Information Systems and e-Business Management

https://doi.org/10.1007/s10257-021-00521-8

ORIGINAL ARTICLE

Analysing the factors affecting the selection of ERP

package: a fuzzy AHP approach

Nityesh Bhatt1 · Sunita Guru2 · Shashank Thanki2 · Gunjan Sood2

Received: 1 April 2020 / Revised: 15 January 2021 / Accepted: 18 February 2021

© The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature 2021

Abstract
Purpose Contribution of small and medium scale enterprises is significant in devel-
opment of any country, specifically developing countries like India. Therefore, syn-
chronization and integration of their business processes and functions through effec-
tive and efficient information sharing is vital. Hence, enhancing their competence
through the adoption of an appropriate Enterprise resource planning (ERP) system
is crucial to improve their competitiveness in the competitive scenario. Under this
backdrop, this paper analyses pertinent factors for selecting an appropriate ERP sys-
tem for SMEs.
Design/methodology/approach This mix-method research involved triangulation
design by merging both quantitative and qualitative techniques. Factor Analysis was
applied for selection of relevant factors affecting ERP procurement decision. Fuzzy
Analytical Hierarchy Process approach, based on triangular fuzzy numbers, was
used to rank these factors. Further, sensitivity analysis was performed to ensure the
robustness of the FAHP results.
Findings Cost of deployment was identified as the most significant criteria. On the
other hand, ‘Vendor credibility’ was found to be the least significant factor. Crite-
rion ‘User friendliness and Security’ and ‘Need fulfilment’ were ranked as second
and third.
Practical implications ERP vendors can use these findings in developing appropriate
marketing mix strategies. SME owners can also make use of these findings by col-
laborating with other SMEs for buying an ERP.
Originality/value This study can be seen as first attempt in investigating and rank-
ing various factors affecting ERP adoption decision for SMEs, specifically in Indian
context, using FAHP approach.

Keywords ERP · Enterprise resource planning · Fuzzy AHP · Multi-criteria

decision-making · SME · Vendor selection

* Nityesh Bhatt
nityesh@nirmauni.ac.in
Extended author information available on the last page of the article

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1 Introduction

Enterprise resource planning (ERP) is defined as “an integrated suite of business

applications that share a common database and processes across the organisa-
tion” (Bond et al. 2000). The benefits of an ERP system may be realized through
increased standardization of processes, which in turn enhance efficiency, lead-
ing thereby to cost savings. The ERP systems evolved from MRP I (Material
Requirement Planning) and MRP II (Manufacturing Resource Planning). MRP I,
launched in the late 1960s was a “technological system for inventory management
and production planning”. MRP II has been defined as a “system for the effec-
tive planning of various activities in a manufacturing enterprise” (Alwabel et al.
2006). While both systems added a lot of value for the manufacturing industry at
large, their limitations led to the emergence of the ERP system, having capability
to integrate different internal business functions and processes. With central data-
base of all entities as well as various transactions, ERP found numerous applica-
tions for external stakeholders like customers (CRM, E-Commerce) and suppliers
(SCM, SRM) (Vrat 2014).
The ERP market is expected to reach USD 61.69 billion globally by 2025 (Wil-
son 2019). ERP software is available and accessible through two platforms known
as in-premise ERP and cloud-based ERP. As the name suggests, major difference
between the two includes its location and ownership, both of its software and data.
Examples of in-premise ERP include SAP, Oracle, Tally etc.; they are deployed in
the firm’s own computers and are largely managed internally. Cloud-based ERP
systems like ZOHO, ODOO, etc., also known as software as a service, are hosted
on the vendor’s servers, managed by experienced and trained professionals at data
centres, which are owned by the vendors and accessed by end-users through a web
browser (Duan et al. 2013; Peng and Gala 2014). The difference between the two
(i.e., in-premise vs. cloud-based ERP systems) is that the cloud-based systems
have reduced infrastructure needs, which lead to reduction total cost of owner-
ship. Additionally, cloud-based ERPs are considered to be eco-friendly (Jain and
Sharma 2016). For in-premise ERP systems like SAP, Sage, MS-Dynamics etc.,
customers can procure them in commercially-off-the-shelf (COTS) form or may
even opt for customised systems to suit their particular needs. Additionally, for
in-premise ERPs, the alternative could also be to choose from industry agnostic,
general-purpose ERP (Horizontal) systems, which could be used for integrating
generic processes like procure to pay (P2P), order to cash (O2C) or vertical-spe-
cific (i.e., steel, petrochemical, hospital, etc.) systems, specifically designed to
cater to industry related processes (Rosa et al. 2013). In recent times, ERP prod-
ucts have been bundled with CRM, SCM and BI applications. Therefore, custom-
ers have the choice of procuring either a stand-alone ERP system or a complete
bundled enterprise application (Gattiker and Goodhue 2004; Wieder et al. 2006).
Decision-makers in organizations, including those from the SMEs, have to do
rigorous due-diligence to select the most appropriate ERP system, considering
their context and constraints (Kahraman et al. 2010). Several internal and exter-
nal factors influence this strategic decision (Illa et al. 2000). Secondary research

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Analysing the factors affecting the selection of ERP package:…

by the researchers of this study, identified numerous factors that tend to affect
ERP selection decision within a firm; however, most of these researches have
been conducted with large companies (Ziaee et al. 2006). To constitute a final
list of factors from a list identified through literature review, exploratory factor
analysis (EFA) was used. Moreover, fuzzy analytical hierarchy approach (FAHP)
was employed to calculate the weight of the factors and rank them accordingly.
The findings of this study are expected to assist owners and managers of Indian
SMEs in identifying and prioritizing factors that go on to influence an ERP selec-
tion process. It could also act as a point of reference for SMEs in other develop-
ing nations too. This paper aims at answering the research questions (RQs) given
below:

RQ1. What are the various factors that influence Indian SMEs in selecting ERP sys-
tem?
RQ2. Which of the factors are more important for Indian SMEs?
RQ3. What is the relative importance and ranking of the factors critical to ERP selec-
tion decisions?

Remaining paper is organised as follows: section 2 provides the review of extant

literature describing the importance of ERP for achieving competitive advantage,
along with the factors that influence its selection. Section 3 presents the research
methodology, application of the FAHP method and results along with validation.
Section 4 provides the discussion. Section five presents the recommendations
derived from the findings. The last section includes the conclusion of research and
scope for future research.

2 Literature review

Information systems, strategically aligned with firms, have become indispensable

for gaining competitive advantage (Zhang and Lado 2001; Piccoli and Ives 2005).
Fierce competition has led firms to switch to more reliable information systems
(Baki and Cakar 2005; Han et al. 2011), which possibly would help in smooth
execution of various processes, such as planning, procurement, manufacturing and
delivery (Pfeffer 2005). Importantly, all of this should be achievable without exceed-
ing the budgets; in fact, the costs should be minimised in all the processes adopted.
One way of maintaining low cost is by reducing waste and increasing efficiency
(Zhu and Sarkis 2004). To this end, ERPs are an information or computer system
that act as a decision tool, which can ensure the effectiveness and efficiency for firms
adopting it (Shang and Seddon 2000; Gattiker and Goodhue 2004; Holsapple and
Sena 2005). ERP is demarcated as the “integrated suite of software programmes that
links back-end and front-office activities with the downstream and upstream supply
chains” (Verville et al. 2007; Badewi et al. 2015). It is a “corporate strategy along
with domain-specific applications which builds value for stakeholders by optimizing
and enabling intra and inter-firm processes” (Bond et al. 2000).

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 N. Bhatt et al.

