ERP IMPLEMENTATION PROJECT MANAGEMENT. RESULTS OF ERP IMPLEMENTATION

ERP IMPLEMENTATION ERP IMPLEMENTATION PROJECT PROJECT

MANAGEMENTMANAGEMENT

RESULTS OF ERP RESULTS OF ERP IMPLEMENTATIONIMPLEMENTATION

RESULTS OF ERP IMPLEMENTATIONRESULTS OF ERP IMPLEMENTATION

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EXISTENCE OF LEGACY SYSTEMSEXISTENCE OF LEGACY SYSTEMS

For those firms that want to implement ERP systems, the typical For those firms that want to implement ERP systems, the typical case is that a variety of stand-alone applications are in use, which case is that a variety of stand-alone applications are in use, which have various interface design, use different databases and data have various interface design, use different databases and data standards, and provide little, if any, interoperability and integration. standards, and provide little, if any, interoperability and integration. Thus for the purpose of investigating ERP implementation risks, it Thus for the purpose of investigating ERP implementation risks, it is assumed that there exists a legacy system in the firm, typically is assumed that there exists a legacy system in the firm, typically a combination of stand-alone applications which do not integrate a combination of stand-alone applications which do not integrate with each other and do not interface effectively. In addition to with each other and do not interface effectively. In addition to outdated information technology, legacy system also encapsulates outdated information technology, legacy system also encapsulates the existing business processes, organizational structure, and the existing business processes, organizational structure, and cultureculture.

ERP INVESTMENTSERP INVESTMENTSAccording to capital budgeting theory, adopting ERP systems is a According to capital budgeting theory, adopting ERP systems is a capital project since the cash flows to the firm will be received capital project since the cash flows to the firm will be received over a period longer than a year. Capital budgeting projects can over a period longer than a year. Capital budgeting projects can be divided into several categories:be divided into several categories:

Replacement projects to maintain the businessReplacement projects to maintain the business Replacement projects for cost reductionReplacement projects for cost reduction Expansion projectsExpansion projects New product or market developmentNew product or market development Mandatory projectsMandatory projects other projects, such as research & development projects. other projects, such as research & development projects.

In this sense, In this sense, investment in ERPinvestment in ERP systems can be treated as a systems can be treated as a replacement project for business continuance or cost reduction or replacement project for business continuance or cost reduction or an expansion project that is taken to grow the business.an expansion project that is taken to grow the business.

THE TOTAL COST OF THE TOTAL COST OF OWNERSHIP OF AN ERPOWNERSHIP OF AN ERP

Implementing an ERP entails direct and indirect costs throughout Implementing an ERP entails direct and indirect costs throughout the life cycle stages of the system. The total cost of ownership of the life cycle stages of the system. The total cost of ownership of an ERP consists ofan ERP consists of:: software and hardware acquisition costssoftware and hardware acquisition costs implementation costs associated with the deployment and roll-implementation costs associated with the deployment and roll-

out of the systemout of the system operation costs pertaining to the maintenance of the system operation costs pertaining to the maintenance of the system

once it has been deployedonce it has been deployed ongoing change and growth costs regarding the upgrade of ongoing change and growth costs regarding the upgrade of

the system and addition of new functionalities.the system and addition of new functionalities.


It also includes associated or hidden costs, such as:It also includes associated or hidden costs, such as: data cleansingdata cleansing documentation updatedocumentation update migration, validation and reconciliation of datamigration, validation and reconciliation of data interfaces development between legacy information systems interfaces development between legacy information systems

and the ERPand the ERP user testinguser testing deployment managementdeployment management ongoing training costsongoing training costs a loss of staff productivity following the implementation of the a loss of staff productivity following the implementation of the

system, which are mainly borne by ERP business owners.system, which are mainly borne by ERP business owners.


For example, For example, the cost of ERP implementations in the United the cost of ERP implementations in the United Nations systemNations system amounted to at least US$712 million. amounted to at least US$712 million.

This figure does not include annual recurring maintenance costs, This figure does not include annual recurring maintenance costs, which amount to at least US$66 million per year.which amount to at least US$66 million per year.

It also excludes associated costs, which tend to be omitted from It also excludes associated costs, which tend to be omitted from ERP budgets, leading to a lack of transparency of the actual ERP budgets, leading to a lack of transparency of the actual implementation costs and preventing the governing bodies of the implementation costs and preventing the governing bodies of the projects from taking timely and informed decisions to mitigate projects from taking timely and informed decisions to mitigate risks, including the risk of a lack of funding.risks, including the risk of a lack of funding.

Source: Review of enterprise resource planning (ERP) systems In United Nations Source: Review of enterprise resource planning (ERP) systems In United Nations organizations. organizations. JIU/REP/2012/8JIU/REP/2012/8

THE ERP LIFE CYCLE MODELTHE ERP LIFE CYCLE MODEL1.1. SSelection phaseelection phase. . TThe standard activities and those unique to he standard activities and those unique to

the organization are reviewed in order to determine the project the organization are reviewed in order to determine the project boundaries; system’s vendor and external consultants are boundaries; system’s vendor and external consultants are selected.selected.

2.2. DDefinition phaseefinition phase. . TThe system components that will be included he system components that will be included in the implementation are defined and the implementation plan in the implementation are defined and the implementation plan is prepared.is prepared.

Source: N. Ahituv, S. Neumann, M. Zviran. Source: N. Ahituv, S. Neumann, M. Zviran. A System Development A System Development Methodology for ERP Systems. Journal of Computer Information Systems, Methodology for ERP Systems. Journal of Computer Information Systems, Spring 2002, pp. 56-67.Spring 2002, pp. 56-67.

THE ERP LIFE CYCLE MODELTHE ERP LIFE CYCLE MODEL3.3. IImplementation phasemplementation phase.. TThe core of the life cycle model.he core of the life cycle model.

During this phase, the organizational processes are redesigned During this phase, the organizational processes are redesigned to work with the ERP system, the system is implemented, user to work with the ERP system, the system is implemented, user training and acceptance testing is performed. At the end of this training and acceptance testing is performed. At the end of this phase, either changes to the system are performed or the phase, either changes to the system are performed or the project progresses to the operation phase. project progresses to the operation phase. ThisThis phase is phase is iterative – the number of component/process implementations iterative – the number of component/process implementations is defined in the definition phase. Each iteration begins at the is defined in the definition phase. Each iteration begins at the conclusion of the acceptance tests of the previous iteration.conclusion of the acceptance tests of the previous iteration.

4.4. OOperation phaseperation phase. the ERP system is in operation, is maintained . the ERP system is in operation, is maintained and is upgraded, if needed.and is upgraded, if needed.

THE SELECTION PHASETHE SELECTION PHASEThe objective of this phase is to identify the ERP package most The objective of this phase is to identify the ERP package most appropriate for the organization and the technological appropriate for the organization and the technological infrastructure needed for it.infrastructure needed for it.

When the decision is When the decision is toto implement components from several ERP implement components from several ERP packages, the objective is to identify the optimal components.packages, the objective is to identify the optimal components.

If additional external human resources are needed, the selection If additional external human resources are needed, the selection of the consulting (or outsourcer) firm is also part of this phase.of the consulting (or outsourcer) firm is also part of this phase.

THE SELECTION PHASETHE SELECTION PHASEThe phase is comprised of nine activities:The phase is comprised of nine activities:

1.1. Definition of project objectivesDefinition of project objectives – analysis of the reasons for an – analysis of the reasons for an ERP system, identification of gaps and weaknesses in the ERP system, identification of gaps and weaknesses in the current information systems and definition of objectives for the current information systems and definition of objectives for the new system. Within this definition, the project boundaries are new system. Within this definition, the project boundaries are defined and a decision is made whether to use consultants defined and a decision is made whether to use consultants and at what project steps. The objectives are defined by an and at what project steps. The objectives are defined by an ERP project steering committee that is appointed for this ERP project steering committee that is appointed for this project.project.

