Understanding ERP

Implementation
Session 7-8
Introduction
• The implementation of an ERP system differs from that of any
traditional information system due to its integrated nature which
causes dramatic changes on work flow, organizational structure and on
the way people do their jobs
• Most ERP systems are not built but adopted and thus they involve a
mix of business process reengineering (BPR) and package
customization and
• ERP implementation is not just a technical exercise but it is a socio-
technical challenge as it poses new set of management procedures.
Understanding ERP Implementation Process

• The ERP implementation process includes various steps and stages,

most typically consisting of:
1.ERP software installation
2.Settings and options configuration
3.Transfer of financial and transaction data from the old system (aka data
migration)
4.Setting up employees (or “users”) with defined roles, system access, and
security settings
5.ERP software training for end users
• Depending on the implementation approach being choosen and the
complexity of business processes, ERP software implementation could
take anywhere from two months to two years … sometimes more.
Contd.. Understanding ERP Implementation Process

• In other words, the timeline for a financial services company

implementing core accounting modules like General Ledger, Accounts
Payable and Accounts Receivable is going to be faster and less
complex than a manufacturing business also needing shop floor and
production modules, inventory and purchasing, order processing and
all the additional configuration, workflow processes, and data that
comes with it.
• Regardless of the timeline, choosing the right ERP partner,
establishing a well-documented project plan, and properly allocating
resources will determine how effective, efficient and successful the
ERP implementation turns out.
What are the Steps in ERP Implementation?

• The first step in an ERP implementation is to mobilize the project

team.
• On the customer side there’s typically an executive sponsor, various
business process owners, and the end users.
• On the ERP partner side (or “technology provider”), there will be
business analysts, technical consultants, and a project manager.
• Project management is critical to communicating the ERP
implementation progress, managing issues quickly and effectively, and
achieving the defined objectives.
ERP implementation process generally include:

• Defining the scope of the implementation, project milestones, customizations needed, process
maps, and expected results.
• Analyzing the business requirements, installing the software in a “sandbox” environment, and
configuring the system to match the necessary process workflow.
• Migrating and mapping data into the new system and performing verification checks.
• Testing the system across all departments and consistently testing and running through the quote-
to-cash cycle.
• Training end users in their specific functional area based on roles and permissions. The “train the
trainer” approach is widely used, whereby select users are trained on the system and then act as
internal trainers.
• Software deployment into the production environment, often referred to as the “go-live.” This will
require extra man power to monitor the process and ensure a smooth transition.
• Post go-live support and project review.
• Comprehensive planning and rigorous testing will be the two main aspects of the ERP
implementation process that ensure the system moves from concept to the live environment.
Implementation Challenges
Implementation Challenges

➢ There are few information system whose design

and implementation challenge a
company/organization like ERP systems.
➢ A new ERP implementation can dramatically
improve business process.
➢ But when an implementation fails or takes a
prolonged and huge amounts of money and effort
could be misspent(unwanted expenses)
Challenges to successful ERP Implementation

➢ Inadequate Definition of Requirement

➢ Resistance to change
➢ Inadequate Resource
➢ Inadequate Training and Education
➢ Lack of Top MGMT support
➢ Unrealistic Expectations of benefits
➢ Miscalculation of time and efforts
➢ Poor communication
➢ S/W business process incompatibility
➢ Poor Project design and MGMT
➢ Poor ERP package selection
➢ Other
Challenges to successful ERP Implementation

➢ ERP implementation are more likely to fail, be

delayed, cost more than forecast or fail to deliver full
functionality than they are to succeed
➢ It is important to be aware of how ERP as a
technology evolved, what its strengths and
weaknesses are and the nature of important
implementation challenges
 Inadequate Definition of Requirement

1. Inadequate definition of requirements is one of the major

challenges faced by the implementation team.
2. The requirements definition should clearly specify the issues
and problems that the ERP system is supposed to solve.
3. If the requirements are properly specified then the
implementation team can go about their job including selection
of the ERP package that is best suited to meet these needs, the
area where customization is needed.
Inadequate Definition of Requirement

