Investigation of Criteria for Selection of ERP Systems
Bálint Molnár
, Gyula Szabó
and András Benczúr
Eötvös University of Budapest, Information Systems Department, Pázmány Péter sétány 1/C, 1117 Budapest, Hungary
Dénes Gábor College, Department of Computing, 1119 Bp, Mérnök u. 39, Budapest, Hungary
Keywords: Information System, ERP, Enterprise Resource Planning, Enterprise Architecture, Selection Criteria.
Abstract: The application and introduction of ERP systems have become a central issue for management and
operation of enterprises. The competition on market enforces the improvement and optimization of business
processes at enterprises to increase their efficiency, effectiveness, and to manage better the resources
outside of the company. The primary task of ERP systems is to achieve the before-mentioned objectives.
For this reason the selection of a particular ERP system has a decisive effect on the future operation and
profitability of the enterprise, i.e. the selection phase is highly relevant step within the introduction and
implementation stage of an ERP system. The issues that are worth investigating are the criteria applied at
the decision. The qualitative correlation between the size of enterprises, market position, etc. and the applied
selection criteria for ERP systems could be analyzed as to whether which criteria are made use of at
multinational enterprises or at SMEs. Our research is grounded in a literature review and case studies of
everyday practice related to introduction, implementation and roll-out of ERP systems and it tries to provide
answers for the above raised questions.
Surveys and practical experiences have shown that
all areas of enterprise operation have been affected
by cost savings including the IT related fields; the
main business objectives are modified to increase
the economic efficiency in spite of previous business
goals. The economic crisis has resulted generally in
dramatic impact on IT budgets at enterprises
(Thompson, 2010).
In spite of the enduring economic and financial
crisis, the introduction and adoption of ERP systems
continues. We have investigated the trends in a small
EU member country (Hungary) empirically and by
publications related to business management and
economics. There are clear tendencies that even the
small and medium enterprises (SME) that had data
processing systems which had been previously
developed individually or tailored to the specific
requirements started projects to buy ready-made or
commercially available Off-the-Shelf (COTS)
products on the market. The main reason is that the
previously developed, legacy systems cannot
comply with the recent requirements related to
information processing, namely cost-efficiency,
staffing level and other labor conditions.
We conclude that there are individually
developed and standard systems within the
industrial sector specific solutions.
In this paper, an ERP system (Enterprise
Resource Planning) is understood as an enterprise-
wide, comprehensive information system involving
all information processing activities that covers the
human resource, production, commercial, planning,
inventory, material planning, management control
and monitoring business processes by placing them
into a unified framework.
In next sections, we analyze the phases of
implementation process and providing some answers
for the raised issues.
The research approach as a methodology was
twofold. We have grounded our investigation in
BSc. / MSc theses that were created on ERP at a
Hungarian College as students’ research project.
There was an empirical research on architectural
approaches of subsidiaries belonging to international
companies and operating in Hungary (ELTE, 2010).
The research was carried out by a consortium of
Molnár B., Szabó G. and Benczúr A..
Investigation of Criteria for Selection of ERP Systems.
DOI: 10.5220/0004151101750180
In Proceedings of the 14th International Conference on Enterprise Information Systems (ICEIS-2012), pages 175-180
ISBN: 978-989-8565-10-5
2012 SCITEPRESS (Science and Technology Publications, Lda.)
Hungarian Universities and Colleges. Beside
companies situated in Hungary, the investigation
covered practice of ERP introduction at several
German companies either based on publications or
in-depth interviews with managers responsible for
ERP systems. There was a comprehensive literature
review related to ERP introduction and
implementation that we will discuss in detail.
ERP selection is an important decision making
problem of organizations and influences directly the
performance. There are a lot of ERP alternatives in
market (Wei, 2004). The failure in selection of ERP
system firstly leads to the failure of ERP
introduction or adaptation project or secondly to
degradation of company performance (Liao, 2007).
Several research studies have been conducted to
identify relevant factors having impact on success of
implementation and introduction at ERP systems.
The major part of studies have chosen the case study
paradigm, i.e. many of them focused on single case
study of ‘‘how we implemented ERP systems in our
company’’ (Ang, 1995); (Bingi, 1999); (Mandal,
2002); (Wilson et al., 1994); (Yusuf, 2004).