Firms should select an appropriate ERP package, which aligns with their pre-
sent needs and future ambitions (Al-Mashari et al. 2003; Presley 2006; Kilic et al.
2014). Upgrading to technological platforms is a crucial decision taken by top man-
agement, that affects the performance and competitive advantage of firms (Ahn and
Choi 2008; Sood et al. 2019). Selection and successful implementation of ERP help
firms to overcome the limitations of their legacy systems. For instance, the depart-
ments within firms that do not use ERPs, often tend to work in silos (Gardner 2016),
which in turn hampers their productivity (Albrecht 2002). On the contrary, an ERP
system not only collates information on a single platform, but it also provides solu-
tions to the business problems. ERPs align all business-related activities, standardise
business processes, ensure availability of real-time information, enable smooth com-
munication, increase inter and intra firm collaboration and enhance the robustness of
decision-making capabilities (Hwa Chung and Snyder 2000; Hwang and Min 2015).
The other benefits of ERP include enhanced customer service, business growth,
robust distribution systems and lower cost of operations (Dwivedi et al. 2009).
Despite the post-implementation benefits of ERP, its adoption is still a challenge
(Pan et al. 2007; Helo et al. 2008). Therefore, selecting the most appropriate ERP
involves various managerial contemplations like choosing from the options avail-
able, matching them as closely as possible to the needs of the organization, and
finally selecting that within a specified budget. For example, in the past, wrong ERP
implementation decisions have proved to be highly expensive even to renowned
firms like Hershey foods, Nike, HP, etc. (Hwang and Min 2015). This ascertains
thereof the criticality of the ERP selection decision, more so for firms, which work
on a relatively smaller scale of operations and a limited budget, such as SMEs.
SMEs are firms, which are neither too small nor very large. In fact, globally, there
is no unanimous definition of SMEs (Maduku et al. 2016). However, researchers
and institutes working for SMEs, tend to adopt the contextual definition, depending
mostly on the economic and infrastructural development of countries (Keskin and
Sentürk 2010). In India, the Development Commissioner, Ministry of Micro, Small
and Medium Enterprises (MSME) mostly make these classifications, through the
MSME Development (MSMED) Act 2006. It defines SMEs as one with an invest-
ment in machinery and plan between INR 2.5 million to INR fifty million.1 Simi-
larly, a medium enterprise is classified as the one investing INR fifty million to 100
million in plant and machinery (dcmsme.gov.in 2019).
MSMEs current contribution in the Indian GDP is approximately thirty percent;
this sector provides employment to 110 million people. The Indian government
acknowledges that the contribution of this sector is very crucial in the economic
development of the country (Dewan 2019). Mr. Nitin Gadkari, Minister for MSME,
Govt. of India opined that, his ministry will work hard to raise the contribution of
the MSME sector to half of country’s GDP from the current present 29 percent,
in the coming years, and ensure higher employment to minimum 150 million com-
pared to existing 111 million people (Press Information Bureau 2019).
An SME’s risk-taking appetite is much less than big corporates (Eniola and Ente-
bang 2015). For SMEs, one decision gone wrong can swipe them off their business

1
One US Dollar is equal to 73.50 Indian rupees (INR) approximately.

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Analysing the factors affecting the selection of ERP package:…

forever; and the ERP package selection decision is one such decision. A compatible
ERP selection and implementation can improve the efficiency of a firm and simi-
larly, improper ERP package selection would adversely affect the productivity of the
firm. Researchers have proposed various criteria, which influence the decisions to
select an ERP. For instance, decisions on “cost, technical and vendor specifications
and ease of use” (Efe 2016); or “technical, corporate and financial criteria” (Kilic
et al. 2014); or “vendor credibility, flexibility, product functionality, implementation
methodology, support, customer focus and strategic plans” (Ünal and Güner 2009)
and/or “functionality, quality, price, market leadership, implementation time, other
interface, global focus” (Kahraman et al. 2010).
Similarly, researchers have also highlighted the role of sub-criteria in influencing
adoption decisions; these include “price, consultant expenses, cost related to infra-
structure and maintenance; security, function-fit, ease of operation, learning, inte-
gration and in-house development; upgrade ability; stability, recovery ability; scale
and financial condition of vendor; capability related to R and D and technical sup-
port, implementation ability; warranties, training service, service speed” (Alanbay
2005; Wei et al. 2005).
It is clear that ERP package and vendor selection depend on number of crite-
ria and sub-criteria as stated above. Extant literature regarding vendor selection for
ERP packages have also emphasised the role of the multi-criteria decision-making
techniques (Oztaysi 2014; Efe 2016). Many researchers in fact have emphasized on
using techniques such as AHP, TOPSIS, PROMETHEE, Fuzzy techniques etc. for
rational decision-making (Lien and Chan 2007; Demirtaş et al. 2011; Kilic et al.
2015). The basic premise for selecting an ERP hinges on the premise that such deci-
sions should be integrated with the strategic as well as functional requirements of
the adopting firm. In order to assist the SME decision-makers in selecting the appro-
priate ERP package, this research identifies and ranks the criteria and sub-criteria
according to its importance. A brief overview of various factors identified have been
described below:

2.1 Experience of ERP vendor

A richer experience of the vendor manifested in terms of their market share, the
number of consultations done and installations performed, improves the probability
of their selection (Huang and Palvia 2001). Moreover, the extent of infrastructural
and other support provided, along with a detailed information about their previous
projects in the proposal, are a few other critical factors that reflect the vendor’s com-
mitment (Alanbay 2005). Wei et al. (2005) suggested that it is advisable to collect
all the information available about the vendors and their systems. For instance, buy-
ers can seek help of well-formulated questions in order to obtain holistic information
about the vendors. This may also include the support services provided by the ven-
dor’s post-implementation.
Client’s experience assists in identifying vendors aligned to their philosophy
and domain (Ahn and Choi 2008). The vendors’ experience boosts client’s confi-
dence about effective project management. Apart from the total experience, recent

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experience is considered as most critical, which tends to affect the robust financial
status of a vendor. A customer on the other hand, should be concerned not only
about the vendor’s past financial stability, but also needs to pay heed to glaring signs
of crisis, which may loom large on the vendor’s business model, in order to ensure
their uninterrupted support during the entire life cycle of ERP implementation
within the firm (Zach 2011).

2.2 Client’s credentials

Client credentials as a factor has been one of the most significant considerations for
vendor selection (Ahn and Choi 2008). In other words, client’s credentials include
the feedback of ERP vendor’s previous as well as current client base. Profiles of
their existing and past clients elucidate the ways and levels of the service, which
the vendor can provide (Gefen 2004). In fact, the details of the vendor’s clients help
firms in determining some clear expectations from the vendors; for example, if the
vendor only caters to large organizations, then, it may not be suitable for SMEs. Fur-
ther, client credentials help in establishing whether the vendor is actually coopera-
tive, compatible and successful.

2.3 Research and development

R and D capability along with an upgrade path (future releases) of an ERP package
provided by the vendor, does play an important role in the decision-making process
of adopting an ERP system. R and D capability may be judged in many ways (Unal
and Guner 2008; Cebeci 2009), and is reflected in the investment being made, num-
ber of R&D professionals employed by the vendor, and their experience (Wei et al.
2005). Most importantly, the intention to upgrade vis-a-vis the actual upgradation of
existing technologies by the vendor also explains his/her R and D capabilities, which
the ERP adopting firm needs to consider (Çakır 2016).

2.4 Capability of manpower

The aspect of human expertise is another salient criterion for choosing the right ven-
dor. Employees in any organization are considered to be ‘key assets’, more so, in ser-
vice-intensive firms. They are central to the core functions and values that an ERP
vendor bring on to the table (Ghodeswar and Vaidyanathan 2008). Factors related to
employees, such as qualification, experience and their product and process knowledge
reflect in their services that they provide. Hence, it is desirable that the staff of the
vendor is selected with care in order to ensure that they’re well trained and are moti-
vated (Alanbay 2005). While the technical ability of the employees is certainly one of
the most important factors (Wei et al. 2005), a cooperative vendor is equally preferred
because employees of cooperative vendors behave responsively and responsibly to the
needs of customer (Wei et al. 2005; Cebeci 2009). Loyal and skilled employees who
work well individually and in teams go on to provide a huge competitive advantage to
firms, regardless of whether they are from the client/vendor.

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2.5 Reputation

Vendor reputation is also regarded as a significant indicator in ERP selection (Efe

2016; Çakır 2016); this is reflected through vendor’s brand name, market posi-
tioning, financials, certifications and awards. It also determines the probability of
long-term client satisfaction. Several researchers have proposed that a prompt way
of assessing the reputation of a vendor is by scrutinising professional magazines,
taking feedback in exhibitions, referring to yearbooks, browsing the internet, along
with several other sources (Wei et al. 2005). The procurers should also be cautious
of the financial health of the vendor firms, such as their debt-credit ratio, top and
bottom line, possibility of takeover or merger etc. This information could then be
used for shortlisting competent vendors (Kumar et al. 2002; Baki and Çakar 2005).

