Abstract. While a large body of research exists on the development and implementation of software, organizations are increasingly acquiring enterprise software packages [e.g. enterprise resource planning (ERP) systems] instead of custom developing their own software applications. To be competitive in the marketplace, software package development firms must manage the three‐pronged trade‐off between cost, quality and functionality. Surprisingly, prior research has made little attempt to investigate the characteristics of packaged software that influence management information system (MIS) managers’ likelihood of recommending purchase. As a result, both the criteria by which MIS managers evaluate prospective packaged systems and the attributes that lead to commercially competitive ERP software products are poorly understood. This paper examines this understudied issue through a conjoint study. We focus on ERP systems, which are among the largest and most complex packaged systems that are purchased by organizations. In a conjoint study, 1008 evaluation decisions based on hypothetical ERP software package profiles were completed by managers in 126 organizations. The study represents the first empirical investigation of the relative importance that managers ascribe to various factors that are believed to be important in evaluating packaged software. The results provide important insights for both organizations that acquire such systems and those that develop them. The results show that functionality, reliability, cost, ease of use and ease of customization are judged to be important criteria, while ease of implementation and vendor reputation were not found to be significant. Functionality and reliability were found to be the most heavily weighted factors. We conclude the paper with a detailed discussion of the results and their implications for software acquisition and development practice.
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