ERP Selection

Chapter 8
Copyright  2013 Dorling Kindersley (India) Pvt. Ltd.

Enterprise Resource Planning Selection
Enterprise Resource Planning: A Managerial Perspective Author: Veena Bansal

ERP Solution and Vendor Selection
• Gather information about the vendors and their products using

available channels and resources.
• Preliminary filtering
 Demonstration by the vendors
 Filtering using high-level parameter
 Decide selection parameters
• Prepare and release RFP (request for proposal) using the business
blueprint prepared during the requirements engineering phase
• Analyse and select the vendor
 Evaluate vendor’s ERP system on certain parameters
 Analysis of financial terms and conditions
 Detailed demonstration by the vendors
Gather Information
• Analyse the prototypes and demonstration versions that are

available.
• Many consultancy companies study ERP solutions and release
reports every year. These reports are expensive but very rich in
contents.
• The vendors can be invited to make presentations.
• IT magazines, exhibitions and Internet sites also provide
information about ERP solutions and vendors.
• If there is no in house IT competence, a consultant can be hired to
gather information about ERP solutions.

Preliminary Filtering

High-level Parameters That Can Be Used for Initial Filtering of the
Vendors

Ways of Selecting a Vendor
• Competitive bidding: The vendors bid and the most competitive

one is awarded the contract provided he fulfills the requirements.
• Two-phase acquisition: The selected bidders are asked to do
some additional work on which they are evaluated and awarded
the contract.
• ERP vendors are generally selected through competitive bidding
only.

Parameters for ERP Selection
1. Business Process Support or Functionality

• ERP fit with business processes. Factors that capture the process
fit:
 The organizational processes flow
 The business practices
 The organizational processes

2. Data Fit

• Three functions associated with the data: creation, storage,
usage.
• End users: who create and use the data.
• Properties important for the end users:

 The name and meaning data items used in the company.
 The form and format of data items of documents .
 The output data items of the documents .
 The input data items of the documents

3. User Interface Fit

• It has three components:
 User interface structures.
 User capabilities required to use interface of the ERP.
 Sufficient user interface to meet the business needs.
• The look and feel, structure and capabilities required should

remain just about the same. Otherwise, significant effort may
be required to either adapt ERP or adapt the organization.

Discussion
• An ERP solution that fits well would result in the following:

 Lower resistance from the users
 Reduced training needs
 Less organizational adaptation

• Gap analysis is done for figuring out the gap between the
process, data and user interface requirements and ERP offering.

4. Implementation Time

 Implementation time depends on the following parameters:
 Number of sites where ERP has to be implemented.
 Number of modules or functions to be implemented.
 Maturity level of organizations.
 Customization.

5. Total cost

6. Platform independence
7. Process improvement
8. Reliability
9. Flexibility and scalability
10. User friendliness
11. Market position of the vendor

GAP Analysis (Discussion)
• Assess the gap between the offering and the requirements.

• The gap analysis will involve the vendor as well the selection
team.
• There are two ways to perform the gap analysis:
 Vendor makes a presentation of their ERP system.
 The vendor makes a prototype available to experiment with.
• The selection team asks questions and based on the answers of
the vendor, gap is established.
• Vendor may be provided with a detail requirements document
and the vendor submits a response to all requirements.

Gap Analysis Report for Sales Process of RetailS

AHP for ERP Selection

• AHP transforms a subjective problem into an objective one.
• A hierarchy is created by putting the objective or the decision at Level 1.
• Put sub-objectives at Level 2 of hierarchy.
• At Level 3, put parameters.
• Put components of parameters at Level 4.