2.6 Functionality

Functionality of the ERP package plays a key role in evaluating the package (Ahn
and Choi 2008); it relates to some core features and functions of the system,
including the functional fitness of the software and even the security features of
the package (Wei et al. 2005). Essentially, the functional fitness ensures that the
functional capability of a software package per se fulfils the current as well as the
future needs of adopting firms (Verville et al. 2007; Kahraman et al. 2010). Many
researchers have emphasised on the need for understanding the security facets
related to ERP (She and Thuraisingham 2007).

2.7 Solution to current concerns

With ERP, firms are able to take the right sourcing decisions, manage their
inventories, optimize their production and enhance the level of customer service
(Krumbholz and Maiden 2001). ERP packages provide many benefits to firms,
which include integration and support for all the functional departments. With
increased integration comes increased flexibility (Lee et al. 2003). The initial
ERP systems used to integrate and bring the entire firm on one platform. How-
ever, contemporary ERP systems are not only integrated within firms, but also
take the integration beyond the firms to their partners in the supply chain using
modules like SCM and CRM (Pan et al. 2011). ERP systems today, reengineer an
adopting firm’s current processes, and do have the potential to increase the effi-
ciency and effectiveness of the firms through improved intra-firm and inter-firm
business practices.

2.8 Facilitation for future strategy

Firms, which are at the verge of making technology adoption decisions always
prefer systems, which align and help in sustaining their business goals (Velcu
2010; Sood and Jain 2020). In the case of selecting an ERP software, firms tend

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 N. Bhatt et al.

to prefer an ERP vendor that is capable of catering to changes even in their future
business strategies (Al‐Mashari and Al‐Mudimigh 2003). These changes could be
driven by both internal and external drivers like management vision, competitive
pressures, customer expectations, changes in legal/ regulatory framework, along
with other emerging disruptive business and technological needs and trends. A
successful business and IT strategy alignment supports operations and makes
firms more competitive (Bakås et al. 2007; Chen et al. 2008).

2.9 Employee’s comfort

Employees of ERP adopting firms become comfortable with the legacy and tradi-
tional systems that they use and do not wish to learn or move-to new ways of doing
their job. Employee’s comfort with the existing processes does therefore hamper
their adaptive ability to new-fangled technologies and processes (Torfi and Rashidi
2011). Hence, if the employees are made comfortable with a new technology, the
transition process in adoption would smoothen and become easier. Thus, training the
employees appropriately is extremely crucial, as that would help in building their
skillsets as well as give them the confidence to adopt and work in a new technology
thereof (AL-Ghamdi 2013; Sood and Jain 2013). Other than training, the adopting
firm’s culture along with their rewards and recognition (R and R) structures also
assist in enhancing the employees’ comfort levels (Motwani et al. 2005).

2.10 Management’s comfort

The top management has to be persuaded about the technology because unless the
top management is convinced about it, the message cannot go down well at the bot-
tom level. Since, ERP implementation leads to change in the entire process setup, it
calls for micro-management, further justifying thereby their role in optimising the
gains from this change (AL-Ghamdi 2013). Top management support and convic-
tion help overcome employee resistance coupled with other challenges (Lien and
Chan 2007). To this end, managers generally follow transactional or transforma-
tional styles (Ke and Wei 2008; Torfi and Rashidi 2011).

2.11 User‑friendliness

User friendliness relates to the ease of learning and operations (Wei et al. 2005).
It is a crucial success factor for ERP selection and implementation. For faster and
hassle-free adoption, the software should be simple to understand and easy to use.
A perfect ERP package is the one, which caters to the end-user requirements effec-
tively, while maintaining its characteristics of reengineering and integration. User-
friendliness shortens the adaptation phase and lessens the requirement of employee
training (Karsak and Özogul 2009). It is preferred that the chosen software package
provide reporting as well as self-help functions through multiple touch points i.e.,
user manuals, guidebooks, help feature in each module, help desk etc. Complicated

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user interface of the software may lead to inefficiency of the employees (Nah et al.
2005).

2.12 Support offered by ERP vendor

Post implementation service and support provided by the vendor has a direct and
proportional influence on vendor reputation (Kilic et al. 2015). There is always an
underlying expectation from the vendor to be able to extend help to their users; in
other words, the system should always be capable of supporting client’s needs (Alan-
bay 2005; Ahn and Choi 2008). Thus, after-sales support becomes crucial because
ERP applications are quite complex and expensive; hence, demand continuous sup-
port as and when required. Therefore, it becomes utmost important for adopting
firms to ascertain the level and extent of the support services post implementation
(Karande and Chakraborty 2012).

2.13 Time to deploy

Deployment time of the technology has been identified as an important criterion in

information technology selection and adoption literature (Ünal and Güner 2009).
Given that the decision-making and disposition of technology are time consuming,
adopting firms prefer that the technologies be deployed in the least time possible
without compromising the desired quality (Demirtaş et al. 2011). Here, the time
of deployment includes both the package implementation time as well as the time
taken to train the employees. Interestingly, time of deployment is influenced by the
maintenance of the schedules, level of customisation expected by the firms, and the
degree of cooperation provided by the employees of the adopting firm (Wei et al.
2005; Lien and Chan 2007).

2.14 Information security

ERP has the potential to integrate internal business processes of the adopting firm,
but can also extend to their suppliers as well as customers. This end-to-end integra-
tion leads to a seamless interchange of information among all the connected enti-
ties. This flow of information in turn can only be smooth when all stakeholders are
confident about the ‘security’ of their information. Security and privacy concerns
often limit the adoption of technological platforms (Kiadehi and Mohammadi 2012;
Hanine et al. 2016). Information security concerns include aspects such as confiden-
tiality of the information shared, availability of the desired information, integrity,
authentication and non-repudiation (Kahraman et al. 2010; Daneva 2006). Further,
like for other new technologies and innovations, right information security policies
should be in place to encourage the diffusion of ERP security too (McKnight and
Kacmar 2006; She and Thuraisingham 2007).

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2.15 Installation cost

It is well acknowledged and accepted that ERP implementation is not only complex
but costly as well (Yaseen 2009). The implementation cost includes the expenses
related to the trials conducted, fees paid to the consultants, software, hardware,
accessories, databases, networking, skilled labour, licensing, etc. (Dowlatshahi
2005; Hellström 2009; Jain and Sharma, 2016). The cost and budget allocations for
technologies depend on the total asset’s vis-a-vis the total sales of the adopting firm.
Cost allocations for ERP implementation have been found to range between 0.5 to
3.5% of the annual revenues. Interestingly, adopting firms also take ERP implemen-
tation decisions to reduce their operating costs. Importantly, the installation costs are
also impacted by the level of customisations availed (Kanellou and Spathis 2013).

2.16 Maintenance and up‑gradation cost

An ERP package once deployed, in order to be effective, needs to be updated reg-

ularly to incorporate new features and technologies. While choosing the software
and the implementation partner, firms need to evaluate them based on the tenta-
tive maintenance costs to be incurred in the future (Seethamraju and Seethamraju
2008). Maintenance and upgradation costs, also known as the running cost, primar-
ily include expenses related to the replacement of damaged or outdated systems and
hardware; it also includes upkeep of operating-systems and software (Hellström
2009). The annual maintenance costs generally vary, but can be up to thirty percent
of the initial implementation costs. Maintenance cost is inevitable, as it helps adopt-
ing firms perform in full capacity of their ERP systems (Dowlatshahi 2005; New-
man and Westrup 2005).
Following table summarises factor wise, industry wise literature review across
countries Table 1.