THE SELECTION PHASETHE SELECTION PHASE2.2. Collection of information about systems and vendorsCollection of information about systems and vendors.. Additional Additional

information is collected from colleagues, IT industry information information is collected from colleagues, IT industry information firms, professional fairs and conferences, professional literature firms, professional fairs and conferences, professional literature and the like. At the end of this step, the information is and the like. At the end of this step, the information is presented to the steering committee. ERP systems that do not presented to the steering committee. ERP systems that do not meet the objectives defined in the previous step are ruled out.meet the objectives defined in the previous step are ruled out.

3.3. Collection of information about consulting firmsCollection of information about consulting firms. T. This step is his step is taken if the steering committee has decided to use consultants. taken if the steering committee has decided to use consultants. A A Request for Information (Request for Information (RFIRFI)) is sent to prospective firms is sent to prospective firms(or individuals), additional information can be collected from (or individuals), additional information can be collected from colleagues, ERP system vendors, and colleagues, ERP system vendors, and ITIT industry information industry information firms. At the end of this step, the steering committee decides firms. At the end of this step, the steering committee decides whether to continue with the project; if so, about three to five whether to continue with the project; if so, about three to five vendors and consultants are selected for more profound vendors and consultants are selected for more profound investigation in later steps.investigation in later steps.

THE SELECTION PHASETHE SELECTION PHASE4.4. AAnalysis of organizational needsnalysis of organizational needs. All processes, computerized . All processes, computerized

or manual, are analyzed, including the feasibility and need for or manual, are analyzed, including the feasibility and need for new processes. The analysis is done by joint teams of IS new processes. The analysis is done by joint teams of IS professionals and key users. At the end of this step, if approved professionals and key users. At the end of this step, if approved by the steering committee and corporate management, an by the steering committee and corporate management, an Request For Proposal (Request For Proposal (RFPRFP)) booklet is produced. Ihe booklet is booklet is produced. Ihe booklet is sent to the vendors and the consultants.sent to the vendors and the consultants.

5.5. Investigation of vendor alternativesInvestigation of vendor alternatives.. AAfter receiving responses fter receiving responses to the RFP, meetings are held with vendors. Vendors can to the RFP, meetings are held with vendors. Vendors can present applications and the advice of vendors’ existing present applications and the advice of vendors’ existing customers can be solicited. At the end of this step, information customers can be solicited. At the end of this step, information about the vendors is kept for final analysis during the feasibility about the vendors is kept for final analysis during the feasibility study step (Step 8).study step (Step 8).

THE SELECTION PHASETHE SELECTION PHASE6.6. Investigation of consultant alternativesInvestigation of consultant alternatives.. IIn parallel to the n parallel to the

previous step, responses to the RFP are evaluated and previous step, responses to the RFP are evaluated and meetings are held. The information is then presented to the meetings are held. The information is then presented to the steering committee.steering committee.

7.7. Collection of information on the technological infrastructureCollection of information on the technological infrastructure..TThis activity is performed by the IS department, after receiving his activity is performed by the IS department, after receiving the vendors’ responses to the RFP. An RFI is sent to hardware the vendors’ responses to the RFP. An RFI is sent to hardware and telecommunications vendors, soliciting possible and telecommunications vendors, soliciting possible technological solutions compatible with the ERP vendors’ technological solutions compatible with the ERP vendors’ responses to the RFP sent to them. At the end of this step, the responses to the RFP sent to them. At the end of this step, the information is kept tor future analysis during the feasibility step.information is kept tor future analysis during the feasibility step.

THE SELECTION PHASETHE SELECTION PHASE8.8. Feasibility studyFeasibility study.. AAfter collecting all the information about ERP fter collecting all the information about ERP

and technology vendors and consultants, IS professionals and and technology vendors and consultants, IS professionals and key users perform a feasibility analysis of the various key users perform a feasibility analysis of the various alternatives. The analysis focuses on three aspects – alternatives. The analysis focuses on three aspects – technological, economical and organizational feasibility.technological, economical and organizational feasibility.At the conclusion of this step, a feasibility report is submitted to At the conclusion of this step, a feasibility report is submitted to the steering committee and senior management for approval. the steering committee and senior management for approval. TThe report includes recommended alternatives and the he report includes recommended alternatives and the rationale for continuing the project, reevaluating it, or killing it.rationale for continuing the project, reevaluating it, or killing it.If the decision is to continue, the ERP system, the technological If the decision is to continue, the ERP system, the technological infrastructure and the consulting firm are selected.infrastructure and the consulting firm are selected.

THE SELECTION PHASETHE SELECTION PHASE9.9. Contract negotiation and signingContract negotiation and signing.. CContracts are negotiated and ontracts are negotiated and

signed with all of the external entities – the ERP system signed with all of the external entities – the ERP system vendor, the infrastructure vendor and the consulting firm. The vendor, the infrastructure vendor and the consulting firm. The development and then the management of the contracts is a development and then the management of the contracts is a prerequisite for the project success. When components from prerequisite for the project success. When components from several vendors are implemented, the contracts have to refer to several vendors are implemented, the contracts have to refer to the integration among the components in order to eliminate the integration among the components in order to eliminate potential future frictions between the vendors and the potential future frictions between the vendors and the organization. The negotiation should also cover the pricing organization. The negotiation should also cover the pricing schemes (including penalties and bonuses).schemes (including penalties and bonuses).

THE THE DEFINIDEFINITION PHASETION PHASEThis phase is the shortest of the four ERP life cycle phases. It This phase is the shortest of the four ERP life cycle phases. It includes all the preparatory activities for the implementation phase includes all the preparatory activities for the implementation phase that follows. The phase is comprised of steps:that follows. The phase is comprised of steps:

1.1. Definition of project scopeDefinition of project scope.. PProject scope (boundaries) is roject scope (boundaries) is determined on the basis of the system selected in the determined on the basis of the system selected in the previous phase. This activity is performed by personnel from previous phase. This activity is performed by personnel from the IS department and user representatives in cooperation the IS department and user representatives in cooperation with the vendor and the consultants. The joint team with the vendor and the consultants. The joint team determines the implementation method and the order in which determines the implementation method and the order in which components and ERP modules will be implemented. The components and ERP modules will be implemented. The recommendations are approved by the steering committeerecommendations are approved by the steering committee..

THE THE DEFINIDEFINITION PHASETION PHASE2.2. Establishing implementation teams and timetablesEstablishing implementation teams and timetables.. TThe teams he teams

include personnel from the ERP vendor, from the consulting include personnel from the ERP vendor, from the consulting firm and from the organization. The division of responsibilities firm and from the organization. The division of responsibilities among the three depends on each one’s experience in ERP among the three depends on each one’s experience in ERP implementation, in implementing IS applications in general and implementation, in implementing IS applications in general and in managing an organizational change.in managing an organizational change.The teams are established by the ERP project leader together The teams are established by the ERP project leader together with the steering committee. In addition to the ERP with the steering committee. In addition to the ERP implementation teams, a technical team (comprised of similar implementation teams, a technical team (comprised of similar personnel) is established to implement the technological personnel) is established to implement the technological infrastructure. The project leader, together with the team infrastructure. The project leader, together with the team leaders, then determines the timetables for the implementation leaders, then determines the timetables for the implementation activities and the system rollout.activities and the system rollout.

THE THE DEFINIDEFINITION PHASETION PHASE3.3. Training of the implementation teamsTraining of the implementation teams.. TThe objective is to train he objective is to train

key users and management representatives, who are members key users and management representatives, who are members of the implementation teams, in the use of the selected system. of the implementation teams, in the use of the selected system. This will enable them, in the next step, to compare the current This will enable them, in the next step, to compare the current work processes with those offered by the ERP system. The work processes with those offered by the ERP system. The training is facilitated by the system vendor.training is facilitated by the system vendor.

