ERP Software and Vendor Selection Systems

Question: Discuss about the ERP Software and Vendor Selection Systems. Answer: Introduction Information technology has drastically changed todays business environment which in turn has caused organisation around the world to enhance their business practices especially operation procedures in order to remain relevant and competitive. Enterprise resource planning is an example of a response given by the industry to meet the ever changing operational challenges (Tsai, Lee, Chen, Hsu Lin, 2009). However, ERP systems are usually a heavy and important investment to an organisation, which like any other investment is filled with risks. Therefore, the selection of a certain ERP package takes time and certain processes in order to meet the needs of an organisation. Implementation of these systems requires research, analysis and evaluation to determine the software that best meets the needs of a given organisation. Furthermore, the decisions made by an organisation affect the purchases and operational costs which eventually determines the overall returns (Iulian Mihalca, 2007). In essence, a careful and strategic plan must be used to determine the ERP system. Nevertheless, this selection process is filled with challenges, challenges that test the suitability of the system as well as the organisation itself. These challenges and their possible solutions are the focus of this report. An overview of an ERP Selection process According to Motiwalla and Thompson (2012), understanding the needs of an organisation is the first and most important step in selecting an ERP system. Moreover, it is also through this process that an organisation is able to determine a suitable vendor. It is also through these requirements that an organisation lays down the plans for the selection process, an integral part of ERP integration. In most cases, most organisation will hire a specialised firm in the field to conduct the selection process in order to reduce the overall operational costs and to minimise errors in the process. However, regardless of the direction followed by an organisation two steps always followed, they are product identification and product evaluation (Page, 2013). Product Identification This step will often have three main items i.e. identification of the user requirements, research on vendors and requesting for bids from all possible vendors. Moreover, it is at this stage that the functionality (service and system ability), technical architecture, and cost of the ERP system are determined. Based on these requirements, research is then conducted on vendors that meet the needs of the organisation and can deliver on the said services (Iulian s Mihalca, 2007). Product Evaluation Having established the vendors, an analysis is done to determine the vendors that satisfy the needs of the organisation. These vendors must meet the functionality requirements among other factors such as the cost implications. In addition to this, evaluations are done on the agreements (contracts) more so the system licence agreements that determine the authorization accorded to the organisation by the system developer. Challenges and Issues of the selection process Several challenges and issues emerge in the processes discussed above, however, unlike popular perceived they are not completely technical and can be easily solved through strategic planning as well as through comprehensive communication. From the processes highlighted above, its clear to see how extensive and complex an ERP implementation is in an organisation. This complexity in itself is an issue that an organisation must deal with to succeed. Moreover, this complexity is only simplified through strategic procedures meant to meet the end objectives. However, one notable issue faced by most organisation in the selection process is the lack of patience and the immediate desire to implement the entire ERP system at one instance. This outlook causes failure which turns a system into a loophole rather than a business advantage (Kripaa, 2011). Secondly, ERP implementation is more than introducing a management software, in fact, its more of a re-evaluation of a company to transform its practices to meet the demands of the market. These adjustments/evaluations need the commitment of the top management who consider the implications of the proposed changes. However, because the ERP system is more of a technical process, most organisations will hand these projects to the technical team who implement system based on technical prowess rather than business implications. In the end, the requirement specifications and cost implications are tailored to meet the technical requirements while ignoring the business implications (Kripaa, 2011). On the other hand, the lack of proper analysis procedures to assess the system requirements and to train the essential personnel impairs the overall functionality of the ERP system. Fundamentally, this is a technical issue that most selection processes go through where organisations fail to adequately invest in technical experts and instead rely on unqualified individuals to carry out the initial system assessment. Such limitations end up costing an organisation more money than initially estimated. Moreover, they interfere with the logical flow of investments as the organisation is forced to continuously pay for solutions to recurring problems caused by these limitations (Carpenter, 2016). System compatibility is another issue faced by organisations in the implementation process. A common trend seen today sees companies adopt single ERP systems to manage their entire operations. This enormous requirement creates an integration challenge as the system is forced to cater for all needs of the organisation. Furthermore, many companies today are versatile in nature having different departments with different functionalities, this contributes to the overall problem of creating a single solution that meets the demand. Moreover, it contributes to the complexity of the