Evaluation and Selection of ERP Packages
Evaluation and selection of ERP package is an essential criterion for successful ERP implementation. Quality of selection will have a long term impact on the processes of the organization. It is also not easy to switch to another product with concomitant scale of investment and complexities. This evaluation and selection process should be properly directed and normally comprises of following activities:
Formation of an evaluation committee: An ERP implementation is not an IT project but a business oriented development. Therefore, in addition to Chief Information Officer, this committee should comprise of all functional heads and driven by a top management representative. Since all business functions are represented in selection process, the chosen package would have wide acceptance subsequently.
Requirement Analysis: This analysis should outline functional expectations of various business divisions, such as warehouse, finance, procurement, from potential ERP package. Vital requirements specific to the company should be highlighted e.g.
- Must have Distribution Requirement Planning (DRP) functionality.
- In transit inventory and pallet tracking, as a part of shipping requirement.
- Multiple purchase orders linked to one bill of lading.
- Multi currency and multi locations functionality.
Requirement analysis forms a base for preparing a Request for Proposal (RFP), where important technical and commercial perquisites are incorporated. Common examples of technical perquisites: flexibility, Upgradability, User friendliness, field level security, Operating system and database compatibility. Common examples of commercial perquisites: cost, reference sites, high level project plan, resumes of consultants, post implementation support, financial health of the company, local presence, number of installation and upgrade.
Selection Criteria: A pre-determined selection Criteria should be ready before actual selection process commences. Selection criteria are normally in the form of questionnaire and point system, where each question represents a business or technical need. Weightage for each point or a group of points are predetermined which varies according to criticality of the issue. These processes help in making the selection process objective and transparent.
Selection Process: Selection process constitutes various stages as mentioned below:
- Short listing of vendors: Hundreds of ERP packages are available in the market, which have different concept, architecture and sets of functionalities. Analyzing all the packages is not feasible. Organization need to identify a few best suited packages by looking at product literatures of vendor, finding out which product is being used by their peer organizations and getting help from external consultants. Once a few packages are short listed, respective vendors should be asked to respond to the RFP, as per its format.
- Demo and Presentation: Responses from shortlisted vendors are evaluated by the selection committee after collating scores obtained by them and a consensus is reached about their final ranking. Anyone not fulfilling a predetermined vital requirement is eliminated at this stage. Top two or three vendors, are then invited for demo and presentation. Mode of presentation should be carefully scripted and send to the vendors in advance. They should be asked to walkthrough a particular business cycle through their vanilla software. They should be specifically asked to clarify any area of concern about their proposal, which may expose weak/ problem area of their offer.
- Site visit and contract negotiations: After the committee has reached a decision on best suited package, visits to reference sites are imperative. The vendor should provide reference sites of similar size and industry, identical version and belonging to same geographical location. Team members should have look and feel of the systems operating at reference sites and ask pertinent questions covering overall satisfaction, functionality, cost/ time over run, support concerns etc. After site visit, if the committee members feel that their selection is right, they proceed with final negotiation and procurement. Negotiations are normally held on license and annual maintenance cost, payment plan including a leasing option, support issues and other commercial and legal terms.
The most important point of selection process is that it should be based on a consensus and have maximum buy in as an ERP system belongs to all functions and departments. Another important issue is that over expression of requirement during requirement planning should be avoided as this will lead to incurring unnecessary expenditure.