4.4. Initial implementation of the systemInitial implementation of the system.. IIn parallel to the training n parallel to the training step above, system components are implemented in key users’ step above, system components are implemented in key users’ sites. This implementation facilitates the construction of sites. This implementation facilitates the construction of prototypes by the implementation teams and, hence, does not prototypes by the implementation teams and, hence, does not have to involve all the users. The implementation enables the have to involve all the users. The implementation enables the users in the implementation teams to exercise the subjects users in the implementation teams to exercise the subjects covered in the training and to get acquainted with the covered in the training and to get acquainted with the technological infrastructure.technological infrastructure.

THE THE IMPLEMENTAIMPLEMENTATION PHASETION PHASEThis is the main phase of the ERP life cycle. Its objective is to link This is the main phase of the ERP life cycle. Its objective is to link the ERP system to the organizational processes so that when the the ERP system to the organizational processes so that when the system moves to the operation phase, its contribution to the system moves to the operation phase, its contribution to the organization would be at the maximum.organization would be at the maximum.

The implementation phase is performed iteratively, according to The implementation phase is performed iteratively, according to one of the following methods:one of the following methods:

Adding processesAdding processes – in each successive round, one or more – in each successive round, one or more additional processes are implemented in all organizational additional processes are implemented in all organizational sites.sites.

Adding organizational layersAdding organizational layers – in each successive round, a – in each successive round, a new organizational entity is added to the computerized new organizational entity is added to the computerized processes. This method facilitates getting a clear picture of processes. This method facilitates getting a clear picture of system use in all activities at an early stage.system use in all activities at an early stage.

THE THE IMPLEMENTAIMPLEMENTATION PHASETION PHASEThese iterations, on one hand, reduce the project risk by an early These iterations, on one hand, reduce the project risk by an early detection of implementation problems. On the other hand, they detection of implementation problems. On the other hand, they enable improvement of the implementation, training of teams and enable improvement of the implementation, training of teams and a reevaluation of the next steps of the life cycle. An update of the a reevaluation of the next steps of the life cycle. An update of the system is rolled out to the users after each iteration and the system is rolled out to the users after each iteration and the implemented process enters the operation phase.implemented process enters the operation phase.

THE THE IMPLEMENTAIMPLEMENTATION PHASETION PHASEThe implementation phase comprises nine steps:The implementation phase comprises nine steps:

1.1. Gap analysisGap analysis.. TThe objective is to identify gaps between the he objective is to identify gaps between the definition of processes in the ERP system and their definition definition of processes in the ERP system and their definition in the organization. The processes described in the RFP are in the organization. The processes described in the RFP are investigated as to whether they can be implemented as investigated as to whether they can be implemented as described, whether complementary solutions are needed, or described, whether complementary solutions are needed, or whether changes in the system or in the processes are whether changes in the system or in the processes are necessary. The recommendations can be to change necessary. The recommendations can be to change organizational processes, to add complementary processes, organizational processes, to add complementary processes, or to expand the ERP system. At the end of the step, a gap or to expand the ERP system. At the end of the step, a gap analysis report is prepared. analysis report is prepared. TThe report describes the he report describes the processes where gaps have been detected and processes where gaps have been detected and recommendations of how to handle the gaps. The report is recommendations of how to handle the gaps. The report is presented to the steering committee for consideration and presented to the steering committee for consideration and approval.approval.

THE THE IMPLEMENTAIMPLEMENTATION PHASETION PHASE2.2. Business process reengineeringBusiness process reengineering ( (BPRBPR).). BPR has been defined BPR has been defined

as an analysis and design of work flows and processes within as an analysis and design of work flows and processes within and between organizations in order to achieve a drastic positive and between organizations in order to achieve a drastic positive change in performance. Performing BPR as part of an ERP change in performance. Performing BPR as part of an ERP project is recoproject is recommmended immediately following the gap analysis mended immediately following the gap analysis step. Sometimes BPR is performed in parallel with the gap step. Sometimes BPR is performed in parallel with the gap analysis or even before the implementation phase.analysis or even before the implementation phase.

THE THE IMPLEMENTAIMPLEMENTATION PHASETION PHASE3.3. Identification of complementary solutionsIdentification of complementary solutions.. IImplementation of mplementation of

solutions complementary to the ERP system is investigated solutions complementary to the ERP system is investigated together with the BPR step. For exampletogether with the BPR step. For example:: Development or acquisition of additional modules that are Development or acquisition of additional modules that are

integrated into the system.integrated into the system. Development or acquisition of complementary systems that Development or acquisition of complementary systems that

can interface to the ERP system.can interface to the ERP system. Additional manual work processes.Additional manual work processes.

The complementary solutions can be regarded as a subproject The complementary solutions can be regarded as a subproject to be implemented according to the project’s timetable.to be implemented according to the project’s timetable.The selection of solutions is approved by the steering The selection of solutions is approved by the steering committee and senior managementcommittee and senior management

THE THE IMPLEMENTAIMPLEMENTATION PHASETION PHASE4.4. Construction of a prototypeConstruction of a prototype.. TThe objective of the prototype is to he objective of the prototype is to

test the system design and the integration of the new test the system design and the integration of the new processes and the complementary systems. The prototype processes and the complementary systems. The prototype facilitates the testing of the new workflows and the constraining facilitates the testing of the new workflows and the constraining of users' expectations concerning the designed processes. It of users' expectations concerning the designed processes. It also reduces risks by reflecting the final model of operation in a also reduces risks by reflecting the final model of operation in a relatively early stage.relatively early stage.Like the ERP implementation phase and as typical to the Like the ERP implementation phase and as typical to the prototyping model the construction of the prototype is iterative, prototyping model the construction of the prototype is iterative, iinn order to save time, it is recommended to build the prototype order to save time, it is recommended to build the prototype in conjunction with the continuing design of new processes; as in conjunction with the continuing design of new processes; as such, it is a rolling and evolving prototype.such, it is a rolling and evolving prototype.At the end of building the prototype and after the processes At the end of building the prototype and after the processes designed are approved, the prototype becomes the full-blown designed are approved, the prototype becomes the full-blown system and is rolled out to all the users.system and is rolled out to all the users.

THE THE IMPLEMENTAIMPLEMENTATION PHASETION PHASE5.5. Data conversionData conversion.. PPerformed in parallel to the construction of erformed in parallel to the construction of

the prototype. The conversion of data from old applications can the prototype. The conversion of data from old applications can be done by manual data entry or by using conversion software.be done by manual data entry or by using conversion software.

6.6. Definition of work proceduresDefinition of work procedures.. TThe objective is to update he objective is to update organizational procedures. The new or updated procedures organizational procedures. The new or updated procedures include general procedures and those specific to working with include general procedures and those specific to working with the new ERP system. This activity is performed by key users. the new ERP system. This activity is performed by key users. At the end of the step, a new procedure manual is produced At the end of the step, a new procedure manual is produced and is approved by senior management.and is approved by senior management.

7.7. Full implementation of the systemFull implementation of the system.. AAfter the prototype is fter the prototype is approved and the data have been converted, the full version of approved and the data have been converted, the full version of the ERP system is implemented in the relevant organizational the ERP system is implemented in the relevant organizational units. This is usually done in parallel to the existing system, in units. This is usually done in parallel to the existing system, in order to minimize the disturbance to the ongoing operation.order to minimize the disturbance to the ongoing operation.

THE THE IMPLEMENTAIMPLEMENTATION PHASETION PHASE8.8. Training of usersTraining of users.. TTraining can be done by lectures or by self-raining can be done by lectures or by self-

study while working with the implementation teams. Since study while working with the implementation teams. Since training costs are quite high, it is recommended to prepare a training costs are quite high, it is recommended to prepare a training plan that will provide an overall framework and facilitate training plan that will provide an overall framework and facilitate control of the activity.control of the activity.