selection process as the organisation is faced with many unrelated variables. In addition to this, consider the changes that are forced upon an organisation in order to meet the basic requirements of an ERP solution. These changes may serve as a challenge because the flexibility of the organisation is affected by the conformity of the industrial standards set by the system design. Furthermore, implementing and ERP system means re-engineering the processes associated with a business. These drastic changes may prove detrimental to an organisation as the people involved may fail to agree on the conditions set by these changes hence, affecting the overall outcome of the implementation process (Kripaa, 2011). Finally, management issues, especially at the initially phase of the selection process, can lead to cost overheads and poor investment procedures. In this case, the system adopted develops functionality issues such as speed and compromised security. To cater for these deficiencies in the system, the organisation is forced to pay for extra services to deal with the compromised system. As seen before, these solutions end up being setbacks that reduce the overall productivity of a business rather than empower it in a competitive market. Recommendation According to Sage vice president Erik Kaas (2012), strategic planning is the essential elements of winning in an ERP project. Up front, planning helps avoid the confusion of choosing the right system based on the requirements determined by the initial evaluation process. In addition to this, an organisation should conduct an internal audit of all the processes and even policies to determine the system requirements. These requirements are then used to accurately determine the vendors who satisfy the organisations needs. However, these initial decisions should be made in collaboration with the all the stakeholders of a business, especially top management (Schiff, 2014). Secondly, consult far and wide to establish multiple contacts with ERP vendors as well as the services they offer. This versatility in options will avoid functionality restrictions once the ERP solution is implemented. Furthermore, it will help improve the organisations understanding of the proposed system. According to MorganFraklin Corp (2014), more 60 percent of all organisations, today dont understand the features they use in their ERP systems. Therefore, having multiple options will help improve a companys understanding so as to choose the best option. This point retaliates the importance of early selection procedures more so, those that offer multiple solutions. Moreover, having these options will also enable an organisation to seek the most qualified individuals to deal with the implementation of the technical aspects of the selection process (Page, 2013). Finally, approach the implementation process as a support project and not as a solution to all (end to end) problems faced by an organisation. ERP systems are designed to support the management unit within an organisation based on the information provided to them. They are never supposed to absorb all the logistics of a business and thus meet all the functionality requirements. If this basic concept is understood, ERP integration and optimisation is done conveniently with minimal issues as the objectives are clearly understood (Motiwalla Thompson, 2012). Conclusion ERP solutions have improved business today as they help integrate the different aspects of an organisation into one common unit. This integration improves the flow of information, making an enterprise quicker and more efficient. However, these enhancements are dependent on the ERP system itself and processes used to integrate it into a business. Therefore, the selection process is more important than the capabilities of the solution. Poorly implemented solutions end up being liabilities and not improvements to existing business infrastructure. Such liabilities end up being added disadvantages to the survival of a business. However, an ERP solution that is properly managed and implemented with the best strategic procedures contribute to the survival of a business and helps beat rivals in a competitive market. References Carpenter. L. (2016). Common Challenges of ERP Software Implementation. Channel. Retrieved 25 January, 2017, from: https://www.nchannel.com/blog/common-challenges-with-erp-software-implementation/ Iulian. A. U Mihalca. R. (2007). Criteria for the selection of ERP software. Informatica Economic. 2(42). Retrieved 25 January, 2017, from: https://core.ac.uk/download/pdf/6612434.pdf Kripaa. A. (2011). 7 Common Challenges Faced in ERP Implementation. Ramco. Retrieved 25 January, 2017, from: https://blogs.ramco.com/7-common-challenges-faced-in-erp-implementation Motiwalla. L Thompson. J. (2012). Enterprise systems for management. Retrieved 25 January, 2017, from: h222767.temppublish.com/Enterprise_Systems/motiwalla_esm2e_pp_06.ppt Osintsev. A. (2016). The 5 Biggest Challenges When Implementing ERP for the First Time. Technology evaluation centres. Retrieved 25 January, 2017, from: https://www3.technologyevaluation.com/research/article/the-5-biggest-challenges-when-implementing-erp-for-the-first-time.html Page. C. (2013). How to select an enterprise resource planning system for small and medium enterprises. University of Oregon applied information management program. Retrieved 25 January, 2017, from: https://ce.uoregon.edu/aim/Capstone1Perm/Page20132014.pdf Schiff. J. L. (2014). 9 Tips for Selecting and Implementing an ERP System. CIO from idg. Retrieved 25 January, 2017, from: https://www.cio.com/article/2458889/enterprise-resource-planning/9-tips-for-selecting-and-implementing-an-erp-system.html Tsai. W, Lee. P, Chen. S, Hsu. W Lin. T. (2009). A study of the selection criteria for enterprise resource planning systems. International journal business and systems research. 3(4). Retrieved 25 January, 2017, from: https://msbfile03.usc.edu/digitalmeasures/wtlin/intellcont/09Tsai%20Selection%20Criteria%20ERP-1.pdf