3 Research methodology and results

As depicted in Fig. 1, this section discusses the methodological steps followed in

this study. Section 3.1 demonstrates the application of exploratory factor analysis
(EFA) for factor reduction and constructs identification. The subsequent sub-sec-
tions explain the application of fuzzy AHP along with computation steps followed
by the application of sensitivity analysis to ensure the robustness of the fuzzy AHP
results.
This mix-method research involved triangulation design by merging both
quantitative and qualitative techniques. Initially, owners and senior manag-
ers of selected organizations, from SME sector, having authority and intention
of taking decision about augmenting their firms’ competitiveness through ERP
system were approached. They were asked to provide their preferences to six-
teen factors identified through literature review on a seven points likert scale,

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 Table 1  Factors for ERP package selection
Authors Ahn and Ünal and Baki and Kłos and Kahra- Kilic et al. Karande and Wei et al. Kilic et al. Tsai et al. Shih Hailu and
Choi Güner Çakar Trebuna man et al. (2015) Chakraborty (2005) (2014) (2006) (2010) Rahman
(2008) (2009) (2005) (2014) (2010) (2012) (2012)

Country Korea Turkey Turkey Poland Turkey Turkey India Taiwan Turkey Taiwan Taiwan USA
Industry Home- Clothing Manufac- Manufac- Automo- Manufactur- Airlines
shopping turing turing tive ing
SME No No No Yes No Yes No No No No No No
Experience * * * *
of ERP
vendor
Client’s * * *
creden-
tials
Research * * * *
and
develop-
Analysing the factors affecting the selection of ERP package:…

ment
Capability * *
of man-
power
Reputation * *
Function- * * * * * * * *
ality
Solution to *
current
concerns
Facilitation * *
for future
strategy

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 Table 1  (continued)
Authors Ahn and Ünal and Baki and Kłos and Kahra- Kilic et al. Karande and Wei et al. Kilic et al. Tsai et al. Shih Hailu and
Choi Güner Çakar Trebuna man et al. (2015) Chakraborty (2005) (2014) (2006) (2010) Rahman

13
(2008) (2009) (2005) (2014) (2010) (2012) (2012)

Employ- * * * *
ee’s
comfort
Manage- * * *
ment’s
comfort
User- * * * *
friendli-
ness
Support * * * * * * * *
offered
by ERP
vendor
time to * *
deploy
Informa- * * *
tion
security
Installation * * * * * *
cost
Mainte- * * * * * *
nance
and up-
grada-
tioncost

Presence of * in particular cell specifies that the factor (given in left most column) has been studied by the researcher (s) mentioned in top column in row 1
N. Bhatt et al.
Analysing the factors affecting the selection of ERP package:…

Literature Review

Identification of determinants (16) for ERP package selection

Exploratory Factor Analysis (EFA)

Reduction of determinants to four constructs (criteria) and 10 sub-criteria

Fuzzy AHP for weight determination and ranking of selected criteria and sub-criteria

Sensitivity Analysis

Validation

Fig. 1  Research methodology

Table 2  Respondent’s profile Industry type Frequency Percent

for EFA
Manufacturing 64 51
Trade 42 34
Service 19 15
Size of company
< 10 employees 26 21
10–50 employees 65 52
> 50 employees 34 27
Number of facilities (Office/factory etc.)
1 30 24
2–5 70 56
>5 25 20
Business existence
< 10 years 15 12
10–50 years 45 36
> 50 years 65 52
Number of business
1 69 55
More than one 56 45

affecting their decision regarding selection of ERP system in their firms. A total
of 125 responses (Table 2) were collected to conduct EFA for finalizing factors
for further analysis using FAHP approach. During second stage of the study,
twelve experts from SMEs belonging to the manufacturing sector provided their
responses on the relative importance of the finalised four criteria and ten sub-cri-
teria in the form of linguistic variables on a nine point scale, suggested by Saaty
(1990). In the third stage, research findings were validated through qualitative

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 N. Bhatt et al.

Table 3  Factors for EFA

Factors Authors

Years of experience Huang and Palvia (2001)

Client credentials Ahn and Choi (2008)
Research and development Unal and Guner (2008)
capability of manpower Ghodeswar and Vaidyanathan (2008)
Reputation Efe 2016
Functionality Ahn and Choi (2008)
Potential to facilitate future strategy Velcu (2010)
Employee comfort Torfi and Rashidi (2011)
Solution to your current business problems Pan et al. (2011)
Management comfort Ke and Wei (2008)
User-friendliness Wei et al. (2005)
Support offered by the vendor Alanbay (2005)
Time to deploy Ünal and Güner (2009)
Information security Kahraman et al. (2010)
Installation cost Prasad and Chakraborty (2016)
Maintenance and up-gradation cost Saini et al. (2014)

research, where four SME owners were contacted, who had already implemented
ERP software in their firms in the last three years.

3.1 Exploratory factor analysis (EFA)

EFA is a statistical tool deployed for data reduction (Lundqvist 2014). This tool
helps in identifying the existence of significant patterns among the original variables
(Lu and Shang 2005). The objective of using EFA is to decide the number of com-
mon factors impacting a set of measures and determine the strength of relationship
among the factors leading to develop the groups of constructs. Researchers began
the analysis with 16 constructs (Table 3), out of which, the latent variables were
identified using EFA.
EFA was performed using Kaiser-Mayer Olkin test (KMO) and Bartlett’s test.
KMO validates the sample adequacy of the data (Abdallah and Hilu 2015) and its
value over 0.50 is acceptable for EFA (Marshall et al. 2007). IBM SPSS 20 was used
to conduct EFA. The KMO value of the data here was found to be 0.721, confirming
its suitability for EFA. Bartlett’s test is performed to check, whether a sample quali-
fies for a multivariate normal distribution (Abdallah and Hilu 2015) and its value
should be less than 0.05. This value was found to be highly significant (χ2 = 504.267;
df = 120; p = 0.000 < 0.05). Moreover, the application of confirmatory factors analy-
sis is not suitable for this study as there is a lack of prior theory that can be employed
to ten measurement items, as suggested by Dhochak and Sharma (2016).
The anti-image matrix was attained and items whose values were lesser than 0.5
were eliminated (Marshall et al. 2007). Thus, six factors out of 16 were dropped

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Analysing the factors affecting the selection of ERP package:…

in this process. These six factors were research and development, functionality,
employees comfort, management comfort, support offered by the vendor and time to
deploy. This can be understood as the SMEs want an ERP package largely for inte-
grating their existing processes that do not change often, therefore; research capa-
bility of vendor and functionality of package or richness of features are not much
relevant to them. Further, there is not much process changes involved during ERP
implementation at SMEs, therefore, comfort of employees and management do not
matter much. Small or no-frills package preferred by the SMEs can be implemented
relatively rapidly, therefore, deployment time is relatively less important. Finally,
SMEs require only basic support from the vendor due to standard processes.
Varimax method of orthogonal rotation produced four constructs having eigen-
value over one. Table 4 provides the list of ten factors considered for further analysis
(Refer Appendix 1 for details). Four constructs extracted from EFA were referred
as “Vendor Credibility”, “Need Fulfilment”, “User Friendliness and Security” and
“Cost of Deployment”. As shown below, the factor loadings values represent vari-
ance explained and Cronbach’s alpha (widely used measure of reliability) for the
four items were: 0.737, 0.714, 0.624, 0.771, respectively. This measure shows good
reliability as the values obtained are above 0.6 (Abdallah et al. 2015) and confirms
that the survey items appropriately measured the underlying constructs.

3.2 Application of fuzzy AHP

Selection of appropriate ERP package is one of the crucial strategic decisions for
any organization for achieving competitiveness. Such decisions require considera-
tion of many factors/ criteria at different hierarchical levels. Capability of multi-
criteria decision-making (MCDM) techniques in dealing with multi-dimensional
and complex decisions appealed many researchers to employ these methods for
analysing several types of strategic problems including sustainable supplier selec-
tion (Mohammed et al. 2019), cloud computing technology selection (Büyüközkan
et al. 2018), cloud service selection (Nawaz et al. 2018), third-party logistics pro-
vider (Raut et al. 2018), quality improvement program selection (Zhou et al. 2018)
etc. There are variety of methods that fall under the umbrella of MCDM such as
SAW (simple additive weightage), AHP (analytic hierarchy process), ANP (ana-
lytic network process), WPM (weighted product method), WSM (weighted sum
method), TOPSIS (technique for order of preference by similarity to ideal solution),
ELECTRE, PROMETHEE, and VIKOR. However, AHP (Saaty 1980) found wider
acceptance and preference among MCDM methods, due to its potential to blend
both qualitative and quantitative approaches in the evaluation and ranking of deci-
sion alternatives in complex decision-making scenario (Wong and Li 2008; Mathi-
yazhagan et al. 2014; Calabrese et al. 2019).
According to Saaty (1980), AHP, a powerful group decision making process,
allows the comparative assessment of several criteria and alternatives at different
hierarchical level through decomposition of the complex problem. AHP uses subjec-
tive judgments of the decision makers to develop pair-wise comparison matrices for
each hierarchical level and provides the estimation of relative weightages of criteria

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Table 4  Construct’s loadings and reliability
Factors Constructs Cronbach’s alpha