4. Failing to provide these (which is the

managements responsibility)could result in
the selection of the wrong ERP package,
unnecessary customization, lack of employee
re-training and so on, all of which can result in
the failure of the ERP implementation.
 Resistance to Change
1. Implementing an ERP system is a change and it is
human nature to resist change.
2. So any ERP implementation will face
some amount of resistance.
3. User will be skeptical (dilemma) about the new
system.
4. But for successful implementation of ERP
the co-operation of every one is required .
Resistance to Change

5. ERP is first an attitude, then a system.

6. So 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.
7. Which can result in the failure of the
system.
 Inability to achieve organizational understanding

1. The biggest ERP challenge faced by organizations is

recognizing that the integration of previously un-
integrated job functions requires that knowledge/expert
workers support.
2. Understanding has a specific definition in an ERP context:
“Understanding an architecture” indicates that the
organizational legacy systems and the ERP are
documented and articulated(expressed) as a digital
blueprint illustrating the interconnections among the
component metadata.
Inadequate Resources

1. ERP implementation is a very costly matter that requires

a variety of resources- money, manpower, s/w, h/w, and
so on.
2. It is not like that the company management would
support the idea of unlimited funding for ERP
implementation project.
3. Instead of that it should from control
stance (point of view) a budget needs to be established.
Inadequate Resources

4. And this will be based on an estimate of the likely costs.

5. There are many things/items that will be missed during the
preparation of the budget but will consume money during the
implementation
6. The long implementation duration will escalate
(increase) money costs.
7. Getting the right persons with necessary skills, aptitude and
enthusiasm is one of the most difficult tasks faced by ERP
implementation team.
Lack of Top management support

1. The commitment of top management to the diffusion(spread) of

innovations throughout an organization has been well documented.
2. In initial project’s life, no single factor is responsible/predictive of
its success as the support of top management
3. The role of top management, in IT implementations include developing
an understanding of the capabilities and limitations of IT, establishing
reasonable goals for IT systems, strong commitment to the successful
implementation of IT and communicating the corporate IT strategy to
all employees.
4. So going ahead without solid backing from top management is a sure
for disaster.
1. The management should make sure that the
organization, the work process and the
employees are amenable(ready/willing) to
adapt to the ERP system.
Inadequate training and education

1. The role of training to facilitate software implementation

is well documented in the Management Information
System (MIS).
2. Lack of user training and failure to completely understand
how enterprise applications change business processes
frequently appear to be responsible for problem ERP
implementations and failures.
3. ERP projects appear to have a 6 month learning curve
at the beginning of the project.
Inadequate training and education

4. Minimally persons who uses ERP system need to be

trained on how they work and how they relate to the
business process early on in implementation process.
5. Although many companies use consultants to help during the
implementation process, it is important to transfer that
knowledge from consultant to internal employee through
training.
Inaccurate expectation

1. Information system failure has been defined as the inability of

an Information System to meet a specific stakeholder groups
expectations and successfully managing user expectations has
been found to be related to successful system implementation.
2. The expectations of a company may exceed the capabilities of the
system.
3. ERP systems may fail to meet expectations despite positive
contributions to the organization if , the systems are oversold by
the vendors.
 Poor package selection
1. Selecting a good ERP solution provider is another
challenge.
2. 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.
3. The choice of the package involves important decisions
regarding budgets, time frames, goals and deliverables that
will shape the entire project.
Poor project management

