What are the criterias for selection of ERP Software and factors leading to improper ERP system selection - MBA Notes

Answer:
An ERP software selection criterion involves asking a lot of questions. Here are some criteria for ERP software selection.

 

For Product Functionality

· Does this package meet the overall requirements listing?
· Is the menu structure easy to follow and understand?
· Are the help files easily assessable and

easy for users to understand?
· Can you customise help to meet the needs of the organisation?
· Is the product too complex?

· Are there standard reports available, and are they useful?

 

For Product Cost

· Are the license costs justified given the functionality offering?
· Is the required database affordable?
· Are annual maintenance charges reasonable and in line with the industry average?
· Are payments for annual maintenance charges in line with industry norms?
· What is the true implementation services-to-software ratio for implementations with comparably-sized companies?
· How quickly can payback be received?

 

For Corporate Vision

· What major organisational changes has the supplier made in recent years?
· What major product changes have occurred in recent years?
· What major product changes does the company foresee or have planned in the coming years?
· What level of involvement do the executive staffs have in the company’s daily operations? Are the executive staffs knowledgeable of industry trends and developing technology?

 

For Service and Support

· Was the team comfortable with the sales process and representative?
· Were the team’s questions answered in an open and honest forum?
· Can the supplier provide a complete turn-key solution?
· What type of training is available?
· What is the average technical support person’s experience level and tenure with the company?
· How quickly are the non-critical software bugs fixed?
· Is 24/7 support available?
· Does the supplier offer business process re-engineering as part of the implementation process?
· Does the supplier have experience in similar industries?

 

For Technology and System Architecture

· Is the technology robust enough to handle current and future transactions load? Is it scalable?
· Is the system’s speed acceptable for daily usage?
· Is source code provided for customisations or modifications without hefty charges?
· Do customisations hamper upgrading to future software releases?
· Is the software Open Database Connectivity (ODBC) compliant?
· Does the software support E-Commerce, Radio Frequency (RF) and bar coding, and Electronic Data Interchange (EDI) transactions?
· Does the software support multi-company, multi-division, and multi-currency environments? Are there any restrictions to this type of environment?

 

For Supplier Longevity

· How many years has the company been actively engaged in this software industry?
· When was the product’s first release? What is the current release version being quoted?
· Has the company been consistently profitable?
· Has there been recent turnover in the management staff?
· Has the supplier increased or reduced overall headcount over the last year?

 

Some factors leading to improper ERP system selection are:

 
· Incomplete set of requirements - It requires people to do their job differently. Therefore, it is very important to understand the requirements of each user for current processes and for future processes.

 
· Reliance on vendor demos – Vendor demonstrations tend to focus on very simple processes. In most businesses, customers have varying and complicated commercial arrangements. In reality, products are not always in stock.

 
· Over-emphasis on system cost – While the cost of an ERP system is very important for a company, it should not be the dole dominant factor as other important decision criteria such as functionality, future proofing, underlying infrastructure [network and database], and e-commerce capability among others.

 
· Selection bias – It is not unusual that the ERP system purchase decision is made by one individual or by one department within the company. In such situations, an ERP system that may be excellent at one function but weak at other may be imposed on the entire enterprise with serious business repercussions.

 
· Failure to use objective professional services – One of the main reasons for failure in system selection is the lack of knowledge within the company. Taking the services of experienced consultants can prove beneficial.

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