The criteria for selecting ERP systems are important because of the obvious influence on the selection result. Irani (2006) argued that ERP or IT/IS 'investments differ in nature from other capital investments as there is a substantial human and organizational interface'. Clearly, the crucial factor in any evaluation and selection study is an understanding of what is being measured. Recent literature on ERP evaluation and selection advocate a shift away from straightforward measures such as the financial and ratio quantification of cost, to including such measures as intangible benefits, risks and opportunities presented by ERP systems. A review of recent studies on ERP evaluation and selection reveals that most of the literature considers intangible benefits and costs when dealing with ERP project evaluation or selection issues and researchers therefore intend to develop a set of criteria to measure those benefits, costs, risks and opportunities.
QingYu
Graduate School of Business @ University of KwaZulu-Natal
20
An investigation of problem factors in KRP selection from KwaZulu-Natal organizations July, 2007"
Table 1: IT/IS investment criteria
IT/IS investment criteria:
External criteria:
Internal criteria:
Risk criteria:
Cost criteria
1. Apply with partner
2. Commit to government requirement 3. React to or compete with other competitors 1. Organization learning
2. Users' requirements
3. Compatibility or integration ability with existing IT/IS portfolio 4. Organizational re-structure
1. Probability of completion: a. Manpower b. Skill of IT staff
c. Maturity of new technology 2. Probability of benefit achievement
1. Hardware costs 2. Software costs
3. Implementation costs (including change of management) 4. Maintenance costs
5. Consultant costs (including training time and learning curve) Benefit criteria 1. Assist in achieving corporate goal
2. Assist planning and control
3. Assist in making a management decision 4. Improve competitive advantage 5. Reduce or avoid operation "S"
6. Improve information quality 7. Improve users' satisfaction 8. System flexibility
9. Security protection
Source: Adapted from Chou, Chou & Tzeng, 2006
In the study of MRP II benefit/cost analysis, Irani (2002) analyzed the benefits and costs of MRP II and then addressed three main sets of benefits, namely: strategic, tactical and operational benefits. This was compared with two main types of cost: indirect human costs and indirect organizational costs. The study conducted by Shang and Seddon (2000) was cited by Murphy and Simon (2002), who identified five main dimensions of ERP benefits, namely: operational, managerial, strategic, IT infrastructure and organizational. Chou (2006) suggest a hierarchical IT/IS investment criteria list, including not only internal ERP or IT/IS evaluation criteria, but also considering external environments. By generalising recent ERP criteria in studies he divided IT/IS investment criteria into five different sectors, namely: benefit, cost, risk, internal and external criteria. These are detailed in Table 1 above.
The research conducted by Wei (2005) creatively proposed a hierarchical structure that separated ERP evaluation and selection criteria into detailed means. Table 2 and Table 3 below are samples adapted from Wei's study (2005) that show how ERP evaluation and selection means can be split into
21 Qing Yu
Graduate School of Business @ University of KwaZulu-Natal
An investigation of problem factors in RRP selection from KwaZulu-Natal organizations July. 2007
product factors (system software factors) and non-product factors (vendor factors).
Wei's study (2005) has expanded on previous studies of ERP selection criteria and in doing so has provided extensive groundwork for researchers to conduct future studies on the topic of ERP selection.
Table 2: ERP product factors
Attributes Total costs
Implementation time
Functionality
Evaluation items 1. Price
2. Maintenance costs 3. Consultant expenses 4. Infrastructure costs
1. Module completion 2. Function fitness 3. Security
Means
1. Limited project budget
2. Limited annual maintenance budget 3. Limited infrastructure budget
1. Designed to minimize implementation time 1. Having complete functionality
2. Operating process improvement 3. Operating system independency 4. Security features
User friendliness
1. Ease of operation 2 Ease of learning
1. Ease of installation
2. Consistency with interface and user-friendly operations
3. Easily understood and well designed business decision-making support for IS
4. Accessibility and quality of product support Flexibility 1. Ability to be upgraded
2. Ease of integration 3. Ease of in-house development
1. Adaptability and flexibility of software 2. Compatibility with existing hardware 3. Compatibility with existing operation software 4. Customization
Reliability 1. Overall performance 1. Overall performance
2. Stability and recovery ability 2. Overall reliability (stability and recovery ability)
Source: Adapted from Wei, Chien & Wang, 2005
22 QingYu
Graduate School of Business (u\ University of KwaZulu-Natal
An investigation of problem factors in L;RP selection from KwaZulu-Natal organizations July. 2007
Table 3: ERP non-product factors
Attributes Evaluation items Means Objective fit 1. Acquisition strategies
2. Requirements
1. Improved innovation capabilities 2. Increased organizational flexibility 3. Customer and supplier needs 4. Increased customer satisfaction Reputation 1. Vendor
2. Marketplace 3. Deliverable
1. Market position of vendor 2. Good reputation of the provider 3. A satisfactory reference site visit 4. Quality of the vendor's proposal
5. The contact person from the vendor seems to be trustful and reliable
1. I nternationality of software
2. Recommendation by a well-known company 1. Good understanding of the requirements, constraints and concerns of the customer
2. Success experienced in delivering solutions to similar companies
Finance 1. Financial advantage 1. Good value relative to cost
2. It is cheaper for the same modules than for different ERP
3. Lower upgrade cost
4. Vendor offers monthly rental or installment option and not just a lump-sum payment option
Service 1. Technical capability 2. Training
3. Data transition
1. Minimum implementation time 2. Ownership of the source-code 1. Good end-user training program
1. Provide data extract and data import service
Source: Adapted from Wei, Chien & Wang, 2005