When a company considers acquiring a new ERP system, they often struggle with clearly defining the evaluation criteria. Ultra Consulting advises clients’ to start with five basic criteria:
- Function fit
The internal ERP evaluation team will expand this list as they progress through the project.
Function fit of the software is where most companies start. The fit of the vendor’s software to your requirements is done with a demonstration of the software. The team should provide the vendors with a list of needs. The vendor then demonstrates how the software meets these needs.
Technology review is normally done by the IT representative on the team. Your company’s IT department should determine the technology direction of the firm. This direction is often a qualifier for a vendor in a selection project. For instance, is Microsoft technology the direction or Oracle? Is your technology IBM AS/400 and you will not change because of the large investment in IT resources? These questions need to be determined at the start of a selection so you do not waste time with vendors that do not fit the technology direction. It is OK to say, we are open to the technology of the software selected because the software fit is the most important criteria.
In addition to the technology direction, it is important to examine the technology tools available from the vendor for report development, application program interfaces (API), and proprietary development tools.
Company is the evaluation of the company as a strategic partner. This should include a review of their financial results, their company direction, and their management team. You should do the same review on the company that you would do for any strategic partner. In the last few years, “survivability” has been a big question because of the consolidation trend that has occurred in the industry over the last 10 years. This has become less of an issue as we have seen some acquirers continually grow acquired software. The biggest examples of this trend are the Microsoft acquisitions, and the Oracle acquisition of J.D. Edwards via its PeopleSoft acquisition. At Ultra, the new question becomes, can the vendor sustain and grow this product as technology changes over the next 10 to 20 years. The answer should be yes for SAP, Oracle, and Microsoft. Is it also “yes” for the vendors that are significantly smaller than the “Big 3”?
Ask the vendor the following:
- How many new sales of your product were made in the last 12 months?
- How much money are you planning to invest in this product over the next 5 years?
By comparing the answer you will get a good idea who is the strongest vendor.
Support includes the review of a number of areas. Consider examining the following:
- Implementation methodology
- Experience of consultants to be assigned to your account
- Support tools such as education, on line tutorials
- Process documentation tools
- Web based support tools
- Vertical ERP vendor industry user advocacy programs
- User groups
- Customer satisfaction surveys
Understand the support policies for the product proposed.
Cost is the comparison of the cost proposals. Use five years as your time horizon to compare the total cost of ownership. Be sure to include the following components:
- Software cost
- Annual support cost. Be sure to understand how the fee can escalate.
- Implementation costs. Be sure to ask for a detail statement of work so you can compare hours by phase and the hourly rate for the different. consultant to be put on the project.
- Hardware costs. Include the servers, but also any infrastructure upgrade requirements, and any shop floor or mobile devices planned.
Most important, get input from the vendor as to the resources required by your organization to make the software implementation a success. Your commitment of time will exceed the vendor’s consultants time by a factor of 3 to 5 times!
At Ultra, we advise our client’s to build out a decision criteria table comparing the information you gather on all of these criteria points. The team and management should meet to analyze the data, but also to weight the five different sections. What are the most important criteria?
This approach will make sure you do not miss something important. You will probably find most of your grades will be fairly close if you have selected the right vendors for review. You should come to the conclusion that any of the vendors will far exceed what you have today, but you will see a few criteria that will jump out and be the reasons why you chose the software and the vendor.
There is also the relationship with the vendor that showed be considered. This is the relationship that is formed between your team and the vendor’s team (sales, pre-sales, ERP implementation consultants, executives, developers, etc.). In the end, ask yourselves, “Who do we want as our business partners?”