Discuss about the ERP Software and Vendor Selection.
The ERP system (Enterprise Resource Planning System) is defined as an integrated system for business management that comprises of all the functional departments like Human Resource, Accounting, Finance, Production, and Logistics. The application of the ERP system helps in integrating and organizing the information flow and operational process of an organization. Shukla et al., (2016, p.144) Illustrated that the application of the ERP system in a business organization helps in optimizing the use of various resources including machine, money, material and men. On the other hand, Kilic, Zaim, and Delen, (2015, p.2341) defined the ERP system as an application with an integrated database that allows customization for developing queries. The ERP system is a module that can be customized according to the requirements of the business and processes. Huang, and Handfield, (2015, p.24) cited that whenever any organization decides for the implementation of the ERP system, the ongoing process impacts the ongoing process of the organization. Depending on the requirement of the organization, a significant requirement of the organization is to select an appropriate process and vendor for the implementation of the ERP system. This particular report will focus on identifying the criteria and process for appropriate vendor selection for an organization.
The aim of the report is to evaluate the appropriate criteria followed for the selection of the required ERP system for an organization. In addition to that, the report also evaluated the various relevant issues faced by the organization during the vendor selection process and identified the solution for the relevant issues.
In the current competitive market, every organization is focusing on implement the ERP system for the automation and optimization of the process. The market completion enforces the organization for the optimization and improvement of the business processes for improving the effectiveness and business efficiency. The implementing process of the ERP system impacts the business process. According to Khan, and Faisal, (2015, p.601), the implementation of the ERP system is one of the complex task Al-Ghofaili, and Al-Mashari, (2014, p.138) stated that the failure of the appropriate ERP vendor has the potential of carrying risk in the business process of the organization. Efe, 2016, (p.112) claimed that in spite of having decades of experience and knowledge about the selection, implementation, and election of the ERP vendor, the projects either fails or exceed the time and budget of the organization.
According to Kilic, Zaim, and Delen, (2014, p.91), the selection of wrong vendors and the acquisition of the inappropriate software has a negative effect on the organization and business procedure. Therefore, the identification of the appropriate vendor selection criteria in the implementation of the ERP system plays a critical role in the project. The evaluation of the relevant risks during the vendor selection process of ERP will allow the small and medium size companies in appropriately selecting the ERP system and its respective vendor.
The selection of the ERP system and the software is crucial as it must meet the requirements of the origination and business process. The lack and limitation in the analysis and evaluation of the business decision can lead to the business process’ detrimental shift and financial loss. Oztaysi, (2014, p.51) cited that for the implementation of the ERP system, the business organization needs to select an appropriate vendor that will help in customizing the software according to the requirement of the business organization.
According to Lopez, and Salmeron, (2014, p.45) evaluate the ERP software economics is essential criteria for the selection of the appropriate vendors. PeopleSoft, SAP, and Oracle have invested millions for the development of ERP software and is one of the dominant vendors in the market. Oztaysi, (2014, p.49) claimed that the selection of the ERP vendor is mostly made based on the dominance of the vendor over the market place. Apart from that, the various factors that are evaluated and assessed during the selection appropriate vendor for the ERP system.
Lopez, and Salmeron, (2014, p.44) illustrated that the cost for implementation of the ERP system in an organization is comprised of the software package cost and the human resource. Furthermore, the most for the human resource is four times the cost of the software. In addition to that, implementation of the ERP system in an organization is not a onetime process and required continuous monitoring and maintenance of the system. Haddara, (2016, p.658) has defined the implementation of the ERP system as a relation between the vendor and the origination. Therefore, it is essential for the organization to be financially stable before selecting any particular vendor for ERP.
According to Wang, (2015, p.29), the implementation of the ERP system includes detailed planning, evaluation, and assessment of the business process and requirement of the company. Therefore, the selection of the required software for the ERP needs to be assessed by the business operational expert. Haddara, (2014, p.401) claimed that implementing a new ERP system in an organization requires accepting the different software established by the particular ERP vendor in order to interpret the practices and processes followed in the business. Generally, in the process for ERP implementation, the business organization needs to accept the re-engineering and assumptions taken by the ERP vendors. Therefore, the organization needs to evaluate the strength and weakness of the particular vendor before implementing the system within their business procedure. In addition to that, Razi, and Tarn, (2015, p.84) claimed that it is essential for the organization to evaluate the critical business required and features within the ERP system that the selected vendor could provide for the customization. Supporting the argument, Vahidi, SalooKolayi, and Yavari, (2014, p.51) cited that the systematic section of the ERP and vendor selection through proper planning and analysis results in the increase if the success likelihood of meeting the business needs.
