Enterprise Resource Planning System - Research Paper Example

Enterprise Resource Planning System Abstract This paper aims to explore the issues that companies face when purchasing an Enterprise Resource Planning system (ERP system). It also provides brief information on the things to consider when purchasing an ERP system, such as expectations from the vendor and consideration on the amount of influence a vendor has over the purchasing company’s decision. It briefly touches on the issues that vendors usually disregard when pitching for a sale of an ERP system. The paper concludes with the most practical strategy to guarantee that the best ERP option is made available according to a company’s business needs. One must consider the scale the drive “Enterprise Resource Planning” (ERP) vendors in order to understand these vendors’ sales tactics. Millions of dollars are invested by big players such as Oracle/PeopleSoft, SAP, Microsoft, and SYSPRO --- to name some --- to develop ERP systems (Dowlatshahi, 2005, p.3745). For these vendors, CD copy of the system is just minimal capital; therefore closed deals for implementations of these systems gain them absolute profit. It should be of no surprise to see these vendors exhaust all means to close deals with potential clients, since there is a lot of profit at stake (Fulla, 2007, p.35). Some companies report being given trips to the vendor’s headquarters, luxurious meals and accommodations, and transport by stretch limos (Dowlatshahi, 2005, p.3747). These are all part of a vendor’s strategy in wooing clients to buy their ERP system. Basically, these ERP systems are similar in their fundamental functionalities in business processes management. Therefore, to sell a product, vendors must establish their product’s superiority over other ERP systems available in the market. The danger here is the vendor’s inclination to make outrageous claims regarding their ERP system. Some vendors publicize the advanced functionality of their system, some vouch for the ease of use, while others offer money-back guarantees of up to millions of dollars if their system fails to double other company’s ERP system performance (Fulla, 2007, p.36). ERP vendors even try to sell extra technical and consultation support aside from their software licenses. Final quotes may include consulting and programming assistance of up to thousands of hours. However, companies should be aware that there are usually fees for this consulting assistance, and it may be easier to find cheaper open market services (Fulla, 2007, p.38). Enterprise Resource Planning System 4 Choosing a Vendor The ERP market has developed to make the products provide the fundamental needs of a typical business. For instance, the big players have general ledgers as well as purchase and sales ledgers than they can offer to financial departments of several companies. However, these standardized systems create confusion among buyers. This is why a vendor’s reputation plays a vital role in the selection of a system to be implemented in a company. There are helpful criteria that aid in addressing the major issues in evaluating which vendor to buy from. First, the vendor should be able to offer live demonstrations. A previous survey showed that a good demo is seen as the most useful criteria in choosing the correct ERP system for the company. Vendor policies should also be given consideration, particularly regarding version upgrades or system updates. Vendors should also be able to present a list of solid references that will vouch for the excellent performance of their proposed system. On this part however, buyers should request for information on failed implementations by the vendors. Areas of failure may be more worthy to evaluate compared to areas of successes, which most vendors will flaunt. Credibility also plays a vital role in choosing the appropriate system for a company. For example, SAP is considered one of the market leaders in the ERP industry. SAP has over 10 million users worldwide and is able to provide solutions for every industry. Therefore, SAP can be considered a credible vendor. On the other hand, PeopleSoft/Oracle boasts of catering to most of the companies in the Fortune 100 list. This gives it a solid reference as evidence of their performance (Dowlatshahi, 2005, p.3751-3). Explicit details on the company needs after sales and implementation should be included in the contract. Additionally, best vendors should be able to answer specific questions prior to Enterprise Resource Planning System 5 the sale. First, the vendor must know if their company provides 24/7 assistance to existing clients, and if yes, how efficient their helpdesk team is. Procedures for changes and response time should also be addressed. Vendors should also be able to provide data on the different levels or plans of maintenance and support to which a user can subscribe. Product upgrades and the forecasted timeframe for these upgrades should also be provided to the client. Additionally, vendors must also inform clients if they have an online support portal for assistance, or if they offer support in particular regions of locations (Fulla, 2007, p.39-41). In the ERP industry, the percentage of failed implementation is high, having an average of 50%. Vendors, therefore, should know that adverse effects on business operations, budget overruns by excessive conflicts, unwarranted delays in the schedule of implementation, and failure to generate the promised ROI causes client dissatisfaction. In large organizations, ERP implementation fails due to several factors. Some examples are: poor project administration, inaccurate customization, incorrect schedule estimates, and inferior ERP system selection (Scott & Vessey, 2000, p.214-6). Therefore, since the crucial stages of planning are based on the purchasing company’s management, the only influence a vendor should have in a company’s purchase of an ERP system should be almost zero. Save for price negotiations and vendor credibility, the full evaluation of the business need and financial capacity should be determined by the purchasing company. In almost all cases, proper planning by the purchasing company coupled with a credible system from a reliable vendor has a higher probability of a successful ERP implementation (Scott & Vessey, 2000, p.229). Enterprise Resource Planning System 6 References Dowlatshahi, S. (January 01, 2005). Strategic success factors in enterprise resource-planning design and implementation: a case-study approach. International Journal of Production Research, 43, 18, 3745-3771. Fulla, S. (January 01, 2007). Change Management: Ensuring Success in Your ERP Implementation. Government Finance Review, 23, 2, 34-41. Gould, L. (2005, 12 01). Easier ERP Implementation? . Retrieved April 5, 2011, from AUTOMOTIVE DESIGN AND PRODUCTION: http://www.autofieldguide.com/articles/easier-erp-implementation Scott, J. E., & Vessey, I. (January 01, 2000). Implementing Enterprise Resource Planning Systems: The Role of Learning from Failure. Information Systems Frontiers, 2, 2, 213-232. Read More