ERP Implementation (Till 18 October) PDF

ERP Implementation Chapter 5  What will we study in this chapter? I. Implementation Challenges VI. Vendors and Consultants II. ERP Implementation (Transition) VII. Employee resistance Strategies...

ERP Implementation Chapter 5  What will we study in this chapter? I. Implementation Challenges VI. Vendors and Consultants II. ERP Implementation (Transition) VII. Employee resistance Strategies VIII. Training and Education III. ERP Implementation Life Cycle IX. Data Migration IV. Implementation Methodologies V. ERP Project Teams CS428 - Enterprise Resource Planning by Shardav Bhatt 2 I. Implementation Challenges A new ERP implementation can dramatically improve business processes. However, when an implementation fails, huge amounts of money and effort could be misspent. We will see the challenges faced before, during, and after an ERP implementation. A survey was done in 2004, over 375 IT and business professionals from around the world. 46% of the participants indicated that the main challenge to successful ERP implementations was inadequate definition of requirements and resistance to change. The complete list of the challenges is given in the figure below: CS428 - Enterprise Resource Planning by Shardav Bhatt 3 CS428 - Enterprise Resource Planning by Shardav Bhatt 4 CS428 - Enterprise Resource Planning by Shardav Bhatt 5 ▪ In another survey done in 2011-12, a study on the completion times of ERP implementations and the reasons behind the extended durations, was done. ▪ According to the study, while 61% of the projects were completed behind schedule 28% completed the project on-schedule and 11% completed implementation earlier than scheduled as shown in Figure. CS428 - Enterprise Resource Planning by Shardav Bhatt 6 ▪ The key reason for delayed implementation noted in this analysis is the expansion of initial project scope (29%). ▪ This is a common issue suffered by organizations that rush into implementations without taking the time to properly plan or understand fully the impact and/or the organizational change management tactics necessary to achieve a successful implementation. ▪ Organizational issues are a component that one-fifth of respondents (20%) indicate extended their durations while data issues and resource constraints accounted for 17%, training issues affected 15%, and technical issues accounted for 14%. ▪ The reasons for the extended durations are given in table below. CS428 - Enterprise Resource Planning by Shardav Bhatt 7 CS428 - Enterprise Resource Planning by Shardav Bhatt 8 CS428 - Enterprise Resource Planning by Shardav Bhatt 9 ▪ From graphs we can say that companies are having increased difficulty implementing their ERP software. ▪ A strong organizational risk mitigation and change management can address many of the issues cited above. ▪ Project planning, resource deployment, segmented communications, targeted training, strong data conversion plans are important to minimize the negative effects of change, decrease the durations, and increase the success of implementations. ▪ Due to the resource and staffing constraints most small or medium-sized businesses face, it is important that they recognize the organizational changes. ▪ “Without proper training and clear leadership, any chosen software package can cause ERP projects to exceed their initial timelines. CS428 - Enterprise Resource Planning by Shardav Bhatt 10 List of Implementation Challenges 1. Inadequate Requirements Definition 2. Resistance to Change 3. Inability to Achieve Organizational Understanding 4. Inadequate Resources 5. Lack of Top Management Support 6. Lack of Organizational Readiness 7. Inadequate Training and Education CS428 - Enterprise Resource Planning by Shardav Bhatt 11 List of Implementation Challenges 8. Inaccurate Expectations 9. Poor Package Selection 10. Poor Project Management 11. Customization Issues 12. Long Payback Period 13. Poor Communication and Co-operation 14. Data Quality Costs CS428 - Enterprise Resource Planning by Shardav Bhatt 12 List of Implementation Challenges 15. Hidden Implementation Costs 16. Improper Integration 17. Improper Operation/Use CS428 - Enterprise Resource Planning by Shardav Bhatt 13 1. Inadequate Requirements Definition ▪ It is one of the major challenges faced by the implementation team. ▪ The requirements definition should clearly specify the issues and problems that the ERP system is supposed to solve, the additional capabilities expected out of the system. ▪ If the requirements are properly specified, then the implementation team can go about their job including… 1. Selection of the ERP package that is best suited to meet these needs, 2. The areas where customization is needed, 3. Functions where the organization’s business processes needs modification. CS428 - Enterprise Resource Planning by Shardav Bhatt 14 2. Resistance to Change ▪ Any ERP implementation will face some amount of resistance. ▪ Implementing an ERP system is a change, and it is human nature to resist change. ▪ Users will be skeptical about the new system. ▪ For an ERP implementation to succeed, the co-operation of everyone involved is an absolute necessity. ▪ If employees are not convinced about the importance of ERP and the benefits of using an ERP tool or system, they will not be fully co-operative. This can result in failure. ▪ This can be solved by educating employees about myths and benefits of ERP. CS428 - Enterprise Resource Planning by Shardav Bhatt 15 3. Inability to Achieve Organizational Understanding ▪ One challenged faced by ERP implementation is that, before implementation, all the business processes were done manually and individually by various departments. ▪ Now using ERP, these processes will now be done using some software. ▪ Moreover, since ERP has an integrated dataset, when an employee enters information that affects the others, too. ▪ So, employees must have knowledge how the things were done earlies and how to do it now. ▪ To do this accurately, employees must have a better understanding than they did before the ERP solution and learn how others in the organization perform their functions. ▪ Without this understanding, they employee will not use ERP effectively, which affects productivity. CS428 - Enterprise Resource Planning by Shardav Bhatt 16 4. Inadequate Resources ▪ ERP implementation is a very costly affair that requires a variety of resources—money, people, software, hardware, and so on. ▪ The company management would support a fixed amount of funding for the ERP implementation. ▪ There are many items that will be missed during the preparation of the budget, but will consume money during the implementation. ▪ The long implementation period (usually 8–20 months) will escalate many costs. ▪ Skilled and motivated personnel from the organization are also important resources. ▪ These inadequacies in resources can create many a challenge to the ERP implementation. CS428 - Enterprise Resource Planning by Shardav Bhatt 17 5. Lack of Top Management Support ▪ In the beginning of ERP implementation, this is the most important factor: support of top management. ▪ The roles of top management are developing an understanding of the capabilities and limitations of ERP, establishing reasonable goals for EPR systems, exhibiting strong commitment to the successful introduction of ERP, and communicating the corporate strategy to all employees. ▪ The importance of top management support is instrumental in the success of all ERP implementations. ▪ Thus, going ahead without solid backing from top management is a sure recipe for disaster. CS428 - Enterprise Resource Planning by Shardav Bhatt 18 6. Lack of Organizational Readiness ▪ The main challenge in the successful implementation of ERP system is the readiness of the organization for a new system of functioning. ▪ The management should make sure that the organization, the work process, and the employees are willing to adapt to the ERP system. CS428 - Enterprise Resource Planning by Shardav Bhatt 19 7. Inadequate Training and Education ▪ The role of training to facilitate software implementation is very important. ▪ Lack of user training and failure to understand how enterprise applications change business processes, are responsible for failures. ▪ Generally, ERP projects have a six-month learning curve at the beginning of the project. ▪ Employees to be trained on how they work and how they relate to the business process early on in the implementation process. ▪ Many companies use consultants to help during the implementation process, so that knowledge is transferred from the consultant to internal employees. ▪ Companies should provide training on a continuous basis to enhance skills of employees. CS428 - Enterprise Resource Planning by Shardav Bhatt 20 8. Inaccurate Expectations ▪ The expectations of a company may exceed the capabilities of the system. ▪ If the systems are oversold by the vendor, ERP systems may fail to meet expectations despite positive contributions to the organization. ▪ Implementation manager must discuss about the measurement and management of expectations from ERP