Chapter 5

ERP Selection
Anonymous, 2015
Reed, 2005
Choosing ERP
 Although major vendors have been selling
ERP software to billion dollar companies for a
while, the selection of suitable package for
particular company is not a straight forward
process.

 Off-the-shelf solutions seldom fit perfectly.

Choosing ERP
 Companies use ERP software to facilitate the
exchange of information throughout an
organisation.

 Vendors tend to sell it in suites containing

modules such as audit trail, payroll,
purchasing, point of sale, manufacturing,
inventory, etc.
How Do We Get Started?
1. Create an Operational Framework
2. Selection of Enterprise System
3. Request For Proposal (RFP)
4. Evaluation and Vendor Selection
1. Create an Operational Framework
Formation of Committees

1. Steering Committee (executive level) – general

guidance and authority
Steering Committee helps to steer a project through from
start to completion. Sometimes it might be formed entirely
by staff from the organization developing and implementing
the project, but more usually it is made up of
representatives of key organizations who are partners in
the project, and/or who have particular expertise to lend to
the project, and/or whose clients are the intended users of
the output of the project.
 1. Create an Operational Framework

Steering Committee Roles

Role #1: To provide direction and alignment

• The executive steering committee ensures that a project
stays on course and achieves the desired benefits through
championing the project within the organization.
• The committee helps secure buy-in at all levels of the
organization and helps drive project branding.
• In this way, the ERP project becomes an extension of the
enterprise itself, rather than a time-consuming obligation
that gets in the way of regular operations.
 1. Create an Operational Framework

Steering Committee Roles

Role # 2: To approve project changes and decisions

• Changes, the scope, budget and schedule changes that
invariably occur require executive-level approval in order
to be executed.

Role # 3: To provide leverage for execution of strategies

• When changes or strategies are proposed by a project
team, the leverage of the steering committee can be a
powerful force in efficient execution.
 1. Create an Operational Framework

2- Advisory Committee (one level lower, key

Directors and major stakeholders) – decision-
making and consensus-building

3- Core Project Team (experienced staff from

key departments on full-time re-assignment) –
leadership and daily operations
 How Do We Get Started?
 What are our benchmark or peer institutions
using?
 Who is making news in (your) Industry?
 What does the IT and business literature tell us
about these providers?
 How do people commonly implement these
systems?
 Can we get a fix on typical budgets for these
projects?
 How do these systems look and feel?
What consultant can add
 An industry expert may be better able to
determine which suite will work well for a
given company.
 An expert in a particular module may know
more about how to get that software up and
running.
What consultant can add
 When choosing a consultant, a prudent ERP
decision maker should inquire about that
consultant’s financial ties to the software
vendor it recommends.
2. Selection of Enterprise System

Define the current business processes. If needed optimization of process,

engage an ERP consultant to assist the business process re-engineering.
With clearly defined business processes, your organization will have a
better idea of the business requirements that your ERP system must
address, and you’ll be ready to begin digital transformation.

Consider the following factors while selecting an ERP software

• Whether the ERP solution is turnkey or will be customized to your
organization and unique business processes

• Whether the solution can meet the technical needs of your

organization.
• If the solution is scalable, able to adapt in response to growing users or
increases in data..
• Possible support for multisite or multi-company environments if you
need to work with multiple operations..
2. Selection of Enterprise System

• What are the system’s functionalities and ease of use?

• Consider the current challenges that your organization faces. Evaluate
which of the ERP system’s functionalities would accomplish this.
• If possible, arrange for a demonstration to see if the potential end
users find the platform easy to use, and whether the platform allows
them to carry out their daily tasks.
• Evaluate the cost of the ERP platform and whether it is appropriate for
the functionalities that it offers.
• Determine if the charges will be one-time or recurring. Find out the
charges for annual maintenance, as well as any upgrades. Consider any
hidden costs that might not be immediately apparent. Calculate the long-
term total cost of ownership for all aspects of the system, including
hardware, software, and support.
• Consider support and training requirements
3. Request For Proposal (RFP)

A request for proposal (RFP) is a document that requests proposal,

through a bidding process, by an agency or company interested in
procurement of a Goods / Services.
The interested bidders return a proposal by a set date and time.
Content of the RFP is very important for the bidder to understand the
requirements.
What should you include in an RFP ??

• Describe about the organization.

• Reason why you want to implement ERP system

• Provide clear Scope of Work (SOW).