Furthermore, several studies that have measured
ERP implementation success used only one or two
factors of ERP implementation success (Ang, 1995,
2002); (Malbert, 2003); (Umble, 2003).
The literature research shows that problems with
the implementation of ERP systems emerge for a
number of reasons. We can summarize briefly the
reasons as follows: (1) Generally there is a need for
business process change or re-engineering for fitting
together the business processes and information
processes of an ERP system. Leaving out the
required business process alignment could lead later
operational problems. (2) Lack of commitment from
top management, deficiency in data accuracy, and
short of user involvement can attribute to system
implementation failures appearing typically during
the operation phase. (3) Education and training to
make use of ERP system are frequently under
estimated and are given less time due to schedule
pressures. (4) The synergy demanded by cross-
functional business processes are not understood
There are competing measurement approaches
and concepts coming from research literature and
practice. Some factors that can be encountered in the
literature: (1) User satisfaction (Al-Mashari, 2003);
(Anget, 1995; 2002); (Mandal, 2002); (Yusuf,
2004). (2) Intended business performance
improvements (Al-Mashari, 2003); (Hong, 2002);
(Mandal, 2002); (Markus et al., 2000); (Yusuf,
2004). (3) On time (Al-Mashari, 2003); (Hong and
Kim, 2002); (Malbert, 2003). (4) Within budget (Al-
Mashari, 2003); (Hong 2002); (Malbert, 2003). (5)
System acceptance and usage (Ang, 1995; 2002);
(Yusuf, 2004). (6) Predetermined corporate goals
(Al-Mashari, 2003); (Umble, 2003); (Yusuf, 2004).
The reason why a decision may have been made to
replace an operational system by an ERP solution
can be concluded from several basic causes. One of
the origins for such a decision is that the enterprise
would like to save or strengthen its market position
through acquisitions or internal growth. The IT/IS
system can be adjusted to these changes flexibly if
there is a “quantum leap” in IS service quality by
introducing an ERP system considered as a “best
practice” in the industry sector. The other important
factor is the competition on the market. Beside the
market competition there are other coercive
requirements to optimize and to increase
performance in enterprise governance and
information processing.
The samples coming out of practice demonstrate
that the introduction and application of ERP is a
longstanding process (Feuchtinger, 2008).There is a
seven phase model for ERP introduction: proposal
for changeover, analysis, conceptual plan, short
listing the potential solutions, selection process,
decision for the designated one, and project closure
(Zimmermann, 2010).
4.1 Modernization of Operational
The companies frequently encounter a decision
situation how they can modernize existing data
processing system. There are three different ways:
development, package procurement and renting or
leasing the ERP services.
At the beginning it is difficult to decide whether
a program package as COTS (Commercial off-the-
shelf) should be procured or a vendor should be
found to develop a customized solution and who can
adapt its basic system to the company’s requirement.
The decision is hard as the package solution cannot
cover all business processes at the enterprise. A
developed system may comply with requirements
and it can be tailor made for specific business
processes; however it requires more resources
(Ayağ, 2007).
Before the decision between the package solution
and development, an analysis should be carried out
on potential solutions then after the analysis a
management decision could be made.
The third opportunity is renting or paying a fee
for all or some services of an ERP system. Most
recently, the ASP (Application Service Providing)
is an appropriate, cost-effective solution for micro
and small enterprises. The software as a service can
be accessed through the Cloud Computing.
4.2 Decision Making on the
Introduction of an ERP Solution
The question emerges whether what the factors are
that lead companies to consider replacing the
operational legacy system fully or partially with a
new information system.
A Hungarian Ltd. decided to adopt an ERP
(ProFinance™) system, their justification contained
three items on the grounds of the underdeveloped,
legacy information processing system: (1) The
rapidly developing enterprise owned old, legacy
information processing system that did not cover all
business processes. For this reason, the introduction
and implementation of a more modern enterprise
management system became the must. (2) In the
region, the other, concurrent companies have
adopted and will have implemented various
management systems gaining competitive
advantage. (3) There is intention to develop and to
extend the retail branch of the enterprise. For this
reason, the new information system should have a
steady and reliable on-line connection between the
retail shops and the wholesale units.