project. ▪ The cost of implementing and the time required to implement are underestimated. ▪ The scope of what organizations are able to implement are routinely overestimated. ▪ Inaccurate expectations is a result of lack of understanding of ERP implementation complexities. CS428 - Enterprise Resource Planning by Shardav Bhatt 21 ▪ According to one study, 10% of ERP implementations succeed with full functionality, within forecast cost and time frames. ▪ 55% are implemented with cost and time overruns. ▪ The remaining 35% are cancelled before completion. ▪ The cost overruns average 189%, schedule overruns average 222%. ▪ 51% ERP implementers viewed their implementation as unsuccessful and 46% characterized their organizations as not understanding how to use the system to improve the way they conducted business. ▪ 34% of organizations were very satisfied with what they got, while 40% of the projects failed to achieve their business case within one year of going live. CS428 - Enterprise Resource Planning by Shardav Bhatt 22 CS428 - Enterprise Resource Planning by Shardav Bhatt 23 9. Poor Package Selection ▪ Selecting a good ERP solution provider is another challenge. ▪ Company must analyze the capabilities of the ERP service provider and make sure the provider has the capabilities and the expertise to provide you with a good solution. ▪ The choice of the package involves important decisions regarding budgets, timeframes, goals, and deliverables that will shape the entire project. ▪ Choosing the right ERP package software that best matches the organizational information needs and processes is critical to ensure minimal modification and successful implementation and use. ▪ Selecting the wrong software may mean a commitment to architecture and applications that do not fit the organization’s strategic goal or business processes. CS428 - Enterprise Resource Planning by Shardav Bhatt 24 10. Poor Project Management ▪ Project management activities span the life of the project from initiating the project to closing it. ▪ Project planning and control is a function of the project’s characteristics like project size, experiences with the technology, and project structure. ▪ Various issues related to hardware, software, organization, human, political etc., make many ERP projects complex, requiring new project management skills. ▪ Customization increases the scope of an ERP project and adds time and cost to an implementation. ▪ Hence proper management of project scope is important for the project management. CS428 - Enterprise Resource Planning by Shardav Bhatt 25 11. Customization Issues ▪ While ERP implementation, one issue occurs how to match business processes with the ERP. For that customization is needed. There are two ways to customization: 1. Modify the ERP to match the organizational processes and/or data structures 2. Modify the organizational processes and/or data structures to match the ERP ▪ This require understanding of the ERP and organizational processes and data structures. ▪ Most organizations approach the customization/tailoring decision without proper information required to reach a good decision. Some organization bypass the customization. ▪ Hence, customization needs to be carefully addressed. CS428 - Enterprise Resource Planning by Shardav Bhatt 26 12. Long Payback Period ▪ The return on investment (ROI) for most organizations runs to almost three years. ▪ According to one study done in 2002, the median annual savings from the new ERP average $1.6 million/annually on a (roughly) $30 million investment one year after implementation is completed. ▪ A Deloitte survey of Fortune 500 companies found that 25% of organizations suffered a drop in performance when their ERP system went live. ▪ Hence, the there may not be immediate gain while implementing ERP. ▪ The payback period may well be long. CS428 - Enterprise Resource Planning by Shardav Bhatt 27 13. Poor Communication and Co-operation ▪ Sharing common goals over individual pursuits and the value of trust between partners, employees, managers, and corporations are important for successful ERP implementation. ▪ ERP systems are cross-functional and above departmental boundaries, co-operation and involvement of all involved is critical. ▪ For this, communication is the key thing that keeps everything running smoothly. ▪ Communication is essential within the project team, between the team and the rest of the organization, and with the client. ▪ Poor communication between implementation team members and other organizational members caused many implementations to fail.. CS428 - Enterprise Resource Planning by Shardav Bhatt 28 14. Data Quality Costs ▪ A data management study performed by Price Waterhouse Coopers survey revealed the two facts about organizational data quality: 1. Only 15% of companies are very confident of the data received from other organizations 2. Only one in three companies are very confident about the quality of their own data ▪ Poor quality data input can be fatal to ERP projects. ▪ Just imagine the confidence that the new system engenders if they get bad data out of the system more easily than the legacy system. ▪ Hence, good quality of previous data of organization is very important for ERP implementation. CS428 - Enterprise Resource Planning by Shardav Bhatt 29 15. Hidden Implementation Costs ▪ There are many items that are missed or that will consume more money than that allotted while preparing the implementation budget. ▪ These cash shortages will hinder the smooth implementation. ▪ If the company does not have sufficient reserves to bear the additional expenditure, the implementation will have to be left halfway. ▪ A very detailed discussion of the hidden cost of ERP implementation is given in Chapter 25. CS428 - Enterprise Resource Planning by Shardav Bhatt 30 16. Improper Integration ▪ ERP should be seamlessly integrated with other information systems. ▪ Organizations face many challenges in ERP integration: the challenges of integrating various functional ERP modules, the challenge of integration with other e-business software applications, and the challenge of integration with legacy systems. ▪ The success of ERP implementation is the success of ERP integration. ▪ There are three areas where integration must succeed: (i) integration of ERP modules, (ii) integration of e-business applications, and (iii) integration with legacy systems. CS428 - Enterprise Resource Planning by Shardav Bhatt 31 ▪ Packaged ERP software consists of many functional modules (production planning, inventory control, financial, and HR). ▪ Organizations tend to install modules from the same ERP vendors in the initial ERP implementation. ▪ Not all companies will purchase all ERP modules from a single ERP vendor (SAP, Oracle, PeopleSoft, etc.). ▪ The implementation of ERP systems could last many years. ▪ So, the integration of ERP modules could be either integration of modules from different vendors or different versions of the modules from the same vendor. ▪ This integration has to be done properly for the successful implementation of ERP. CS428 - Enterprise Resource Planning by Shardav Bhatt 32 17. Improper Operation/Use ▪ The most crucial challenge is the optimal utilization of the ERP software solution. ▪ You can have the best ERP solution implemented. ▪ But if its resources are not utilized to the fullest, the whole initiative goes for a toss. ▪ If it is deployed appropriately, ERP solutions can create dramatic changes in your business performance. CS428 - Enterprise Resource Planning by Shardav Bhatt 33 II. ERP Implementation (Transition) Strategies ▪ The most important factor that decides the success of an ERP implementation is the transition strategy. ▪ Few of the reasons of failure of ERP can be … ▪ The implementation or transition strategy chosen was not the one suited for the organization ▪ The implementation took much longer than expected ▪ Pre-implementation preparation activities were done poorly, if at all ▪ People were not well-prepared to accept and operate with the new system ▪ The cost to implement was much greater than anticipated CS428 - Enterprise Resource Planning by Shardav Bhatt 34 Transition Strategies: ▪ There are several transition strategies but most of them are variants of the four basic types: 1. Big bang 2. Phased 3. Parallel 4. Process line 5. Hybrid ▪ These techniques focus on the strategy of how to make the transition from a legacy system to a new ERP system. ▪ The selection of the transition strategy that is best suited for each organization is crucial. Wrong strategy can result in a failed or flawed implementation. CS428 - Enterprise Resource Planning by Shardav Bhatt 35 ▪ Three pillars to support any ERP implementation are: process, people, and technology. ▪ Failure to use any one of these or failure to use them in the best possible manner can result in inappropriate implementation. ▪ Understanding the relationships of ERP transition strategies between the process, people, and technology will assist the ERP implementers to better understand what type or combination of types of ERP transition strategy is