A Combined Method for Evaluation Criteria when Selecting

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] * * * * * * 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. 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 • Open. MFG • Open for Business Project • Tiny ERP • Web ERP • Open Office • Open. Bravo • Open. Pro 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 Reuther [2004] Rittammanart et al. [2008] Baharum et al. [2009] Database migration Technology Technical requirements Complexity of technology East of database administration BPR Business drivers 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 3 rd party software Cost drivers Others Flexibility Scalability Business specific Ease of service exposure Resource utilization User support 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 Software Functionality 0. 457 20. 03 Yes Software Cost -0. 253 -11. 08 Yes Implementation Ease of Customization Software Ease of Use 0. 129 5. 67 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 Customize vendor 0. 0 0. 8 0. 7 0. 5 Mid-size vendor 0. 4 0. 6 0. 5 0. 6 OSS with support fees 0. 7 0. 9 0. 6 0. 8 0. 7 OSS without support 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