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ERP Selection Methods

ERP Selection Methods. INFSY 489 / IST 402 Spring 2005. How to Develop an ERP. Adopt only a few ERP modules from a vendor. Rent and ERP product From an application Service provider. Adopt a vendor product completely. Develop an ERP In-house. Customize a vendor product.

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ERP Selection Methods

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  1. ERP Selection Methods INFSY 489 / IST 402 Spring 2005

  2. How to Develop an ERP Adopt only a few ERP modules from a vendor Rent and ERP product From an application Service provider Adopt a vendor product completely Develop an ERP In-house Customize a vendor product

  3. Measurement of Project Impact • Information Systems projects are often difficult to justify solely based on concrete monetary benefits • Cost-Benefit Analysis includes • Intangible Factors: • Increased market share • Improved customer service • Better corporate image • Improved employee satisfaction

  4. Measurement of Project Impact • Large IT projects often change organizational power • Change the communication structure • Experienced employees may feel threatened by new system • Change work roles making some workers feel less productive

  5. Information Technology Selection • Hinton and Kaye surveyed 50 members of a professional organization to identify how IT projects were selected • Treated IT projects as: • Capital investment using cost-benefit analysis to establish profitability – general practice • Revenue-related project expected to benefit organizational goals

  6. Information Technology Selection • Most commonly cited justification for IT projects: • Reduction in expenses, i.e. Payroll • Accomplishing a strategic objective • IT projects involve multiple risks • Most important being abilities of project manager

  7. Evaluation Techniques • Cost-Benefit Analysis • Accurate measurement of the benefits and costs in monetary terms of project • Uses the ratio benefits/costs

  8. Evaluation Techniques • Net Present Value • Uses present value of the cash flows expected from a proposal • If the present value of the net cash flow expected from a proposed investment, at the selected rate, equals or exceeds the amount of the investment, the proposal is desirable

  9. Evaluation Techniques • Payback • Identify cumulative net cash flow and identify how long it will be before it turns positive

  10. Evaluation Techniques • Value Analysis • Used when projects’ benefits are heavily intangible • Separate the benefits measured in intangible terms from costs • Present decision maker with the intangible comparisons in performance • Are the improvements provided by the new system worth the price?

  11. Evaluation Techniques • Multiple Objectives • Profit • Minimize Risk • Develop markets • Capital replenishment • Labor policies • These items pose conflicts for decision makers in today’s businesses

  12. Evaluation Techniques • SMART (Simple Multiattribute Rating Technique) • Considers benefits of a system on a variety of scales without converting them to a common scale like dollars • Provides a means for decision makers to quantify their preferences • Scores and Weights are used to compute a Value Score on each project

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