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Book Excerpt

The market for ERP systems isvery competitive. Industryanalysts are forecasting steady

growth rates for the ERP market. Whyare companies replacing their manualor semi-automated systems with ERPsystems? Some of the reasons for theincreasing popularity of ERP systemsare information integration, improvedproductivity, improved business agility,reduction in errors, automation, etc. Asmore and more companies join the ERPbandwagon, the competition is gettingkeener and ERP vendors are gearing upto meet this challenge by offering morefeatures and better capabilities for theirproducts. So, the future will see a fiercebattle for market share and mergers andacquisitions aimed at gaining strategicand competitive advantage. Theultimate winner in this race will be thecustomer, who will get better productsand better services at affordable prices.

ERP package evaluation andselectionERP systems are now available in all sizesand shapes for all platforms anddevelopment environments. Evaluatingthe ERP systems available in themarketplace and then selecting onefor your organisation is a very criticaltask. This decision can make or breakan organisation. If the choice is notright, then the organisation will paydearly for it.

The objective of the selection processis to find a package that is flexibleenough to meet the company’s needs.Or in other words, to find a packagethat can be customised to obtain a“good fit.”

If one studies the history of ERPpackages and finds out how eachpackage evolved, then it soon becomesevident that every ERP package grewout of the experience of a group ofpeople working in a specific business,who created systems that could dealwith certain business segments. TheERP packages evolved over time as thecompanies grew. The experiencegained from implementation, thefeedback by the users, the need to enterinto new markets and the pressure fromcompetitors, forced most ERP vendorsto redefine and expand the scope of theactivities and functionality of theirproducts. The concepts were expanded

So, you think that all ERP packagesare the same? Think again, because theyare not. Of the more than 50 ERPpackages available, the features theyoffer vary, as do the technologies theysupport, the technologies they use, thearchitecture on which they are built andthe available platforms. Each packagehas its own strengths and weaknesses.But the marketing literature from ERPvendors will give the impression thattheir product is just as good as anyother. Such literature is valuable forgiving the reader an overview offunctionality and a glimpse at thedifferentiator for that vendor's offering.But, if you compare the literature orlisten to a vendor's presentation, itwould be very difficult to evaluate whichpackage is the best or which would bemost suitable for your organisation.

Deciding which package is suitedto your organisation is a difficult task. Ifyou go by what is written in the productbrochure or what the salespeople say,you will find it very difficult to make adecision and might end up with thewrong choice. So package selection issomething that should be done in asystematic and scientific manner.

The most important factor to keepin mind when analysing the differentpackages is that none of them areperfect. The idea that there is no perfectpackage needs to be understood byeveryone in the decision-making team.

ERP PackageSelectionERP packages, if chosen correctly, implementedjudiciously and used efficiently have the ability to raiseproductivity and profits dramatically. The book, ERPDemystified (Second Edition) by Alexis Leon helpsdecision-makers in choosing the ERP package that isbest suited for their organisation.

ERP Demystified (Second Edition)Tata McGraw-Hill Publishing CompanyLimited

ERP Demystified is primarily acomprehensive resource for managers andexecutives who are entrusted with the jobof implementing ERP systems in theirorganisations. The revised and updatededition includes the latest developments inthe field of ERP, IT and new technologiesthat are changing the ERP landscape.Divided into eight sections, the bookcovers: ERP basics, ERP and technology,ERP implementation, ERP in action,business modules, ERP market, presentand future of ERP, ERP resources, casestudies, career guidance, manufacturingperspective, etc.

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upon, new functions were introduced,good ideas were copied from others,and so on. But still each package has anorigin that determines the type ofbusiness it is best suited for. So whilemaking the analysis, it is a good idea toinvestigate the origins of the differentpackages.

