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ERP System Installation &
Implementation
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ERP Implementation Project
It is a special IS Project
If vendor system
Much less system design than otherwise
Vendor software already programmed
Only need interfaces
Have help from vendor, consultants
Opportunities to outsource
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Relative Use of ERP Implementation StrategiesMabert et al. [2000]
Strategy %
Single vendor package-internal modifications 50
Single vendor package 40
Vendor packages-internal modifications 5
Best-of-Breed 4
In-house plus special packages 1
Total in-house development 0.5
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ERP as an IS Project
At least 7 optional ways to implement ERP
Outsourcing (ASP) the easiest
But risky
Next easiest is single vendor source withoutmodifications
Not necessarily least expensive, nor greatestbenefits
All others involve significant IS project
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Implementation Strategy Use
Dominant strategy in manufacturing:
Single vendor
Over half added internal modifications
Very few best-of-breed
Almost none developed totally in-house
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IS/IT Project Management
Results Conventional IS/IT projects have trouble
with time, budget, functionality
ERP projects have slightly more structure,
but still face problems
Underestimation of required time is common
Vendors have made easier & faster
Enhancement of systems another trend
Reintroduces time problem
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System Analysis & Design
Waterfall model
Basic standard for software development
Prototyping Good for development when final design not clear
Spiral model
Intended to reduce project development risk
Cyclical prototyping and testing Rapid Prototyping
Use feedback from users in compressed development
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Application Service Providers
Outsource ERP
Popular
Unocal pared IT staff 40% in two years Focus on core competencies, shed cost centers
Many specific functions can be outsourced
Outsourcing benefits
Speed Organization lacks IT skills
ASP the most popular way to outsource
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ASP Risks
Your applications and data are controlled by
others
Service failures out of your control
Confidentiality failure a possibility
Performance issues possible
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Relative Implementation Effort
Method In-House Vendor Consultant
Single vendor package-internal
modifications
Significant Heavy Heavy
Single vendor package Significant+ Heavy Heavy +
Vendor packages-internal
modifications
Significant+ Moderate Heavy +
Best-of-Breed Significant ++ Moderate Heavy +
In-house plus special packages Excruciating None Maybe
Total in-house development Painful Moderate Maybe
Application Service Provider Light None To select
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Implementation Effort
Implementing ERP places strain on in-
house information systems groups
Consultants are expensive
Sometimes need special expertise
Tradeoff: control vs. time & cost
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Implementation Life Cycle
Phases of ERP Implementation
Pre Evaluation Screening
Package Evaluation
Project Planning Phase
Gap Analysis
Implementation Training
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Implementation Life Cycle
Phases of ERP Implementation (Contd.)
Testing
Going Live
End User Training
Post Implementation
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Pre Evaluation Screening
Hundreds of ERP Vendors
Limit the No. of packages to be evaluated to
less than five
Thorough evaluation of a small no. of
packages
No superficial analysis of dozens of
packages
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Pre Evaluation Screening (Contd.)
Zero in on a few best packages by
Looking at product Literature
Getting help from External Consultants
Package used by similar companies
Vendors standing in the Market
Local Implementation and post
Implementation support
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Package Evaluation
Do it right the first time
Huge Investment
Not easy to switch to another one, oncepurchased one package
A very little room for error
None of them are perfect
Objective should be to find the best fit
Develop selection criteria
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Package Evaluation (Contd.)
Technology
Client / Sever capabilities
Database Independence
Security
Availability of regular upgrades
Amount of customization required
Local support infrastructure
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Package Evaluation (Contd.)
Availability of reference sites
Total costs
Cost of licensesCost of Training
Cost of Implementation
Customization costHardware cost
Maintenance cost
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Package Evaluation (Contd.)
Form a selection / evaluation committee
People from various departments ( Functional
Experts )Top Management ( CIO, COO etc.)
Consultants ( Package Experts )
Package selected by the committee will havecompany wide acceptance
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Project Planning Phase
Time Schedules
Deadlines
Development of Project Plan
Roles & Responsibilities
Project Manager selection & appointment
Selection of Implementation Team
Members
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Project Planning Phase (Contd.)
