needs.
- Offers support that’s fast, knowledgeable, and proactive.
- Includes your feedback in their roadmap.
In construction, where project timelines are tight and margins are even tighter, your ERP vendor is effectively a long-term business partner. If their support falters or their system doesn’t evolve with your business, the cost is operational risk.
Xpedeon: built for construction, ready for growth
Xpedeon is a fully integrated ERP platform is purpose-built for general contractors, specialist contractors, engineer-to-order firms, and property developers. With features tailored to the unique challenges of construction, from multi-site project tracking to subcontractor management and real-time cost control, it helps businesses streamline operations without the need for heavy customisation.
Designed to adapt as your business grows, Xpedeon brings clarity and control across every phase of the construction lifecycle, all from a single source of truth.
Ready to explore what a construction-specific ERP could do for you?
Schedule a demo with Xpedeon.