Basic criteria used in the selection of an ERP system
It is always difficult to choose an ERP system, especially if an adequate comparison is made. The objective of the present document is to show some of the most important criteria after which individual proposals for systems must be assessed. Provided are both descriptions of the significance of the criteria proper, and the factors that are to be evaluated in order to make an assessment of each supplier proposal. At its end this document contains a model system of assessment by points that can be used to work out an own system. Systems can also be evaluated without assigning points, just on the basis of a subjective opinion; in that event it will be good for the evaluators to read the present document simply as an advance preparation as to what they must watch closely in reviewing the proposals.
In order to make a well-grounded choice it is important to elaborate in advance terms of reference on the needs, which shall be forwarded to the suppliers of ERP systems, so that they can submit their offers. The method of preparing terms of reference is beyond the scope of the present document. The only recommendation is to make it as detailed as necessary in order to achieve parity of the proposals.
The functionality of a system represents the degree to which the system covers the information needs of the enterprise. As such needs are a mixture of standard and non-standard requirements, operating model of the firm, methodology of reporting, etc., as a general rule no system can cover 100 percent of the requirements. It is important to evaluate the functional potentials that are material for doing the business and those that can be ‘sacrificed’, at least for the time being.
The main processes that must be satisfactorily ‘covered’ by a system in the manner on which they take place:
– The process of trading – from meetings and contacts through conclusion of transactions to the development of relations follow-up;
– The processes of purchasing the necessary technical means and materials;
– Planning of the required resources – human, material, time, etc. needed to meet in a correct manner the commitments undertaken;
– The cash flows – monitoring, authorization, planning, accounting;
– Status of the material stock;
– Other attending activities – of small importance, yet the possibilities of applying a unified system must be evaluated.
2. Ease of usage
Despite the widespread belief that ease of usage can stay in the background this, in the most general case, is, to put it mildly, not true. Due to the easier perception and usage by consumers the ease of usage saves money and seriously reduces the TCO (Total Cost of Ownership) of one system. Besides, it is much easier for the personnel to enter upon and start using a system more pleasant to work with. This results in a timely, more precise and more usable, as a whole, information. Ease of usage includes:
– Good visual appearance;
– Well arranged screens;
– Instructions in the very screen and information on the individual fields in the process of work. Information in the screens proper in the process of work is much more essential than the availability of user documentation, which remains unread, in the general case;
– Reduced, yet not as a must, absolutely minimized number of clicks with the mouse or keys pressed in order to perform the respective functions;
– Main menu that is easy to orientate in;
Ease of usage, of course, can also mean the use of a system that will not cover the entire necessary functionality, and this actually means seeking shelter from real problems for a certain period of time.
3. Corporate environment
Where the system is used by a holding structure, in addition to the coverage of individual enterprises the need arises to integrate the information. Specific features of the system in this connection are:
– Unified data base;
– Multiple companies operating in one data base;
– Openness towards consolidation of the information from all enterprises;
– It shall be possible, in the work of multiple companies, to share data – most of all data on counterparties and products and the obligations related to that, payments, service, mutual relations, etc. This possibility is extremely important, but due to its complexity it is not provided by all ERP systems;
– Openness for connection with accompanying systems – these are web-sites and other subsystems that can be used by the different enterprises;
– Flexibility – in order to apply a unified system to heterogeneous enterprises it is extremely important for the system to be capable of ‘accommodate’ itself in accordance with the business model of the difference companies.
Flexibility of a system means the degree to which such system is capable of ‘accommodating’ itself to various types of business and different styles of management.
The flexibility of s system is difficult to assess and the factors provided here can only be used in a general evaluation:
– Ability of the system to adapt to different documentary models.
Documentary models show the sequence of documents that are processed in the firm, Proposal – Proforma – Invoice, for example.
– Capacity to change the entry screens in conformity with the needs
» to hide redundant fields
» to set values by default
» to determine the order of fields
– Capacity to create ‘user’ fields. These are additional fields that are not provided for in the system as standard. It shall be possible to process user fields like standard fields. It shall be possible, in the general case, for user fields to:
» to be filtered
» to be sorted
» to be grouped
» to be summed up – a possibility to combine different screens and assemble user interface.
» et cetera.
5. State of integration
The link between individual modules /sections of one ERP system/ contributes to the obtainment of a timely idea of what is happening in the given organization, automates the business processes, regulates the conditions of exercising the activity.
Quite often the importance of complete (or almost complete) integration is undervalued and a decision is taken to purchase software programmes from various producers and to ‘connect’ them. One must bear in mind however, that such connection brings several problems:
– Problems arise in the exchange of data, which can possibly result in each of the supplier shirking their responsibility;
– Often, the connection is not adequate and requires heightened attention in every exchange;
– With the development of software programmes the connection either becomes inoperable or is not of full value any more, and sometimes the supplier, who created it, is unable to upgrade it;
– It becomes necessary, quite often, to introduce basic nomenclatures in both connected software programmes and this necessitates the continuous monitoring of their codes for parity, etc.