The significant aim of the business organization is to enhance the profitability of the business and minimize the cost of conducting the business. According to Zeng, Wang, and Xu, (2015, p.18), the most significant activity in the process of ERP implementation is the defining and capturing all the requirement of the organization. On the contrary, Kazemi, Saeidi, and Azizmohammadi, (2014, p.65) have shown an effective selection criteria for selecting the appropriate vendor for ERP system. The selection considers the vendor’s stability, history and technical support and assistance provided by the vendor during the implementation. In addition to that, Shen, Chen, and Wang, (2016, p.131) cited that the organization needs to evaluate the financial records and last year sales of the ERP vendor. Shukla et al., (2016, p.141) showed that during 1993, Cisco Systems implemented unique software packages based on UNIX for processing the transaction of an organization. During the time, Cisco System has implemented the system based on the $500 billion company (Huang, and Handfield, 2015, p.25). The rapid growth rate of 80% of the company has resulted in the reliability, redundancy, maintainability issues and system outages (Khan, and Faisal, 2015, p.487). As a result, in 1994, the Cisco has witnessed corruption in the database and meltdown of the business process that in turn resulted in the closedown of the organization for two days. Therefore, the identification and access of the all the possible risks within the organization need to be evaluated for the selection of an appropriate vendor for the ERP system.
In addition, that, Poba-Nzaou et al., (2014, p.601) claimed that the selection of the appropriate vendor for the ERP system is based on various categories including cost, integration, the technology used, functionality, vendor’s reputation and strength. On contrast to this, Efe, (2016, p.111) cited that the organization defines the vendor selection criteria based on the requirement and business process. The selection criteria defined by the organization for the vendor selection reflects the importance of the organizations’ requirements. Oztaysi, (2014, p.51) have provided example stating that if any organization prioritized the technical advancement and upgradable criteria of the EPR system, the organization conducts the selection based on a two-step process. In the initial process, the organization shortlisted six to seven vendors depending on the upgrading criteria. In the second process, the organization selected the appropriate vendor on the basis of the other criteria.
The final selection of the appropriate vendor for the organization is a crucial decision for an organization. Kilic, Zaim, and Delen, (2015, p.2351) claimed that the organization needs to consider the technological infrastructure and performance of the system provided by the ERP vendor. Moreover, based on the various approaches to the organization of the vendor selection process for ERP implementation considers the following criteria:
Methodology: The process adopted by the vendor for implementing the ERP system. The process reflects the smooth transition of the existing system to the new system without any issues. The appropriate vendor needs to follow a detailed training to the employees for success of the ERP system;
Stability: The organization assesses the financial stability or the vendor along with the market reputation for the ERP solution provided. In addition to that, the client base and the number of active years in the market helps in evaluating the stability of the ERP vendor;
SLA (Service Level Agreement): The implementation of the ERP system is a continuous project based on monitoring and continuous maintenance of the ERP system. Therefore, before selecting the appropriate vendor, the business organization need evaluate and assess the service and level of the agreement provided by the ERP vendor.
Professionalism: The ability of the ERP vendor in working with the customer’s requirement and provide demonstration and training for the products;
The implementation of the ERP in any business organization fails mostly due to the improper process followed during the vendor selection and implementation (Khan, and Faisal, 2015, p.486). The significant issues related to the implementation of the ERP system in an organization includes:
The commitment of the top management: The implementation of the ERP system requires the active incorporation of the top management of the organization. The ERP system does not require the change in the software system, but the transforming and repositioning the practices and procedures followed in the organization. Al-Ghofaili, and Al-Mashari, (2014, p.136) claimed that the top management of the organization does not only provide financial resources to the implementation but takes a major decision using the implementation process. The lack of management commitment during the implementation process results in the failure of the system;
Reengineering: Reengineering the ERP system means modifying the system according to the business requirements ensuring the profitability and enhances the performance of the business organization. Customization of the ERP system increases the cost. In addition to that, the significant issues related to the implementation in implementing the AS-IS process followed as per the ERP module of the vendor (Kazemi, Saeidi, and Azizmohammadi, 2014, p.65). Therefore, the organization needs to select the ERP vendor offering modules related to the business procedures.
ERP Consultant: The market for the ERP has witnessed the significant growth of the technology. The continuous growth resulted in the fulfillment of the requirement gap for achieving the goals of the organization. Finding the appropriate consultant with the right technological skills for maintaining the ERP. In addition to that, involving a consultant of a minimum of five years of experience in the industry result in the increase of cost up to $80,000 annually (Shen, Chen, and Wang, 2016, p. 137).
Following a particular process for selecting the accurate ERP vendor will increase the efficiency in selecting ERP vendors and integrity of data within the business. In addition to that, following the appropriate steps in the vendor selection will result in the comprehending and visualizing the risk involved in the implementation.
The organization requiring the ERP implementation need to develop a trade-off criteria for selecting the appropriate vendor. According to (), the tradeoff during vendor selection process requires replacement of particular criteria with another criterion with equal or fewer values. Developing criteria for tradeoff ERP vendor differs in each organizational based on their requirements and organizational process.