9.9. Acceptance testsAcceptance tests.. TThe objective is to test with real life data the he objective is to test with real life data the new ERP system and its linkage to other organizationalnew ERP system and its linkage to other organizational(non-ERP) systems. The tests include the testing of the (non-ERP) systems. The tests include the testing of the modules that were added to the system. The emphasis is on modules that were added to the system. The emphasis is on system capacity and throughput and interfaces with other system capacity and throughput and interfaces with other systems.systems.The tests must be conducted in a process orientation – process The tests must be conducted in a process orientation – process scenarios have to be prepared and tested with real-life data.scenarios have to be prepared and tested with real-life data.

THE THE OPERATIONSOPERATIONS PHASE PHASEThis phase is the longest phase of the ERP life cycle and can last This phase is the longest phase of the ERP life cycle and can last several years. Five steps are included in this phase.several years. Five steps are included in this phase.

1.1. Establishment of support centersEstablishment of support centers. T. These constitute a learning hese constitute a learning network network inin the organization, whose objective is to develop the organization, whose objective is to develop user training tools and to support ongoing operations.user training tools and to support ongoing operations.The need for a support center increases directly with the The need for a support center increases directly with the complexity of the system.complexity of the system.

2.2. Performance of changes and enhancementsPerformance of changes and enhancements.. TThese are hese are needed over time due to organizational dynamics, changes in needed over time due to organizational dynamics, changes in business strategy, technological and environmental changes business strategy, technological and environmental changes and the like. They can be handled by adding new processes and the like. They can be handled by adding new processes to the system or by expanding existing ones.to the system or by expanding existing ones.

THE THE OPERATIONSOPERATIONS PHASE PHASE3.3. Upgrading the systemUpgrading the system.. TThe objective in this step is to watch the he objective in this step is to watch the

software updates of the vendor and the technological changes software updates of the vendor and the technological changes and to upgrade the ERP modules by adding activities and and to upgrade the ERP modules by adding activities and functions facilitated by the updates.functions facilitated by the updates.

4.4. System auditSystem audit.. SSimilar to other life cycle models, the objective is imilar to other life cycle models, the objective is to verify whether the system meets users' needs. This audit is to verify whether the system meets users' needs. This audit is performed periodically.performed periodically.

5.5. System terminationSystem termination.. Due to the strategic importance of an ERP Due to the strategic importance of an ERP system and its close linkage to organizational processes, it system and its close linkage to organizational processes, it seems that replacing the system is much more complex and seems that replacing the system is much more complex and difficult than replacing conventional applications.difficult than replacing conventional applications.

IMPLEMENTATION STRATEGIESIMPLEMENTATION STRATEGIES ““Big bang” (Cutover approach)Big bang” (Cutover approach)

RapidRapid Requires many resourcesRequires many resources Small firms can employSmall firms can employ

““Mini big bang” (Partial vendor implementation)Mini big bang” (Partial vendor implementation) Module-by-module (Good for large projects)Module-by-module (Good for large projects) Phased by site (Location-based implementation)Phased by site (Location-based implementation)

CRITICAL SUCCESS FACTORSCRITICAL SUCCESS FACTORSFACTORFACTOR DESCRIPTIONDESCRIPTION

Vision Vision and and GoalsGoals

Goals should be clearly defined and well-understood. Goals should be clearly defined and well-understood. Attaining stated goals or benefits is important to Attaining stated goals or benefits is important to sustaining organizational commitment to ERP sustaining organizational commitment to ERP implementation.implementation.A good business vision is helpful because it reduces A good business vision is helpful because it reduces the effort of capturing the functionality of the ERP the effort of capturing the functionality of the ERP business model and therefore minimizes the business model and therefore minimizes the customization effort.customization effort.Visioning and planning requires articulating a business Visioning and planning requires articulating a business vision to the organization, identifying clear goals and vision to the organization, identifying clear goals and objectives, and providing a clear link between business objectives, and providing a clear link between business goals and IS strategy.goals and IS strategy.

Source: Michael F. Frimpon. A Project Approach to Enterprise Resource Planning Implementation. Source: Michael F. Frimpon. A Project Approach to Enterprise Resource Planning Implementation. International Journal of Business and Management. Vol. 7, No. 10; May 2012. pp. 116-133.International Journal of Business and Management. Vol. 7, No. 10; May 2012. pp. 116-133.


ERP ERP VersionVersion

The choice of the correct ERP version has to be The choice of the correct ERP version has to be decided upon. An older version may result in frequent decided upon. An older version may result in frequent updating.updating.


ERP ERP StrategyStrategy

This includes management decisions concerning how This includes management decisions concerning how the software package is to be implemented. There are the software package is to be implemented. There are different approaches to ERP implementation strategy different approaches to ERP implementation strategy ranging from ranging from ““phasedphased”” to to ““big-bangbig-bang”” implementations. implementations. While While ““phasedphased”” implementations provide usable implementations provide usable functionality incrementally, functionality incrementally, ““big-bangbig-bang”” ones offer full ones offer full functionality all at once at implementation end. functionality all at once at implementation end. AnoAnothetherr question of whether the implementation should question of whether the implementation should be centralized versus decentralized. Also there is the be centralized versus decentralized. Also there is the benefit of introducing a new system and completely benefit of introducing a new system and completely forgetting about the legacy system. This is called the forgetting about the legacy system. This is called the greenfield site, as opposed to a brownfield site.greenfield site, as opposed to a brownfield site.


Management Management SupportSupport

Management support is important for Management support is important for accomplishing project goals and objectives and accomplishing project goals and objectives and aligning these with strategic business goals. aligning these with strategic business goals. Sustained management commitment, both at top Sustained management commitment, both at top and middle levels during the implementation, in and middle levels during the implementation, in terms of their own involvement and the willingness terms of their own involvement and the willingness to allocate valuable organizational resources.to allocate valuable organizational resources.It has been empirically proven that strong and It has been empirically proven that strong and committed leadership at the top management level committed leadership at the top management level is essential to the success of an ERP is essential to the success of an ERP implementation.implementation.


Decision Decision DelegationDelegation

Project team members must be empowered to make Project team members must be empowered to make quick decisions to reduce delays in implementation quick decisions to reduce delays in implementation related with slow decision-making.related with slow decision-making.Organizations should attempt to make decisions as Organizations should attempt to make decisions as rapidly as possible, as even small delays can have an rapidly as possible, as even small delays can have an impact on such a long-term project.impact on such a long-term project.


Project Project ChampionChampion

This individual is considered to be central to This individual is considered to be central to successful implementations is that he has both the successful implementations is that he has both the position and the skills that are critical to handle position and the skills that are critical to handle organizational change.organizational change.The role of the project champion is very important for The role of the project champion is very important for marketing the project throughout the organization.marketing the project throughout the organization.The champion is really an ERP project advocate.The champion is really an ERP project advocate.The individual should possess strong leadership The individual should possess strong leadership skills, as well as business, technical and personal skills, as well as business, technical and personal managerial competencies.managerial competencies.


Hardware Hardware and and SoftwareSoftware

Management must make a careful choice of an ERP Management must make a careful choice of an ERP package that best matches the legacy systems, e.package that best matches the legacy systems, e. g. g. the hardware platform, databases and operating the hardware platform, databases and operating systems. The suitability of software and hardware systems. The suitability of software and hardware refers to the fit between the selected ERP system and refers to the fit between the selected ERP system and the hardware. Lack of data software quality and the hardware. Lack of data software quality and reliability and the hardware, software difficulties lead reliability and the hardware, software difficulties lead to ERP failure.to ERP failure.

Data Data AccuracyAccuracy

Data loaded from existing legacy systems must be of Data loaded from existing legacy systems must be of high quality. Data must be cleansed and transferred high quality. Data must be cleansed and transferred to the ERP system to ensure no disruption to to the ERP system to ensure no disruption to performance, high quality data is very important in the performance, high quality data is very important in the integrated environment of an ERP system.integrated environment of an ERP system.