1. Project management activities span the life of the project

from initiating the project to closing it.
2. The project planning and control is a function of the
project’s characteristics such as project size, experiences
with the technology and project structure.
Choosing the Right ERP Implementation Strategy
for Your Business
• There’s no question about it: choosing the right ERP implementation
strategy will greatly increase your chances of success, but this is no
easy decision.
• Each method has its own set of advantages and disadvantages, and
there is no one-size fits-all implementation approach.
• To help you make the right decision, let’s review the most common
implementation strategies and the factors you need to consider to
select the one that best suits your company’s objectives.
Top ERP implementation strategies
• The most widely used ERP implementation strategies are big bang, phased rollout,
parallel adoption, hybrid course of action.
Big bang —
• With big bang implementation, all users move to the new system on a specific go-
live date, usually over the course of one day or weekend.
• Once the new ERP has been deployed, you cannot revert back to the old system.
• This strategy can help you get a quicker return on investment, because it is much
faster and less expensive than the other options.
• However, full end-to-end testing prior to the go-live date can be difficult, and if
you overlooked an issue during testing, that error could affect other parts of the
system
Top ERP implementation strategies
Phased rollout —
• Conversely, with a phased rollout, your organization would move off the legacy
system more progressively, either by module, business function, business unit or
location.
• It is often the preferred plan for larger organizations, because it is more flexible
and less risky than big bang ventures.
• The downside is that employees have to use a system that is constantly changing.
• In addition, interfaces are built temporarily and therefore cost money but produce
little value, except managing risk.
• Also if the rollout takes longer than expected, the implementation will be
perceived as a project that never ends
Top ERP implementation strategies
Parallel adoption —
• As its name indicates, this strategy keeps the legacy system operational in
parallel with the new ERP for a specific period.
• It is slower than a big bang implementation, but faster than a phased
approach.
• Considered to be less risky, parallel adoption is often selected for mission-
critical situations. In the event of a system failure, you can always revert
back to the old system.
• But this safety net comes with a price.
• Parallel adoption is the most expensive implementation method. For that
reason, more and more organizations are replacing it with rigorous testing.
Top ERP implementation strategies
Hybrid approach —
• This formula lets you combine the above-mentioned methods to adapt to your
unique situation.
• You could implement the most important modules by big bang, then gradually add
the other modules, or use the big bang approach for headquarters and a phased
rollout elsewhere.
Factors to consider to make the right decision
• The two most frequently used ERP implementation strategies are the big bang and
phased approaches.
• A study by Panorama Consulting showed that more than half (53%) of companies
used a phased approach for their implementations, 35% used big bang and the rest
(11%) chose a hybrid method.
• Although insightful, these statistics should not influence your decision.
• When choosing an ERP implementation strategy, the goal is not to imitate others,
but to find the course of action that best fits your particular situation.
• Here are some of the variables you need to take into account.
Factors to consider to make the right decision
The size and complexity of your organization.
If you’re running a complex organization or a large multinational, a big bang implementation is
likely to be too risky.
And yet if the different modules or sites are highly interdependent, it may be the only solution.
Level of business risk.
There is always a certain level of uncertainty with ERP implementation.
Risk cannot be avoided—inaction in itself is a risk—but it can be managed.
Your risk tolerance depends on a number of factors, including the nature of your business.
A hospital or airline carrier would think differently and take different risks than a clothing
manufacturer.
And since big bang implementations have an inherently higher level of risk than other
approaches, they may be too risky for certain companies.
Factors to consider to make the right decision
The software architecture.
• It is much easier to implement by phase when you are dealing with a modular and scalable ERP system than with a rigid
business application.
• For instance, a three-tier architecture ERP allows you to upgrade or replace any of the three tiers independently.
• Similarly, Cloud ERP lets you select the functions you want and add them as your company grows.
The type of ERP implementation.
• Vanilla implementation is when the ERP software will not be modified or customized.
• Typically, the big bang strategy will help you complete a vanilla implementation faster.
• But, it may not be the best approach if you are dealing with lots of customizations.
The anticipated benefits.
• One of the biggest advantages of phased adoption is that you can realize quick wins before moving to the next phase.
• It is therefore ideal if you expect higher returns in certain areas of the business.
• This type of deployment is also less daunting for users and might even be good for your team’s morale.
• Users will stay motivated and convinced that changing the system is indeed for the greater good.
Factors to consider to make the right decision
Impact on your personnel.
If your resources are already at full capacity, it may be wise to consider a
phased rollout.
The workload will be more spread over time than with a big bang approach.
In addition, your staff will have more time to perform crucial tests, which are
essential to the success of any ERP implementation.
Budgetary and time constraints.
A phased approach is less risky, but it requires more time.
Additional delays translate into additional costs such as consulting fees,
support personnel and even the opportunity cost stemming from employees
who cannot focus on core business for an extended period of time.
Separate your needs from your wants
• Is selecting an ERP implementation strategy really a choice?
• Naturally, all companies want rapid implementation with minimal costs and risks,
but as you consider the pros and cons of each ERP implementation approach,
you’ll soon realize that the solution often arises from your circumstances, not your
preferences.
• Griffith, G March 28, 2011 ERP Rollout Strategies: Big Bangs and
Phases http://panorama-consulting.com/erp-rollout-strategies-big-
bangs-and-phases/
• http://web.eng.fiu.edu/chen/summer%202012/egn%205621%20ente
rprise%20systems%20collaboration/reading%20erp/readings_on_erp
_chapter04.pdf
A conceptual model for ERP system implementation
proposed by Marnewick and Labuschagne
• There are four aspects of implementation namely people, product, process and
performance (4P).
• In relation to ERP systems,
• People as the customers that represented the organizational requirements/mindset,
• Product as software modules that are to be implemented across the business,
• Process as representing the project’s change management issues and
• Performance that is analogous to data flows associated with business process.
• Every 4P component has a direct or indirect effect on the ERP implementation
process.
• This includes the identification of organizational requirements, the customization
of selected software, its installation and subsequent operationalization, and finally
the important needs of systems training for personnel.
• In the ERP context, people refer to users (both key-users and end users).
Process theory to ERP implementation by Markus et al.

