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Informatica Economic , nr. 2 (42)/2007 63

Criteria for the selection of ERP software

Adina U, Iulian NTORSUREANU, Rodica MIHALCAAcademy of Economic Studies, Bucharest

The implementation of an ERP software package is an important investment for anorganization, which is characterized also by a high degree of risk. Selecting the most appro-

priate software is a necessary condition for a successful implementation. This paper is de- scribing the major aspects of software selection in general and the relevant criteria in thecase of ERP software. Keywords : ERP, software, selection.

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roductionftware selection is a topic concernedthe process, methods and tools applied

by organizations in order to decide whichsoftware they choose from the wide range ofavailable solutions on the market. Such a de-cision must be taken very carefully, as theadoption of software solutions is having animportant impact in the medium and longterm. This impact is related to purchase andoperating costs, but also to the way the soft-ware is helping the company to build com- petitive advantage.

The selection of a software application can be understood as one of the steps in the proc-ess of software acquisition by the company[4]. This wider process includes the stagesof: planning, information search, (pre-) selec-tion, evaluation, choice and negotiation. Dur-ing the planning process, the acquisition teamis formed. This team addresses as many is-sues as possible related to the other stages.During the information search stage, infor-mation about technologies and vendors is

found and screened and its sources are evalu-ated. During the (pre) selection process, ashortlist of possible vendors and technologiesis created. The elements of this list are evalu-ated in the next stage, which incorporatesvendor, functional and technical evaluation.The choice stage is the result of the evalua-tion process. A final recommendation ismade, followed by a negotiation process,which could be concluded by a final contract.The planning activity involves the definitionof requirements and the identification of se-lection / valuation criteria, both of which arerelevant for the software selection process.

ERP Software is a generic term for Enter- prise Resource Planning Software. ERP cov-ers a range of activities for improving busi-ness efficiency across a number of depart-ments in an organization or enterprise. Thesedepartments may include manufacturing,sales, marketing, purchasing, production planning, inventory control, shipping and dis-tribution and even maintenance through aCMMS (Computerized Maintenance Man-agement System).ERP software is therefore very complex andarguably the most difficult software applica-

tion to select. The acquisition of this type ofsoftware package is a high-expenditure activ-ity likely to consume a significant portion ofan organizations budget.The high risk levels for such acquisitions isobvious, as a wrong decision can affect theorganization as a whole, in several differentareas and on several different levels - even tothe point of endangering its existence. The praxis shows that, in a significant number ofcases, the companies fail to obtain the ex-

pected benefits from an ERP system. There-fore, the definition of appropriate selectioncriteria play a critical role in the acquisitionof ERP software.

Criteria for selecting ERP softwarePractically all evaluation methods rely on theapplication of evaluation criteria as basis forselection; based on the values obtained by thecandidate software packages for each crite-rion, an aggregate score can be calculated,which is used for the ranking of candidates.The most used technique is AHP AnalyticalHierachical Process, in which the criteria are

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structured as a hierarchy, and specificweights are defined for each level in the hier-archy.The criteria to be used for ERP software se-

lection, as presented in the literature, includeseveral categories of criteria. One such struc-turing, presented by [2] includes six catego-ries: functionality the coverage of functionalrequirements, technical architecture technical require-ments, including integration with existingsystems cost both for implementation, mainte-nance and further adaptation / extension service and support levels provided by thevendor ability to execute visionMost authors also include the vendor evalua-tion as a significant criterion. However, thereis no standard regarding the defined catego-ries and criteria. Further, a recommended setof criteria for the selection of an ERP solu-tion is presented.

When finding and selecting ERP software,the following main functions should be con-sidered: Customer and Order Management,Purchasing Control, Production Schedule,Ingredient List, Inventory Management, In-terface with CMMS system, Reporting andAnalysis, Integration with Accounting Sys-tem, Payroll and HR (Human Resources).The software evaluation process uses a num- ber of factors that can be consider in specify-ing the application software. This factors are:general requirements, administration and se-curity, reporting, Web access and integration,vendor characterization and cost (of thesoftware and associated support and ser-vices).General requirements are related to:- Operating System - requirement for a par-ticular operating system- Database format - requirement for a par-ticular database system- Data import or export the capabilities ofexport or import data in/from other software packages.