ConfigurationConfiguration

Configuring the software and making it actually Configuring the software and making it actually useful to the business is an aspect of ERP useful to the business is an aspect of ERP implementation that no business manager is ever implementation that no business manager is ever willing to face. Serious attention should be given to willing to face. Serious attention should be given to the conference room pilot (CRP), which provides a the conference room pilot (CRP), which provides a demonstration of the ERP system that users can demonstration of the ERP system that users can test drive before the system configuration is locked test drive before the system configuration is locked down. The system should not be under configured. down. The system should not be under configured. It can become a nightmare to spend many months It can become a nightmare to spend many months designing and building a system, just to have it designing and building a system, just to have it perform slowly out of the gate.perform slowly out of the gate.


Performance Performance Monitoring Monitoring and and EvaluationEvaluation

Milestones and targets need to be actively Milestones and targets need to be actively monitored to track the progress of an ERP project. monitored to track the progress of an ERP project. TTwo criteria may be used:wo criteria may be used: project management-based criteria should be project management-based criteria should be

used to measure against completion dates, used to measure against completion dates, costs, and qualitycosts, and quality

operational criteria should be used to measure operational criteria should be used to measure against the production system.against the production system.

TThe measuring and evaluation of performance are he measuring and evaluation of performance are very critical factors in ensuring the success of any very critical factors in ensuring the success of any organization. Preventive maintenance is related organization. Preventive maintenance is related with the problem and risk areas that exist in every with the problem and risk areas that exist in every implementation. Trouble-shooting mechanisms implementation. Trouble-shooting mechanisms should be included in the implementation plan.should be included in the implementation plan.


Testing and Testing and TroubleshootingTroubleshooting

Troubleshooting errors is criticalTroubleshooting errors is critical.. Rigorous and Rigorous and sophisticated software testing eases sophisticated software testing eases implementation. Development and testing implementation. Development and testing perspectives unique to ERP projects must be perspectives unique to ERP projects must be well-thought-out and managed.well-thought-out and managed.


CustomizationCustomization

Even the most robust out-of-the-box ERP Even the most robust out-of-the-box ERP functionality might need to be customized to fit functionality might need to be customized to fit the business. The possibilities of such the business. The possibilities of such customizations should be addressed upfront customizations should be addressed upfront versus during mid-deployment, in order to have versus during mid-deployment, in order to have better control over the costs.better control over the costs.The management of the tradeoffs between The management of the tradeoffs between customization and standardization is a key to a customization and standardization is a key to a successful implementation.successful implementation.


Consultant Consultant SupportSupport

EExternal consultants cannot be replaced and play xternal consultants cannot be replaced and play an essential role in the implementation process. an essential role in the implementation process. Considering the particularities of the Considering the particularities of the companycompany staff staff an advantage could be obtained by the quick and an advantage could be obtained by the quick and substantial transfer of knowledge from consultants substantial transfer of knowledge from consultants to qualified to qualified companycompany staff, creating the possibility staff, creating the possibility for them to participate to the tasks of external for them to participate to the tasks of external consultants or even to take them over. In fact, it is consultants or even to take them over. In fact, it is imperative to arrange for knowledge transfer from imperative to arrange for knowledge transfer from the consultant to the company so as to decrease the consultant to the company so as to decrease the dependency on the vendor/consultant.the dependency on the vendor/consultant.


Vendor Vendor SupportSupport

An An ERP represent the best-practice processes that ERP represent the best-practice processes that can be can be different from organizational business different from organizational business process, thus, it’s important to get the vendor's process, thus, it’s important to get the vendor's support. Software vendors should be carefully support. Software vendors should be carefully selected since they play a crucial part in shaping selected since they play a crucial part in shaping the ultimate outcome of the implementation.the ultimate outcome of the implementation.


Standardization / Standardization / Vanilla ERPVanilla ERP (which is used (which is used without without customization or customization or updates)updates)

Organizations should be willing to change their Organizations should be willing to change their businesses to fit the software in order to businesses to fit the software in order to minimize the degree of customizations needed. minimize the degree of customizations needed. Wherever and as far as possible, the ERP-Wherever and as far as possible, the ERP-hosting organization should try to adopt the hosting organization should try to adopt the processes and options built into the ERP, processes and options built into the ERP, rather than seek to modify the ERP to fit the rather than seek to modify the ERP to fit the particular business practices. The concept of particular business practices. The concept of vanilla ERP means that organizations should vanilla ERP means that organizations should be committed to the idea of implementing the be committed to the idea of implementing the unadulterated or basic version with no or unadulterated or basic version with no or minimal customization. That is the ultimate in minimal customization. That is the ultimate in standardization.standardization.


User User InvolvementInvolvement

User involvement and participation will result in a User involvement and participation will result in a better fit of user requirements achieving better better fit of user requirements achieving better system quality, use and acceptance. Statistical system quality, use and acceptance. Statistical results show that lack of end user involvement can results show that lack of end user involvement can cause the ERP process to have difficultiescause the ERP process to have difficulties..User participation refers to the behaviors and User participation refers to the behaviors and activities that users perform in the system activities that users perform in the system implementation process.implementation process.User involvement refers to a psychological state of User involvement refers to a psychological state of the individual, and is defined as the importance and the individual, and is defined as the importance and personal relevance of a system to a user.personal relevance of a system to a user.User involvement and participation will result in a User involvement and participation will result in a better fit of user requirements achieving better better fit of user requirements achieving better system quality, use and acceptance.system quality, use and acceptance.


Organizational Organizational CultureCulture

Culture has a substantial and definite influence on Culture has a substantial and definite influence on organizations, organizational behavior, and the organizations, organizational behavior, and the management of organizations. Many difficulties have management of organizations. Many difficulties have been faced when implementing and using western been faced when implementing and using western technologies, management processes, information technologies, management processes, information systems methods, and information systems systems methods, and information systems techniques in developing countries.techniques in developing countries.Enterprise-wide culture and structure change should Enterprise-wide culture and structure change should be managed, which includes people, organization, be managed, which includes people, organization, and culture change. A culture with shared values and and culture change. A culture with shared values and a strong corporate identity that is conducive to a strong corporate identity that is conducive to change is critical. In the local context, the mentality change is critical. In the local context, the mentality change from using reams of paper to electronic change from using reams of paper to electronic media should be encouraged, and ERP facilitates media should be encouraged, and ERP facilitates that.that.


Education and Education and TrainingTraining

The most measured subset of costs is the initial The most measured subset of costs is the initial software development efforts while the most software development efforts while the most uncertain (and often the largest) cost is long-term uncertain (and often the largest) cost is long-term maintenance and training.maintenance and training.Users can only gain an appreciation of the utility Users can only gain an appreciation of the utility of the system only if they are well trained to use of the system only if they are well trained to use it. Insufficient training causes significant negative it. Insufficient training causes significant negative impact on ERP systems implementationimpact on ERP systems implementation..


DisciplineDiscipline

Ensuring that a complex change like that Ensuring that a complex change like that associated with a transcendental information associated with a transcendental information system that gets the right results, in the right system that gets the right results, in the right timeframe, at the right costs, requires a paradigm timeframe, at the right costs, requires a paradigm change in an attitude as basic as discipline. This change in an attitude as basic as discipline. This can be improved through indoctrination at can be improved through indoctrination at meetings to address attitudinal changes.meetings to address attitudinal changes.ERP packages, lack of top management support, ERP packages, lack of top management support, changes in personnel, lack of discipline, changes in personnel, lack of discipline, resistance, and lack of broad-based company resistance, and lack of broad-based company commitment are the major factors that slow down commitment are the major factors that slow down the process of implementation.the process of implementation.


CommitmentCommitment

Sustained management commitment, both at top Sustained management commitment, both at top and middle levels during the implementation, in and middle levels during the implementation, in terms of their own involvement and the terms of their own involvement and the willingness to levels during the implementation, in willingness to levels during the implementation, in terms of their own involvement and the terms of their own involvement and the willingness to allocate valuable organizational willingness to allocate valuable organizational resources.resources.The need for organizational commitment should The need for organizational commitment should be stressed during strategy sessions because a be stressed during strategy sessions because a lax in that can scupper the project.lax in that can scupper the project.


