A Combined Method for Evaluation Criteria when Selecting ERP Systems
David L. Olson, Univ. of NebraskaBjörn Johansson, Lund Univ.
Rogério Atem de Carvalho, CEFET Campos
CONFENIS 2011 Aalborg
ERP
• Integrated• BPR efficiency• Reduced IS payroll• MANY OPTIONS– International differences
• SELECTION– PIRCS meta-method– SMART multicriteria selection
CONFENIS 2011 Aalborg
Alternative Supply Chain Software SourcesMethod Advantages Disadvantages
Develop in-house Best fits organization Most difficult to developMost expensiveSlowest
Stand-alone APS Less expenditureSimpler installation
Harder to integrate
Full vendor ERP Relatively fastLess expensive than customizationIT efficiencyEasier to upgrade
InflexibleEmployees change work methods
Selected vendor modules
Less riskRelatively fast to installLeast expensive vendor approach
Expansion problems in time and cost
Customized vendor ERP Retain flexibility while gaining vendor expertise
SlowerUsually more expensive
Best-of-breed Gain best of all systems Difficult to link (middleware)Slow
Application service provider
Least risk of ERP changeLeast costFastest
At ASP provider’s mercyNo controlSubject to price increase
Open source system COST (it’s free to install)Flexible
Greatest risk (after in-house)Need computer-literate employees
ERP Selection CriteriaBaki & Çaki [2005]
Criteria Hecht [1997]
Brewer [2000]
Rao [2000]
Verville & Hallingten [2002]
Kumar et al. [2003]
Mean
Fit with allied organizations * 4.79Cross module integration * * 4.72Compatibility with other systems * 4.28References 4.24Vision * * 4.22Functionality * * * * 4.15System reliability * 4.08Consultancy 4.06Technical aspects * * * * 4.01Implementation time 3.94Vendor market position * * 3.87Ease of customization * * 3.84Software methodology 3.83Fit with organization * 3.83Service & support * * * 3.77Cost * * * * * 3.65Vendor domain knowledge * 3.46
CONFENIS 2011 Aalborg
Open Source Development
Red Hat [2009]: Can save by:1.Enabling use of commodity hardware rather than proprietary machines2.Avoids maintenance contracts3.Greater functionality, reliability, performance4.Faster learning curve, available support tools5.Avoid vendor lock-in6.Reduce need for security consultants & tools
CONFENIS 2010 Natal
Open Source ERP/EIS
• Jaisingh et al. [2008]: OSS ERPs can be customized to modify code, gain competitive advantage
• Serrano & Sarriegi [2006]: OSS ERP benefits:– Increased adaptability– Decreased reliance on single supplier– Reduced costs
CONFENIS 2010 Natal
Open Source ERP Products• Compiere• OpenMFG• Open for Business Project• Tiny ERP• Web ERP• Open Office• OpenBravo• OpenProSourceforge.net listed over 1,000 ERP projects May
2009
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Conclusion
• Open source ERP projects are increasing– Not all projects are highly structured
• Reluctance to use open source ERP in firm’s core activities
• PROVIDES OPTION FOR SME• VENDORS CAN USE TO REFINE THEIR SYSTEMS– Open source an access to free labor
Open Source ERP Software Selection Criteria
Criteria Reuther [2004] Rittammanart et al. [2008] Baharum et al. [2009]
Technology Technical requirements
Complexity of technologyEast of database
administration
Database migration
BPR Business drivers Ease of business logic implementation
Synchorizing modules to workflow
User interface Ease of presentation layer implementation
User friendly interfaces
Administration Ease of administration Integration with 3rd party software
Cost Cost drivers Others Flexibility
ScalabilityBusiness specific
Ease of service exposureResource utilization
User support
CONFENIS 2011 Aalborg
ERP Selection Crtieria for Outsourcing ERP
Study Context CriteriaEkanayaka et al. [2003]
Application service providers
Customer serviceReliability, availability, scalabilityIntegrationTotal costSecurityService level
Kahraman et al. [2009]
Outsourcing Market leadershipFunctionalityQualityPriceImplementation speedLink with other systemsInternational orientation
CONFENIS 2011 Aalborg
Conjoint AnalysisKeil et al. [2006]
Attribute Effect t-value P<0.01 P<0.001
Software Reliability 0.464 20.34 Yes Yes
Software Functionality 0.457 20.03 Yes Yes
Software Cost -0.253 -11.08 Yes Yes
Implementation Ease of Customization
0.129 5.67 Yes Yes
Software Ease of Use 0.073 3.19 Yes No
Implementation Vendor Reputation
0.007 0.29 No No
Implementation Ease 0.000 0.01 No No
CONFENIS 2011 Aalborg
AHP CriteriaÜnal & Güner [2009]
• Cost• Functionality• Implementation approach• Support• Organizational credibility• Experience• Flexibility• Customer focus• Future strategy
CONFENIS 2011 Aalborg
ANP Vendor Selection CriteriaPerҫin [2008]
System Factors Vendor Factors
FunctionalityStrategic fitnessFlexibilityUser friendlinessImplementation timeTotal costsReliability
Market shareFinancial capabilityImplementation abilityR&D capabilityService support
CONFENIS 2011 Aalborg
AHP HierarchyKahraman et al. [2009]
Top Level Criteria Second Level CriteriaMarket Leadership Relevant technology
Innovative business processCompetitive position
Functionality Consumer preferenceFunctional capabilityCompatibility with third party
Quality ReliabilitySecurityInformation QualityConfiguration
Price Service costOperating costSet-up cost
Implementation speed PerformanceUsabilityTraining
Interface with other systems Data shareCompatibility with the systemMulti-level userFlexibility
International orientation National CRMWeb applications
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PIRCSDe Carvalho [2009]
• Prepare– Define requirements– Establish positioning strategy– Identify attributes and constraints on the decision– Identify measures of attributes to be considered
• Identify– Identify alternative ERP options and their characteristics
• Rate– Establish the utility (value) of each attribute on each alternative
• Compare– Apply multicriteria methods, such as AHP or SMART
• Select– Consider the comparison analysis– Make the decision
CONFENIS 2011 Aalborg
Value Matrix Cost Time Flexibility Robustness Support
Large vendor 0.2 0.3 0.1 1.0 1.0
Customize vendor 0.0 0.0 0.8 0.7 0.5
Mid-size vendor 0.4 0.6 0.5 0.5 0.6
OSS with support fees 0.7 0.9 0.6 0.8 0.7
OSS without support 0.6 0.6 0.5 0.4 0.0
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Swing WeightingCriteria by order Relative weighting Standardized weighting
(/320)Time 100 0.312
Robustness 80 0.250
Support 70 0.219
Cost 40 0.125
Flexibility 30 0.094
SUM 320 1.000
CONFENIS 2011 Aalborg
Relative Scores of Alternatives
Alternative Score
OSS with support fees 0.778
Large vendor 0.597
Mid-size vendor 0.541
ASP 0.446
OSS without support 0.409
Customize vendor 0.360
CONFENIS 2011 Aalborg
Conclusions
• Many criteria important in ERP selection• Business case for ERP challenging– Costs complex (hidden)– High levels of benefit uncertainty
• PIRCS framework• SMART selection evaluation
CONFENIS 2011 Aalborg
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