How to Evaluate Vendors

exhaustive analysis contains the key steps to purchasing an ERP system.

BEFORE BEGINNING THE SEARCH FOR AN ERP VENDOR, the following decisions need to be reached:¹⁹

• What type of database platform will the ERP software be on? SQL Server database? IBM database? Avoid wasting time by looking at software that doesn’t run on the desired platform.
• How many users will be on the sytem? Licensing fees can be based on named users (the number of unique users that will use the system) or concurrent users (the maximum number of users on the system at one time). At this stage, only estimate the number of named and concurrent users.
• Define the type of business being conducted. Is it make-to-order? Make- to-stock? Mixed mode? Process? The package must fit the business model.
• What is the budget? Plenty of solutions are available at many different price points.
• Devise a ballpark budget that includes software and implementation services to avoid wasting time investigating software that is unaffordable.

Of course, these questions open the door to the standard set of vendor evaluation criteria that any manufacturing company would use to conduct due diligence on as significant a purchase as an ERP system. The de facto questions include:

• Number of years in business;
• How long the ERP product has been on the market;
• Functionality for the type of business considering the purchase
• Vendor stability and reputation; ability to service and support the software
• Making sure the vendor has a roadmap for the future of the product

Once the basics have been addressed, it is time to carry out an exhaustive requirements analysis. This contains the key steps to purchasing an ERP system:²⁰

1. Do a comprehensive assessment of your existing business processes and the scale of operations to identify the need for an ERP system. Implementing an ERP system is a long-term strategic decision for any organization, as it alters the way your organization works. Therefore, it is imperative to justify your decision to top management before researching ERP packages in the market.

2. Define the objective of your selection process. Considerable background research is necessary before exploring the market for ERP packages. It is imperative to realize that no ERP package offers functionalities that can meet all business requirements of the organization. Some level of configuration and customization to the ERP package as well as to an organization’s business processes is always required during ERP implementations. The objective of the selection process should be to find a package that is flexible enough to meet the organization’s needs or that can be customized easily to obtain a “good fit.”

3. Form a selection or evaluation committee for carrying out the evaluation process. The evaluation committee should typically include functional experts from different departments, top management (CIO, COO, or IT director), consultants (ERP experts), and end-users. As members represent their respective business functions, the final package will find enterprise-wide acceptance and application.

4. Define your product requirements, in terms of both core and advanced ERP modules and features.

5. Develop pre-evaluation selection criteria to permit the evaluation of the available packages on the same parameters; this will help in shortlisting the top five or 10 ERP packages for final selection. The selection criteria should be prepared to help the committee choose a solution that meets critical business needs, matches the business profile, and identifies with the company’s practices.

6. Shortlist four to five ERP packages. Besides using pre-evaluation selection criteria, ERP packages can also be shortlisted with the help of online product identification tools such as Managing Automation’s TechMatch product or with the help of external consultants that analyze product specifications and identify ERP solutions that are being used by peer companies. Once a few packages are shortlisted, the respective vendors can be contacted for presentations and demonstrations.

7. Conduct extensive research on the shortlisted ERP packages. The selection committee should gather more information about shortlisted packages through the use of online tools such as TechMatch, independent industry experts, user reviews, and research agencies. These channels provide analyses and comparative reports on leading ERP packages, and position themselves as excellent sources of information on the latest developments in the ERP domain. However, these reports are not completely unbiased and objective in nature, and therefore should not be relied upon as gospel. Refer to a wide range of research resources and get an overall idea about the features of shortlisted ERP packages. Every effort should be made to keep abreast of the latest developments in ERP.

8. Formulate the final selection criteria. Even before marketing executives of ERP vendors make presentations for their tools, be ready with a comprehensive list of questions for vendors addressing all your concerns. These questions are the final selection criteria for shortlisted ERP packages. Carry out a detailed requirement analysis of business needs to prepare the selection criteria. Further categorize the criteria as “critical,” “essential,” “desirable,” and so forth; assign appropriate weights to make the evaluation process more objective. The categorization of requirements will depend on the criticality of requirements for a company. For instance, a company with operations units in different countries might have multi-currency and multi-language support as critical criteria. On the other hand, a local company might have multi-currency and multi-language support as either desirable or avoidable requirements.

9. Evaluate vendors based on selection criteria and product demonstrations. The vendor’s responses to your questions will help to eliminate a vendor or strengthen their case. You can also prepare minutes of the meeting and make the vendor sign it. This will prevent the vendor from making false claims and make it accountable in case of failure to deliver promised results. Once the committee has evaluated ERP packages based on the pre-evaluation and selection criteria, seen vendor presentations, and clarified all questions and doubts, it should be able to select an ERP package.

Then check for successful ERP implementations by the vendor. Before making the final call, visit and consult companies where the selected ERP package has already been implemented. If the package is working as expected in those companies, it will reinforce confidence in your selection. However, if you identify any issue, you should reconsider your purchase decision.

Throughout the selection process, conclude each step with the consensus of all members of the selection committee, including end-users, to gather enterprise-wide acceptance for the ERP package.