Factors Which Influence the Success of ERP Implementation

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Enterprise resource planning (ERP) system has evolved over the period of last two decades. By ERP, I meant a system with user base of at least 200+ with more than a million dollars in investments.

Approach to implementation can be performed in phased manner.

Phase 1:

ERP implementation has its own challenges from the stage of conceptualization to actual usage and beyond. I thought of sharing my views as what can primarily contribute to success of ERP implementations.

These factors provided below are more from project management perspective, particularly on the software implementation part.

Management support and confidence: This is the first and foremost factor which determines the success of ERP project. Any entity or business has to put effort and time in analyzing the need for an ERP system, before a decision to go for an ERP system. An entity, which is capable of investing more than a million dollars, would definitely have some kind of legacy system. They would be performing the ERP function to an extent through legacy, hence it’s important as a first step to perform the following.

1. Cost Vs Benefit Analysis.

2. Return on investment.

When cost of implementation is considered, apart from license and consulting cost, it is important to consider the maintenance cost for post implementation and this, also varies upon on size of implementation.

Both needs to be worked out and I would suggest only if management is happy with above estimates & expectation there is need for a new ERP system.

Choosing an ERP product: Once, decision is taken in favor of ERP implementation, then the next step would be to find out the suitable ERP product which would suit the business. Few factors, I believe that is essential towards choosing of ERP products are:

Product suitability to its business, support the seller provides, future upgrades & scalability, cost & availability of consultants to provide support in future needs to be considered apart from pricing before choosing product.

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Implementation Approach: ERP’s can be tailored to suit a business needs, this is commonly referred as ‘customization’. Customization can plug the gap from business solution perspective. However, it is always better to avoid customization or at most keep customization to a minimum considering the following factors.

• Additional cost involved in development and testing.

• Maintenance cost even after deployment in production.

• Any business process change might impact customization and this would require enhancement of the customization and thereby cost.

• When upgrade happens in future, the customization has to be upgraded as well which would incur cost.

On all the above factors, management needs to play important role towards success of the implementation and they can be considered as preliminary phase or phase 1 of the ERP project implementation.

Phase 2:

‘One Team’: Once it’s decided to go in for ERP, the next step is to have a steering committee, which will play an important role to tracking the project towards successful implementation of ERP system and proactively address risks. Ideally, the steering committee should have proper representation from management, different vendors associated with project. An ERP project can have different vendors like:

• Hardware

• Servers

• Operating systems

• Networks

• Software

• Licensing

• Consulting or IT service for implementation, training & support

It would be a good option to have a project management office (PMO), which would look into day-to-day coordination reporting into the steering committee. Each of these tasks performed by vendors has dependency on start on the other vendor. Hence, PMO office should be proper control on all task executed by Vendors.

Schedule, Budget, Scope: From this stage of the project, Project management plays important role in success of the project. Budgeting would have been preliminarily done at the “Phase 1” of the project, but these would be more of ball park number (Variation of 20 to 25%). At this stage, more accurate estimate needs to be worked out.

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ERP implementation has other stream as well, which has dependency in successful implementation of the project. Project management tools/ software can be used to track some of the key project related parameters.

Project deliverables, sign off & change requests:

The project as such can have broken down into different phase with a work break down structure (WBS) with deliverables defined for each milestone or phase, the sign off and change request procedure agreed with all stakeholders. This should be brought about by the PMO team and agreed with ‘Steering Committee’

Till about phase 2, it’s more of setting up the ground rules towards successful execution of the project. All these might take considerable amount of time.

Phase 3:

Business Process Engineering or Re-engineering: An ERP system has to be configured to work as per expectation. The business processes have to be mapped to ERP product and set up have to be configured.

The process of requirement gathering towards set up requires coordinated effort between functional consultant and the business process area owners through workshops. An iterative approach needs to be followed, meaning the system has to be set up 2 to 3 times to map the requirement and refined if needed, before actually performing the set up in production system. Such iterative approaches of mapping business to systems are referred as ‘Conference room pilots’ (CRP).

Data migration from legacy system and their strategy, Interfaces to feeder system needs to defined and agreed up and tested.

Training: At times, training to end-user is overlooked. Inadequate training is the one of the cause for bottleneck in successful implementation. If there is in adequate training, one can find more than 60 to 80% of issue post Go-Live being clarification related, hence adequate importance needs to be worked towards training. If possible it’s better to work out a strategy for measuring the training effectiveness. There are some thoughts that training can be done towards production move. But, it’s better training is provided from the stage of defining business process, so that even if there is a change in business process user can appreciate the changes.

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Support team & cut over planning. It equally critical, plan is also worked out for the support team to be in place post go-live. Normally Implementation team would be handing over to the support team. The support team is either in-house or out sourced.

Cut over planning means the activities that would be carried out by the time users stops entering into the legacy system and the time by which user starts using new ERP system. Effort also need to put towards cut over planning particularly, the activities as how reconciliation of legacy and new ERP system would be performed post Go-Live and as what are the activities, which would be performed during the cut over period with assigned owner to each task.

Go-Live and beyond: Beyond go – live, there is a certain period, which is required towards stabilization of the system. It’s also easier said than done. Though these can be guidelines for a general scenario, each of the ERP project are unique has its own challenges and situation changes based on various factors, this is where project managers and PMO can play a vital role in steering the project to safety and thereby achieve the end objective of a successful implementation.

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