ERP implementation can take ages to complete and the process can be delayed by faulty planning and execution. Experts’ opinions vary on the time they estimate for fully implement an ERP system. Some conjecture that, on average, ERP implementation is a nine-month effort from start to finish, depending on the size of the organization. A 1999 survey by the Stamford, CT-based Meta Group, however, reported that the average time it takes to implement ERP application systems is 23 months.

According to the Meta Group study, ERP system implementation takes an average of two and a half years from project initiation to achieve a quantifiable return on investment for an ERP system. 90% of those quantified benefits are the result of a cost reduction, according to the study.

According to Paul Allen of Project Management Institute, 80% of new software applications and 67% of reengineering efforts are abandoned or fail to meet deadlines or the projected cost benefits. To avoid being included in these statistics, you need to recognize that an implmenting ERP affects all areas of an organization and requires a large amount of planning to be successful.

Businesses rarely remain static and requests for changes in scope during the project can get out of control. The technology may work, but many organizations miscalculate the impact of process change. Incomplete needs analysis almost always results in understated costs of ERP implementation. Infrastructure and integration requirements, if incomplete, can also result in hidden costs in ERP implementation. Managing time, scope, and money is truly a challenge in the process of ERP implementation.

Here are main key considerations that organizations need to keep in mind for ERP implementation:

#1: Prior to ERP implementation, make sure you understand the “why”

Understand the value proposition and the business case for your ERP system. What are the key deliverables and objectives?

What is driving the project? Where is the win? What assumptions does the sponsor hold? The answers to these questions will help the team understand the target and the expected results in ERP implementation.

#2: Make sure you have a strong sponsor

Commitment from top-level management is also imperative to the success of an ERP implementation. Senior staff must think of the ERP system as more than just a facet of the technology infrastructure, but more as an integral business tool. Often it’s a CIO or IT manager alone who oversees the ERP implementation, when a partner from the operations or finance division is needed.

It’s going to be a culture change for the whole company. You really need someone on the operations side of the business, not just the IT side of the business chartered with that responsibility.

Your sponsor’s level of commitment and support can have the greatest impact in ERP implementation. Issues and risks will likely get escalated to the sponsor if they aren’t resolved earlier. Your sponsor can also serve as the champion for the project when conducting status briefings and training across the enterprise.

ERP implementation can stretch resources beyond capacity, so you must have a rational project plan not padded by wishful thinking. Roles and responsibilities must be crystal clear to the sponsor and stakeholders. Strong sponsorship and project management can dramatically affect the outcome, as critical decisions are often required.

#3: Gap analysis is a must have in implmenting ERP

What are the gaps between the “as-is” and the “to-be” systems? Has the existing system been customized? Identifying functional and nonfunctional gaps between the existing and planned systems is one of the first major tasks to be completed. It’s highly recommended that the gap analysis be reviewed and approved by the executive sponsor.

An incredible number of details are involved in the implementation and integration of ERP systems. The vendor may provide an “off-the-shelf” implementation plan, but it doesn’t know your integration requirements or functional gaps. So it’s up to you to make sure you fully understand and accept the functionality to be delivered. Leave no surprises to surface after it’s too late. Gap analysis is a major means of avoiding scope creep down the road and preventing delays due to misunderstood deliverables.

#4: Vanilla is best

Stay with vanilla at all costs and use the standard off-the-shelf package with as little customization as is feasible. Once the enterprise has implemented the core modules (GL, AP, AR, payroll, etc.), it can phase in new features and build things around the edges, such as remote Web interfaces and wireless networking.

Plugging a vanilla system into a legacy system can be tricky, as there may be years of customization built into the original system. Some say that businesses building too much complexity into ERP systems can spend up to 30 percent more per employee on finance operations.

#5: Success = change

Success means delivering change. Functionality must enable existing processes, or processes must change. Business process implications cannot be glossed over, no matter how arduous the task of process mapping/process engineering. What processes and functions are in scope?

Socialize change across the organization with key stakeholders and those most affected by change. Whether the changes entail the processing of payroll exceptions or creating journal entries, involve the most experienced end users as much as possible.

Organizations that focus on technology and ignore the human element in ERP implementation often fail. ERP by definition is about people, not just technology and organizations. Minimize the people side and run a larger risk of missing the target. In fact, process change is often part of the case for the ERP investment.