The level of integration of the overall information system of a company, arranged by their degree of preference, is as follows:
– Each department uses different software for its activity. Software products come from different producers and were purchased separately;
– Each department uses different software in its activity. Software products come from different producers, but are supplied as a set by one integrator;
– Different software products delivered by different suppliers, with a connection built between such products;
– Different software products from one supplier with communication between them;
– One fully integrated software.
The ‘reliability’ factor is very difficult to evaluate. The reliability of a system is a complex quantity dependent from almost all other factors listed here that shows the degree to which the system will remain fit for operation. Most of all, reliability depends from:
– The level of integration of the system proper;
– The method of implementation and support;
– The system administration;
– The scalability of the system – i.e. if the system is stipulated for the expected load. etc.
7. Security of information
A main purpose of the ERP systems is the comprehensive service of the needs of a medium to large corporate organization. In order to meet such requirements there must a system of security at the various levels of work in this organization. Managers must be able to determine themselves which employee what to see and what his/her occupation is from the different modules of the product and this shall not influence the efficiency of performance of his/her duties.
Conditionally the security systems can be divided into two main types:
– System of functional security. It allows the determination of users’ access to the functions of the system. Where a user has access to a particular function, however, he/she is capable of manipulating all data to which such function has access;
– System of data security. This system is found very rarely in its full shape, despite the assertion of most suppliers that they have all sorts of security systems. The idea is to be able to determine which user to what records shall be allowed access. All too often a system of that kind will be present partially – access is defined by rules firmly encoded in the software or there exists a possibility of setting rules at the system level (but not by the users);
A good system of data security must allow the determination of user access levels individually to any record or at least to any type of record.
System scalability means its capability of exponentially assuming greater volumes of data with no disturbance thereby caused on the normal (pace of) operation. Very often systems are designed for a particular order of the scope of information and any increase of such scope by 1-2 orders results in problems in the usage of the system. Under scope here we understand both the volume of data and the number of users, servers, branches, offices, etc.
In the course of their growth firms create more and more complex hierarchical organizations. The other aspect if scalability of a software system is its ability to assume the division of departments into smaller and targeted ones and provision of control under a growing hierarchy. To cut it short, systems that look unnecessarily complex (at small companies) with rules of approval, hierarchical levels etc. become irreplaceable under a growing organization.
Where a system is chosen it is important to strike the balance between system complexity and its capacity to assume future growth of the firm during the coming 6-7 years.
9. Prompt and efficient implementation
Prompt and efficient implementation is also frequently underestimated because it is a one-time process. In fact, a slow or inefficient implementation may have exceptionally ling-term adverse consequences, such as system rejection by certain users, non-usage of functions, etc.
Attention shall be paid at the very same time not to place objectives to excess for the implementation as this can bother all too much both the implementation team and the everyday activity later on (in the event that a very complex document flow is undertaken).
It is better to have experts doing the implementation who possess both theoretical and practical experience. The experts must be very well familiar with the system they undertake to implement.
The implementation of a system of that class is one step of the continuous process of perfection of the activity of a particular organization.
Usability and adaptability of the system by its users also presupposes the need of technical support. Errors are eliminated, functions are optimized and improvements are introduced with the respective assistance on the part of the consultants. In order to have efficient support consultants must possess expert knowledge, theoretical experience and practical expertise in the day-to-day operation of the product and familiarity with the functions of the programme.
System support includes:
– provision of customer support via a ‘hot line’;
– remote maintenance;
– assistance on the spot at customer offices;
– migration to a new software revision;
– optimization of the document flow and the business model of the organization;
– assistance in acquiring knowledge for system operation by the personnel in the organization, etc.
The utilization of top technologies is not the most important characteristic of an ERP system, yet, at the very same time a number of hazards are behind the corner where obsolete technology is in use:
– Poor or absence of support for obsolete components, base systems, databases, etc.;
– Low productivity where extensive volumes are involved; including non-utilization of the full capabilities of modern hardware;
– Limited capacity for archiving, protection, etc.
12. Additional developments
ERP systems are capable of taking additional modules to supplement the base functionality with extensions specific for the activity. The assessment after this criterion is two-fold. On the one part, the system proper must provide adequate extension possibilities. On the other part the implementation team must be capable of working out the required new modules.
13. Easy access
The remote access possibility inbuilt in the very system is not of material importance any more. The reason is that even the systems that are not of the modern 3-tier architecture also can be used remotely with the help of the terminal environments of Citrix or Microsoft Terminal Server. For the very same reason web-based systems provide no significant advantage with regard to the remote access.
In the event that usage of the specified means for providing a terminal environment is not desirable (for cost-price reasons or other factors) the significance of this criterion may grow.
MODEL SYSTEM OF EVALUATION BY POINTS
||Weight in points
||Assessment of system 1
||Assessment of system 2
|2. Ease of usage
|3. Corporate environment
|5. State of integration
|13. Easy access
The total number of points for one system is obtained as a sum of the point weight of each criterion multiplied by the assessment.