A company from Netherland had an AS/400
based system named TOTICS and had operated for
20 years. The question “Whether does the company
need a new information system and if the answer yes
then why?” has been responded as it follows: (1)The
new system is pre-condition to realize the business
strategy plan; (2) The new IS provides higher
reliability and service level for customers; (3)
Within the business group, the objective is to
increase efficiency and to make more transparent the
business processes; (4) The system should support
the business planning and consequently the cost-
efficiency and serving the consumers; (5) The new
IS creates the opportunity for an integrated system.
(Tóth, 2008).
The subsidiary of a multinational oil company in
Hungary used to employ JDE (J.D. Edwards) ERP
system. The company has roughly 100 subsidiaries
world-wide and they had applied a wide variety of
ERP systems. The company decided to eliminate the
heterogeneity of systems. The enterprises wanted
one integrated solution. Considering the
opportunities, the top management of multinational
company made the decision for a project called
Global SAP, GSAP project (Kulcsár, 2008). The
Dutch company settled to introduce SAP R/3 as
In one of our empirical research, we have met the
following approach (ELTE, 2010); (Molnár, 2011):
some business administration functions are
centralized at some regional headquarters as e.g.
invoice processing and payment. The customization
primarily meant specific parameters that reflect the
country specific legal environment. Consequently, a
business function is covered totally by a single ERP
module introduced during the changeover.
4.3 Objectives of ERP Selection and
Practical Approaches
The difficulties in selection of ERP system did not
originate from the fact that too few ERP systems is
available on market, in spite of it there are multitude
of ERP systems. There are hundred vendors beside
the major players in Germany (Grandjean, 2010).
The primary vendor selection could be based on the
market position within the specific ERP sector.
(Meyer, 2011).
The investigation of potential ERP solution
should take into account business and financial
consideration beside the information technology
viewpoints (e.g. software and programming
environment, information system function etc.). A
Hungarian Ltd. had as selection goals for ERP the
following criteria: (1) The system supplier should be
a domestic vendor, the vendor should commit itself
for satisfying the users’ request for change; (2) User
friendly system, easy handling of user interface and
ability for customization; (3) Capability for
integration and interoperation with other systems;
(4) The IT stability of IS should be high. (Csete,
4.4 Business Case
One of the major objectives during ERP selection is
to mitigate the risks inherent in the selection process.
Besides the business and technical criteria and risks
there are financial ones too. Evaluation methods
include Net-Present-Value, Cost–Benefit Analysis,
Payback, Return on Investment, etc. To assess the
financial parameters one of the analysis models is
the ROI (Return on Investment) that can be applied.
There is an elaborated method that consists of
several hundred questions. However, the extensive
questionnaire does not solve the problem deriving
from lack of information at stakeholders. There is a
dearth of reliable information on the following
subjects (Gronau, 2010): (1) Knowledge of the
actual functions within the ERP system; (2) The
applied software and –generally – information
technology; (3) The market position, the economic
capability, viability of the potential vendor; (4) The
comprehensive view of the alternative, competing
solutions existing on market; (5) The potential
improvement of information processing; (6) The
comparative analysis of references for alternative
solutions and their implemented instances. ROI is a
good compromise for assessing the financial risks of
an ERP adaption process and other socio-technical
viewpoints. (Lindemann, 2007).
The comparison of the potential alternatives as
procuring, renting, leasing or paying per usage for
services through Cloud Computing can be carried
out by TCO approaches. At a Hungarian Ltd. the
TCO model was employed to analyze the costs for
introduction and operation (Csete, 2008).
4.5 Soft Criteria for Selection
Besides the service quality and financial criteria,
there are lots of other objectives that should be taken
into account during the selection process. The
compliance to the requirements of the company is
one of the most important criteria. To clarify and to
define accurately the compliance criteria, a business
process modeling exercise should be carried out to
discover and to map the whole business process that
will be involved in the ERP introduction. To explore
the discrepancies between the existing processes and
the processes of potential ERP systems, a gap
analysis should be performed. T
The new ERP system may fulfill the recent
requirements; however the ERP system should be
prepared for future demands (Lotto, 2006). The
stability of information systems means the
adaptability to changes of technology, business
processes and business environment.
The experiences shows that if the set of functions
to be automated is minimized for several reasons –
financial, compliance, project timing, resources etc.
– then later on, the enhancement and evolutionary
development to react to the changing environment
may cause extra costs and other operational
difficulties as against of maximization of set of
functions for automation (Grandjean, 2010).