1 2 3 4
Vendor credibility Need fulfilment User friendliness and secu- Cost of deployment
(VC) (NF) rity (UFS) (CD)

Years of experience (EXP) 0.791 0.737

Clients credentials (CC) 0.679
Capability of manpower (CM) 0.670
Reputation (RP) 0.631
Facilitates future strategy (FFS) 0.839 0.714
Provides solution to the current business problems 0.728
(BP)
User friendliness (UF) 0.818 0.624
Information security (SE) 0.768
Installation cost (IC) 0.882 0.771
Maintenance and upgradation cost (MUC) 0.871
N. Bhatt et al.
Analysing the factors affecting the selection of ERP package:…

Analysing the Factors for ERP

Level 1 (Goal) Package Selection

Level 2 (Criteria)

Vendor Credibility Need Fulfilment User Friendliness & Security Cost of Deployment
(VC

Level 3 (Sub Criteria)

Years of Experience Facilitates User Friendliness Installation Cost

Future Strategy
Client Credentials Security Maintenance and
Solves current upgradation Cost
Capability of business
manpower problems

Reputation

Fig. 2  AHP model

and alternatives at each level. However, in the complex decision-making scenario,

linguistic subjective assessments rendered by the decision makers are largely based
on their experience and may not be precise (Zhou et al. 2011). To address the issues
of uncertainty and vagueness in assigning the importance of criteria over each other,
concept of fuzzy set theory (Zadeh 1965) needs to be incorporated with traditional
AHP methodology. Fuzzy set theory allows the mapping of linguistic variables
between values 0 (complete absence) and 1 (Complete presence) within fuzzy set.
Therefore, this study employs fuzzy AHP (FAHP) method to rank the criteria and
alternatives for the selection of appropriate ERP package considering its ability to
address issues of uncertainty and fuzziness in decision maker’s relative assessments
(Awasthi et al. 2018). Though, various types of fuzzy numbers such as trapezoidal
fuzzy number (Zheng et al. 2012), rectangle fuzzy number (Secundo et al. 2017),
triangular fuzzy number (Lan et al., 2016), and continuous fuzzy number (Cevik
et al. 2014) were used to describe the uncertainty and fuzziness in the group deci-
sion making process; fuzzy triangular numbers allow effective depiction and han-
dling of linguistic variables for the purpose of analysis (Calabrese et al. 2019). Fig-
ure 2 demonstrates the hierarchical structure of criteria and sub-criteria selected for
this study. Table 5 presents fuzzy linguistic terms used for FAHP analysis.
Experts from various manufacturing SMEs having relevant knowledge and expe-
rience (Table 6) were initially requested to provide their feedback on various criteria
and sub-criteria identified for ERP package selection problem. Based on their rec-
ommendations, final hierarchical structure was developed for further investigation.
Furthermore, experts were asked to give relative ratings and weights for the selected
criteria and sub-criteria to develop pairwise comparison matrices. Responses
received from twelve experts in the form of linguistic variables ranging from
“equally important” to “extremely important” were converted in to triangular fuzzy
numbers ãij = (lij, mij, uij) as depicted in Table 5. Pairwise comparison matrices were
developed by computing geometric mean of the received responses acknowledging

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Table 5  Fuzzy relative importance scale used for making pair-wise comparison (Balusa and Gorai 2019; Ayhan 2013; Saaty 1980)
Fuzzy number Definition (Linguistic variables) Fuzzy scale Explanation
∼
1 Equal importance (1,1,1) Two activities contribute equally to the goal
∼
3 Weak importance (3− α, 3, 3 + α) Experience and judgement slightly favour one activity over another
∼
5 Essential or strong importance (5− α, 5, 5 + α) Experience and judgement strongly favour one activity over another
∼
7 Demonstrated importance (7− α, 7, 7 + α) Experience and judgement more strongly favour one activity over another
∼
9 Extreme importance (9, 9, 9) One activity is strongly favoured and demonstrated in practice
∼
2∼ Intermediate values between Two adja- (x− α, x, x + α) The evidence favouring one activity over another is of the highest pos-
4 cent judgements sible order of affirmation
∼
6∼
8
N. Bhatt et al.
Analysing the factors affecting the selection of ERP package:…

Table 6  Profile of experts for Expert no Industry type Years of

FAHP experience

1 Auto-ancillary 4
2 Footwear 7
3 Pharmaceuticals 12
4 Construction 18
5 Construction 22
6 Textiles 33
7 Marbles 38
8 Jewellery 52
9 Pumps 54
10 Chemicals 58
11 Multiple Businesses 61
12 Textiles 62

Table 7  Criteria to criteria (C to C) fuzzified pair-wise comparison matrix for ERP system selection
model
Criteria VC NF UFS CD

VC (1,1,1) (0.470, 0.570, 0.710) (0.300, 0.360, 0.440) (0.310, 0.350, 0.400)
NF (1.410, 1.760, 2.110) (1,1,1) (0.830, 0.990, 1.170) (0.670, 0.760, 0.850)
UFS (2.267, 2.781, 3.349) (0.858, 1.007, 1.206) (1,1,1) (0.458, 0.527, 0.624)
CD (2.509, 2.859, 3.192) (1.034, 1.201, 0.707) (1.658, 1.835, 2.131) (1,1,1)

its consistency and ability to uphold the reparability, unanimity and homogeneity in
aggregating individual judgments (Mosadeghi et al. 2015; Thanki et al. 2016).
The steps for the Fuzzy AHP method are explained for a criterion to criteria pair-
wise comparison matrix as shown below (Tables 7, 8, 9, 10, 11, 12, 13, 14) (Balusa
and Gorai 2019).

Step 1: formation of fuzzy-relative importance matrices

  The relative importance matrices were built by using scale given in Table 5
and were transformed into fuzzy matrices through following equation:
[ ]
1 1 1
xa = [x−𝛼, x + 𝛼]; = , (1)
x x−𝛼 x + 𝛼
 Here α ranges from 0 and 1 and higher values of α signify greater uncertainty.
By employing Eq. (1), the relative importance of criteria and sub-criteria for
ERP package were transformed into fuzzy matrices. This research has applied
six different α values – 0, 0.2, 0.4, 0.6, 0.8 and 1 to perform sensitivity analysis.
However, various steps for fuzzy AHP analysis (step 1–step 6) are demonstrated
for α = 1 in the following discussion. The sensitivity analysis was performed
considering six different values of α as mentioned above.

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Table 8  Fuzzy geometric mean value for C to C matrix
( )
Criteria VC NF UFS CD fuzzy GM value r̃i

VC (1,1,1) (0.470, 0.570, 0.710) (0.300, 0.360, 0.440) (0.310, 0.350, 0.400) (0.457, 0.518, 0.595)
NF (1.410, 1.760, 2.110) (1,1,1) (0.830, 0.990, 1.170) (0.670, 0.760, 0.850) (0.941, 1.073, 1.204)
UFS (2.267, 2.781, 3.349) (0.858, 1.007, 1.206) (1,1,1) (0.458, 0.527, 0.624) (0.972, 1.102, 1.260)
CD (2.509, 2.859, 3.192) (1.034, 1.201, 0.707) (1.658, 1.835, 2.131) (1,1,1) (1.440, 1.584, 1.481)
N. Bhatt et al.
Analysing the factors affecting the selection of ERP package:…

Table 9  Fuzzy weights for C to ( ) ( )

Criteria Fuzzy geometric mean value r̃i Fuzzy weights w̃ i
C matrix
VC (0.457, 0.518, 0.595) (0.101, 0.119, 0.155)
NF (0.941, 1.073, 1.204) (0.207, 0.247, 0.313)
UFS (0.972, 1.102, 1.260) (0.214, 0.254, 0.328)
CD (1.440, 1.584, 1.481) (0.317, 0.364, 0.385)

Table 10  de-fuzzified and ( )

Criteria De-fuzzified weights wi Normalized
normalized weights for criteria weights (W)

VC 0.125 0.125
NF 0.256 0.255
UFS 0.265 0.265
CD 0.355 0.355

Table 11  Crisp comparison Criteria VC NF UFS CD

matrix
VC 1.000 0.583 0.367 0.353
NF 1.760 1.000 0.997 0.760
UFS 2.799 1.024 1.000 0.536
CD 2.853 0.981 1.875 1.000

