v - erp implementation revised feb 2007

7/27/2019 V - ERP Implementation Revised Feb 2007

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ERP System Installation &

Implementation


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ERP Implementation Project

It is a special IS Project

If vendor system

Much less system design than otherwise

Vendor software already programmed

Only need interfaces

Have help from vendor, consultants

Opportunities to outsource


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Relative Use of ERP Implementation StrategiesMabert et al. [2000]

Strategy %

Single vendor package-internal modifications 50

Single vendor package 40

Vendor packages-internal modifications 5

Best-of-Breed 4

In-house plus special packages 1

Total in-house development 0.5


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ERP as an IS Project

At least 7 optional ways to implement ERP

Outsourcing (ASP) the easiest

But risky

Next easiest is single vendor source withoutmodifications

Not necessarily least expensive, nor greatestbenefits

All others involve significant IS project


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Implementation Strategy Use

Dominant strategy in manufacturing:

Single vendor

Over half added internal modifications

Very few best-of-breed

Almost none developed totally in-house


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IS/IT Project Management

Results Conventional IS/IT projects have trouble

with time, budget, functionality

ERP projects have slightly more structure,

but still face problems

Underestimation of required time is common

Vendors have made easier & faster

Enhancement of systems another trend

Reintroduces time problem


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System Analysis & Design

Waterfall model

Basic standard for software development

Prototyping Good for development when final design not clear

Spiral model

Intended to reduce project development risk

Cyclical prototyping and testing Rapid Prototyping

Use feedback from users in compressed development


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Application Service Providers

Outsource ERP

Popular

Unocal pared IT staff 40% in two years Focus on core competencies, shed cost centers

Many specific functions can be outsourced

Outsourcing benefits

Speed Organization lacks IT skills

ASP the most popular way to outsource


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ASP Risks

Your applications and data are controlled by

others

Service failures out of your control

Confidentiality failure a possibility

Performance issues possible


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Relative Implementation Effort

Method In-House Vendor Consultant

Single vendor package-internal

modifications

Significant Heavy Heavy

Single vendor package Significant+ Heavy Heavy +

Vendor packages-internal

modifications

Significant+ Moderate Heavy +

Best-of-Breed Significant ++ Moderate Heavy +

In-house plus special packages Excruciating None Maybe

Total in-house development Painful Moderate Maybe

Application Service Provider Light None To select


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Implementation Effort

Implementing ERP places strain on in-

house information systems groups

Consultants are expensive

Sometimes need special expertise

Tradeoff: control vs. time & cost


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Implementation Life Cycle

Phases of ERP Implementation

Pre Evaluation Screening

Package Evaluation

Project Planning Phase

Gap Analysis

Implementation Training


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Implementation Life Cycle

Phases of ERP Implementation (Contd.)

Testing

Going Live

End User Training

Post Implementation


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Pre Evaluation Screening

Hundreds of ERP Vendors

Limit the No. of packages to be evaluated to

less than five

Thorough evaluation of a small no. of

packages

No superficial analysis of dozens of

packages


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Pre Evaluation Screening (Contd.)

Zero in on a few best packages by

Looking at product Literature

Getting help from External Consultants

Package used by similar companies

Vendors standing in the Market

Local Implementation and post

Implementation support


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Package Evaluation

Do it right the first time

Huge Investment

Not easy to switch to another one, oncepurchased one package

A very little room for error

None of them are perfect

Objective should be to find the best fit

Develop selection criteria


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Package Evaluation (Contd.)

Technology

Client / Sever capabilities

Database Independence

Security

Availability of regular upgrades

Amount of customization required

Local support infrastructure


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Availability of reference sites

Total costs

Cost of licensesCost of Training

Cost of Implementation

Customization costHardware cost

Maintenance cost


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Form a selection / evaluation committee

People from various departments ( Functional

Experts )Top Management ( CIO, COO etc.)

Consultants ( Package Experts )

Package selected by the committee will havecompany wide acceptance


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Project Planning Phase

Time Schedules

Deadlines

Development of Project Plan

Roles & Responsibilities

Project Manager selection & appointment

Selection of Implementation Team

Members


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Project Planning Phase (Contd.)

Implementation Team will meet

periodically

Review the progress

Chart the future course of action


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GAP Analysis

Best Fit

Meets 80% of Functional Requirements

Solutions for the GAPAlter business processes to fit the package

Pinning hopes on Upgrades

Third party InterfaceWrite additional programs

Altering ERP Source Code ( Most expensive )


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Implementation Team Training

How to Implement the package

Running the system

Consultants will Implement at the first site Selection of the employees for training

People with the right attitude

People who are willing to change, learn newthings, have good functional knowledge and arenot afraid of technology


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Testing

Test for extreme case scenarios

System Overloads

Multiple users logging on at the same time withthe same query

User entering invalid data

Hackers trying to access restricted areas

Design the test cases to find

Weak links in the system


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End User Training

Actual user will be given training on how touse the system

This should be done before going Live Identify the employeesthe users of the

new system

There will be resistance to change Most Implementations fail because of lack

of user training


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Going Live

Data conversion

Databases should be up & running

Prototype should be fully configured &

tested & should be ready to go operational

New system is Live when the old system is

removed & only new system is used for

doing business


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Definition & Measurement of

Success Second issue is timings of Measurement

Success in the short run & long run

Instances when Successfully installed ERPsystems were terminated when the companies

were merged with another

Successes measured at three different points intime in ERP experience cycle

Three distinct phases


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Success Project Phase

During this phase ERP software is configured & rolledout

Shake down Phase

During this phase the company makes transition fromGo Live to Normal Operations

Onward & Upward Phase

During this Phase the company captures the majority ofbenefits from ERP & plans for next steps fortechnology implementation & business improvements