• The process theory breaks down the ERP implementation into clearly defined phases.
• These phases allow an organization to focus on the sequence of activities that are
associated with the successful implementation of ERP systems.
• According to Markus et al. there are various phases an ERP project progresses through.
• The initial phase is a chartering phase that addresses the decision-making issues such as the need
to purchase system and requirements analysis that lead to financial approval of an ERP project.
• The next phase is a project phase, where system configuration, customization, data capture and
conversion and rollout is conducted and finally the shakedown phase.
• The shakedown phase is a period in which the system begins to operate and users interact with it
in their day to day operations.
• Furthermore, Markus et al. tends to relate these implementation phases with key activities
and players to highlight the degree of coordination required for the successful
implementation of an ERP system
Different strategies for implementing ERP
• These strategies can be classified into organizational, technical, and
people strategies.
• Organizational strategies focus mainly on change management techniques,
project management, organizational structure and resources and how these
would lead to successful ERP implementation.
• Technical strategies address infrastructural issues like ERP installation, ERP
complexity, adequacy of inhouse technical expertise, and time and cost of
implementation have been proposed as determinants of successful ERP
implementation.
• Staff and management attitudes, user participation and involvement and their
training are some of the people strategies that can be used in facilitating a
successful implementation of an ERP system.
ERP systems success models by Gable et al. and Ifinedo

• It is a model for measuring the success of an enterprise system.

• In their model, Gable et al. identified system quality, information quality,
satisfaction, individual impact and organizational impact as dimensions or
variables for measuring success of enterprise systems.
• The individual impact presents an attempt of recognizing the importance of users
in the success of enterprise systems.
• Ifinedo studied the work of Gable et al. and extended it by adding the Workgroup
Impact dimension on to the model.
• This dimension is concerned with the impact of the system on the individual.
• These models attempt to place the users in the picture of ERP systems
implementation success.
• The models, through Individual Impact and Workgroup Impact dimensions,
indicate the importance of taking into consideration the users of the ERP system.
How and why user participation is important in ERP implementation?

• Users participate in order to improve the functionality of the modules.

• Participation helps users to provide better information on requirements, overcome
resistance and validate design options.
• Participation is also seen as a way of improving understanding between users and system
builders hence enabling users have their input in the changes to their work environment.
• Implementing an ERP system brings in changes to the way people work within the
organization.
• Most organizations implement ERP systems that have been purchased from software
vendors.
• These kind of ERP systems require customization during adoption.
• Processes will change and there may be job cuts and rationalization of responsibilities
within departments due to the customization.
• All these will definitely evoke resistance from the employees and this has to be managed
effectively before, during and after the implementation of the ERP package.
With respect to user (user involvement) ERP systems implementation differ from in-
house or custom development systems in a number of ways.
• One of the ways stems from the fact that ERP systems are considered to be built on best
business practices and thus the user may be required to make changes to business
processes and procedures in order to fully utilize the system.
• The ERP system may need to be customized to match the business process that the user
is familiar with.
• After the successful implementation the user usually becomes dependent on the ERP
vendor for assistance and updates.
• The successful implementation or adoption of technology by an organization must take
into account the human and management issues.
• Users of these technologies, such as information systems/technology, are at the central
of these implementations and adoption.
• It is therefore important to allow these users to participate in the implementation
process.
• User participation has traditionally been recognized as a critical component in
Information System/Technology implementation.