Table 12  RI and recommended CR values

N 3 4 5 6 7 8 9 10

RI 0.52 0.89 1.11 1.25 1.35 1.4 1.45 1.49

Recommended < 0.05 < 0.08 < 0.10 < 0.10 < 0.10 < 0.10 < 0.10 < 0.10
CR value

Table 13  Consistency check Criteria W W’ λmax CR

VC 0.125 0.496 4.015 CI = (4.015–4)/3 = 0.005

NF 0.255 1.008 CR = 0.005/0.89
UFS 0.265 1.065 = 0.005541 < 0.08
CD 0.355 1.458

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Table 14  Local weights, global weights and ranking of criteria and sub-criteria
Criteria Relative weights of Sub-criteria Local weights of sub- Global weights Rank
criteria using FAHP criteria using FAHP of sub-criteria

VC (4) 0.125 EXP 0.135 0.017 10

CC 0.244 0.031 9
CM 0.281 0.035 8
RP 0.339 0.042 7
NF (3) 0.255 FFS 0.256 0.065 6
BP 0.744 0.190 2
UFS (2) 0.265 UF 0.393 0.104 5
SE 0.607 0.161 3
CD (1) 0.355 IC 0.431 0.153 4
MUC 0.569 0.202 1

  The fuzzified pairwise comparison matrix can be developed as,

⎡ (1, 1, 1) (l12 , m12 , u12 ) ⋯ (l1n , m1n , u1n ) ⎤

⎢ (l21 , m21 , u21 ) (1, 1, 1) ⋯ (l2n , m2n , u2n ) ⎥
à = (̃aij )nxn =⎢ ⎥
⋮ ⋮ ⋮ ⋮
⎢ ⎥
⎣ (ln1 , mn1 , un1 ) (ln2 , mn2 , un2 ) ⋯ (1, 1, 1) ⎦

where,
( )
1 1 1
ã ij = (lij , mij , uij ) = (̃aij )
−1
= , , , i, j = 1, ...n; i ≠ j
uji mji lji

 Table 7 presents the pairwise comparisons established by twelve experts for

four criteria of ERP system selection. Each expert was requested to provide his/
her response in linguistic term (see Table 5) by comparing each criterion against
other criteria for its importance in ERP system selection decision making. The
linguistic terms were converted into appropriate fuzzy scale and then, geometric
mean values of twelve responses were used to( develop) Table 7.
Step 2: calculating fuzzy geometric mean value r̃i
[ 1 1 1
]
r̃i = (li1 ∗ li2 ∗ ⋯ ∗ lin ) n , (mi1 ∗ mi2 ∗ ⋯ ∗ min ) n , (ui1 ∗ ui2 ∗ ⋯ ∗ uin ) n

 Table 8 exhibits the fuzzy geometric mean value for each criterion. These val-
ues were further used to calculate fuzzy weights of the criteria in the next step.
Step 3: calculating fuzzy weights ( w̃ i)
( )−1
w̃ i = r̃i ⊗ r̃1 ⊕ r̃2 ⊕ ⋯ ⊕ r̃n

 Table 9 depicts the fuzzy weight for each criterion computed using step 3.
These fuzzy weights were de-fuzzified to obtain crisp weight value for each cri-
terion.

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Analysing the factors affecting the selection of ERP package:…

Step 4: calculating de-fuzzified (

and normalized
) weights.
  For de-fuzzification: wi = i 3i i .
l +m +u

  The de-fuzzified weights (wi) obtained through step 4 were normalised to obtain
the relative importance of each criterion (Table 10).
Step 5: consistency check
Step 5.1: Conversion of fuzzy matrices
  Using formula given below, a crisp comparison matrix (Table 11) was
derived from the fuzzy comparison matrix (Table 7).
( )
( ) lij + mij + uij
A = ã ij =
3

 Table 11 presents the crisp comparison matrix required to measure the

inconsistency of the pairwise comparison matrix (Table 7), which was derived
based on the expert’s judgments in criteria comparison process. As incon-
sistency is underlying in judgment process (Saaty 1980) which may lead to
biased results, it is important to check the consistency of the matrix, once
weights are computed to ascertain the quality of the decision.
Step 5.2: calculation of λmax, consistency index and consistency ratio
( � � �
)
1 W1 W2 Wn
𝜆max = + + ..... +
n W1 W2 Wn

where,

⎡ W� ⎤
⎢ 1� ⎥
⎢W ⎥
W = AW = ⎢ 2 ⎥
�

⎢⋮ ⎥
⎢ W� ⎥
⎣ n⎦

𝜆max − n
Consistency index(CI) =
n−1

CI
Consistency ratio(CR) =
Random index(RI)
 Table 12 exhibits the recommended consistency ratio (CR) values for
matrices of size 1–10. The judgments provided by the experts are considered
acceptable if CR is less than 0.10, else there is possibility that judgments are
made arbitrarily.
  The CR value obtained with step 5.2 is shown in Table 13 for criteria to
criteria pair-wise comparison matrix. As CR is less than limiting value indi-

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 N. Bhatt et al.

cated in Table 12, we can conclude that the judgments made by the experts
are consistent.
  The local and global weights for sub-criteria were also computed using
the steps discussed above. Table 14 presents the ranking of criteria and sub-
criteria based on the weights obtained. This ranking explicates the importance
of respective criteria and sub-criteria in ERP system selection process for
Indian SMEs.

3.3 Sensitivity analysis

By varying the fuzzification factor α in Eq. (1) and decision–making attitude (λ) in
Eq. (2), sensitivity analysis was conducted for the proposed model. The λ was con-
sidered for following conditions—optimistic (λ = 1), pessimistic (λ = 0) and neutral
(λ = 0.5), respectively. Subsequently, the decision-making model output was ana-
lysed for each combination of α (six α sets: 0, 0.2, 0.4, 0.6, 0.8 and 1) and λ (three
λ sets: 0, 0.5, 1). The results highlighted that the ranking were not altered by either
changing the decision-making attitude or changing the fuzzification factor from 0 to
1. The sensitivity of the decision-making results are given below:
Thus, results presented from Tables 15, 16, 17, 18, 19 and Figs. 3, 4, 5, 6, 7, 8, 9,
10, 11, 12, 13, 14, 15, 16, 17 prove therobustness of the FAHP results for selection
of ERP package.

4 Discussion

This section deals with the results of both our quantitative (data collected from
12 SMEs owners who intended to implement ERP in their firms) and qualitative
research, conducted in order to validate the results. For later, researchers interviewed
four SME owners, who had already implemented ERP in their firms in the last three
years. Insights shared by them are given along with research findings:
Table 14 suggests that the criterion ‘Cost of Deployment’ obtained maximum
weightage (0.355) while ‘Vendor Credibility’ received minimum weightage of 0.125
in the process of selecting an ERP system. Criterion ‘User Friendliness and Secu-
rity’ and ‘Need Fulfilment’ with weightage of 0.265 and 0.255 respectively, were
ranked as second and third. Our qualitative research also revealed almost similar
results; hereby, the cost of the software or an ERP system drives decision-mak-
ing when it comes to the selection and purchase among the Indian SMEs. This is
because most SMEs are integral part of value-chain to bigger companies, wherein
capital investment expenses are critical to operate in lean fashion to survive and
grow. Moreover, ‘Maintenance and Upgradation Cost’ is ranked first in the sub-
criteria, which indicates that owners/decision-makers of SMEs prefer ERP systems,
which can help them manage their limited operational requirements with minimum
running cost. During our qualitative research, a promoter of a small automobile
ancillary manufacturer based at Ahmedabad, Gujarat shared his concerns for cost
in the following way: “We are a small firm with an annual turnover of around INR

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 Table 15  Global weights of four criteria for different decision-making attitudes (λ) and fuzzification factors (α) for ERP package selection
λ=0 λ = 0.5 λ=1
α=0 α = 0.2 α = 0.4 α = 0.6 α = 0.8 α = 1 α=0 α = 0.2 α = 0.4 α = 0.6 α = 0.8 α = 1 α=0 α = 0.2 α = 0.4 α = 0.6 α = 0.8 α = 1

VC 0.1205 0.1200 0.1203 0.1204 0.1195 0.1203 0.1205 0.1206 0.1209 0.1213 0.1216 0.1224 0.1205 0.1211 0.1214 0.1220 0.1205 0.1237
NF 0.2501 0.2489 0.2491 0.2488 0.2491 0.2489 0.2501 0.2499 0.2495 0.2496 0.2494 0.2491 0.2501 0.2508 0.2497 0.2502 0.2501 0.2492
Analysing the factors affecting the selection of ERP package:…