There exist various trades off criteria including system scalability, vanilla ERP system, customized ERP system, the functionality provided by the vendor, level of vendor involvement after implementation. The organization needs to access the business needs and or “key business drivers.” The functionality of the module provided by the vendor needs to be considered as an additional criterion for the tradeoff. The business organization should always consider the services and functionality provided by the required vendor for meeting the needs and requirement of the business processes. Although there exists a trade-off during the selection and prioritizing the functional modules based on budget, time and the capabilities of the particular vendor. Moreover, the organization should consider the scalability of the vendor for meeting the business requirements while considering the organizational growth. In addition to that, the top management of the organization should take the vital decision for whether the implemented ERP system needed to be managed and monitored by the eternal employees or outsourcers. The eternal ERP team will be able to provide the accurate requirement of the business procedure but lacks the technical knowledge and experience with the ERP system. On the other hand, the external team will have the expertise of handling the ERP system but will lack the understanding of the internal processes of business.
Conclusion
Selection of the appropriate ERP vendor for the implementation of the new system into the business environment is quite challenging. The detailed planning and analysis of the resources within the organization. In addition to the close attention provided during the gathering of the information, vendor evaluation will allow the business organization in effective selection of the appropriate ERP vendor. Moreover, the feasibility of the ERP system on the business allows in the identification of the risks and selection of an appropriate tradeoff for selecting the ERP vendor.
References
Al-Ghofaili, A.A. and Al-Mashari, M.A., 2014, August. ERP system adoption traditional ERP systems vs. cloud-based ERP systems. In Innovative Computing Technology (INTECH), 2014 Fourth International Conference on (pp. 135-139). IEEE.
Efe, B., 2016. An integrated fuzzy multi criteria group decision making approach for ERP system selection. Applied Soft Computing, 38, pp.106-117.
Haddara, M., 2014. ERP Selection: The SMART Way. Procedia Technology, 16, pp.394-403.
Haddara, M., 2016. ERP Selection: A Case of a Multinational Enterprise. Information Resources Management Journal.
Huang, Y.Y. and Handfield, R.B., 2015. Measuring the benefits of ERP on supply management maturity model: a “big data” method. International Journal of Operations & Production Management, 35(1), pp.2-25.
Kazemi, A., Saeidi, S.R. and Azizmohammadi, M., 2014. Selecting an ERP system using multi-criteria decision making method: a goal programming and fuzzy approach. International Journal of Business Information Systems, 16(1), pp.55-71.
Khan, H. and Faisal, M.N., 2015. A Grey-based approach for ERP vendor selection in small and medium enterprises in Qatar. International Journal of Business Information Systems, 19(4), pp.465-487.
Kilic, H.S., Zaim, S. and Delen, D., 2014. Development of a hybrid methodology for ERP system selection: The case of Turkish Airlines. Decision Support Systems, 66, pp.82-92.
Kilic, H.S., Zaim, S. and Delen, D., 2015. Selecting “The Best” ERP system for SMEs using a combination of ANP and PROMETHEE methods. Expert Systems with Applications, 42(5), pp.2343-2352.
Lopez, C. and Salmeron, J.L., 2014. Dynamic risks modelling in ERP maintenance projects with FCM. Information Sciences, 256, pp.25-45.
Lopez, C. and Salmeron, J.L., 2014. Dynamic risks modelling in ERP maintenance projects with FCM. Information Sciences, 256, pp.25-45.
Oztaysi, B., 2014. A decision model for information technology selection using AHP integrated TOPSIS-Grey: The case of content management systems. Knowledge-Based Systems, 70, pp.44-54.
Oztaysi, B., 2014. A decision model for information technology selection using AHP integrated TOPSIS-Grey: The case of content management systems. Knowledge-Based Systems, 70, pp.44-54.
Poba-Nzaou, P., Uwizeyemungu, S., Raymond, L. and Paré, G., 2014. Motivations underlying the adoption of ERP systems in healthcare organizations: Insights from online stories. Information Systems Frontiers, 16(4), pp.591-605.
Razi, M.A. and Tarn, J.M., 2015. ERP system solutions for small companies: readiness & selection. Journal of small business strategy, 14(1), pp.71-85.
Shen, Y.C., Chen, P.S. and Wang, C.H., 2016. A study of enterprise resource planning (ERP) system performance measurement using the quantitative balanced scorecard approach. Computers in Industry, 75, pp.127-139.
Shukla, S., Mishra, P.K., Jain, R. and Yadav, H.C., 2016. An integrated decision making approach for ERP system selection using SWARA and PROMETHEE method. International Journal of Intelligent Enterprise, 3(2), pp.120-147.
Vahidi, J., SalooKolayi, D.D. and Yavari, A., 2014. A model for selecting an ERP system with triangular Fuzzy numbers and Mamdani inference. J. Math. Comput. Sci, 9, pp.46-54.
Wang, C.H., 2015. Using quality function deployment to conduct vendor assessment and supplier recommendation for business-intelligence systems. Computers & Industrial Engineering, 84, pp.24-31.
Zeng, Y.R., Wang, L. and Xu, X.H., 2015. An integrated model to select an ERP system for Chinese small-and medium-sized enterprise under uncertainty. Technological and Economic Development of Economy, pp.1-21.
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