best. CS428 - Enterprise Resource Planning by Shardav Bhatt 36 1. Big Bang Strategy ▪ In this strategy, companies layout a grand plan for their ERP implementation. ▪ The installation of ERP systems of all modules happens across the entire organization at once. ▪ The big bang approach promised to reduce the integration cost in conditions of thorough and careful execution. ▪ This method dominated early ERP implementations. ▪ It partially contributed to the higher rate of failure in its implementation. ▪ Today, not many companies dare to attempt it. CS428 - Enterprise Resource Planning by Shardav Bhatt 37 ▪ In the big bang strategy, the company moves from the existing or legacy system to the new ERP system on a specific date. ▪ All the business functions performed in the legacy system across the entire enterprise are simultaneously transferred to the new legacy system during a period of one day or a weekend. ▪ The big bang strategy is rarely used and often not recommended by ERP vendors, systems integrators, and service providers. CS428 - Enterprise Resource Planning by Shardav Bhatt 38 ▪ Many companies struggle in deciding whether the big bang approach is the right choice for their company. ▪ One of the reasons given for not using the big bang approach is that it consumes too many resources to support the go-live of the ERP system. ▪ High failure rates have been found using the big bang approach, but high failure rates have also been found using other strategies. ▪ Success in using the big bang strategy comes with careful preparation and planning prior to using big bang. ▪ The success of the big bang strategy depends on how well an organization plans and prepares itself prior to implementation. CS428 - Enterprise Resource Planning by Shardav Bhatt 39 Advantages of Big Bang Strategy: ▪ The overall cost of implementation is less because no interface programs are required to communicate between the legacy system and the new ERP system. ▪ Big bang eliminates all the sequencing and decision-making of implementing one module at a time. ▪ It is well-designed for rapid implementations. ▪ It creates a strong central focus for all the ERP team members. ▪ It can avoid complex integration issues. CS428 - Enterprise Resource Planning by Shardav Bhatt 40 Disadvantages of Big Bang Strategy: ▪ The amount of time and cost of careful planning and preparation for the go-live ▪ Bottleneck of critical resources, like lack of funds, non-availability of professionals, etc., during the implementation can result in failed implementations ▪ The recovery process, if something has gone wrong is more difficult in this approach; it is a do-it-right-the-first-time project ▪ The consequences of a failed implementation can range from anything such as a huge financial loss to the company going bankrupt CS428 - Enterprise Resource Planning by Shardav Bhatt 41 2. Phased Implementation ▪ The phased approach implements one functional module at a time, in sequential order. ▪ The phased approach is also called modular, functional, and sequential approach. ▪ The method of modular implementation goes after one ERP module at a time. ▪ This limits the scope of implementation usually to one functional department. CS428 - Enterprise Resource Planning by Shardav Bhatt 42 ▪ The phased approach suits companies that do not share many common processes across departments or business units. ▪ Independent modules of ERP systems are installed in each unit while integration of ERP modules takes place at a later stage of the project. ▪ This has been the most used methodology of ERP implementation. ▪ Each business unit may have their own ‘instances’ of ERP and databases. ▪ Modular implementation reduces the risk of installation, customization, and operation of ERP systems by reducing the scope of the implementation. ▪ The successful implementation of one module can benefit the overall success of an ERP project. CS428 - Enterprise Resource Planning by Shardav Bhatt 43 ▪ Interface programs are common in their use for the phased approach or any situation that contains phasing. ▪ These interface programs are required to bridge the gap between the legacy ERP system and the new ERP system until the new ERP system becomes fully functional. ▪ A good example is where the financial modules go live on the new ERP software, while the inventory module still remains active on the legacy ERP system. ▪ Through the use of interface and conversion programs, the financial activity that occurs in the inventory modules is exported to the new financial system in a format that can be understood by the new ERP system. ▪ Financial functions are usually implemented before distribution and manufacturing functions. CS428 - Enterprise Resource Planning by Shardav Bhatt 44 The advantage of phased approach are: ▪ It allows companies to implement one functional module at a time before another is attempted ▪ Many companies feel more comfortable taking this stepping stone approach ▪ The total number of resources needed at any one given point in time may be less ▪ Additional flexibility may also be gained in the scheduling of people CS428 - Enterprise Resource Planning by Shardav Bhatt 45 The disadvantages of phased approach are: ▪ This approach needs many technical resources. ▪ Technical resources are usually needed in this kind of approach because of the conversion and interface programs that are required between the two ERP systems. ▪ The overall cost and time to implement is usually higher using this approach. ▪ Higher turnover rate can also be expected among key ERP team members because of the lengthy durations that usually accompany this approach. CS428 - Enterprise Resource Planning by Shardav Bhatt 46 3. Parallel Implementation ▪ The parallel approach keeps both the legacy system and the new ERP system active simultaneously for a length of time. ▪ The amount of time the systems are both in operation ranges from one day to several months. ▪ Portions of the same functional business areas (including software) such as finance, manufacturing, marketing, etc., are operating at the same time for both the legacy and ERP systems. CS428 - Enterprise Resource Planning by Shardav Bhatt 47 ▪ An advantage to the parallel approach is that it has good recovery options in case something goes wrong. ▪ Because both the legacy ERP system and the new ERP system operate at the same time for a particular module. ▪ The company’s business processes will not get interrupted if the new ERP system malfunctions. ▪ Because of the high failure rates of ERP systems, the concept of running parallel to protect against implementation malfunction can provide a significant psychological cushion for the organization. ▪ The parallel approach also validate that the new ERP system is performing the necessary business process flows. CS428 - Enterprise Resource Planning by Shardav Bhatt 48 ▪ The parallel approach consumes considerably more resources than other techniques during the transition. ▪ All functional interaction with the legacy system must also be duplicated exactly in the new ERP system. ▪ Confusion often erupts when people do not interact with both systems in exactly the same way. ▪ This is often detected upon inspection of ending period balances when they are found to be different. Once errors are detected, the process of investigation begins ▪ We can determine whether the differences resulted from the new ERP system not functioning properly or the users not interacting with the new system correctly. CS428 - Enterprise Resource Planning by Shardav Bhatt 49 ▪ The parallel approach is ideally suited for situations that cannot survive a major malfunction of an ERP system. ▪ It also works well for business environments that require stability of an ERP system such as financial (banking and insurance), pharmaceutical, or medical companies. ▪ The parallel approach does not work well in situations where the legacy system has an expiration limitation that is within the needed amount of time for the system to operate in parallel mode. ▪ A classic example of this was the year 2000 situation. Because many legacy ERP systems had fatal year 2000 programming flaws, they could not continue beyond December 31, 1999, their expiration date. It would of course, be impossible to run in parallel mode beyond this date. CS428 - Enterprise Resource Planning by Shardav Bhatt 50 4. Process Line Transition Strategy ▪ The process line strategy is conceptually like the mini big bang. ▪ It breaks the implementation strategy to manage parallel business process flows or product lines. ▪ An example includes a company making two products where both products are manufactured in the same plant and a few resources are shared between them. CS428 - Enterprise Resource Planning by Shardav Bhatt 51 ▪ The process-oriented implementation focuses on the support of one or a few critical business processes, which involves a few business units. ▪ The initial customization of the ERP system is limited to functionality closely related to the intended business processes. ▪ The process-oriented implementation may eventually grow into a full-blown implementation