UFS 0.2569 0.2558 0.2566 0.2573 0.2602 0.2564 0.2569 0.2561 0.2569 0.2576 0.2574 0.2591 0.2569 0.2564 0.2571 0.2577 0.2569 0.2607
CD 0.3724 0.3751 0.3738 0.373 0.3710 0.3742 0.3724 0.3731 0.3726 0.3713 0.3715 0.3692 0.3724 0.3714 0.3716 0.37 0.3724 0.3661

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Table 16  Global weights of sub-criteria (vendor selection) for different λ and α for ERP package selection
λ=0 λ = 0.5 λ=1
α=0 α = 0.2 α = 0.4 α = 0.6 α = 0.8 α = 1 α=0 α = 0.2 α = 0.4 α = 0.6 α = 0.8 α = 1 α=0 α = 0.2 α = 0.4 α = 0.6 α = 0.8 α = 1

YE 0.0162 0.0159 0.0159 0.0162 0.0157 0.0158 0.0162 0.0162 0.0163 0.0169 0.0165 0.0166 0.0162 0.0164 0.0165 0.0164 0.0167 0.0171
CC 0.0294 0.0293 0.0294 0.0294 0.0294 0.0298 0.0294 0.0294 0.0294 0.0305 0.0297 0.0298 0.0294 0.0295 0.0295 0.0298 0.0293 0.0299
CM 0.0338 0.0338 0.0338 0.0338 0.0338 0.0339 0.0338 0.0339 0.0339 0.0351 0.0342 0.0345 0.0338 0.0339 0.0340 0.0342 0.0338 0.0349
RE 0.0412 0.0411 0.0412 0.0411 0.0406 0.0409 0.0411 0.0412 0.0412 0.0388 0.0412 0.0414 0.0412 0.0413 0.0413 0.0417 0.0408 0.0417
N. Bhatt et al.
 Table 17  Global weights of sub-criteria (Need Fulfilment) for different λ and α for ERP package selection
λ=0 λ = 0.5 λ=1
α=0 α = 0.2 α = 0.4 α = 0.6 α = 0.8 α = 1 α=0 α = 0.2 α = 0.4 α = 0.6 α = 0.8 α = 1 α=0 α = 0.2 α = 0.4 α = 0.6 α = 0.8 α = 1

EP 0.0638 0.0629 0.0635 0.0635 0.0637 0.0639 0.0493 0.0474 0.0492 0.0454 0.0442 0.0429 0.0325 0.0306 0.0324 0.0280 0.0268 0.0255
Analysing the factors affecting the selection of ERP package:…

ES 0.1863 0.1860 0.1856 0.1853 0.1854 0.1850 0.2008 0.2025 0.2003 0.2042 0.2052 0.2062 0.2176 0.2202 0.2173 0.2222 0.2233 0.2237

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Table 18  Global weights of sub-criteria (user friendliness and security) for different λ and α for ERP package selection
λ=0 λ = 0.5 λ=1
α=0 α = 0.2 α = 0.4 α = 0.6 α = 0.8 α = 1 α=0 α = 0.2 α = 0.4 α = 0.6 α = 0.8 α = 1 α=0 α = 0.2 α = 0.4 α = 0.6 α = 0.8 α = 1

UF 0.1012 0.1003 0.1010 0.1011 0.1023 0.1007 0.0837 0.0806 0.0792 0.0769 0.0746 0.0724 0.0619 0.0579 0.0558 0.0527 0.0499 0.0477
IS 0.1556 0.1554 0.1555 0.1561 0.1578 0.1556 0.1731 0.1754 0.1776 0.1806 0.1827 0.1866 0.1949 0.1984 0.2012 0.2049 0.2069 0.2129
N. Bhatt et al.
 Table 19  Global weights of sub-criteria (cost of deployment) for different λ and α for ERP package selection
λ=0 λ = 0.5 λ=1
α=0 α = 0.2 α = 0.4 α = 0.6 α = 0.8 α = 1 α=0 α = 0.2 α = 0.4 α = 0.6 α = 0.8 α = 1 α=0 α = 0.2 α = 0.4 α = 0.6 α = 0.8 α = 1

IC 0.1601 0.1608 0.1604 0.1605 0.1599 0.1618 0.1601 0.1603 0.1600 0.1599 0.1600 0.1595 0.1601 0.1599 0.1597 0.1594 0.1603 0.1580
Analysing the factors affecting the selection of ERP package:…

MC 0.2123 0.2449 0.2134 0.2125 0.2111 0.2124 0.2123 0.2128 0.2126 0.2114 0.2115 0.2097 0.2123 0.2115 0.2119 0.2106 0.2121 0.2081

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Fig. 3  Sensitivity analysis for criteria (λ = 0)

Fig. 4  Sensitivity analysis for criteria (λ = 0.5)

Fig. 5  Sensitivity analysis for criteria (λ = 1)

Fig. 6  Sensitivity analysis for

sub-criteria (vendor selection)
(λ = 0)

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Analysing the factors affecting the selection of ERP package:…

Fig. 7  Sensitivity analysis for

sub-criteria (vendor selection)
(λ = 0.5)

Fig. 8  Sensitivity analysis for

sub-criteria (vendor selection)
(λ = 1)

Fig. 9  Sensitivity analysis for sub-criteria (need fulfilment) (λ = 0)

Fig. 10  Sensitivity analysis for sub-criteria (need fulfilment) (λ = 0.5)

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 N. Bhatt et al.

Fig. 11  Sensitivity analysis for sub-criteria (need fulfilment) (λ = 1)

Fig. 12  Sensitivity analysis for sub-criteria (user friendliness and security) (λ = 0)

Fig. 13  Sensitivity analysis for sub-criteria (user friendliness and security) (λ = 0.5)

Fig. 14  Sensitivity analysis for

sub-criteria (user friendliness
and security) (λ = 1)

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Analysing the factors affecting the selection of ERP package:…

Fig. 15  Sensitivity analysis for sub-criteria (cost of deployment) (λ = 0)

Fig. 16  Sensitivity analysis for sub-criteria (cost of deployment) (λ = 0.5)

Fig. 17  Sensitivity analysis for sub-criteria (cost of deployment) (λ = 1)

50 Million. For us, cost is the most important parameter for choosing any software
including an ERP system. We kept the ceiling of INR 30,000 for complete package
installation. Even then, every month, we need to spend around INR 10,000, which is
not a small amount for us”.
The ‘User Friendliness and Security’ criterion was ranked second in preference.
Herein, the sub-criteria of Security (0.607) assumed more importance than another
sub-criteria User friendliness (0.393); this may be because the SMEs neither have
a dedicated IT department/IT employee nor do they have formally qualified and
trained employees in different nuances of IT including security. Due to the lack of
in-house competencies, they want to ensure the security of the chosen package, in
turn, ensuring the security of network as well as the data. An SME owner with a
Foundry based at Rajkot endorsed similar views about this criterion: “No doubt,
cost is a predominant factor for all sorts of procurements for us; but I consider user-
friendliness of ERP software almost at par with the cost. As our employees are not

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 N. Bhatt et al.

