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
Method
Advantages
Disadvantages
Develop in-house
Best fits organization
Most difficult to develop
Most expensive
Slowest
Stand-alone APS
Less expenditure
Simpler installation
Harder to integrate
Full vendor ERP
Relatively 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 ERP
Retain flexibility while gaining vendor
expertise
Slower
Usually more expensive
Best-of-breed
Gain best of all systems
Difficult 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 system
COST (it’s free to install)
Flexible
Greatest risk (after in-house)
Need computer-literate employees
ERP Selection Criteria
Baki & Çaki [2005]
Criteria
Fit with allied organizations
Cross module integration
Compatibility with other systems
References
Vision
Functionality
System reliability
Consultancy
Technical aspects
Implementation time
Vendor market position
Ease of customization
Software methodology
Fit with organization
Service & support
Cost
Vendor domain knowledge
Hecht
[1997]
Brewer Rao
[2000] [2000]
*
*
*
*
*
*
*
*
*
*
*
*
*
*
CONFENIS 2011 Aalborg
Verville & Kumar
Mean
Hallingten et
al.
[2002]
[2003]
*
4.79
*
*
4.72
4.28
4.24
*
4.22
*
*
4.15
*
4.08
4.06
*
4.01
3.94
*
*
3.87
*
3.84
3.83
*
3.83
*
3.77
*
*
3.65
3.46
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
Rittammanart et al.
[2008]
Complexity of technology
East of database
administration
Baharum et al.
[2009]
Database migration
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
Ease of service exposure
Resource utilization
User support
Criteria
Reuther [2004]
Technology
Technical
requirements
BPR
Business drivers
Cost
Cost drivers
Others
Flexibility
Scalability
Business specific
CONFENIS 2011 Aalborg
ERP Selection Crtieria for Outsourcing
ERP
Study
Context
Ekanayaka Application service
et al.
providers
[2003]
Criteria
Customer service
Reliability, availability, scalability
Integration
Total cost
Security
Service level
Kahraman Outsourcing
et al.
[2009]
Market leadership
Functionality
Quality
Price
Implementation speed
Link with other systems
International orientation
CONFENIS 2011 Aalborg
Conjoint Analysis
Keil et al. [2006]
Attribute
Effect
t-value
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
Software Ease of Use
0.129
5.67
Yes
Yes
0.073
3.19
Yes
No
Implementation Vendor
Reputation
Implementation Ease
0.007
0.29
No
No
0.000
0.01
No
No
CONFENIS 2011 Aalborg
P<0.01 P<0.001
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 Factors
Functionality
Strategic fitness
Flexibility
User friendliness
Implementation time
Total costs
Reliability
Vendor Factors
Market share
Financial capability
Implementation ability
R&D capability
Service support
CONFENIS 2011 Aalborg
AHP Hierarchy
Kahraman et al. [2009]
Top Level Criteria
Market Leadership
Functionality
Quality
Price
Implementation speed
Interface with other systems
International orientation
Second Level Criteria
Relevant technology
Innovative business process
Competitive position
Consumer preference
Functional capability
Compatibility with third party
Reliability
Security
Information Quality
Configuration
Service cost
Operating cost
Set-up cost
Performance
Usability
Training
Data share
Compatibility with the system
Multi-level user
Flexibility
National 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
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
CONFENIS 2011 Aalborg
Swing Weighting
Criteria by order
Time
100
Standardized weighting
(/320)
0.312
Robustness
80
0.250
Support
70
0.219
Cost
40
0.125
Flexibility
30
0.094
320
1.000
SUM
Relative weighting
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