Factors Influencing the Success of ERP Implementation
The enterprise resource planning (ERP) system has evolved over the period of the last two decades. By ERP, I mean a system with a user base of at least 200+ with over a million dollars in investments.
The implementation approach can be done in a phased manner.
Phrase 1:
ERP implementation has its own challenges from the conceptualization stage to actual use and beyond. Thought I’d share my views on what can primarily contribute to the success of ERP implementations.
These factors given below are more from the project management perspective, particularly in the software implementation part.
Management support and trust – This is the first and most important factor that determines the success of the ERP project. Any entity or business has to put effort and time into analyzing the need for an ERP system, before making the decision to opt for an ERP system. An entity, that is capable of investing more than a million dollars, would definitely have some kind of legacy system. They would be doing the ERP function to some degree through legacy, so it’s important as a first step to do the following.
1. Cost vs. Benefit Analysis.
2. Return on investment.
When considering the cost of implementation, in addition to the license and consulting cost, it is important to consider the cost of maintenance for the subsequent implementation and this also varies depending on the size of the implementation.
Both need to be resolved and I would suggest that only if management is satisfied with previous estimates and expectations is a new ERP system necessary.
Choosing an ERP Product – Once the decision is made in favor of ERP implementation, the next step would be to find the right ERP product that suits the company. Some factors that I believe are essential in choosing ERP products are:
The suitability of the product for your business, vendor support, future upgrades and scalability, cost, and availability of consultants to provide future support should all be considered in addition to price before choosing the product.
Implementation Approach – ERPs can be tailored to meet business needs, this is commonly known as “customization”. Personalization can bridge the gap from a business solution perspective. However, it is always best to avoid customization or at best keep customization to a minimum by considering the following factors.
• Additional cost related to development and testing.
• Maintenance cost even after implementation in production.
• Any change in the business process could affect personalization and this would require an improvement in personalization and therefore cost.
• When an update is made in the future, the personalization must also be updated, which would incur a cost.
In all of the above factors, management should play an important role for the success of the implementation and can be considered as the preliminary phase or phase 1 of the ERP project implementation.
Stage 2:
‘One Team’ – Once it is decided to go ERP, the next step is to have a steering committee, which will play an important role in tracking the project towards successful implementation of the ERP system and will proactively address risks. Ideally, the steering committee should have adequate representation from management, different vendors associated with the project. An ERP project can have different providers such as:
• Hardware store
• Servers
• Operating systems
• Networks
• Software
• License
• Consulting or IT service for implementation, training and support
It would be a good option to have a project management office (PMO), which would be in charge of reporting day-to-day coordination to the steering committee. Each of these tasks performed by the providers depends on the start of the other provider. Therefore, the PMO office must have proper control of all the tasks executed by the vendors.
Schedule, budget, scope: From this stage of the project, project management plays an important role in the success of the project. The budget would have been made in a preliminary way in the “Phase 1” of the project, but these would be more than the number of stadiums (Variation of 20 to 25%). At this stage, it is necessary to develop a more precise estimate.
ERP implementation also has another stream, which depends on the successful implementation of the project. Project management tools/software can be used to keep track of some of the key parameters related to the project.
Project deliverables, signatures and change requests:
The project as such may have been divided into different phases with a Work Breakdown Structure (WBS) with defined deliverables for each milestone or phase, approval and change request procedure agreed with all stakeholders. This must be done by the PMO team and agreed with the ‘Steering Committee’
Until about phase 2, it’s more about establishing the ground rules for successful project execution. All of this can take a considerable amount of time.
Phase 3:
Engineering or re-engineering of business processes: An ERP system must be configured to work according to expectations. Business processes must be assigned to the ERP product and configured.
The process of gathering requirements for the installation requires a coordinated effort between the functional consultant and the owners of the business process area through workshops. An iterative approach should be followed, which means the system should be configured 2-3 times to map the requirement and refine if necessary, before configuration is done on the production system. These iterative approaches to mapping businesses to systems are called “conference room pilots” (CRPs).
Data migration from the legacy system and its strategy, the interfaces to the feeder system must be defined, agreed and tested.
Training: Sometimes end user training is overlooked. Inadequate training is one cause of the bottleneck in successful implementation. If there is adequate training, it can be found that more than 60 to 80% of post-commissioning problems are related to clarification, therefore proper importance should be worked towards training. If possible, it is better to develop a strategy to measure the effectiveness of the training. There are some ideas that training can be done to advance production. But it is better that training is provided from the business process definition stage, so that even if there is a change in the business process, the user can appreciate the changes.
Team support and transition planning. It is equally critical that a plan is also made for the support team to be ready after go-live. Typically, the implementation team would take care of the support team. The support team is internal or external.
Cross-planning means the activities that would take place between the time the users stop logging into the legacy system and the time the user starts using the new ERP system. Effort should also be made for transition planning, in particular, activities on how the reconciliation of the legacy and new ERP system would be done after go-live and what activities would be done during the transition period with the owner assigned to each. task.
Go-Live and beyond: Beyond Go-Live, there is a certain period that is required for system stabilization. It’s also easier said than done. While these may be guidelines for a general scenario, each ERP project is unique, has its own challenges and situation changes based on various factors, this is where project managers and the PMO can play a vital role in the steer the project towards security and thus achieve the ultimate goal of a successful implementation.
