A Combined Method for Evaluation Criteria when Selecting ERP Systems David L. Olson, Univ. of Nebraska Björn 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 Sources MethodAdvantagesDisadvantages Develop in-houseBest fits organizationMost difficult to develop Most expensive Slowest Stand-alone APSLess expenditure Simpler installation Harder to integrate Full vendor ERPRelatively fast Less expensive than customization IT efficiency Easier to upgrade Inflexible Employees change work methods Selected vendor modules Less risk Relatively fast to install Least expensive vendor approach Expansion problems in time and cost Customized vendor ERPRetain flexibility while gaining vendor expertise Slower Usually more expensive Best-of-breedGain best of all systemsDifficult to link (middleware) Slow Application service provider Least risk of ERP change Least cost Fastest At ASP provider’s mercy No control Subject to price increase Open source systemCOST (it’s free to install) Flexible Greatest risk (after in-house) Need computer-literate employees

ERP Selection Criteria Baki & Çaki [2005] CriteriaHecht [1997] Brewer [2000] Rao [2000] Verville & Hallingten [2002] Kumar et al. [2003] Mean Fit with allied organizations *4.79 Cross module integration **4.72 Compatibility with other systems * 4.28 References 4.24 Vision* * 4.22 Functionality** **4.15 System reliability *4.08 Consultancy 4.06 Technical aspects**** 4.01 Implementation time 3.94 Vendor market position **3.87 Ease of customization * *3.84 Software methodology 3.83 Fit with organization *3.83 Service & support* * *3.77 Cost*****3.65 Vendor 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 machines 2.Avoids maintenance contracts 3.Greater functionality, reliability, performance 4.Faster learning curve, available support tools 5.Avoid vendor lock-in 6.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 OpenPro Sourceforge.net listed over 1,000 ERP projects May 2009 CONFENIS 2010 Natal

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 CriteriaReuther [2004] Rittammanart et al. [2008] Baharum et al. [2009] TechnologyTechnical requirements Complexity of technology East of database administration Database migration BPRBusiness driversEase of business logic implementation Synchorizing modules to workflow User interface Ease of presentation layer implementation User friendly interfaces Administration Ease of administrationIntegration with 3 rd party software CostCost drivers OthersFlexibility Scalability Business specific Ease of service exposure Resource utilization User support CONFENIS 2011 Aalborg

ERP Selection Crtieria for Outsourcing ERP StudyContextCriteria Ekanayaka et al. [2003] Application service providers Customer service Reliability, availability, scalability Integration Total cost Security Service level Kahraman et al. [2009] OutsourcingMarket leadership Functionality Quality Price Implementation speed Link with other systems International orientation CONFENIS 2011 Aalborg

Conjoint Analysis Keil et al. [2006] AttributeEffectt-valueP<0.01P<0.001 Software Reliability Yes Software Functionality Yes Software Cost Yes Implementation Ease of Customization Yes Software Ease of Use YesNo Implementation Vendor Reputation No Implementation Ease No CONFENIS 2011 Aalborg

AHP Criteria Ünal & Güner [2009] Cost Functionality Implementation approach Support Organizational credibility Experience Flexibility Customer focus Future strategy CONFENIS 2011 Aalborg

ANP Vendor Selection Criteria Perҫin [2008] System FactorsVendor Factors Functionality Strategic fitness Flexibility User friendliness Implementation time Total costs Reliability Market share Financial capability Implementation ability R&D capability Service support CONFENIS 2011 Aalborg

AHP Hierarchy Kahraman et al. [2009] Top Level CriteriaSecond Level Criteria Market LeadershipRelevant technology Innovative business process Competitive position FunctionalityConsumer preference Functional capability Compatibility with third party QualityReliability Security Information Quality Configuration PriceService cost Operating cost Set-up cost Implementation speedPerformance Usability Training Interface with other systemsData share Compatibility with the system Multi-level user Flexibility International orientationNational CRM Web applications CONFENIS 2011 Aalborg

PIRCS De 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 CostTimeFlexibilityRobustnessSupport Large vendor Customize vendor Mid-size vendor OSS with support fees OSS without support CONFENIS 2011 Aalborg

Swing Weighting Criteria by orderRelative weightingStandardized weighting (/320) Time Robustness Support Cost Flexibility SUM CONFENIS 2011 Aalborg

Relative Scores of Alternatives AlternativeScore OSS with support fees0.778 Large vendor0.597 Mid-size vendor0.541 ASP0.446 OSS without support0.409 Customize vendor0.360 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