Implementation Team will meet
periodically
Review the progress
Chart the future course of action
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GAP Analysis
Best Fit
Meets 80% of Functional Requirements
Solutions for the GAPAlter business processes to fit the package
Pinning hopes on Upgrades
Third party InterfaceWrite additional programs
Altering ERP Source Code ( Most expensive )
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Implementation Team Training
How to Implement the package
Running the system
Consultants will Implement at the first site Selection of the employees for training
People with the right attitude
People who are willing to change, learn newthings, have good functional knowledge and arenot afraid of technology
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Testing
Test for extreme case scenarios
System Overloads
Multiple users logging on at the same time withthe same query
User entering invalid data
Hackers trying to access restricted areas
Design the test cases to find
Weak links in the system
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End User Training
Actual user will be given training on how touse the system
This should be done before going Live Identify the employeesthe users of the
new system
There will be resistance to change Most Implementations fail because of lack
of user training
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Going Live
Data conversion
Databases should be up & running
Prototype should be fully configured &
tested & should be ready to go operational
New system is Live when the old system is
removed & only new system is used for
doing business
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Definition & Measurement of
Success Second issue is timings of Measurement
Success in the short run & long run
Instances when Successfully installed ERPsystems were terminated when the companies
were merged with another
Successes measured at three different points intime in ERP experience cycle
Three distinct phases
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Definition & Measurement of
Success Project Phase
During this phase ERP software is configured & rolledout
Shake down Phase
During this phase the company makes transition fromGo Live to Normal Operations
Onward & Upward Phase
During this Phase the company captures the majority ofbenefits from ERP & plans for next steps fortechnology implementation & business improvements
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Definition & Measurement of
Success Success Metrics for different Phases
Project Phase
Project Cost Vs. Budget
Project completion in time relative to schedule
Completed & installed system functionality relative
to the scope
Shakedown Phase
Short term changes occurring after system Go
Live
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Definition & Measurement of
Success Success Metrics for different Phases
Shakedown Phase
Length of time before KPI achieve Normal orExpected Levels
Short term impact on Organizations adopters,
suppliers and customers such as average time on
hold when placing a telephone order
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Definition & Measurement of
Success Success Metrics for different Phases
Onward & Upward Phase
Achievement of Business results such as reducedoperational cost, reduced inventory carrying costs
On going improvements in business results
Ease in adopting new ERP releases, other new
technologies, improved business practices, improveddecision making etc. after ERP system has achieved
stable operations
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Implementation
Failures reasons
Choosing a wrong product
Incompetent & haphazard implementationInefficient & ineffective usage
What is required for SuccessfulImplementation
Good people who know the business
Good vendor
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Implementation (Contd.)
Questions & Concerns
Should we buy an ERP package or no
If yes, which oneWhat are the hidden costs
How does one implement
What problems are likely to crop up
Obstacles & Hurdles
Who should be involved in Implementation
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Implementation (Contd.)
Questions & Concerns (Contd.)
What is the role of the consultant in
ImplementationHow does one overcome the employee
resistance
When will the benefits start showing up
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Implementation (Contd.)
Obstacles
ERP system should have support & cooperation
of all the usersWithout their support, chances of failures are
high
Strong commitment & support from topmanagement
Change on a massive scale
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Implementation (Contd.)
Obstacles (Contd.)