AHP for ERP Selection

• Level 1: Select the most suitable ERP system.
• Level 2: Sub-objectives are to pick most suitable ERP system (or vendor) and
implementation partner.
• Level 3: Put parameters for selecting ERP system.
• Level 4: Put components of parameters

Possible Parameters
• • Cost

Functionality
• Reliability • No customization
• Implementation time • Platform independence
• No process modification • Running cost
• Maintenance • Software cost
• Consultancy cost • Infrastructure cost
• Hardware cost • Availability of trained manpower
• Training required • Total cost
• Payment terms • Flexibility
• Total time

More Parameters

• Which RDBMS? Cost sub-parameter
• Uploading the legacy data: Cost sub-parameter
• MRP: Functional fit sub-parameter
• Security: Functional fit sub-parameter

Try These Possible Parameters
• Hardware support

• Upgrade support for the software
• Documentation
• Web-enabled access
• Will the software be implemented in modules?
• Will the software be purchased in modules?
• Year-ending accounting
• Posting of transaction online
• Business rules
• Data entry screens
• Report generation
• Master data preparation
• Is the customization cost included in the ERP cost?

Hierarchy Built Based on Objectives, Sub-objectives , Parameters
and Sub-parameters

AHP Process (Step 1)
• The team makes pair-wise comparison to answer questions of the form:

 What is the relative importance of Parameter i with respect to Parameter j?
 We can use a scale of 1 to 5 (1: means equally important and 5 means that
Parameter i is 5 times more important than Parameter j).
 We will prepare matrices for each level of hierarchy and make pair-wise
comparisons for each level.
 Every member of the team will fill up these matrices.

Matrix for Pair-wise Comparison
of Parameters

Pair-wise Comparison of the Parameters Filled by One
Team Member


• Use Expertchoice to analyse the data and get a vector giving us relative
importance of parameters.
• W: <w1, w2, w3, …,wn> where wi is the relative importance or weight of
parameter i.
• This software also checks for the consistency of responses.

Priority Vector
< Cost, Functionality, Reliability, Time, Platform Independence,

Vendor, Flexibility, Scalability >
= <.119, .327, .10, .242, .035, .091, .052, .033>


Evaluate ERP solution on the selected parameters.
• We create one matrix for each parameter.
• We compare every pair of ERP solutions on each parameter and fill the matrices.
• We would answer questions such as: Does ERP solution A meet our requirements
better than ERP solution B, Does solution A more reliable than solution B?

Pair-wise Comparison of ERP Solutions
A, B, C and D on Functionality

A, B, C and D on Reliability

Pair-wise Compare of ERP Solutions
A, B, C and D on Cost

A, B, C and D on Implementation Time

A, B, C and D on Vendor


Run these matrices through Expertchoice and get one vector for each parameter
that gives relative score of each ERP solution on each parameter.
 Param1: <score_ERPA, score_ERPB, ..., score_ERPD>

Rating of Each ERP System on All Five Parameters

Consolidate the scores by multiplying weight of each parameter with score of ERP

and add them as follows:
• Score of ERPA = Σ weight of Parameteri *score of ERPA for Parameteri
• Score of ERPB = Σ weight of Parameteri *score of ERPB for Parameteri
• Score of ERPC = Σ weight of Parameteri *score of ERPC for Parameteri

 ERPA = 0.327 * 0.516 + .1*0.375 + 0.119* 0.056 + 0.242*0.069

+ 0.091*0.653 = 0.289
 ERPB = 0.327 * 0.363 + .1*0.375 + 0.119* 0.131 + 0.242*0.121
+ 0.091*0.225 = 0.221
 ERPC = 0.327 * 0.061 + .1*0.125 + 0.119* 0.353 + 0.242*0.316
+ 0.091*0.076 = 0.158
 ERPD = 0.327 * 0.061 + .1*0.125 + 0.119* 0.46 + 0.242*0.495 +
0.091*0.047 = 0.211
 < ERPA, ERPB, ERPC, ERPD>=< 0.289, 0.221, 0.158, 0.211 >

Hierarchy Built—Based on Objectives, Sub-objectives,
Parameters and Sub-parameters


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Chapter 8

Copyright  2013 Dorling Kindersley (India) Pvt. Ltd.