of the ERP system. ▪ This approach is utilized by many small to mid-sized companies, which tend to have less complex internal business processes. CS428 - Enterprise Resource Planning by Shardav Bhatt 52 ▪ Using the process line strategy, the first product line and all related resources go first in making the transition from the legacy system to the new ERP system. ▪ Once this transition is achieved successfully, the second product line is moved from the legacy system to the new ERP system. ▪ While using the process line strategy, the smaller process lines, which pose less risk and have a higher probability of success, usually go first. ▪ This initial success victory helps to build organizational trust in the new ERP system, increasing its overall probability of success. ▪ Upon completion of the first process line, resources are then loaned to the more difficult and challenging process lines. CS428 - Enterprise Resource Planning by Shardav Bhatt 53 5. Hybrid Transition Strategy ▪ The hybrid strategy is a combination of the process line, phasing, and parallel transition strategies. ▪ Hybrid strategies are rarely predicted precisely at the beginning of an ERP implementation. ▪ They tend to evolve into the needed configuration as ERP team members learn and analyze information. ▪ The complexity of a hybrid strategy varies tremendously depending upon the situation. ▪ Small single site ERP implementations tend to have simpler hybrid strategies than those used by large multinational corporations with different geographical locations. CS428 - Enterprise Resource Planning by Shardav Bhatt 54 ▪ The concept of a hybrid strategy is not necessarily fixed over the implementation of an ERP system. ▪ It can and often does, change as people learn more about the software and project scope changes. ▪ Many implementations use hybrid strategies because they are flexible in adapting to the specific needs of the situation. ▪ By using a hybrid strategy, organizations can fine-tune implementation for their needs. ▪ ERP team members often find it difficult to learn to adjust to hybrid implementations. ▪ A great deal of communication is required, combined with strong leadership, for these to be effective. CS428 - Enterprise Resource Planning by Shardav Bhatt 55 Summary: ERP Implementation (Transition) Strategies ▪ Panorama Consulting Solutions conducted a study in 2102 on the ERP implementation approaches. ▪ According to the study, one factor that impacts employee buy-in is the determination of how exactly the ERP system will be implemented. ▪ The ‘big-bang’ approach implies all modules ‘go live’ at the same time in all locations. ▪ This approach forces all employees to use the new system with no opportunity to fall back on the old one and often results in temporary business disruptions. ▪ The phased approach in which the companies implement modules across multiple locations or departments at different times can help avoid business disruptions but also may create some resistance to change within departments. CS428 - Enterprise Resource Planning by Shardav Bhatt 56 ▪ According to survey results, 34% of companies used a ‘big bang’ approach when implementing their ERP system, while 47% used some type of phased approach during their ERP implementation, and 20% used a hybrid approach. CS428 - Enterprise Resource Planning by Shardav Bhatt 57 ▪ Phased approaches are the most common. ▪ It provide companies the opportunity to implement gradually across different locations and departments to minimize business disruption and address organizational changes one phase at a time instead of all at once. CS428 - Enterprise Resource Planning by Shardav Bhatt 58 III. ERP Implementation Life Cycle Like any other project, the ERP implementation project also must go through different phases. There are no clear defining lines between these phases. In many cases one phase will start before the previous one is completed. However, logical order is followed. Also, all the phases that we are discussing in this session may not be applicable in all cases. CS428 - Enterprise Resource Planning by Shardav Bhatt 59  The different phases of the ERP 8. Testing implementation are 9. Going live 1. Pre-evaluation screening 10. End-user training 2. Package evaluation 11. Post implementation 3. Project planning phase 4. Gap analysis 5. Reengineering 6. Customization 7. Implementation team training CS428 - Enterprise Resource Planning by Shardav Bhatt 60 CS428 - Enterprise Resource Planning by Shardav Bhatt 61 1. Pre-evaluation Screening Once the company has decided to go in for the ERP system, the search for the perfect package starts. There are hundreds of ERP vendors—of all sizes and shapes—all claiming to have the solution that is ideal for you. Analyzing all the packages before reaching a decision is not a viable solution. It is also a time-consuming process. It is better to limit the number of packages that are evaluated to less than five. CS428 - Enterprise Resource Planning by Shardav Bhatt 62 ▪ It is always better to do a thorough and detailed evaluation of a small number of packages, than to do a superficial analysis of dozens of packages. ▪ Therefore, the company should do a pre-evaluation screening to limit the number of packages that are to be evaluated by the committee. ▪ The pre-evaluation process should eliminate those packages that are not suitable for the company’s business processes. ▪ Few best packages can be selected by looking at the product culture of the vendors, getting help from external consultants, and most importantly finding out what package is used by similar companies. CS428 - Enterprise Resource Planning by Shardav Bhatt 63 ▪ ERP packages emerged from specific business contexts, shaped by the experiences of those working in those domains. Each package has strengths and weaknesses—like PeopleSoft excelling in HR and Baan historically favoring manufacturing. ▪ Over time, ERP vendors refined their products based on user feedback, market demands, and competition. ▪ While most ERP systems now serve diverse sectors, their original purpose still influences their suitability. Even if initially designed for manufacturing, they’ve adapted to meet broader business needs. ▪ Once you select a few packages after the screening, you can start the detailed evaluation process. CS428 - Enterprise Resource Planning by Shardav Bhatt 64 2. Package Evaluation The evaluation/selection process is one of the most important phases of the ERP implementation. The package that you select will decide the success or failure of the project. ERP systems involve huge investment, so once a package is purchased it is not an easy task to switch to another. The most important factor that should be kept in mind when analyzing the different package is that none of them are perfect. The idea that there is no perfect package needs to be understood by everyone in the decision-making team. CS428 - Enterprise Resource Planning by Shardav Bhatt 65 ▪ The objective of the selection process is not to identify a package that covers each requirement (a perfect fit). ▪ The objective is to find a package that is flexible enough to meet the needs of the company, or in other words, software that could be customized to obtain a ‘good fit’. ▪ Thus, once the packages to be evaluated are identified, the company needs to develop the selection criteria that will permit evaluation of all the available packages on the same scale. ▪ To choose the best system, the company should identify the one that meets the business needs, matches the business profile, and identifies with the business practices of the company. CS428 - Enterprise Resource Planning by Shardav Bhatt 66 ▪ It is impossible to get a system that will perform exactly as the company does business, but the aim should be to get the system that has the least number of differences. ▪ It is always better to entrust on a selection or evaluation committee that will do the evaluation ▪ process. ▪ This committee should comprise of people from the various departments, top management, and consultants. ▪ The selection committee should be assigned with the task of choosing a package for the company. ▪ The package experts or the consultants can act as mediators or play the role of explaining the pros and cons of each package. CS428 - Enterprise Resource Planning by Shardav Bhatt 67 3. Project Planning Phase This is the phase that designs the implementation process. It is in this phase that the details of how to go about the implementation are decided, Time schedules, deadlines, etc., for the project decided. The project plan is developed. Roles are identified and responsibilities are assigned. The organizational resources that will be used for the implementation effort are decided and the people who are supposed to head the implementation are identified. The implementation team members are selected, and task allocation is done. CS428 - Enterprise Resource Planning by Shardav Bhatt 68 ▪ This phase will decide when to begin the project, how to do it, and when the project is supposed to be completed. ▪ This is the phase which will plan what to