3. Request For Proposal (RFP)

• Expected Deliverables eg: Hardware (Servers), Networking Services,

ERP software, Implementation Service, Testing Services, Trainings,
Data Migration, Go-Live events, Post go-live supports.

• Project Management & Project Team Structure.

• Project Timelines and Milestones
• Project Location
• Change Request Management
• Roles and Responsibilities
• Problem resolution and escalation matrix
• Bidding Process.
3. Request For Proposal (RFP)

• Evaluation Criteria – Technical and Financial Criteria

• Payment Milestones
• Penalty Clauses
• Confidentiality
• Contract Type
• Project Cancellation Clauses
• Annual Maintenance Contract (AMC)
• Service level agreements
• Performance level security.
• Annexures
How Do We Make a Good Decision?

 Keep the focus on the project goals

 Describe the general scope and any known
constraints
 Be specific on format of responses and
evaluation criteria
 Establish a reasonable timeline
 Preserve maximum flexibility for reaching a
decision
How Do We Make a Good Decision?

 Identify representative processes and/or critical

business scenarios
 Examine the underlying technology
 Focus on architecture, tools, and sample
functionality
 Don’t allow demos of versions in development
(look at release history and R&D budgets as
predictors of future behavior)
4. Evaluation and Vendor Selection

All proposals received from the bidders are evaluated in a consistent

manner following all applicable rules and policies

The evaluation process in general should include the following steps.

• Formation of Evaluation Committee : The evaluation committee will

consist of at least three individuals. The committee members should be
familiar with, and may have assisted in establishing, the specifications
and the rating criteria that were included in the RFP.

• Responsive Determination : Review the proposal to confirm that the

bidder comply with requirements outlined in the RFP. If the bidder
doesn’t not comply, then the proposal will be eliminated from
consideration.
4. Evaluation and Vendor Selection

• Responsible Determination : Evaluate various factors such as financial

resources; experience; organization; technical qualifications; available
resources; record of performance; integrity; judgment; ability to perform
successfully under the terms and conditions of the contract; etc.
Proposals from vendors found to not be responsible will be eliminated
from consideration.

• Technical Evaluation : The RFP Evaluation Score Sheet will be used by

each committee member for the technical evaluation. If a vendor
submits alternate proposals, they are considered separate proposals
and should be evaluated as such. The committee members will
complete a score sheet for each proposal being evaluated.
4. Evaluation and Vendor Selection

• Cost Evaluation: After the technical evaluations have been completed,

perform a cost evaluation of each proposal and assign a cost score to
each proposal.

• Composite Score Computation: Combine the technical score and the

cost score to create a composite score for each proposal. Create a list
of all the proposals and scores in order from highest to lowest. The list
and the cost proposals will then be distributed to the committee for
review. Once the cost proposals have been distributed to the committee,
no changes can be made to the technical evaluation

• Award Notification: Award shall be made to the vendor whose proposal

received the highest composite score.
4. Evaluation and Vendor Selection
In general the committee need to consider the following while evaluating:

 System architecture (including support for open standards), security configuration,

reporting functionality

 Application software functionality (including support for best practices)

 Company characteristics (strategic vision, customer support resources and

commitment, R&D, financial stability, client references)

 Total costs (acquisition, implementation, maintenance)

 Implementation and maintenance factors (availability and cost of 3rd party consulting
and training services, proven methodologies for implementation and support, training
plans and opportunities)
In summary Choosing ERP
 Requires:
 Whom to Buy From
 What consultant can add
 Locking and Leasing Options
 Troubleshoot Early
Locking and Leasing Options
instead of purchasing
 The company that purchase all the modules
does not have access to any module until it
pays for the “key” to it.
 Instead of buying, some companies lease
ERP modules or suites in which they might
rent the modules they need.
 This save on equipment cost and
Implementation cost
Locking and Leasing Options
 With this the responsibility of ensuring that
the system is kept running is on vendor. The
company is not aware all behind the scene.

 But this may involve considerable expense

and inconvenience; if that vendor changes
formats, the company has no choice but to do
the same.
Troubleshoot Early
 After ERP suite has been chosen the
company must know will implement it and
keep up-to-date.

 Even the ERP choice that the company has

is great, it is of no meaning if there is no one
with know-how to instal and maintain.
Troubleshoot Early
 Before the company commits to a particular
ERP package, the decision makers must
know the IT people needed to implement and
upgrade it – whether they come inside or
outside the company. They must available
and affordable.
References
 https://net.educause.edu/ir/library/powerpoin
t/EDU05014.pps