Enterprise Resource Planning: A Managerial Perspective Author: Veena Bansal

• Gather information about the vendors and their products using

Copyright  2013 Dorling Kindersley (India) Pvt. Ltd.

• Analyse the prototypes and demonstration versions that are

Copyright  2013 Dorling Kindersley (India) Pvt. Ltd.

Enterprise Resource Planning: A Managerial Perspective Author: Veena Bansal

Copyright  2013 Dorling Kindersley (India) Pvt. Ltd.

Enterprise Resource Planning: A Managerial Perspective Author: Veena Bansal

• Competitive bidding: The vendors bid and the most competitive

Copyright  2013 Dorling Kindersley (India) Pvt. Ltd.

Enterprise Resource Planning: A Managerial Perspective Author: Veena Bansal

1. Business Process Support or Functionality

Copyright  2013 Dorling Kindersley (India) Pvt. Ltd.

Enterprise Resource Planning: A Managerial Perspective Author: Veena Bansal

Copyright  2013 Dorling Kindersley (India) Pvt. Ltd.

• End users: who create and use the data.

• Properties important for the end users:

Enterprise Resource Planning: A Managerial Perspective Author: Veena Bansal

3. User Interface Fit

Copyright  2013 Dorling Kindersley (India) Pvt. Ltd.

• The look and feel, structure and capabilities required should

Enterprise Resource Planning: A Managerial Perspective Author: Veena Bansal

• An ERP solution that fits well would result in the following:

Copyright  2013 Dorling Kindersley (India) Pvt. Ltd.

 Reduced training needs

 Less organizational adaptation

Enterprise Resource Planning: A Managerial Perspective Author: Veena Bansal

Copyright  2013 Dorling Kindersley (India) Pvt. Ltd.

Enterprise Resource Planning: A Managerial Perspective Author: Veena Bansal

Copyright  2013 Dorling Kindersley (India) Pvt. Ltd.

Enterprise Resource Planning: A Managerial Perspective Author: Veena Bansal

• Assess the gap between the offering and the requirements.

Copyright  2013 Dorling Kindersley (India) Pvt. Ltd.

Enterprise Resource Planning: A Managerial Perspective Author: Veena Bansal

Copyright  2013 Dorling Kindersley (India) Pvt. Ltd.

Copyright  2013 Dorling Kindersley (India) Pvt. Ltd.

Enterprise Resource Planning: A Managerial Perspective Author: Veena Bansal

Copyright  2013 Dorling Kindersley (India) Pvt. Ltd.

Enterprise Resource Planning: A Managerial Perspective Author: Veena Bansal

Copyright  2013 Dorling Kindersley (India) Pvt. Ltd.

Enterprise Resource Planning: A Managerial Perspective Author: Veena Bansal

Copyright  2013 Dorling Kindersley (India) Pvt. Ltd.

Enterprise Resource Planning: A Managerial Perspective Author: Veena Bansal

Copyright  2013 Dorling Kindersley (India) Pvt. Ltd.

Enterprise Resource Planning: A Managerial Perspective Author: Veena Bansal

Copyright  2013 Dorling Kindersley (India) Pvt. Ltd.

• The team makes pair-wise comparison to answer questions of the form:

Copyright  2013 Dorling Kindersley (India) Pvt. Ltd.

Enterprise Resource Planning: A Managerial Perspective Author: Veena Bansal

Copyright  2013 Dorling Kindersley (India) Pvt. Ltd.

Copyright  2013 Dorling Kindersley (India) Pvt. Ltd.

Copyright  2013 Dorling Kindersley (India) Pvt. Ltd.

Enterprise Resource Planning: A Managerial Perspective Author: Veena Bansal

< Cost, Functionality, Reliability, Time, Platform Independence,

Copyright  2013 Dorling Kindersley (India) Pvt. Ltd.

Enterprise Resource Planning: A Managerial Perspective Author: Veena Bansal

 ERPA = 0.327 * 0.516 + .10.375 + 0.119 0.056 + 0.242*0.069