- The look and feel of the application re-quirements for standard windows processesand procedures?- Filtering and searching friendliness (this

applies to database software) existence ofseveral optional ways of finding data that theusers will need.- Look-ups Look-ups are tables or dropdown lists that offer a selection of data tochoose from when using the system.- User configurability of look-ups and lists -the lists and drop downs mentioned above to be user configurable.- User configurability of tags and labels- Handling of links to ancillary information -the system should meet the requirementswith respect to its handling of links and hy- perlinks to external records and information.- Required number of concurrent users. -does the application support the requirednumber of users? Concurrent users are usersthat are logged on to the system at the sametime or not.- Archiving requirements. - archive the datafor a number of years.- Existence of barcoding, PDAs and remotedevices if are necessary.- Single or multi-site functionality the pos-sibility that the application support multi-siteoperation or it will be installed on a singlesite- Graphical, hierarchical data structure - da-tabase systems which display a graphical rep-resentation of a hierarchical structure (par-ent/child relationships) are generally pre-ferred.

- Regulatory compliance support if in userindustry are there any statutory standards to

which the software must comply- Ease of implementation the work requiredto implement the software- Additional database software required -some applications require that licenses are purchased for additional database software.- System maintenance required- Paperless systems - most applications gen-erate paper reports or other hard copy.

- Access to data from various areas - systemusers may require to log on and input or

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Informatica Economic , nr. 2 (42)/2007 65

check data from any work station that has theapplication installed.- Equipment history - display of equipmentmaintenance history over time should be eas-

ily achieved is an important capability ofsoftware.- Simple login process - login should beachieved quickly and effortlessly.- Speed of access and response time- Customizable screens - allow the adminis-trator to hide specific fields from defined us-ers. This is not a security function, but is onlyused to simplify the screens for certain users,hiding those fields that they do not use.- Resourcing - all software applications re-quire resources to keep them running andadminister them.- Alternative Languages the existence ofthe support of alternative languages,Administration and security requirements are related to:- Ease of use - Administration of the securityfeatures of some software systems can bevery complex. The application should havean useable administration module.- Tabular selection - Many security modulesoffer a table of functions for which permis-sions can be granted to each user or group.This is normally done by checking or tickingthe relevant permissions boxes for each useror group.- Password - Users should be allocated passwords. This need not necessarily be doneon an individual basis. For example it may beenough for all people doing the same job andin the same section to have the same pass-

word.- Individuals and group settings it should be possible to set up individual users ID's aswell as user groups. This allows users whorequire the same access level to be placed inthe same group.- Audit trail - an administration audit trailcan be required, that would provide traceabil-ity to individuals for all changes to the ad-ministration and security module.- Customization - Application customization

should be easy for the administrator. For ex-ample configuration of screens and user con-

figurable data should be intuitive and not re-quiring a high level of IT knowledge.Reporting requirements are related to:- Ease of access to reports - Reports must be

easily accessed and found on the system.- Data export capability - Many systems pro-vide a data export facility. For example theymay allow to export data to MS Excel.- Customizable reports - Customizable re- ports allow the user to modify existing re- ports and same them as additional reports.This is much easier that creating reports fromscratch.- Format of reports (graphical/text) - Whatfunctionality does the application have withrespect to its handling of report output? Doesit allow data to be displayed graphically?Web access and integration- Purchase or rent - Who owns the software?This is an important factor as some web based systems can be purchased and installedon your own Intranet. Others are rented andinstalled on the vendor's servers.- Data ownership - Is there any ambiguitywith respect to the ownership of the data?- Functionality - Due to limitations in the programming of web browser based systemssome of these packages have limited func-tionality.- Response Speed - Is the response time ofthe software satisfactory?- Company stability - a mechanism should bein place to recover the data if the vendorcompany is going out of business.- Cost analysis In case of renting web based software the cost against that of buying

a web based package for installation on yourIntranet should be assessed.- Internet access - Do all the PC's in a a web based system already have Internet access,and if not what will this cost?- Customization - Web based software mustoften be used without customization. If this isthe case, will the application meet the re-quirements in its standard form?

Vendor characterization

- Stability - each vendor's stability must beassessed. How long have they been in busi-ness? How long have they been selling this

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