Needs Needs assessmentassessment

One of the first steps involves evaluating the One of the first steps involves evaluating the needs and requirements that will drive the needs and requirements that will drive the implementation of an ERP system. A needs implementation of an ERP system. A needs assessment with a definition of requirements is assessment with a definition of requirements is essential not only to guide the start of the project, essential not only to guide the start of the project, but also to gauge the success of the project after but also to gauge the success of the project after completion. The basic description of needs completion. The basic description of needs should be refined to a set of specific institutional should be refined to a set of specific institutional acceptance criteria at an early phase of the acceptance criteria at an early phase of the project. This statement will be used at a later project. This statement will be used at a later date to help evaluate the success of the project date to help evaluate the success of the project in meeting these goalsin meeting these goals..


StaffingStaffing A dedicated and competent staff is a must.A dedicated and competent staff is a must.

TeamTeamCompositionComposition

ERP projects typically require some combination ERP projects typically require some combination of business, information technology, vendor, and of business, information technology, vendor, and consulting support. The structure of the project consulting support. The structure of the project team has a strong impact in the implementation team has a strong impact in the implementation process. Two important factors are the process. Two important factors are the integration of third-party consultants within the integration of third-party consultants within the team and the retention within the organization of team and the retention within the organization of the relevant ERP knowledgethe relevant ERP knowledge..


Formalized Formalized PlanPlan

A single integrated project plan, not a collection A single integrated project plan, not a collection of independent plans that can’t be rolled into a of independent plans that can’t be rolled into a summary report to management. This means to summary report to management. This means to have a well-defined plan/schedule for all the have a well-defined plan/schedule for all the activities involved in the ERP implementation, activities involved in the ERP implementation, with an appropriate allocation of budget and with an appropriate allocation of budget and resources for these activities. Evidence shows resources for these activities. Evidence shows that the majority of projects fail to finish the that the majority of projects fail to finish the activities on time and within budget.activities on time and within budget.


CoordinationCoordination

Good coordination and communication between Good coordination and communication between implementation partners are essential.implementation partners are essential.PProject management has evolved in order to roject management has evolved in order to plan, coordinate and control the complex and plan, coordinate and control the complex and diverse activities of modern industrial and diverse activities of modern industrial and commercial projectscommercial projects..A faulty communication between these parts is a A faulty communication between these parts is a major failure cause in implementing information major failure cause in implementing information systems (i.e. between IT specialists and users or systems (i.e. between IT specialists and users or IT specialists and IT specialists and companycompany management). management).


CommunicationCommunication

Communication means not only sharing Communication means not only sharing information between the project team but also information between the project team but also communicating to the whole organization the communicating to the whole organization the results and the goals in each implementation results and the goals in each implementation stage.stage.The communication effort should be done in a The communication effort should be done in a regular basis during the implementation phase. regular basis during the implementation phase. In order to successfully accomplish the decision In order to successfully accomplish the decision to implement an ERP system, the effective to implement an ERP system, the effective project management comes into play to plan, project management comes into play to plan, coordinate and control such an intricate project.coordinate and control such an intricate project.


PartnershipPartnership

During the implementation phase there are During the implementation phase there are different partners involved such as consultants different partners involved such as consultants and software and hardware vendors.and software and hardware vendors.An adequate partnership between them will ease An adequate partnership between them will ease achievement of the goals defined.achievement of the goals defined.The project leadership must engender trust and The project leadership must engender trust and avoid attrition and unnecessary competition avoid attrition and unnecessary competition among members.among members.


ScopeScopeManagementManagement

This factor is related with concerns of project goals This factor is related with concerns of project goals clarification and their congruence with the organizational clarification and their congruence with the organizational mission and strategic goals. This includes both scope mission and strategic goals. This includes both scope definition and subsequent scope control. Some definition and subsequent scope control. Some components of this factor are: scope of business components of this factor are: scope of business processes and business units involved, ERP processes and business units involved, ERP functionality implemented, technology to be replaced/functionality implemented, technology to be replaced/ upgraded/integrated, and exchange of data. Avoid upgraded/integrated, and exchange of data. Avoid Scope creep, which is clearly delineating and effectively Scope creep, which is clearly delineating and effectively limiting the scope of the project. While new functionality limiting the scope of the project. While new functionality shouldn’t be rejected outright, hard decisions have to be shouldn’t be rejected outright, hard decisions have to be made to keep the project from careening out of made to keep the project from careening out of proportion. When there are unrealistic expectations from proportion. When there are unrealistic expectations from the ERP, poor estimation of its scope and size, it the ERP, poor estimation of its scope and size, it creates a mess and the realistic goals are lost.creates a mess and the realistic goals are lost.


LeadershipLeadership

Effective leadership is critical. The project lead can Effective leadership is critical. The project lead can be considered to be the team leader or project be considered to be the team leader or project champion.champion. The Project leader needs leadership The Project leader needs leadership skills and respect of project members and skills and respect of project members and companycompany administration. The single most important attribute administration. The single most important attribute of this key individual is the ability to efficiently and of this key individual is the ability to efficiently and effectively run a large project, not loyalty to the effectively run a large project, not loyalty to the companycompany. Broad-based, consensus decision-. Broad-based, consensus decision-making doesn’t generally work on ERP projects.making doesn’t generally work on ERP projects.

LIST OF ERP EMPLEMENTATION LIST OF ERP EMPLEMENTATION RISKRISK

Dimension of Dimension of RisksRisks Risk FactorRisk Factor

OrganizationalOrganizational

Ineffective strategic thinking and strategic Ineffective strategic thinking and strategic planningplanning

Organizational misfitOrganizational misfit

Inadequate ERP selectionInadequate ERP selection

Low top management support & involvement Low top management support & involvement and lack of a project championand lack of a project champion

Cultural and environmental issuesCultural and environmental issues

Source: Yajun ZengSource: Yajun Zeng.. (2010). Risk management for enterprise resource planning system (2010). Risk management for enterprise resource planning system implementations in project-based firms. PhD Thesis, University of Maryland.implementations in project-based firms. PhD Thesis, University of Maryland.



ManagerialManagerial

Ineffective project management techniques and Ineffective project management techniques and practicespractices

Bad managerial conductBad managerial conduct

Inadequate change managementInadequate change management

Poor leadershipPoor leadership

Inadequate financial managementInadequate financial management



OperationalOperational

Inadequate business process reengineeringInadequate business process reengineering

Inadequate training and instructionInadequate training and instruction

Ineffective communication systemIneffective communication system

Ineffective consulting servicesIneffective consulting services

Inadequate IT supplier stability and performanceInadequate IT supplier stability and performance



TechnologicalTechnological

Technical complexityTechnical complexity

Inadequate IT system capabilitiesInadequate IT system capabilities

Inadequate IT system maintainability and Inadequate IT system maintainability and upgradabilityupgradability

Inadequate legacy system managementInadequate legacy system management

Lack of information sharing or integration with Lack of information sharing or integration with non-ERP systemsnon-ERP systems



HumanHuman

Low key user involvementLow key user involvement

Poor project team composition and skill mixPoor project team composition and skill mix

Inadequate stakeholder relationship Inadequate stakeholder relationship managementmanagement

MiscellaneousMiscellaneousLegal and regulatory risksLegal and regulatory risks

Multi-site issuesMulti-site issues

INEFFECTIVE STRATEGIC INEFFECTIVE STRATEGIC THINKING AND PLANNINGTHINKING AND PLANNING

ERP implementation is very different from and far more complex ERP implementation is very different from and far more complex than typical software installation. Considering the capital than typical software installation. Considering the capital investment and resources required for ERP adoption and the investment and resources required for ERP adoption and the impact its success – or failure – may have on the organization, it is impact its success – or failure – may have on the organization, it is too risky to simply treat it as normal software licensing and too risky to simply treat it as normal software licensing and installation. The lack of strategic directions and planning has been installation. The lack of strategic directions and planning has been repetitively cited as a critical issue in current IT investment repetitively cited as a critical issue in current IT investment practices. Strategic thinking and planning require articulation of a practices. Strategic thinking and planning require articulation of a business vision to the organization, alignment ERP business vision to the organization, alignment ERP implementation with corporate goals and business strategies, and implementation with corporate goals and business strategies, and definition of clear goals and objectives.definition of clear goals and objectives.