do in case of contingencies; how to monitor the progress of the implementation, what control measures should be installed and what corrective actions should be done when things get out of control. ▪ A committee constituted by the team leaders of each implementation group usually does the project planning. ▪ The committee will be headed by the ERP in-charge. It will meet periodically to review the progress and chart the future course of actions. CS428 - Enterprise Resource Planning by Shardav Bhatt 69 4. Gap Analysis This is the most crucial phase in the success of the ERP implementation. This is the process through which companies create a complete model of where they are now and where they want to be headed. The trick is to design a model, which both anticipates and covers any functional gaps. It has been estimated that even the best ERP package, customized to a company’s needs meets only 80% of the company’s functional requirements. The remaining 20% of these requirements present a problematic issue for the company’s BPR. One of the most affordable, although painful, solutions needs changing the business to ‘fit’ the ERP package. CS428 - Enterprise Resource Planning by Shardav Bhatt 70 ▪ Of course, a company can simply agree to live without a particular function (the cheap but annoying solution). ▪ Other solutions include: 1. Pinning your hopes on an upgrade (low cost but risky) 2. Identifying a third-party product that might fill the gap (hopefully it also partners with the ERP packages, keeping interfacing to a minimum) 3. Designing a custom program 4. Altering the ERP source code (the most expensive alternative; usually reserved for mission critical installations) CS428 - Enterprise Resource Planning by Shardav Bhatt 71 5. Reengineering It is in this phase that human factors are considered. Reengineering has two different meanings: (1) Use of ERP to aid in downsizing efforts, (2) Business process reengineering (BPR). ▪ There have been occasions where high-level executives have purchased an ERP package with the aim of reducing significant numbers of employees. ▪ Ideally it is best to treat ERP as an investment as well as a cost-cutting measure, rather than as a downsizing tool. ▪ ERP should cause business change but should not risk the jobs of thousands of employees. CS428 - Enterprise Resource Planning by Shardav Bhatt 72 ▪ The BPR approach emphasizes the human element of necessary change within organizations. ▪ This approach is generally more time-consuming, and it can create high budgets and extended projects. ▪ However, there is no way that you can ignore the human element to an implementation that involves significant changes in responsibilities. CS428 - Enterprise Resource Planning by Shardav Bhatt 73 6. Customization This is the main functional area of the ERP implementation. Customization is about synchronizing existing company practices with the ERP package. To do so, business processes must be understood and mapped with ERP in such a way that the overall goals of the company is satisfied. However, companies cannot just shut down their operations while the mapping processes take place. Hence a simulation of the actual business processes of the company will be used. The prototype allows for thorough testing of the ‘to be’ model in a controlled environment. CS428 - Enterprise Resource Planning by Shardav Bhatt 74 ▪ A company might have an accounting practice that cannot be configured into the system or some shipping process that will not conform to the package. ▪ The company needs to know which processes must change during the implementation. ▪ Finding out what will work and what won’t require a knowledge of the business process itself and an ability to work with people throughout the company. ▪ Almost all the ERP vendors offer some tools that automate at least some part of the customization process. CS428 - Enterprise Resource Planning by Shardav Bhatt 75 7. Implementation Team training Around the same time that the customization is taking place, the implementation team is being trained, not so much on how to use the system, but how to implement it. This is the phase where the company trains its employees to implement and later run the system. The ERP vendors and the hired consultants will leave after the implementation is over. However, for the company to be self-sufficient in running the ERP system, it should have a good in-house team that can handle the various situations. Therefore, it is very vital that the company recognizes the importance of this phase and selects employees with the right attitude and good functional knowledge. CS428 - Enterprise Resource Planning by Shardav Bhatt 76 8. Testing This is the phase where you try to break the system. You have reached a point where you are testing real case scenarios. The system is configured and now you must produce extreme case scenarios: 1. system overloads, 2. multiple users logging on at the same time with the same query, 3. Users entering invalid data, 4. hackers trying to access restricted areas, and so on. CS428 - Enterprise Resource Planning by Shardav Bhatt 77 ▪ The test cases must be designed specifically to find the weak links in the system and these bugs should be fixed before going live. ▪ Following are some of the different types of testing employed: 1. Unit testing: Testing the new and additional features in isolation to make sure that the subsystem or unit works as expected. 2. Integration testing: Testing end-to-end business processes including customizations, enhancements, and interfaces to external systems. 3. Acceptance testing: Testing done by the users working with real data to find out whether the system is functioning as expected and to find out any problems that the users of the system have about the systems functionality or usability. CS428 - Enterprise Resource Planning by Shardav Bhatt 78 4. Security testing: Testing the user roles, access privileges, authorizations, and other security measures that are set up to ensure the security of the system. The objective of this testing is to find the loopholes or weaknesses in the system’s security and fix if there are any. 5. Performance and stress testing: Testing done to find out whether the system is able to perform as expected under normal business loads and at huge increase in the transaction volumes. The system should not fail when there is a spike in the transaction volume, and if that happens it must be fixed. CS428 - Enterprise Resource Planning by Shardav Bhatt 79 9. Going Live This is the phase where ERP is made available to the entire organization. On the technical side, the work is almost complete: (1) data conversion is done, (2) databases are up and running. On the functional side, the prototype is fully configured and tested and ready to go operational. The system is officially proclaimed operational even though the implementation team must have been testing it and running it successfully for some time. But once the system is ‘live’ the old system is removed, and the new system is used for doing business. CS428 - Enterprise Resource Planning by Shardav Bhatt 80 10. End-user training This is the phase where the actual users of the system will be given training on how to use the system. This phase starts much before the system goes live. The employees who are going to use the new system are identified. Their current skills are noted, and they are divided into groups based on their current skill levels and based on this, training is imparted on the new system. This training is very important as the success of the ERP system is in the hands of the end-users. These training sessions should give the participants an overall view of the system and how each person’s actions affect the entire system. CS428 - Enterprise Resource Planning by Shardav Bhatt 81 11. Post implementation (Operation and Maintenance) Once the implementation is over, the organizations enter the operation and maintenance phase (O&M). O&M phase begins with a period of initial struggle until people become comfortable in their roles and tasks. The duration of this stage depends on how effective the training was. If the training given to the employees was efficient and effective, the initial problems will be overcome soon, and the system becomes stable. The period required for the stabilization varies between 3 and 9 months. During this period one can expect a dip in performance due to the continued training. CS428 - Enterprise Resource Planning by Shardav Bhatt 82 ▪ Once the implementation is over the vendors and the hired consultants will leave. ▪ There should be enough employees who are trained to handle the problems that might crop up. ▪ There should be people within the company who have the technical prowess to make the necessary enhancements to the system as and when required. ▪ The system must be upgraded as and when new versions or new technologies are introduced. ▪ Maintenance activities also will start shortly after implementation and operation. ▪ The annual maintenance costs should be budgeted during the planning phase itself. CS428 - Enterprise Resource Planning by Shardav