So, after the decision to go in for anERP package is taken, the companyneeds to develop the selection criteriathat will permit evaluation of all theavailable packages on the same scale.To choose the best system, thecompany should identify the systemthat meets the business needs, matchesthe business profile, and identifies withthe business practices of the company.It is impossible to get a system that willperform, exactly as the company doesbusiness, but the aim should be to getthe system that has the least number ofdifferences.

The selection processOnce you have decided to implementthe ERP system, you have to find apackage that is best suited for you. Theselection process is one of the mostimportant phases of the ERPimplementation because the packagethat you select will decide the successor failure of the project. Since ERPsystems involve huge investment, oncea package is purchased, it is not an easytask to switch to another one. So it is a‘do it right the first time’ proposition.The consequences of choosing a wrongpackage are catastrophic, often forcingthe company to close shop.

There are many ERP packagesavailable in the market. Analysing allthe packages before reaching a decisionis not a viable solution. So, it is better tolimit the number of packages that areevaluated to less than five. It is alwaysbetter to do a thorough and detailedevaluation of a small number ofpackages, than to do a superficialanalysis of dozens of packages.

The company should do a pre-evaluation screening to limit the numberof packages that are to be evaluated bythe committee. Since all packages are

not equal, the pre-evaluation processshould eliminate those packages that arenot at all suitable for the company’sbusiness processes. One can select thefew best packages by looking at theproduct literature of the vendors, gettinghelp from the external consultants and,most importantly, finding out whatpackage is used by similar companies. Itis always better to look around to findout how the different packages areperforming in environments similar toyours. Once you select a few packagesafter the screening, you can call therespective vendors for presentations/demos.

The selection committeeIt is always better to form a selection or

evaluation committee that will do theevaluation process. This committeeshould comprise of people from thevarious departments (the functionalexperts), top management (preferablythe CIO or COO), consultants (packageexperts) and end-users. This team canprovide the different perspectives andcan ensure that the needs of allstakeholders are addressed.

The selection committee should beentrusted with the task of choosing apackage for the company. Since allbusiness functions are represented andthe management is involved, thepackage that is selected will havecompany-wide acceptance. Thepackage experts or the consultants canact as mediators or play the role ofexplaining the pros and cons of eachpackage.

Handling the vendorsOnce you make a decision to go in foran ERP package, the marketingexecutives of the different vendors willswamp you. Each will have colourfuland excellently produced brochuresand presentations claiming that theirproduct is the best one for you. Theywill use all the tricks to get you hooked.So it is better that you have a strategyfor dealing with these vendors.

Since you have done a detailedevaluation of the few packages thatmeet your pre-selection criteria, youcan be prepared for the vendorpresentations. This point is beingstressed again and again because mostvendors can make presentations thatleave potential users dazzled. Theselection may thus end up being basedon a set of factors that are insufficientfor arriving at a well-informed andjudicious decision.

So, instead of just listening topresentations, you should be preparedwith your questions. The questionsshould be prepared beforehand andshould address all your concerns. Theresponses that you get for yourquestions will help you in eithereliminating a vendor or strengtheningits case. The questions, if properly

“

“

The most important factorto keep in mind whenanalysing the different

packages is that none ofthem are perfect. The idea

that there is no perfectpackage needs to be

understood by everyone inthe decision-making team.

The objective of theselection process is to find

a package that is flexibleenough to meet the

company’s needs. Or inother words, to find apackage that can be

customised to obtain a“good fit.” To choose the

best system, the companyshould identify the system

that meets the businessneeds, matches the

business profile, andidentifies with the businesspractices of the company.

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Book Excerpt

prepared and asked will expose theweak/problem areas that exists in thevendors’ products. Also, when you areasking questions, it means that you arenot taking anything for granted. It is agood idea to prepare the minutes of themeeting and make the vendors sign it.This will prevent them from makingfalse claims and you can make themaccountable if they fail to deliver whatthey have promised.