INADEQUATE ERP SELECTIONINADEQUATE ERP SELECTION Thorough evaluation and careful selection of an ERP vendor, ERP Thorough evaluation and careful selection of an ERP vendor, ERP packages, modules, and services is the premise of successful packages, modules, and services is the premise of successful ERP deployment. The better the ERP selection process, the ERP deployment. The better the ERP selection process, the greater the chance of success. If the wrong choices are made, greater the chance of success. If the wrong choices are made, and these choices have to be made very early on, the company and these choices have to be made very early on, the company faces either a misfit between ERP package and business faces either a misfit between ERP package and business processes and strategy, or a need for major modifications and processes and strategy, or a need for major modifications and customizations, which are time-consuming, costly and risky.customizations, which are time-consuming, costly and risky.

LOW TOP MANAGEMENTLOW TOP MANAGEMENTSUPPORT & INVOLVEMENT ANDSUPPORT & INVOLVEMENT ANDLACK OF A PROJECT CHAMPIONLACK OF A PROJECT CHAMPION

Sustained top management support is one of the most cited Sustained top management support is one of the most cited critical success factors in ERP implementation. In the early stage critical success factors in ERP implementation. In the early stage of ERP project, no single factor is as predictive of its success as of ERP project, no single factor is as predictive of its success as the commitment of top management. A number of key activities, the commitment of top management. A number of key activities, including establishing strategic directions, setting the goals, including establishing strategic directions, setting the goals, allocating necessary resources, and mediating among different allocating necessary resources, and mediating among different interest groups etc., all are dependent on the support and interest groups etc., all are dependent on the support and participation of senior management. The need of a project participation of senior management. The need of a project champion is also frequently advocated. A project champion, also champion is also frequently advocated. A project champion, also called executive sponsor, is an individual who has the authority called executive sponsor, is an individual who has the authority and influence to advocate the project and obtain valuable and influence to advocate the project and obtain valuable resources within or outside an organization for the completion of resources within or outside an organization for the completion of the project. The person usually comes from the rank of senior the project. The person usually comes from the rank of senior management, and performs the crucial functions of transforma-management, and performs the crucial functions of transforma-tional leadership, facilitation and marketing the project to users.tional leadership, facilitation and marketing the project to users.

INEFFECTIVE PROJECT MANAGEMENT INEFFECTIVE PROJECT MANAGEMENT TECHNIQUES AND PRACTICESTECHNIQUES AND PRACTICES

Project management refers to the management of the ERP Project management refers to the management of the ERP implementation processes, from project planning, assignment of implementation processes, from project planning, assignment of responsibilities to various players, scheduling of project tasks, responsibilities to various players, scheduling of project tasks, definition of milestones and critical paths, to monitoring and definition of milestones and critical paths, to monitoring and controlling activities, and closing the project. Effectively utilizing controlling activities, and closing the project. Effectively utilizing various project management methodologies and tools and various project management methodologies and tools and adopting good practices such as those recommended by Project adopting good practices such as those recommended by Project Management Institute (PMI) are essential for ERP project Management Institute (PMI) are essential for ERP project success, as the myriad of technical, organizational and human success, as the myriad of technical, organizational and human issues makes many ERP project huge and inherently complex. issues makes many ERP project huge and inherently complex. Besides project planning and controlling, a particular challenge is Besides project planning and controlling, a particular challenge is to properly manage the scope of ERP implementation to avoid to properly manage the scope of ERP implementation to avoid scope creep caused by major customization.scope creep caused by major customization.

BAD MANAGERIAL CONDUCTBAD MANAGERIAL CONDUCTEffective project implementation requires a well-articulated Effective project implementation requires a well-articulated business vision that establishes the goals and the business model business vision that establishes the goals and the business model behind the project. The lack of clearly defined goals and behind the project. The lack of clearly defined goals and objectives or the inclination to shift them now and again brings objectives or the inclination to shift them now and again brings confusion and disruption the ERP implementation. Also, managing confusion and disruption the ERP implementation. Also, managing user and stakeholder expectations is a part of managerial user and stakeholder expectations is a part of managerial challenge. In addition, while dedicated resources is indispensable challenge. In addition, while dedicated resources is indispensable for ERP success, there is a tendency to escalate projects because for ERP success, there is a tendency to escalate projects because of social norms (e.g. to save face; for public companies, to avoid of social norms (e.g. to save face; for public companies, to avoid the negative impact of project failure on stock prices) and to keep the negative impact of project failure on stock prices) and to keep pouring resources into a failing project. Such kind of social pouring resources into a failing project. Such kind of social commitments may augment risks and lead to more severe commitments may augment risks and lead to more severe consequences should the project fail.consequences should the project fail.

INADEQUATEINADEQUATECHANGE MANAGEMENTCHANGE MANAGEMENT

The adoption of ERP system is normally accompanied with The adoption of ERP system is normally accompanied with changes in the way that an organization operates and its changes in the way that an organization operates and its employees conduct their work. It also brings changes in corporate employees conduct their work. It also brings changes in corporate culture and the relationship of employees. Moreover, in light of the culture and the relationship of employees. Moreover, in light of the complexity of ERP system, numerous changes such as changing complexity of ERP system, numerous changes such as changing requirements, must be dealt with during the process of requirements, must be dealt with during the process of implementation. Therefore, effective change management is implementation. Therefore, effective change management is important for ERP success. Underestimating the effort involved in important for ERP success. Underestimating the effort involved in change management may result in project failure, especially in change management may result in project failure, especially in early stages.early stages.

POOR LEADERSHIPPOOR LEADERSHIP

Strong and committed leadership, and under the leadership, open Strong and committed leadership, and under the leadership, open and honest communication, and a motivated and empowered and honest communication, and a motivated and empowered implementation team are among the social enablers of successful implementation team are among the social enablers of successful ERP adoption.ERP adoption.

INADEQUATE FINANCIAL INADEQUATE FINANCIAL MANAGEMENTMANAGEMENT

ERP implementation is very expensive. Significant cost overrun ERP implementation is very expensive. Significant cost overrun may nullify the benefits in years that can be realized by the may nullify the benefits in years that can be realized by the adoption of ERP and even cause the organization to go adoption of ERP and even cause the organization to go bankruptcy.bankruptcy.

INADEQUATE BUSINESS INADEQUATE BUSINESS PROCESS REENGINEERINGPROCESS REENGINEERING

ERP packages are not always compatible with an organization’s ERP packages are not always compatible with an organization’s needs and business processes immediately off the shelf. Thus needs and business processes immediately off the shelf. Thus either software modification or business process reengineering is either software modification or business process reengineering is necessary, or both. As software modification and customization necessary, or both. As software modification and customization are expensive and plagued with uncertainties, and ERP packages are expensive and plagued with uncertainties, and ERP packages are normally designed with generally accepted good practices and are normally designed with generally accepted good practices and optimized processes, restructuring the business processes is optimized processes, restructuring the business processes is regarded by some as a favorable option. Therefore, neglecting or regarded by some as a favorable option. Therefore, neglecting or downplaying business process reengineering is prone to risks.downplaying business process reengineering is prone to risks.

INADEQUATEINADEQUATETRAINING AND INSTRUCTIONTRAINING AND INSTRUCTION

The role and importance of training and education to facilitate The role and importance of training and education to facilitate ERP or other software implementation have been well ERP or other software implementation have been well documented. Lack of end-user training and understanding of documented. Lack of end-user training and understanding of changes in business processes is posited as responsible for many changes in business processes is posited as responsible for many ERP implementation problems. As the adoption of ERP system ERP implementation problems. As the adoption of ERP system bring changes in organizational structure and business process, bring changes in organizational structure and business process, the roles of some employees may need to be redesigned to reap the roles of some employees may need to be redesigned to reap the benefits of the new system.the benefits of the new system.