Bhatt 83 ▪ A system upgrade can cost as much as 25–33% of the implementation cost. ▪ The annual maintenance costs will come to about 20% of the ERP implementation costs. ▪ The maintenance activities include 1. Preventive maintenance (regular maintenance to keep the system functioning properly), 2. Emergency or unscheduled maintenance (maintenance done to prevent some damage from occurring to the system or data), 3. Breakdown maintenance (maintenance performed to correct some problem that have caused the system to stop functioning), and 4. System updates (applying the patches, bug fixes, etc., provided by the ERP vendor). CS428 - Enterprise Resource Planning by Shardav Bhatt 84 IV. Implementation Methodologies There are various ERP implementation methodologies used by various ERP consultants. All implementation methodologies look very much alike. Many terms and terminologies are common to all of them. However, the differences start appearing once you start discussing with the consultants about their implementation methodologies. Every consulting firm will try to impress upon the fact that their implementation methodology is the most perfect and the one that will guarantee success. heir presentations will convince you that their way is the most appropriate one for developing a business solution. CS428 - Enterprise Resource Planning by Shardav Bhatt 85 ▪ The company must pay special attention when comparing the different methodologies. ▪ Selecting the consultants and an implementation methodology is as important as selecting the package. ▪ The company should investigate the minor details when comparing the different methodologies. ▪ The minor details will say whether the methodology is practical and successful. ▪ These minor details are (1) the content of a particular slide, (2) the write-up in a brochure, (3) the conduct of the consultants during the presentation and (4) the practical demonstration that the consultants really have dealt with similar situations before. CS428 - Enterprise Resource Planning by Shardav Bhatt 86 ▪ If the consulting firm has practical experience, the methodology for the implementation will have been adapted to include tasks or activities specifically tailored to the specific application being analyzed. ▪ This may be apparent in one or more of the following aspects of project: 1. training, 7. definition of procedures, 2. master files 8. procedures for customization, 3. definition, 9. development of interfaces, 4. business modeling, 10.tuning of the processing environment 5. initial load plan and test plan, (performance tuning), 6. data migration strategies, 11.definition of accesses and permissions. CS428 - Enterprise Resource Planning by Shardav Bhatt 87 ▪ The above contains the aspects that are most subject to comparison. ▪ If the differences between consultants are not evident during their presentations, then one should ask them questions. ▪ While dealing with the consultants you should prepare a detailed questionnaire and grill the consultants during their presentations. ▪ One can ask for testimonials of successful implementations and check the consulting firm’s reputation before signing on. CS428 - Enterprise Resource Planning by Shardav Bhatt 88 ▪ A methodology is a roadmap to an implementation. ▪ The purpose of a methodology is to deliver an implementation on time, according to specifications, and within budget. ▪ Most vendors, especially in the software industry, have developed their own methodologies. ▪ Consulting companies also developed their own methodologies in relation to a product. ▪ Vendors primarily use methodologies as a marketing tool to relieve the fears of the top management when they are considering implementing a major software application (enterprise resource planning, supply chain management, customer relationship management, etc.). CS428 - Enterprise Resource Planning by Shardav Bhatt 89 ▪ ERP methodologies are beyond just marketing tools. ▪ They are now useful because vendors have gained from experience and these methodologies have lived through several generations. ▪ Methodologies are now applied and used by project managers and their teams. ▪ Some well-known methodologies are 1. ‘Accelerated SAP’ (ASAP) from SAP 2. ‘PERFECT Path’ from Panorama Consulting Solutions, 3. ‘Offshore-onsite ERP implementation methodology’ from Marlabs, 4. ERP Implementation Method’ by Fugo Consulting Pvt. Ltd. CS428 - Enterprise Resource Planning by Shardav Bhatt 90 (1). Accelerated SAPTM (ASAP) The ASAP Roadmap is a detailed project plan by SAP that describes all activities in an implementation. It includes the entire technical area to support technical project management and address things like interfaces, data conversions, and authorizations earlier than in most traditional implementations. The ASAP roadmap consists of five phases: (1) Project preparation, (2). Business blueprint, (3). Realization, (4). Final preparation, (5). Go-live and support continuous change. ASAP provides examples, checklists, or templates as samples. They are used as a starting point to avoid re-inventing the wheel. ASAP calls these accelerators. CS428 - Enterprise Resource Planning by Shardav Bhatt 91 ▪ In the Project preparation phase, ASAP uses “project estimator” to guide the project team through a series of predefined questions. ▪ They drive interviews with senior executives and key operating managers about their expectations of SAP ERP and the speed of its deployment. ▪ During the business blueprint phase, the broad scope of mySAP is narrowed to fit the industry-specific processes. ▪ Then, a two-step process of configuring the mySAP system is begun. ▪ First the baseline system will be configured. ▪ Second, the system is fine tuned to meet all the business process requirements. CS428 - Enterprise Resource Planning by Shardav Bhatt 92 ▪ In this Final Preparation, the mySAP system is fine-tuned. ▪ Necessary adjustments are made in order to prepare the system and the business for production start-up. ▪ Final system tests are conducted, and end-user training is completed. Initial audit procedures are developed. ▪ In the Go-live and Support phase, procedures and measurements are developed to review the benefits of the mySAP investment on an ongoing basis. ▪ SAP support and services are provided to ensure that the system continues to run smoothly. ▪ The online service system (OSS) provides electronic support using a remote connection. CS428 - Enterprise Resource Planning by Shardav Bhatt 93 (2). PERFECT Path PERFECT Path is the ERP implementation methodology of Panorama Consulting Solutions. Their ERP implementation methodology and tools enable companies to do more with the ERP software systems. Panorama’s broad and independent experience allows clients to implement ERP more effectively. Panorama serves the organization’s single point of accountability during an ERP implementation by focusing on the following activities: CS428 - Enterprise Resource Planning by Shardav Bhatt 94 1. Program management of vendor and internal client resources, project plan, and budget 2. Comprehensive business process re-engineering and workflow definition 3. Incorporation of lean manufacturing, Six Sigma, and other industry-specific skill sets into the overall business transformation 4. Improvement of technical infrastructure 5. Alignment of ERP implementation with business requirements 6. Risk management and mitigation planning activities 7. Organizational change management, communication, and training activities 8. Integration between the core ERP system and business processes, systems, and stakeholders 9. Definition of ERP measures of success 10. Optimization of measurable business benefits 11. Functional and technical development and support CS428 - Enterprise Resource Planning by Shardav Bhatt 95 ▪ Developed by Panorama consultants and based on years of ERP implementation experience, PERFECT Path uses a comprehensive, proprietary set of analytical tools, and guidelines to drive completion of ERP project milestones, deliverables, and results. ▪ Even though the solution is mainly developed for SAP, Oracle, and Microsoft Dynamics, it can be used for implementing any ERP package. CS428 - Enterprise Resource Planning by Shardav Bhatt 96 (3). Offshore-onsite ERP Implementation Methodology Marlabs Inc. (www. marlabs.com), has developed an ERP implementation methodology— Offshore onsite ERP implementation methodology. It helps organizations combine the advantages of world-class delivery with robust ERP implementation and deployment skills. The Marlabs ERP implementation methodology is shown in Figure, and it has following phases: (1) Define, (2) Design, (3) configure, (4) Deploy, (5) Support. CS428 - Enterprise Resource Planning by Shardav Bhatt 97 CS428 - Enterprise Resource Planning by Shardav Bhatt 98 (4). ERP Implementation Method Fugo Consulting is an ERP vendor as well and ERP implementation consulting firm, mainly specializing in the implementation and maintenance of PeopleSoft solutions. Even though their ERP implementation methodology is used for PeopleSoft implementations, it is equally applicable