The flexibility of ERP systems is a success
criterion within the corporate and SME world
(Feuchtinger, 2008). In this context, the flexibility is
an overarching concept that involves the
simultaneous use of various languages carrying out
even the same task, at the same time, furthermore
adaptation to the changing business and market
environment. The top management at the center of
enterprises has various opportunities to find a
satisfactory solution among the potential ERP
systems (ELTE, 2010); (Molnár, 2011). The
concrete implementation is situated in the
centralization-decentralization continuum - both
horizontally and vertically according to the
Zachmann architecture - to provide the support that
is required the top management of enterprises.
Other uncertainty factor is the structure of
business processes and organization and the
capability for adjustment to the processes provided
by an ERP system. The ERP system adaptation and
transformation of business processes has as outcome
a solid market position. The ERP system adaptation
may have as a side-effect stronger market position,
efficient internal business processes and a profound
transformation of whole activities in the enterprise.
On selecting an EPR system to support
globalized business activities, so-called country
specific features should be taken into account. Such
features include as follows: Custom and excise
handling; Tax, revenue handling; Commercial code;
Financial and cost accounting; Banking, rules for
bank accounts; Local legal environment,
The potential ERP system may or may not
contain the above listed, country specific features.
The required customization needs extra
implementation effort generally.
Some examples for the difficulties that occurred
(Contini, 2010): Country specific, compulsory Chart
of Account (Belgium); Accounting the transfer
prices (Brazil); Handling and accounting the billing
credit (Bulgaria); Country specific Payroll (Chile).
The future research should deal with the changing IT
environment, especially the proliferation of Cloud
Computing, the Software as a Service (SaaS), the
application as a service, namely the ERP system
Table 1: Factors effect on ERP implementation.
Factors effect on ERP
Occurence in case studies
weak positive
average positive
strong positive
average negative
weak negative
strong negative
Top management support 8 5 6 6 2 3 3
Company-wide support 8 5 4 4 4 4 4
Business process
1 2 6 6 6 6 6
Effective project
7 7 7 3 3 3 3
Organizational culture 1 2 4 4 9 6 7
Education and training 2 7 12 3 3 3 3
User involvement 1 2 6 6 6 6 6
User characteristics 2 3 7 3 3 7 8
ERP software suitability 8 8 12 2 1 1 1
Information quality 8 8 12 2 1 1 1
System quality 8 8 12 2 1 1 1
ERP vendor quality 2 8 12 7 1 2 1
Total : 56 65 100 48 40 43 44
services. in this situation, it will be worth
investigating how the notion of asp (application
service provider) changes and what the particular
features may have regarding the erp services.
The multiple case studies and financial analysis
models presented in this paper provide assistance for
the decision making processes at enterprises where
the changeover issue is reviewed.
The results of research can be summarized in a
table as a conclusion (Table 1). The assessment of
each single factor (Table 1.) is grounded in working
up the in-depth interviews, BSc. / MSc theses and
other reports, overall 40 companies were involved in
the research.
The project management during implementation
and introduction typically followed the traditional
pattern, the disciplined project controlling and
efficient team organization was a pre-condition of
success. The commitment from the top management
considered generally a crucial aspect along with a
comprehensive support from personnel of the
The result of re-engineering is evaluated by
stakeholders with mixed feelings. Nevertheless, the
education and training is regarded as having positive
influences on the final success of ERP
implementation. The user characteristics and
education are intimately related so that the technical
and business skill of staff contributes to the success
of projects. The high level of information quality at
the customer organization makes easier the
introduction of ERP system as the organization has
been already accustomed to provide accurate,
timely, reliable and consistent data.
The ERP vendor quality appears in the form of
services that are provided together with ERP system
implementation and long-term operation. These
services includes response time of help desk;
knowledgeable consultants with experiences in both
enterprise’s business processes and information
technology including vendor’s ERP system. The
participation and support of vendor’s consultant in
implementation and introduction is a significant
factor. The services provided by consultants can be
characterized by the level of knowledge in both
customer’s business processes and functions of the
particular ERP system.
The Project is supported by the European Union and
co-financed by the European Social Fund (grant
agreement no. TÁMOP-4.2.2/B-10/1-2010-0030).
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