A very challenging question to answer – ERP Vendor selection criteria?
When any organization plans to strengthen its IT department for getting high quality MIS and business insights, generally, they move towards implementation of one ERP. Normal we have a perception about ERP in our mind that it can do anything. It is the high standard, complex and integrated software that can handle each and every activity we do in our organization.
Frankly speaking my more than 25 years of experience in the field does not allow me to think like that. Yes, a good ERP can do many things but not everything. The capabilities of ERP depend on the capabilities of both- The Vendor and The Organization or customer. If anyone is weak even a good ERP can become fail. So how to face the challenge? Should organizations stop thinking about ERPs? Should vendors stop implementing ERPs?
Hey folks, just don’t label me a – Negative fellow. Above are just some inputs for brainstorming. But yes, these are the facts you cannot ignore them. Ignoring them may lead to a big loss. So, what’s next? How to move ahead to analyze my business performance? How to execute my future plans?
Okay!!! Wait. I understand your worries. Your professional obligations. Your exhaustive state because of immature information you are getting about your business. You are not alone who are struggling with this problem. Many like you are also facing the same challenges. So, what’s the solution is?
Then what is the Problem
Agreed!!! You have done all homework on ERP implement. A good team of ground level executives who will directly work on ERP is also working for you. You are also having a very brilliant team of functional heads or HODs who understand the working of their department very well. There is no problem of budget and have already aligned it to implement the ERP. Last but not least you are also having a very good IT team to handle the implementation. So, what’s the problem now? Best of luck. You have done a great job. So, what’s the problem now? Oh yes, Vendor? Absolutely correct. You must think on that. So how to select the vendor? What should be your ERP Vendor selection criteria?
Selecting a right ERP vendor is not an easy task. It totally depends on your IT team expertise, your budget with tolerance, your road map and the technology you want to implement. Most of the vendors are working on almost all modern technologies but with different degrees of expertise. It is always not true a small vendor can not use best practices but it depends on its exposure to real world problems. If it has implemented its solution in some organizations of your level then it can handle your organization too. But it will require your teams 100% dedication from system study time to final GO Live.
Points to consider in ERP Vendor selection criteria
Functional Expertise in terms of implementation
When looking for an ERP vendor the basic purpose of finding a suitable vendor is to understand the ability of vendor. If the vendor has already familiar to your business process and understand your business pain areas very well then there are far better chances the system will get implement effectively.
Market size and references
If the vendor has come with some good reference from same business, then there are good chances the system will get implemented effectively in less time as now vendor understands the reputation of his as well as the person who introduced him are on stake.
Market size means when any vendor has already implemented its system successfully in same type of industry, its name and fame are already in the market.
Vendor size and strength
A large sized vendor has a big team and stakeholders. IT Industry is the kind of industry where normally people come in and goes out. Now if any resource goes out large size industries never bother as their system is getting managed by system and not by person. But in a low sized agency, it matters. Sometime even system get irreversible damage.
Vendor must have a good market reputation
The very first analysis of ERP vendor selection criteria is the vendor we are planning to deal with must have a good market reputation. It has implemented some good implementations from scratch and the customers are happy with its working.
AMC in ERP vendor selection criteria
Any vendor can implement the ERP but the problem arises when discussing for AMC. Normally AMC starts after 12 months of implementation. But some big organizations charge from post six months. Some may even post one month. It completely depends on your bargain strategy and exposure to how long can pull the vendor to support without AMC.
AMC settlement – a tough task in ERP Vendor selection criteria
The most important factor while discussing about AMC in ERP vendor selection criteria is the way AMC will be charged. Some time it is a fixed percentage of implementation cost and some time it is man day basis.
If AMC started after 12 months of successful implementation, then Man-day basis will be beneficial as in 12 months most of the problems have also been taken care. Now chances are less for a drastic change in functionality. So very less work will be there where vendor’s services will be required.
But if it starts within one or six-months post implementation, AMC should be given on fixed percentage basis. As now many tasks were still pending to be managed.
The key factor of ERP vendor selection criteria is the platform of application. The ERP Software must be a web-based application and should be of light weight. The application must consume less bandwidth. It should be a multi tire application. Business logics of the ERP should be wrapped and must not get exposed to outer world.
System Integration with third party applications and Hardware
System is having capabilities to integrate with third party software, already working in the organization? Or vendor has the ability to integrate the system. Normally Industries already having many hardware and machines that can be integrate with the software and if done, will give best result with less resource.
Price and Licensing
If the technology, planning to implement has the licensing then must know the licenses are named licenses or concurrent licenses. Vendor must brief difference between them and suggest the minimum need in very clear and satisfactory way. Hiding the fact for just to get the order will in future leads problem.
Bargain while handling – ERP Vendor selection criteria
Bargain is always like a bet. If played intelligently, chances are good to win. But if are playing in overconfidence, chances are more, purchasing headache by paying a good amount.
You are thinking for ERP because you are an organization and are in a large sized business. Can you sale your product in loss or just at par to your customer? If not then how can think to get the best deal by pressing the vendor?
Never opt if vendor surrenders to you and accept your loss-making deal, be sure the system will never become successful. Today vendor may accept the deal due to any reason but once will get order, will never depute best resources on it. Not joking friends. This is the harsh truth. If still not willing to learn, Your bad time starts now.
Geographically should not be far away
Though in ERP vendor selection criteria this factor does not matter a lot. In IT world, most of the companies are settled in Metro cities and work globally. But still, you must consider this. There are two basic reasons to think on it:
- Vendor located far away will take much time if required an Off-line support.
- Cost incurred in reimbursing a long-distance vendor will be much higher as compared to a nearby vendor
Above are some points if considered smartly, you did a great job. Success is not far away. Be sure you have covered 50% of ERP journey by selecting a good vendor.