Selecting the Correct ERP Solution

A Company's management first interacts with ERP systems most often in the grueling vendor-selection process. Unfortunately, most organizations try to make this process easier by either trying to figure out why they should not buy an expensive ERP system, or why they should use one of the Big Five implementers. Both of these approaches are clearly flawed. Focusing the ERP system selection on a single vendor often results in a search conducted without data, with no identifiable evaluation criteria, and no vision of the value of the system. And using one of the Big Five implementers also has its pitfalls. Most of these organizations derive a majority of their
system integration revenue from one or two ERP vendors. Hence, they place those vendors at the top of their client's short list of options, blocking the consideration of potentially more suitable ERP vendors.

Experience and research have revealed four major stumbling blocks to successful vendor selection. These are:

Time: The ERP software selection process in a medium to large organization can consume up to 12-15 months, with much of the effort spent identifying the key evaluation criteria and collecting data on the alternatives.

Cost: A major part of the total cost of ERP software selection is largely hidden in the employee time mentioned above. Personal and travel expenses incurred during the selection process, developing RFP, gathering and validating product data, and interviewing vendors contribute to almost 25-30% of the overall cost.

Validated Data: Organizations have reported that they lack objective, validated data on vendor products and services, and are often forced to rely solely on the vendor RFP responses, presentations, or marketing materials, to make their final decision.

Unstructured Selection Process: With the absence of a structured and rigorous selection methodology, many organizations end up either focusing on a very limited set of criteria or caving into internal political agendas or gut feelings.

Many organizations have fallen into the trap of quick-pick vendor selection or have been constrained by one or more of the four challenges listed above. However, companies should ideally implement a more complex and in-depth evaluation and selection methodology. This methodology should focus on the six most important criteria for selecting an ERP solution: functionality, technical architecture, cost, service and support, ability to execute, and vision.

Functionality: The most important criteria for selecting an ERP solution is the functionality. This is where most of the companies are now focusing on getting the best-of-breed solutions. The return on investment justifies the extra cost that one has to pay to get the best-configured solution.

Technical architecture: The technical architecture evaluates the fit between the information system and the end user's needs by looking at the environment in which the application is available, the user-interface capabilities, the third-party software interface capabilities, the software architecture of the application, the development and management tools associated with the application, and the data and process models available with the application.

Cost: Yet another issue with most of the ERP projects is the lack of realistic costs. A relatively close to completion cost should be budgeted for up front to gain management buy-in for the project.

Service and support : A very important criterion for selecting an ERP vendor is the after sales service and support that the vendor offers. Most of the vendors have a way of digging deep once they have your wallet. The costs and services provided by vendors should be very clearly identified and discussed during the vendor selection.

Ability to execute : Now that the ERP market has matured globally, the financial well being of a potential ERP vendor cannot be stressed enough, and should be very high on the list of criteria for ERP evaluation. Companies should be careful not to give into the promises of a lot of small vendors that have cropped up in the past few years.

Vision : Finally, organizations should closely study the vendor's vision. What modification is the vendor planning to make to its products and services in the middle and long term? Do they match the goals of the marketplace in general and your organization in particular?


More and more companies in the western world are moving towards the best-of-breed solutions. And the implementation time of such solutions also is very closely linked to the various software selected. This is highlighted by one such survey conducted in the UK.

In the survey conducted by Banner Research with 101 large and mid-size UK companies either using ERP (56 respondents) or planning to implement ERP (45 respondents), it was found that one fourth of respondents use more than one ERP package. The reasons cited: 74% said no one package does everything; 65% said different divisions or regions chose their own solution; 61% prefer to integrate best-of-breed; 43% inherited a mix through mergers or acquisitions; 26% said the original package did not meet business needs. Also, 64% of the respondents said application integration accounted for more than 25% of ERP implementation costs, while 20% said it was over 50%. As to implementation timing, 71% said application integration accounted for more than 25% of ERP project time, while 14% said it was over 50%.