Enterprise resource planning

ERP Evaluation and Selection process. A successful ERP project requires selecting an ERP solution, implement the solution, manage changes and examine the practicality of the system, Wei and Wang, (2004). Wrong ERP solution choice would either fail the implementation or weaken the system to a greater impact on the enterprise, Hicks, (1995); Wilson, (1994).

Most enterprises often jump into looking at ERP functions and features rather than examining the strategy and business processes. It is important for management to know the current strategy, processes and supporting systems compared to what they could be with the new systems, Donovan, (2001).

For most enterprises, the decision to implement ERP functionalities will require buying a software package from one of the more popular vendors on ERP market like SAP and Oracle. But the selection process is not a straightforward task, hence thorough understanding of what ERP packages are to offer, differences in each of them and what might be at stake in selecting one package over the other should be well examined, Sammon and Adam, (2000).

Evaluating and selecting an ERP system can be a very complex process on the other hand, but it should be a ‘fact-based’ process that will bring the enterprise to the point where comfortable & well-informed decisions can be made, Donovan, (2001).

Thus, in an online poll conducted by ESI International survey of 2,000 business professionals, (2005), fig. 1, below, it clearly show that most software projects, ERP inclusive, failed due to lack of adequate requirements definition.

In addition to the above, typical ERP project implementation can still fail due to wrong solution choice, Donovan, (2001).

Therefore, a research carried out by Management Agility Inc, (2005), revealed that it is imperative to adopt a thorough evaluation and evaluation process before adopting any ERP solution in SMEs. Hence, there are eight steps detailed below in the flowchart, fig. 2, for a careful and reasonable level of a successful ERP implementation in SMEs. None of these steps must be rush through or skip to avoid any element of failure.

These eight steps can be categorised into 5 stages;

• Planning
• RFP
• Solution Evaluation
• Negotiation
• Selection and Agreement

ERP Software & Hardware (Solution) Evaluation and Selection Steps

Yes

No

Stage 4

Stage 3

Stage 2

Stage 1

Define Requirements

Shop Round for Product

Clarify Requirements

Evaluation Vendor Inquiry

Interact with Vendors

Negotiate Agreement

Action Agreement

Define business case/need and spell-out required values. Be specific. Ensure the business sponsor is willing to push through business case for change.

Look round the market for what product is available. Identify vendors that operates and their general approaches to technologies the take. Discuss with others in the same industry as you are etc.

Clarify your requirements and be sure of what you are looking for in line with you business case. Refine requirements if possible and be specific too.

Find out what product is looking promising in line with the business need and from which vendor. Identify which vendor and their products and invite interesting ones for demo etc. Request for proposal (RFP).

Invite each shortlisted vendor over for a chat and find out more about the product. List out expectations based heavily on business requirements.

At this point evaluate this approach. Can you afford to change your current process? Can you afford the change the new product will bring and many more?

Initiate Negotiation for the selected product with the selected vendor. Agree on who does what, when are they to be done. Negotiate deliverables, timelines, cost & payments schedules and terms, support inclusive.

Review all legal terms, finalise the contract and select product for onward implementation.

Alignment of business requirement to what the software/hardware can provide. This is the core of the whole exercise else stop the evaluation.

Evaluate the product capabilities in line with the business requirement. Evaluate the impact of this product on the business requirement.

Stage 5

Analyse Gaps

Yes

For effective ERP Solution evaluation and selection process, the above steps are categorised into 5 phases as explained below;

Stage 1 – Plan Requirement

Business need is defined, along with areas in business that required technical approach.

Develop a specific business case with business value for a solution.

Ensure that the project sponsor is willing to articulate the business case for change.

Indentify vendors that operate in the line of products you are looking for.

Get familiar with the software and hardware infrastructure presence for the solution seeking.

Get general view of investment needed, considering software, hardware, other related infrastructure and ongoing support.

Based on the survey, evaluate the organisation readiness for the investment and decide whether to continue or not.

Now define priorities under “must-have” and “nice-to-have” accordingly.

Stage 2 – Request for Proposals (RFP)

Shortlist interesting vendor based on the outcome of market survey for products.

Invite interesting vendors for interaction/demonstration of their products.

Collects facts/functionalities in line with the business need from various products demonstrations for the developments of unbiased RFP for vendors.

Set-up a neutral body to develop RFP using all facts gathered during products demonstration aligned to the business requirements.

Distribute out RFP that addresses the vendor as a company and the products they offer.

Generate basic expectations from an ideal proposal in line with the business need for onward selection of the ideal software vendor.

Stage 3 – Solution Evaluation

Identify and prioritise remaining gaps between software capabilities as demonstrated and business requirements. Sample form in fig. 3; below.

Identify how the gaps will be bridge in terms of configuration, configuration, process change or combination of all these.

If the gaps cannot be bridge, then discontinue the evaluation exercise immediately.

If the gaps can be bridge consider reengineering of those affected business processes affected and continue with the evaluation.

Stage 4 – Contract Negotiation

Negotiate with each vendor.

Establish software, hardware and other infrastructure agreement requirements, which include version, components, maintenance and support. Also negotiate participation in user groups, license costs, maintenance fees and many others.

Establish service provider agreement which also include deliverables, timelines, resources, costs and payment schedules.

Establish other legal requirements.

Stage 5 – Selection and Agreement

Upon successful negotiation with the right vendor;

Review all legal terms on privacy protection, operation guidance and data manipulation etc.

Approve agreements with the selected vendors.

Agree on implementation plan.