The effectiveness of Enterprise Resource Planning (ERP) can be measured through an ERP evaluation. Businesses performing an ERP evaluation should weigh several factors. These include how well the software adapts to changes in the business, how easy the ERP software is to use, and how much the ERP software costs to purchase and maintain.
Essentially, ERP is software that consolidates information about a company’s financial resources, assets, liabilities, and employees in order to provide a centralized database for use by management or shareholders. When conducting an ERP evaluation, the ability of the software to integrate all the information is a major factor to consider. Since the software is designed to facilitate the aggregation of information, the efficiency of the selected ERP software and the ability to easily implement ERP into the operations of the business should be considered.
Software that is incongruent with the industry or business practices of a company can result in ERP failure. An ERP evaluation should focus on how well the software adapts to changes in the business. If the ERP software does not adjust to changes in revenues or the workforce, the functionality of the software will be inhibited. In order for ERP to succeed in integrating a company, the software must be custom tailored to each segment of the company. If the ERP evaluation fails to integrate, the actual utility of the software will be inhibited by recommendations and information that is too general to be of any use.
Ease of use is the second factor to consider when administering an ERP evaluation. Software that is convoluted or requires advanced knowledge will limit the number of people capable of using the ERP. Also, if the ERP technology causes problems during the installation phase, or is incompatible with the computer system of a business, efficiency and productivity will be negatively impacted because more time will be spent adjusting the ERP system instead of collecting data relevant to making quality business decisions.
While ERP can benefit a company, if too much money is spent purchasing, implementing and training employees on how to use the program, the benefits will be negated. ERP software is very expensive. Therefore, when overseeing an ERP evaluation, the cost of maintaining the ERP should be compared to the benefits provided by the program such as increased productivity, improved communication between departments or facilities, and better organization of information. Also, the relationship of a company and its ERP vendor is important. If the vendor charges more money for updating or troubleshooting ERP, a change in vendors may allow a business to save more money.