highly educated and well-versed with technology, software should be easy to under-
stand and manage. Unless they adopt it and learn it fast, software is of no use to us.
I always prefer a robust software with limited features but higher acceptance among
employees than another software having too many features but which is too complex
for employees to understand. Our philosophy is simple, once employees become
comfortable with a system, we can always upgrade it for higher value. As we do not
understand technicality like security, we rely on a software that is commonly used.”
Criterion of ‘Need Fulfilment’ (Current and Future) also influences SMEs’ deci-
sion-making process to a great extent. In this, the sub-criterion Solution to Current
Business Problems got higher weightage (0.744), than another sub-criterion Facili-
tation for Future Strategy (0.256). This reveals that the SMEs prefer to invest in IT
systems, largely keeping current problems in mind; they do not want to consider
issues emanating after 5–10 years. Two co-owners of a small packaging firm nar-
rated their viewpoint in following manner: “We had procured an ERP system three
years ago. Prior to that, we had multiple systems catering to different functional
requirements. Only problem faced by us was the lack of integration. Therefore,
we took a conscious decision to adopt an ERP. As we did not have much require-
ments like large companies, we settled for a basic ERP system, which could pro-
vide us limited reports that we needed. Our customers, processes and products are
largely same from last 22 years, so there is near certainty in terms of data processing
requirements. As and when critical need arose ex. GST, ERP vendor provided us
add-ons. When we bought an additional software, vendor provided an interface with
our existing ERP software at a very marginal cost. However, many of reports which
are still not available, we rely on Ms-Excel.”
Vendor credibility plays least important role out of the four factors; this may be
because ERP packages chosen are generally relatively low in terms of features and
price, and need little time for implementation. SMEs prefer to opt for vendors who
is known to them or some of their acquaintances in order to reduce this risk. The
opinion of an owner of a steel pipe manufacturer based at Jamnagar with around
INR 80 million turnover about the role of vendor credibility in ERP selection pro-
cess is: “ERP system has become important in last one decade to fulfil our day-
to-day functional and regulatory requirements but it remains in the backend only.
Unlike large companies, any ERP vendor with decent experience of implementation
and reasonable competence of technical manpower suits us as our requirements are
limited, need for frequent change does not exist and our data and processes are not
very confidential. We believe that, a known vendor of moderate quality is better than
an excellent vendor unknown to us. For us, cost including the operational expenses
drives our purchase decision.”
Study of recent literature highlights some additional insights about the factors
affecting ERP selection decision. Czekster et al. (2019) evaluated and mined nine
crucial criteria from the several criteria present in recent literature related to selec-
tion of ERPs. These are ERP package reputation and references, acquisition and
monthly costs, ERP package’s feature set, level of support and training, deployment
experience, efficiency, easiness of use, reliability, and maintainability. It has been
posited in many research work that vendor’s reputation, their willingness to provide
support to the customers throughout the life of the software and their engagement

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Analysing the factors affecting the selection of ERP package:…

for customer value creation are the important deciding factors in implementing
ERP systems (Seethamraju 2015; Garg and Khurana 2017; Claybaugh et al. 2019).
Through his research work, Seethamraju (2015) asserted that external factors such
as data security, competition, and performance of the ERP system have no influ-
ence on adoption decision. Moreover, change management and enhancing the usage
effectiveness are challenging, however, the intent of the ERP vendor to accommo-
date client’s needs and the regular value creation bolster the clients during the sup-
port phase.
Wie (2005) proposed an AHP based framework for selection of most suitable
ERP system considering two criteria, appropriateness of ERP system and best ERP
vendor. The application of the framework was demonstrated for a Taiwan based
electronic company. The AHP analysis positioned sub-criteria ‘functionality’ at the
first rank, while ‘total cost’ and ‘user-friendliness’ were ranked at 4th and 5th posi-
tions, respectively. These results indicate that in a developed country like Taiwan,
industries are looking for ERP systems which are providing higher level of function-
ality in terms of richness of features, broad scope of modules and parameter settings
etc. along with flexibility in upgradation, integration and development. This is not
the case in the developing country like India, and specifically in SME environment
where cost of the ERP package and its user-friendliness are more crucial. This is
because of the fact that Indian SMEs are operating with limited funds and lower
level of competency pool.

5 Recommendations

The findings of this research paper have many implications, specifically for ERP
vendors. Vendors can use these findings in developing appropriate marketing mix
(product, price, place, promotion) strategies. They need to develop/modify their
ERP product with a modular approach, a core package with necessary functional-
ity but several add-ons, for the SME segment at large. On one end, this would help
in reducing the cost of the package, but on the other, it would ensure incremental
revenue through add-ons at regular intervals. Keeping end-user’s comfort and con-
venience in mind, design and navigation should be kept simple. Simple user manual
(in user’s preferred languages in addition to English), online FAQs and tutorials can
also add value for the vendors. Cloud based ERP (software as a service) can also be
proposed for lowering capital expenditure of SMEs (Lenart 2011). A product can be
bundled with service support for different time-periods (e.g., one year, three years
etc.) for lowering total cost of ownership (TCO) including capital and operational
costs. Moreover, in order to reduce operational costs, support (upgrade, maintenance
etc.) may be offered online.
SME owners can also make use of these findings. Two or more SMEs from the
same industry can explore possibility of collaboration for buying an ERP together,
for economies of scale in initial due-diligence, training and other initiatives. Fur-
ther, they can consider the total cost of ownership (TCO) or lifetime cost instead of
an upfront price of the ERP package. Ultimately, for realising the desired benefits

13
 N. Bhatt et al.

from an ERP system, it may be worthwhile for SMEs to invest in people and process
along with technology implementation.

6 Conclusion and scope for further research

SMEs are the growth engine for developing countries like India. Information tech-
nology including the ERPs facilitate integration of their internal business processes
and enable real-time information for smooth functioning of business. Considering
various challenges, selection of an appropriate ERP system becomes very impor-
tant for SMEs. Previous researchers have identified various factors affecting the ERP
selection. However, this research fills the gap by ranking these factors, specifically
for the SME sector of India. ‘Cost of deployment’ was identified as the most signifi-
cant criteria affecting the adoption decision of an ERP product by the SMEs. ‘Ven-
dor credibility’ was found to be the least significant factor. Criterion ‘User friend-
liness and Security’ and ‘Need fulfilment’ were ranked as second and third. ERP
vendors can use these findings in developing appropriate marketing mix strategies.
SME owners can also make a leaf out of this study for decision-making.
The first limitation of this work is that the technique used i.e., FAHP does not
consider interrelations among the variables (criteria and sub-criteria), which can be
checked using some contemporary Operations Research techniques like Decision-
making trial and evaluation laboratory (DEMATEL) and analytic network process
(ANP). Second, while researchers through literature review tried to list major fac-
tors affecting the selection of ERP packages, there may be some important factors,
which might not have been covered. Third limitation is that all the respondents (in
the second and third stages) involved in ranking the four criteria and ten sub-criteria
belonged to the manufacturing sector only.
Future researches may be conducted for understanding the interrelations among
the variables by applying ANP and DEMATEL. Second, the scope of research can
also be extended by comparing small enterprises with medium scale companies and/
or larger companies. Third, researchers may also undertake similar studies for SMEs
operating in the service sector. Lastly, future research can also consider alternatives
for selecting ERP vendors.

Appendix 1: description of constructs

1. User friendliness of the ERP Package: Ease of learning, adoption, navigation, reporting etc.
2. Information Security offered by the ERP Package: Inherent measures offered by package for protecting
data and system from unauthorised access.
3. ERP Package offers solution to your current business problems: Chosen ERP package should include
modules/ functionality that has potential to solve current business problems like government reporting,
accurate costing, access to real-time data, salesforce management etc.

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Analysing the factors affecting the selection of ERP package:…

4. ERP Package has potential to facilitate your future Strategy: Chosen ERP package should include
additional functionality that will enable in attainment of organisational future Strategy like R and D,
geographical expansion, exports etc.
5. ERP Installation Cost: Total deployment cost incurred by organisation including search cost, hard-
ware, software, database, networking, consulting, training, implementation, customisation etc.
6. ERP maintenance and upgradation Cost: Total cost incurred by organisation after ERP implementa-
tion including support, maintenance and upgradation.
7. Reputation of the ERP vendor: In terms of its brand name, market position, financials (profitability,
sales), certifications, awards received etc.
8. Capability of Manpower of the ERP vendor: Tangible and Intangible evidences of Manpower quality
reflected through qualification, relevant experience, tenure in current organisation, awards, ability to
satisfy queries raised etc.
9. Years of Experience of the ERP vendor: Overall IT & ERP related experience of deployment and
maintenance.
10. Clients Credentials provided by the ERP vendor: Credential of existing Clients of ERP Vendor
like number of clients across industries, contact details, client satisfaction level, evidence of benefits
delivered etc.

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 N. Bhatt et al.

Authors and Affiliations

Nityesh Bhatt1 · Sunita Guru2 · Shashank Thanki2 · Gunjan Sood2

Sunita Guru
sunita@nirmauni.ac.in
Shashank Thanki
shashank@nirmauni.ac.in
Gunjan Sood
gunjansood@nirmauni.ac.in
1
Information Management Area, Institute of Management, Nirma University, SG Highway, Gota,
Ahmedabad 382481, India
2
Operations and Quantitative Management Area, Institute of Management, Nirma University, SG
Highway, Gota, Ahmedabad 382481, India

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