to any ERP implementation. Implementing an ERP system for any enterprise solution is not the end, but only a means. Realizing the benefits need not be a prolonged or an elusive pursuit. Fugo’s effective implementation methodology identifies key success factors early on, thus sharpening focus on where it is most needed. CS428 - Enterprise Resource Planning by Shardav Bhatt 99  Right from working with the executive management to identify business drivers to interacting with end-users to fine tune business processes, Fugo’s implementation methodology is all- encompassing as shown in Figure. CS428 - Enterprise Resource Planning by Shardav Bhatt 100 V. ERP Project Teams The success of an ERP implementation depends on how a company categorizes its ERP project team. ERP project teams are formed (1) to implement ERP software and (2) for the ongoing maintenance of an ERP system. Team structures vary from company to company and situation to situation. Organizations usually do not give enough thought as to how to form ERP implementation teams ERP consultants and vendors sometimes suggest the need and structure of the ERP teams. CS428 - Enterprise Resource Planning by Shardav Bhatt 101 ▪ The top management should form the ERP team in consultation with the consultants and vendors. ▪ The ERP teams should contain the consultants and vendor representatives before, during, and after the implementation. ▪ The vendor representatives will come into the ERP team after the selection of the ERP package. ▪ External consultants (the experts) should be there to help in the package selection and vendor negotiations. ▪ The vendor representatives and the consultants will work together during the implementation and for some time after the implementation. CS428 - Enterprise Resource Planning by Shardav Bhatt 102 ▪ They should be allowed to leave the organization only after 1. the knowledge transfer is done, 2. employee training is given, 3. employee education has been completed and 4. in-house ERP experts are sure that they can manage the operation and maintenance of the ERP system on their own. CS428 - Enterprise Resource Planning by Shardav Bhatt 103 ▪ The participation of people in an 7. functional participant, implementation can falls into several 8. consultant, categories : 9. vendor representative 1. project sponsor, 10. end-user. 2. executive steering committee, 3. project manager, 4. functional manager, 5. team leader, 6. team member, CS428 - Enterprise Resource Planning by Shardav Bhatt 104 CS428 - Enterprise Resource Planning by Shardav Bhatt 105 ▪ Basic skill sets that are important to any ERP team position include 1. communication skills, 2. computer literacy, 3. maturity, 4. conceptual skills, and 5. organizational knowledge. CS428 - Enterprise Resource Planning by Shardav Bhatt 106 1. Sponsor Every ERP implementation project needs a sponsor. Ideally the project sponsor will be the CEO – Chief Executive Officer. The role of the project sponsor is to ensure that the ERP implementation gets all the assistance it needs from resources to management backing. CS428 - Enterprise Resource Planning by Shardav Bhatt 107 2. Executive Committee The executive committee formulates the long-terms goals, objectives, and strategies regarding the implementation of the ERP system in the company. The executive committee is headed by the project sponsor and includes the CIO – Chief Information Officer, CTO – Chief Technology Officer, CFO – Chief Financial Officer, and other senior level managers and department heads. It also includes a representative of the package vendor and external consultants. CS428 - Enterprise Resource Planning by Shardav Bhatt 108 3. Project Manager The project manager is the most important person in the ERP implementation project. He is the person responsible for translating the vision and goals into reality. He reports to the executive committee and heads the project management team. His team, the project management team, consists of the head of the vendor representatives, the chief of the consultants, and the project team leaders. CS428 - Enterprise Resource Planning by Shardav Bhatt 109 4. Implementation Team or Project Team The implementation team or the project team consists of selected employees from the company in addition to vendor representatives and consultants. These employees will perform the various tasks in implementing the ERP system from installing the hardware, software, customizing, documenting, training, and so on. The positions of the functional managers are pre-existing positions that do not need to be filled. CS428 - Enterprise Resource Planning by Shardav Bhatt 110 5. Functional Managers Functional managers oversee the day-to-day operations of their respective functional areas. Ideally, they should have strong conceptual skills in understanding the overall ERP project and how it relates to the business. The amount of time they spend on the ERP implementation is usually minimal. They play a significant role in the success of the ERP systems during its implementation by maintaining a positive attitude toward ERP. They also have role to play after implementation by ensuring that their team members are properly trained, and they are using the system in the best possible manner. CS428 - Enterprise Resource Planning by Shardav Bhatt 111 6. Functional participants Functional participants have a limited role in the implementation of the project. Most of their time is spent carrying out the day-to-day activities of the functional area. Functional participants answer questions and review the training programs and business process flows that are proposed in the new software. Through the feedback of the functional participants, other members of the ERP team can get a basic feel of how well the new ERP system may work. Functional participants usually have a significant amount of organizational and product knowledge. After the implementation of the ERP system, they become end-users. CS428 - Enterprise Resource Planning by Shardav Bhatt 112 7. Consultants Consultants provide a wide variety of functions often filling in the gaps. Positions that consultants can fill include project manager, team leader, team member, service representative, and end-user. A consultant’s success depends upon several factors including computer literacy, conceptual skills, software knowledge, industry knowledge, maturity, problem-solving capability, communication skills, and organizational skills. Consultants provide three general categories of services — (1) management, (2) application, and (3) technical. CS428 - Enterprise Resource Planning by Shardav Bhatt 113 1. Management consultants focus primarily on the function of management as it relates to the organization of resources and business process flows. Management consultants often participate in project management and will provide high-level direction for the overall successful implementation and use of an ERP system. 2. Application consultants focus on the process of communicating, teaching, demonstrating, and configuring software for the business process flows. 3. Technical consultants deal with technical issues such as database conversions, source code modifications, communication protocols, operating systems, software installation, hardware systems, and integration programs. CS428 - Enterprise Resource Planning by Shardav Bhatt 114 8. Package Vendors Package vendors are people who have developed the ERP packages. They are the people who have invested huge amounts of time and effort in research and development to create the packaged solutions. The vendor representatives are responsible for fixing any problems in the software that the implementation team encounters. Another role the vendor representatives must play is that of the trainer—to provide the initial training for the company’s key users, people who will play lead roles in the implementation of the system. CS428 - Enterprise Resource Planning by Shardav Bhatt 115 ▪ The vendor representatives also play an important project support function and must exercise the quality control with respect to how the product is implemented. ▪ The vendor is responsible for helping the implementation team in customizing the ERP package to suit the company’s needs. CS428 - Enterprise Resource Planning by Shardav Bhatt 116 9. End-Users End-users, who represent the largest group, are the general mass of people who will use the new ERP system. Tremendous variation in skill sets can be found among this group. They have the least control over the outcome of the ERP project. Documentation and training programs are often prepared specifically for this group of people. High end-user acceptance of the new ERP system is required for its success. CS428 - Enterprise Resource Planning by Shardav Bhatt 117 VI. Vendors and Consultants Developing an ERP package is a very complex and time-consuming process. It needs a lot of skilled manpower and other resources. Companies can’t develop their own ERP packages. Many companies have personnel in their IT/IS departments, but such specialized computer work is not the main business of these companies. They are required to focus on their own products or services. ▪ That’s why they need help of software firms who are specialized in this business. ▪ These software firms can produce sophisticated packages. CS428 - Enterprise Resource Planning by Shardav Bhatt 118 Benefits of taking help of external software firms: 1. They have knowledge of how to organize and run a project of this magnitude. 