INEFFECTIVE COMMUNICATION INEFFECTIVE COMMUNICATION SYSTEMSYSTEM

Clear and effective communication at all levels of an organization Clear and effective communication at all levels of an organization is necessary before and during the implementation of ERP. is necessary before and during the implementation of ERP. Communication among various functions/levels and specifically Communication among various functions/levels and specifically between business and IT personnel is especially important.between business and IT personnel is especially important.A communication plan is required to ensure that open A communication plan is required to ensure that open communication occurs within the entire organization.communication occurs within the entire organization.

INEFFECTIVEINEFFECTIVECONSULTING SERVICESCONSULTING SERVICES

The use of consultants, usually external consultants from The use of consultants, usually external consultants from professional service firms, is common in ERP projects and professional service firms, is common in ERP projects and regarded as a success factor. Consultants are supposed to have regarded as a success factor. Consultants are supposed to have experience in specific industries and comprehensive knowledge experience in specific industries and comprehensive knowledge about certain ERP modules. Consultants may be involved in about certain ERP modules. Consultants may be involved in various stages of the implementation: performing requirements various stages of the implementation: performing requirements analysis, recommending a suitable solution, and participating in analysis, recommending a suitable solution, and participating in the implementation. As consultants play a major role in the implementation. As consultants play a major role in diminishing ERP risks, choosing unqualified consultants or using diminishing ERP risks, choosing unqualified consultants or using their services ineffectively should be avoided.their services ineffectively should be avoided.

INADEQUATE IT SUPPLIER INADEQUATE IT SUPPLIER STABILITY AND PERFORMANCESTABILITY AND PERFORMANCE

The success of ERP implementation requires the support and The success of ERP implementation requires the support and involvement of ERP vendor(s). Also, post-implementation ERP involvement of ERP vendor(s). Also, post-implementation ERP use may necessitate further investment in upgrades and new use may necessitate further investment in upgrades and new modules with additional functionality. So the stability and modules with additional functionality. So the stability and performance of ERP vendor is a risk factor.performance of ERP vendor is a risk factor.

TECHNICAL COMPLEXITYTECHNICAL COMPLEXITYThe number of modules to be implemented, the complexity of The number of modules to be implemented, the complexity of system architecture, and the extent of software customization and system architecture, and the extent of software customization and customization influence the technical complexity of ERP projects. customization influence the technical complexity of ERP projects. As the number of modules increase, the project complexity is As the number of modules increase, the project complexity is increased accordingly. System architectural consideration is increased accordingly. System architectural consideration is important, particularly in the early stages. Without adequate important, particularly in the early stages. Without adequate system planning and architecture design, personalization and system planning and architecture design, personalization and adaptation may cause problems. Indeed, minimal customization adaptation may cause problems. Indeed, minimal customization has been frequently cited as a critical success factor for ERP has been frequently cited as a critical success factor for ERP success. Thus the scope of software modification and success. Thus the scope of software modification and customization, if they cannot be avoided, should be carefully customization, if they cannot be avoided, should be carefully managed and controlled.managed and controlled.

INADEQUATEINADEQUATEIT SYSTEM CAPABILITIESIT SYSTEM CAPABILITIES

Technical software capabilities must be studied before Technical software capabilities must be studied before implementation matters and their impact on business processes implementation matters and their impact on business processes assessed; questions such as these are pivotal for ERP success. assessed; questions such as these are pivotal for ERP success. They should also be routinely evaluated during the implementation They should also be routinely evaluated during the implementation process, especially in software customization and system testing. process, especially in software customization and system testing.

INADEQUATEINADEQUATEIT SYSTEM CAPABILITIESIT SYSTEM CAPABILITIES

Essential technical aspects are:Essential technical aspects are: all necessary functionalityall necessary functionality user friendlinessuser friendliness portabilityportability scalabilityscalability modularitymodularity versioning managementversioning management flexibilityflexibility securitysecurity presence of a complete guidepresence of a complete guide a procedure manual to help usersa procedure manual to help users data accuracy.data accuracy.

INADEQUATE IT SYSTEMINADEQUATE IT SYSTEMMAINTAINABILITY AND UPGRADEABILITYMAINTAINABILITY AND UPGRADEABILITY

ERP maintenance activities are very important for continual use ERP maintenance activities are very important for continual use and benefit realization; they require continual capital spending. and benefit realization; they require continual capital spending. ERP upgrade may be necessary to introduce additional ERP upgrade may be necessary to introduce additional functionalities and keep pace with the development of technology; functionalities and keep pace with the development of technology; it, however, may turn out to be very expensive. Thus the it, however, may turn out to be very expensive. Thus the maintainability and upgradeability of the system must be taken maintainability and upgradeability of the system must be taken into account during ERP implementation.into account during ERP implementation.

INADEQUATE LEGACY SYSTEM INADEQUATE LEGACY SYSTEM MANAGEMENTMANAGEMENT

Legacy systems encapsulate the existing business processes, Legacy systems encapsulate the existing business processes, organization structure, culture, and information technology. organization structure, culture, and information technology. Because the business, organizational and cultural aspects of Because the business, organizational and cultural aspects of legacy systems are mostly covered in other risk factors listed legacy systems are mostly covered in other risk factors listed above, the risk factor related to legacy system management above, the risk factor related to legacy system management mainly copes with technical issues, especially the conversion and mainly copes with technical issues, especially the conversion and migration of important data, the treatment of legacy information migration of important data, the treatment of legacy information system and transition strategies. Inadequate legacy system system and transition strategies. Inadequate legacy system management might lead to the loss of valuable data and management might lead to the loss of valuable data and disruption to the business operations of the company.disruption to the business operations of the company.

LOW KEY USER INVOLVEMENTLOW KEY USER INVOLVEMENT Key user involvement is essential to gain users’ confidence in the Key user involvement is essential to gain users’ confidence in the system, manage their expectations and extract users’ system, manage their expectations and extract users’ requirements. While user training and instruction take place in the requirements. While user training and instruction take place in the later stages of ERP implementation, key user involvement should later stages of ERP implementation, key user involvement should be conducted earlier in the process.be conducted earlier in the process.

POOR PROJECT TEAM POOR PROJECT TEAM COMPOSITION AND SKILL MIXCOMPOSITION AND SKILL MIX

Sufficient and appropriate staffing for the project team is Sufficient and appropriate staffing for the project team is indispensable for ERP implementation success. It has been indispensable for ERP implementation success. It has been repeatedly mentioned that there is a critical need to put in place a repeatedly mentioned that there is a critical need to put in place a solid, core implementation team that is comprised of the solid, core implementation team that is comprised of the organization’s best and brightest individuals. The project team organization’s best and brightest individuals. The project team should also have a suitable and adequate combination of skills should also have a suitable and adequate combination of skills and experiences that is required by the implementation.and experiences that is required by the implementation.

RISK FACTORS ANDRISK FACTORS ANDTHEIR IMPACTSTHEIR IMPACTS

† Budget overrunBudget overrun† Schedule overrunSchedule overrun† Project abandoned Project abandoned

or left incompleteor left incomplete

† Failure in meeting Failure in meeting requirements or requirements or delivering expected delivering expected business benefitsbusiness benefits

† Failure in meeting Failure in meeting design objectivesdesign objectives

† User resistence / User resistence / Lower Client / Lower Client / Stakeholder Stakeholder satisfactionsatisfaction

Implementation Implementation Process Process FailureFailure

System usage System usage failurefailure

RISK MANAGEMENT APPROACHRISK MANAGEMENT APPROACH

http://www.talaconsult.com/http://www.talaconsult.com/

RISK MANAGEMENT APPROACHRISK MANAGEMENT APPROACH

FTA – Fault FTA – Fault tree analysistree analysis

Documents

ERP IMPLEMENTATION PROJECT MANAGEMENT. RESULTS OF ERP IMPLEMENTATION