The vendors should be asked toshow testimonials and practical dem-onstrations of the system. The vendorshould provide references oforganisations where the system hasbeen implemented successfully. But allvendors will have customers for whomtheir products have failed. In my opin-ion, getting those names and the rea-sons for the failure is more importantthan the success stories. Also, in myexperience, while vendor representa-tives are well prepared for the successstories, the questions about failedimplementations usually reveal pointsand issues that the vendor is trying todownplay. So it is important to askabout failed implementations.

The vendor will usually send tworepresentatives to visit you—a marketingagent and a technical expert. Most ofyour questions should be directed to thetechnical expert. The marketing expertshould be asked about warranties,licenses, cost, support, training, etc,whereas, the technical expert should beasked about the functionality andcapabilities of the system they areoffering.

The role of technologyThe existing technology will play a veryimportant role in the ERP selectionprocess. Each organisation will have itsown technological environment. Themanagement must decide whether theERP systems will be selected keeping inmind the existing infrastructure or not.It is always a better idea to find a packagethat is compatible with the hardware,software and technology that thecompany already has in place. If theorganisation has the necessary

infrastructure then it can think of buyingthe required components from thevendors and integrating them with theexisting system. For example, if anorganisation is using an HRmanagement system and is quitesatisfied with it, then it can go in for theother modules and not for the completeoffering from the vendor.

It is not imperative that all thecomponents offered by the vendor bebought. The evaluation committee inassociation with the vendor can selectthe required components and thenintegrate them with the existinginfrastructure. But here, do not forgetto get the vendor’s assurance (inwriting) that the existing system willintegrate smoothly and seamlessly withthe purchased components.

The selection criteriaERP packages come in all sizes andshapes, with all the frills, bells andwhistles, gizmos and gadgets that youcan imagine. Hence, it is a good practiceto specify selection criteria forevaluating the packages that survive the

pre-evaluation screening. The criteriacan be in the form of a questionnaireand a point system can beimplemented. This will help in makingthe selection process more objective.

The questions should address thecompany’s business needs andconcerns and each issue or questionshould be given a weight according tohow critical that function is for thecompany. For example, if the companyhas offices in different countries, thenthe capability of handling multiplelanguages and currencies becomes animportant criterion. Likewise theselection criteria should be divided intocategories—vital, essential anddesirable—and points should be givento each criterion. The point ratingsystem will simplify the evaluationprocess. But the importance of humanintuition, gut feeling, and judgmentshould never be underestimated.

The best method for preparing theselection criteria is to conduct arequirements analysis—find out whatthe company needs. The requirementsmust reflect those factors that thecompany considers indispensable forthe successful running of the businessaccording to the company’s workculture and practices. Given below aresome examples of the selection criteria.� The package should have multi-

language and multi-currency support.� The package should be international

and should have installations inspecified countries (basically incountries where the company haveoffices). The vendor should also havea local presence in those countries.

� The package should have at least ‘x’number of installations out of whichat least ‘y’ should be in your businesssector.

� The cost of the package with all thenecessary modules should be lessthan ‘x’ Rupees.

� The package should have the facility todo an incremental module addition.For example, the company should havethe facility to buy the core modulesinitially and then go in for the additionalmodules as and when desired.

“

“

All vendors will havecustomers for whom their

products have failed.Getting those names andthe reasons for the failure

is more importantthan the success stories.

Also, while vendorrepresentatives are wellprepared for the success

stories, the questionsabout failed

implementations usuallyreveal points and issues

that the vendor istrying to downplay. So it is

important to ask aboutfailed implementations.

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Book Excerpt

� The vendor should provideimplementation and postimplementation support.

� The vendor should give acommitment on training thecompany employees on the package.

� The package should have the capabilityof interfacing with other systems thatthe company is dealing with—banks,suppliers, customers, etc.

� The package must be customisableand the customisation process shouldbe easy (something that could be donein-house)

� The vendor’s policy and practicesregarding updates, versions, etc,should be acceptable.