#6: “Center of excellence” team

Create a center of excellence–an oversight team in addition to the project management office (PMO). Vital to the success of an ERP implementation is a strong tactical team that can manage change and drive toward stability. Most businesses are not prepared to manage the impact to their day to day functions during the implementation. This team is responsible for help desks, testing, training, documentation, database administration, and many other operational issues and “fires.”

This team’s functions are all closely coordinated with the go-live handoff for each module/milestone, and it can act as the “super-user” from day-one to help avoid chaos.

#7: Manage risks

There are many flavors and complexities of ERP. Know where the major pain points lie for your situation. The risks to the plan must be clearly defined and include an escalation plan. Are there technology risks? Are scarce skills required? Is there a migration path? Many risks can be mitigated via thorough testing. Testing business cycles is, by nature, a long process. Be

certain to have a fallback plan for each implementation milestone where there are risks to mitigate.

If the ERP system is for a small/medium size business (SMB) with little or no legacy systems integration, the task is less risky. However, if a replacement of a large highly integrated, highly customized system is required, get ready for the unexpected. An ERP project should never begin without a clearly defined risk management plan that has the sponsor’s approval.

#8: Invest in business intelligence

In addition to managing operations more efficiently, common data enables ERP software to support more detailed analysis and reporting. Business intelligence (BI) is the engine–the database of business rules that need to be defined for the benefits to be achieved. Building it takes time and enterprise-level decision making.

Often, ERP systems are required to integrate with existing databases. The customer helps lead the BI effort and actively participates in integration. Some things can’t be accomplished by the IT pro alone.

#9: Consider compliance

Because ERP systems are accounting/financial based, there are a number of areas to consider for audits and compliance. Sarbanes-Oxley is the primary act that regulates financial systems. Specific IT controls affect ERP systems implementations as well as the ongoing management of those systems.

Dr. John T. Whiting of E-Business Management Consulting, said organizations are wise to choose ERP vendors that subscribe to the International Standards Organization (ISO) 9000 Standard.This set of international technical quality standards and guidelines helps to assure quality of management systems across industries.

This is a big topic, but suffice it to say that in Section 404 of the Sarbanes-Oxley act, compliance is measured by a set of controls that will likely be on the external audit team’s list. Any significant conversion, upgrade, or implementation of a financial system is fair game. The project “artifacts” must also be preserved as evidence of due diligence and adherence to the controls throughout the project. These include but are not limited to project plans, issues/risk logs, data conversion plans and results, and signoff on significant financial reports.

#10: Solid relationship with the ERP consultant

As ERP programs become more sophisticated and encompass more areas within the company, it’s cost effective to have ERP consultants stay on after the “go live” phase to work out new requirements, new functionality, and new users—especially situations involving mergers, acquisitions, and entirely new implementations. Thus, a solid relationship with the ERP consultant is a must.

#11: Post ERP Implementation

In the midst of the complicated process reengineering that accompanies an ERP implementation, many organizations forget the importance of retraining the employees who are expected to operate the new system. Whiting notes that a quality implementation can be derailed by poorly trained employees who do not know how to properly operate the new technology.

The knowledge transfer to the employees is arguably more important than the quality of the implementation. Too many companies are not paying attention to this issue, and systems integrators frequently focus most of their attention on the IT process reengineering and relatively little time on reengineering the human resource. In a lot of training scenarios, they teach people how to do the basics, but they don’t teach them what to do when they run into problems.

The software must become a critical aspect of their business. They need to understand how it’s set up and how it works, so that as their business evolves and changes, they can change the setup of the software.

Conclusion: When ERP implementation goes wrong, the results can be disastrous. Doing it right can be rewarding; failing can be devastating. A number of large organizations are reporting difficulties in ERP implementation. For example, Volkswagen AG had trouble delivering spare parts to car dealers in Germany after going live with SAP AG’s R/3 software in its central parts warehouse. Hershey Food Corp. also experienced problems processing orders during the lucrative Halloween and Christmas seasons after an installation of R/3.

What is ERP System?

Blog RSS
Subscribe to Full Feed RSS or via Email subscriptions!
Subscribe to the post Comments Feed or Link to this post by Leaving a Trackback