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174 Chapter 6 • Software and Vendor Selection

through the ERP functionality. The organization can then see what works for them, what business
processes will need to change, and what changes are necessary for the ERP to work for the organi-
zation. Time-consuming organizations have found that they know just what they are buying and
what changes are necessary before the implementation is in full swing. With this information, the
organization can decide on what changes will be made to the system, if any, and get an estimate on
how much they cost. A benefit of this process is the organization will know up front what changes
will be made to the ERP and a cost estimate in addition to the ERP purchase.

REQUEST FOR BIDS
The bid process in private industry is not required, but in public institutions it almost always is. It is an
expensive and time-consuming process for both the company and vendor(s), but it can yield
significant software savings when done right. In addition, one of the benefits of bidding is a more
detailed understanding of the ERP system functionality and a willingness of the vendors to work with
the company better to ensure a successful implementation (see Appendix A for a sample bid layout).
The request for bids (RFB), which is sometimes called request for proposals (RFP), should
include the type of ERP system the company wants with specific functionality, along with a
specified hardware and software infrastructure, training requirements, and any specific contract
issues required by the company. If the company has an infrastructure in place it should be clearly
stated in the request. A format to respond to the bid, including a pricing sheet and a clear
description of the selection process and a timeline for selecting an ERP vendor, should also be a
part of the RFB. The goal will be to evaluate bids from vendors, comparing “apples to apples” to
determine which system will work best in the company’s current and future environment.

VENDOR ANALYSIS AND ELIMINATION
The task of evaluating ERP system bids will take organizing and planning. There will be many
components to a bid that require many different skill sets. Office staff will need to evaluate func-
tionality, IT staff will evaluate the technology requirements, and contract staff will need to
evaluate the contract and pricing of the system. All of this will need to be coordinated to select
the top one, two, or three vendors with which to start negotiating a purchase. If there is clearly
only one vendor that meets the needs with no close second, the negotiation should only include
that vendor. If there is more than one, however, be sure to negotiate with each of them. If needed,
bring the vendor(s) in to clarify any questions and answers.
The bid evaluation and any vendor discussions should focus on the best fit. It is important
to understand that no vendor will meet all the requirements. Further evaluation is needed if the
number of vendors is not reduced to one. One must evaluate both the functionality, as well as any
other additional components needed to make the ERP operational, and the expansion capability
of the ERP system if growth occurs within the company. It is appropriate to check references of
the vendors looking for issues related to functionality and implementation. It is helpful to learn
from others’ experiences where possible.
Last, develop and analyze the total cost of ownership. This can be difficult, but it should be
inclusive of all costs. The largest cost of the system occurs after the implementation in the system
maintenance and upgrades. The actual software purchase will likely be less than 15 percent of the
overall cost.
TCO was developed in the 1980s as a result of PC hardware and software proliferation. In
moving computers to the desktop, many companies were evaluating what it would take to maintain