2. They have enough experience in handling problems and issues that arise during the implementation. 3. They have Good people skills. 4. They have Good leadership skills. 5. They have Excellent training skills. CS428 - Enterprise Resource Planning by Shardav Bhatt 119 (1) Vendors: ▪ Vendors are the people who have developed the ERP packages. ▪ They are the people who have invested huge amounts of time and effort in research and development to create the packaged solutions. ▪ The ERP marketplace is becoming crowded and more and more players entering the market, and the competition is increasing. ▪ Today’s ERP packages have features and functionality to cater to the needs of businesses in almost all sectors. ▪ ERP vendors spend crores of rupees in research and produce innovations that make the packages more efficient, flexible, and easy to implement and use. CS428 - Enterprise Resource Planning by Shardav Bhatt 120 ▪ The vendors must constantly upgrade their products to use the best and latest advancements in technology. ▪ Choosing the right software vendor is important for a company. ▪ Vendor selection is not a popularity contest and bigger does not always mean better. ▪ Top vendors offers the financial stability, ensured longevity, and broad spectrum. ▪ While smaller vendors that are not quite household names may carry increased risks in long- term longevity. ▪ But they may provide a better solution if they specialize in your industry segment rather than covering a broad spectrum of industries. CS428 - Enterprise Resource Planning by Shardav Bhatt 121 ▪ You have the greatest leverage with your vendor once you have made the decision to buy their software but have not yet issued the purchase order. ▪ Waiting for the end of their quarter can help you get the best price. ▪ Entrust your vendor to get the job done right, on time, and within budget. ▪ It is important to remember that the vendor, if they provide working software and capable personnel, really has very little responsibility for your overall success. ▪ Responsibility for success or failure lies within the four walls of your business, and if you import failure in the form of a third party, it is still your responsibility. CS428 - Enterprise Resource Planning by Shardav Bhatt 122 (2) Consultants: ▪ Business consultants are professionals who specialize in developing techniques and methodologies for dealing with the implementation. ▪ They also deal with various problems that will crop up during the implementation. ▪ They are experts in the administration, management, and control of these types of projects. ▪ Each of them will have many years of implementation experience with various industries. ▪ They have knowledge of time-tested methodologies and business practices that will ensure successful implementation. ▪ They will be good at all phases of the implementation life cycle right from package evaluation to end-user training. The only problem is that they are expensive—very expensive. CS428 - Enterprise Resource Planning by Shardav Bhatt 123 ▪ There are many myths about the consultants: 1. Employing a consultant or consulting firm can make the implementation successful. 2. Consultants should lead the project. 3. Consultants know everything. 4. Having more consultants will increases the chances of success. 5. Consultants who are expensive and who have fancy degrees are better. CS428 - Enterprise Resource Planning by Shardav Bhatt 124 ▪ Consultants provide a wide variety of functions often filling in the gaps. ▪ Some of the positions that consultants can fill include project manager, team leader, team member, service representative, and end-user. ▪ A consultant’s success depends upon several factors including 1. computer literacy, 5. maturity, 2. conceptual skills, 6. problem-solving capability, 3. software knowledge, 7. communication skills, and 4. industry knowledge, 8. organizational skills. CS428 - Enterprise Resource Planning by Shardav Bhatt 125 ▪ Before choosing a consultant, the project team should consider the following: 1. Experience—Do they have experience in the organization’s particular industry? 2. Success rate—How many successful implementations have they completed? 3. Size and scope—What are the sizes of the companies and number of users involved in the previous implementations? What was the scope of those implementations? Were they big- bang or phased? 4. Continuity—Do the consultants provide ongoing service and support? 5. Training—How good is the knowledge transfer? Do the consultants train the employees to operate and maintain the system independently? CS428 - Enterprise Resource Planning by Shardav Bhatt 126 ▪ Consultants provide three general categories of services: management, application, and technical. 1. Management consultants focus primarily on the function of management as it relates to the organization of resources and business process flows. 2. Application consultants focus on the process of communicating, teaching, demonstrating, and configuring software for the business process flows. 3. Technical consultants deal with technical issues such as database conversions, source code modifications, communication protocols, operating systems, software installation, hardware systems, and integration programs. CS428 - Enterprise Resource Planning by Shardav Bhatt 127 Summary: ▪ Developing an ERP package is complex and requires significant resources and expertise, which is why vendors are required. ▪ Implementing an ERP system is challenging, making it advisable to hire experienced business consultants. ▪ ERP vendors and consultants plays role in ensuring successful ERP implementation. CS428 - Enterprise Resource Planning by Shardav Bhatt 128 VII. Employee Resistance ERP implementation is not a technology or process project—it is a people project. To succeed during and after implementation, the ERP system needs full and complete support of all the end-users of the system. The end-users are the people who will be using the ERP system once it is in place. These are the people who were doing the functions that are being automated or computerized by the ERP system. With the implementation of the ERP system, the old job descriptions will change. The nature of the job will undergo drastic transformation. CS428 - Enterprise Resource Planning by Shardav Bhatt 129 ▪ It is human nature to resist change. ▪ When we are talking about implementing an ERP system we are talking about change on a very massive scale. ▪ Therefore, there will be fear of the system replacing existing jobs, as many functions will be automated. ▪ People will be afraid of the amount of training they have to undergo and learning they must do to use the new system. ▪ Job profiles will change, job responsibilities will undergo drastic alterations, and people will be forced to develop new skill sets. ▪ If these fears are not addressed and are alleviated well in advance, then it will be asking for trouble. CS428 - Enterprise Resource Planning by Shardav Bhatt 130 ▪ While the ERP systems eliminate many existing jobs, it creates many new ones—ones with more responsibilities and value additions. ▪ It is easy to see that the automation of the business processes through technology can eliminate the job of many employees whose function is to record, control, calculate, analyze, file, or prepare reports. ▪ However, it must be pointed out to the employees that the same automation also creates many more opportunities for employees because they can grow from the monotonous clerical work and transform themselves into highly valued individuals. ▪ If the company can succeed in making its employees accept this fact and assist in making the transformation (by giving them training), then the major obstacle in the path of an ERP implementation is solved. CS428 - Enterprise Resource Planning by Shardav Bhatt 131 ▪ Reasons for Employee Resistance: 1. Fear of being Redundant 2. Fear of Failure 3. Fear of the Future CS428 - Enterprise Resource Planning by Shardav Bhatt 132 ▪ How To Deal with Employee Resistance: 1. Training and Education 2. Implement an Organizational Change Management Program 3. Creating ERP Champions 4. Pilot Projects 5. Involve Employees in ERP Process 6. Address Issues of Fear, Uncertainty, and Self-esteem 7. Manage Expectations CS428 - Enterprise Resource Planning by Shardav Bhatt 133 ▪ The main challenge in ERP implementation is dealing with people’s fears and doubts. ▪ To succeed, you need to address these concerns through careful planning, training, and getting everyone on board. ▪ If you ignore these fears, they can ruin your efforts. ▪ People’s resistance to change can cause problems at any stage of the process. CS428 - Enterprise Resource Planning by Shardav Bhatt 134