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Success Success Metrics for different Phases

Project Phase

Project Cost Vs. Budget

Project completion in time relative to schedule

Completed & installed system functionality relative

to the scope

Shakedown Phase

Short term changes occurring after system Go

Live


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Shakedown Phase

Length of time before KPI achieve Normal orExpected Levels

Short term impact on Organizations adopters,

suppliers and customers such as average time on

hold when placing a telephone order


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Onward & Upward Phase

Achievement of Business results such as reducedoperational cost, reduced inventory carrying costs

On going improvements in business results

Ease in adopting new ERP releases, other new

technologies, improved business practices, improveddecision making etc. after ERP system has achieved

stable operations


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Implementation

Failures reasons

Choosing a wrong product

Incompetent & haphazard implementationInefficient & ineffective usage

What is required for SuccessfulImplementation

Good people who know the business

Good vendor


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Implementation (Contd.)

Questions & Concerns

Should we buy an ERP package or no

If yes, which oneWhat are the hidden costs

How does one implement

What problems are likely to crop up

Obstacles & Hurdles

Who should be involved in Implementation


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Questions & Concerns (Contd.)

What is the role of the consultant in

ImplementationHow does one overcome the employee

resistance

When will the benefits start showing up


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Obstacles

ERP system should have support & cooperation

of all the usersWithout their support, chances of failures are

high

Strong commitment & support from topmanagement

Change on a massive scale


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Obstacles (Contd.)

Fear of losing jobs

People will be afraid of training & new learning

Job profiles will change

Job responsibilities will undergo drastic

alterationsERP will eliminate many existing jobs, but will

also create new jobs with new responsibilities


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Adopters problems with ERP

Project Phase Problems

Software Modifications

Strongly recommended to avoid modifying thesoftware & live with existing functionality

Difficulty in getting modifications to work well

Getting well tested & working modifications in atimely manner is a problem

When the user understands the software better, theydiscover ways to implement needed capabilitieswithout modifications


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Even though ERP systems are said to be

comprehensive, need for retaining some legacysystems & third party specialized software

cannot be totally ruled out

Interfacing these systems with ERP is both

challenging & expensive


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Problems with product & implementation

consultants Coordinating the efforts of various consultants is a

challenge ( H/W Vendor, Software Vendor, telecom

Vendor, ERP Vendor, Implementation Consultant )

Turnover of Project Personnel Losing key IT specialists & user representatives

working on the project while the project is going on


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Turnover of Project Personnel

Losing experienced people after the project iscomplete

Shakedown Phase Problems

Companies experienced negative outcomes

during this phase ERP system performance problems

Data entry errors


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Companies experienced negative outcomes

during this phase Increased staffing required to cope with slowdown

& errors

Negative impact on customers & suppliers from an

inability to answer their queries & delayedshipments

Inadequate management reporting


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These were caused by problems occurred

during Project Phase which were notrecognized as problems or were not resolvedwhen occurred

The most important problems that occurred

during Project Phase were Inappropriately cutting project scope when there aremissing key milestones


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Cutting end user training

Underestimating the need for trainingInadequate Testing

Testing of cross module integration

Testing of interfaces with legacy systems

Testing of modifications carried out by externalvendors

Testing unusual business scenarios


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Underestimating data quality problems &

reporting needs Retaining legacy data for many years ( Regulatory

compliance & Product servicing for many years )

In integrated ERP systems, data must be clean

Users will be disappointed if their reporting needsare not met


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Reveals unresolved or unrecognized problems

of Project PhaseMany of these problems can be avoided bygiving adequate attention during Project Phaseto :

Cross functional configuration & testing of software End user training

Data conversion & management of legacy data


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Shakedown Phase Problems Reporting needs

Scenarios for recovering from data input errors

Onward & Upward phase problems

Fragile human capital

Losing ERP knowledgeable IT specialists & endusers

Difficulty replacing them


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Onward & Upward phase problems

Migration Problems

Software modifications made earlier convert poorlyduring implementation of later releases

Some organizations vowed never again to modify

ERP software but to make necessary changes totheir business processes


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Motivations for ERP

Most common reasons

Infrastructure

Common Platform, Y2K Compliance, replacingaging IT Infrastructure, High support costs for

legacy systems

Capability

Process improvements such as Logistics, ProductionScheduling or Customers Services


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Motivations for ERP

Most common reasons

Capability

Data visibility End to end view of supply chain processes

Performance

Cost reduction

Strategic decision making

Customer responsiveness


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Risk Factors

Failure to redesign business processes to fit

the software

Lack of senior management support

Insufficient training to IT workforce & end

users

Lack of ability to recruit & retain qualifiedERP system developers


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Critical Success Factors

Management support

Top management advocacy, provision of

adequate resources & commitment to theproject

Best people full time

Relevant business experts should be releasedfull time for the project


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Empowered decision makers

Project team members should be empowered tomake quick decisions

Deliverable dates

At planning stage set realistic milestones & enddates

ChampionAdvocate for ERP system in promoting benefits


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Vanilla ERP

Minimal customization

Smaller scopeFewer modules, Less Functionality

implemented, Smaller user groups, Single /Fewer Site/s

Definition of scope & goalsClear definition & adherence


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Balanced Team

Right mix of business analysts, technical

experts and users from within the company &consultants from external companies

Commitment to change

Perseverance & determination to solveinevitable problems of change

v - erp implementation revised feb 2007

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