Fear of losing jobs
People will be afraid of training & new learning
Job profiles will change
Job responsibilities will undergo drastic
alterationsERP will eliminate many existing jobs, but will
also create new jobs with new responsibilities
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Adopters problems with ERP
Project Phase Problems
Software Modifications
Strongly recommended to avoid modifying thesoftware & live with existing functionality
Difficulty in getting modifications to work well
Getting well tested & working modifications in atimely manner is a problem
When the user understands the software better, theydiscover ways to implement needed capabilitieswithout modifications
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Adopters problems with ERP
Project Phase Problems
Even though ERP systems are said to be
comprehensive, need for retaining some legacysystems & third party specialized software
cannot be totally ruled out
Interfacing these systems with ERP is both
challenging & expensive
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Adopters problems with ERP
Project Phase Problems
Problems with product & implementation
consultants Coordinating the efforts of various consultants is a
challenge ( H/W Vendor, Software Vendor, telecom
Vendor, ERP Vendor, Implementation Consultant )
Turnover of Project Personnel Losing key IT specialists & user representatives
working on the project while the project is going on
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Adopters problems with ERP
Project Phase Problems
Turnover of Project Personnel
Losing experienced people after the project iscomplete
Shakedown Phase Problems
Companies experienced negative outcomes
during this phase ERP system performance problems
Data entry errors
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Adopters problems with ERP
Shakedown Phase Problems
Companies experienced negative outcomes
during this phase Increased staffing required to cope with slowdown
& errors
Negative impact on customers & suppliers from an
inability to answer their queries & delayedshipments
Inadequate management reporting
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Adopters problems with ERP
Shakedown Phase Problems
These were caused by problems occurred
during Project Phase which were notrecognized as problems or were not resolvedwhen occurred
The most important problems that occurred
during Project Phase were Inappropriately cutting project scope when there aremissing key milestones
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Adopters problems with ERP
Shakedown Phase Problems
Cutting end user training
Underestimating the need for trainingInadequate Testing
Testing of cross module integration
Testing of interfaces with legacy systems
Testing of modifications carried out by externalvendors
Testing unusual business scenarios
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Adopters problems with ERP
Shakedown Phase Problems
Underestimating data quality problems &
reporting needs Retaining legacy data for many years ( Regulatory
compliance & Product servicing for many years )
In integrated ERP systems, data must be clean
Users will be disappointed if their reporting needsare not met
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Adopters problems with ERP
Shakedown Phase Problems
Reveals unresolved or unrecognized problems
of Project PhaseMany of these problems can be avoided bygiving adequate attention during Project Phaseto :
Cross functional configuration & testing of software End user training
Data conversion & management of legacy data
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Adopters problems with ERP
Shakedown Phase Problems Reporting needs
Scenarios for recovering from data input errors
Onward & Upward phase problems
Fragile human capital
Losing ERP knowledgeable IT specialists & endusers
Difficulty replacing them
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Adopters problems with ERP
Onward & Upward phase problems
Migration Problems
Software modifications made earlier convert poorlyduring implementation of later releases
Some organizations vowed never again to modify
ERP software but to make necessary changes totheir business processes
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Motivations for ERP
Most common reasons
Infrastructure
Common Platform, Y2K Compliance, replacingaging IT Infrastructure, High support costs for
legacy systems
Capability
Process improvements such as Logistics, ProductionScheduling or Customers Services
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Motivations for ERP
Most common reasons
Capability
Data visibility End to end view of supply chain processes
Performance
Cost reduction
Strategic decision making
Customer responsiveness
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Risk Factors
Failure to redesign business processes to fit
the software
Lack of senior management support
Insufficient training to IT workforce & end
users
Lack of ability to recruit & retain qualifiedERP system developers
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Critical Success Factors
Management support
Top management advocacy, provision of
adequate resources & commitment to theproject
Best people full time
Relevant business experts should be releasedfull time for the project
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Critical Success Factors
Empowered decision makers
Project team members should be empowered tomake quick decisions
Deliverable dates
At planning stage set realistic milestones & enddates
ChampionAdvocate for ERP system in promoting benefits
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Critical Success Factors
Vanilla ERP
Minimal customization
Smaller scopeFewer modules, Less Functionality
implemented, Smaller user groups, Single /Fewer Site/s
Definition of scope & goalsClear definition & adherence
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Critical Success Factors
Balanced Team
Right mix of business analysts, technical
experts and users from within the company &consultants from external companies
Commitment to change
Perseverance & determination to solveinevitable problems of change