In this way, the issues, concerns andexpectations that the company has,regarding the package, can beconsolidated and made into a list. Thenthe items in the list should be placed intothe ‘vital-essential-desirable’ categories.Then, using this list each package shouldbe evaluated. Many items in the list willhave descriptive answers. The committeeshould sit together and analyse theseissues and assign points to these items.

One important thing that should bekept in mind is that whenever a decisionis made, the committee should discussit and a consensus must be reached toensure commitment and avoidconflicts. The functional experts (whoknow the business process well) andvendor representatives (who know theERP package well) can tell areas andissues that should be given moreimportance, the aspects that should bescrutinised more thoroughly and howthe company’s current businesspractices could be replaced with newones or modified to suit the package.

Another source from which theevaluation committee can getinformation about the tools isindependent research agencies andcompanies. These sources supplyinformation, comprehensive analysesand comparison reports about theleading tools. But these reports,although excellent sources ofinformation and a single-pointreference about the leading ERP

systems, are not totally unbiased,completely accurate and totallyobjective and therefore, should not betaken as gospel truth. But these reportscan provide valuable informationabout the tools. So, at least a fewreports by these research groupsshould be studied along with thevendor’s literature so that you get acomplete picture of the ERP systemmarketplace. These reports analyseand compare the tools and theirfeatures, predict market trends,forecast the position of the differentplayers in the coming years, and so on.A number of companies andconsultants do this kind of analysis.Prominent among them are AMRResearch (www.amrresearch .com),Forrester Research (www.forrester.com), Gartner Group (www.gartner.com)The International DataCorporation (www.idc.com), TheButler Group (www.butlergroup.com),Ovum (www.ovum.com), VNU(www.vnu .com), etc. Sometimes trademagazines like CIO, HBR, Forbes,Fortune, etc, publish articles about ERPand its current state. This informationis also worth looking into because it isindependent and not biased.

Once the committee has evaluatedall the packages that have cleared thepre-evaluation criteria, listened to thevendor presentations and demos, andhave cleared pending issues, a decisionis reached on which package to buy.

Once the committee has reached adecision on a package, it is a good ideato visit a few companies that haveinstalled the particular package andsee it in action. But many people willnot admit that they have made amistake, so whatever the existingowners say about a package should betaken with a pinch of salt. But visiting

4 or 5 installations should give a goodidea about the package. If thecommittee members feel that theirdecision is right and what they havethought is what they have seen, thenthe company can proceed with thepurchasing and implementation.

If anybody is uneasy about someaspect or feels that the product is notup to the expected standard, then thecommittee members should sitand discuss this again and perhapsdo the analysis once again. The packagethat has got the maximum score in thepoint rating system need not necessarilybe the one that is best suited forthe company. The extra time spenton analysis and evaluation is not awaste; it might save the company froma potential disaster.

Finally…One final word, the most critical factorthat determines the success of any ERPimplementation is the support of thepeople who use the system. Even thebest ERP systems will fail if there is nouser support. So the decision of thecommittee should be a consensusdecision. If there are some peoplewhose views are overridden bymajority vote, then the managementshould take every effort to make themunderstand the reasons for thedecisions and should spare no effortto win them over. Disagreements arecommon in any group discussion, butthe success of the group lies in the factthat all the people in the group ownthe decisions that are made. Thus,since the group as a whole makes thechoice, everybody emerges as a winner.This feeling is very important, as thecompany will need everyone’s goodwilland support to achieve success duringand after implementation. �

Alexis Leon is the managing director of L and L Consultancy Services Pvt.Ltd. He has more than 18 years of consulting experience in the areas ofsoftware engineering, workflow automation, groupware, product design,process improvement, project management, configuration management,quality assurance, productivity improvement, etc. He has written more than40 books on computing, IT and management topics. He has worked withcompanies like Pond’s India Ltd. and Tata Consultancy Services. He holds amaster’s degree (M.Tech.) in Industrial Engineering. He can be reached

through his Web site at http://www.alexisleon.com/