erc_group2_final_v1

8/6/2019 ERC_Group2_final_v1

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Presented by:

Group 2

4 August 2011 1


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Agenda

Introduction to selection phase

y Decisions taken

y Strategies followed

Case 1 First time ERP implementation

Case 2 Two ERP vendors

Case 3 Replacing old ERP with a newone

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ERP Selection: Three Decisions

Blendedinto One A TECHNICAL decision, based mostly on what happens at

the end-user level, as well as with the IT team.

y Issues like platform and integration and customization.

AnOPERATIONAL decision, based on what the companydoes to fulfil customer orders.

y The ERP system must adapt easily to the customer / product/service mix, and do it without or expensive modifications.

ABUSINESS decision, based on the anticipated return on

investment (ROI)y ERP system functionality, pricing, and vendor support capabilities

vary widely

y Choosing the wrong implementation partner can reduce ROI andconsume resources otherwise available to expand the enterprise.

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ERP Selection Strategy

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Six Rulesto Make Best Decision:

Rules 1 & 21. Allow the time and allocate the resources

to audit the current processes

y Create a wish list of processes

y Invite everyone

y Sort and prioritize the list

2. Knowledge is Power

y Poll the company staff for hidden expertise andexperience in ERP implementation

y Check industry network for a consultant thatknows both ERP and your unique needs

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Rules 3 & 4

3. Give ERP decision the resources itneeds to succeedy Define clearly what the team is to do

y Scope the projecty Establish a clear process and timetable

4. Pick the right team for the joby Rather than a fixed budget, give the team a

broad benchmark for the projecty Dont make this a stealth project

y Welcome differences of opinion

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Rules 5 & 6

5. Lookout for ERP capabilitiesy Keep vendornames out of early discussions

y Separate ERP capabilities into three categories:Must have, Beneficial but not essential, Fancybut not particularly useful for us

6. Dont try to take all subjectivity out of thepurchasey Pay attention to soft needs beyond your ERP

hardware/software budgety Dont negotiate on price; negotiate onnet value lift

y Ask about performance pricing

y Purchase agreements

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Company facts

Based inSouth-eastern Michigan

manufactures temperature andpressure instruments used in therefrigeration, food service, commercialheating, ventilating and air-conditioning(HVAC) and processing industries

many of its products either directly usedby original equipment manufacturers or

by contractors of products (refrigeratedcases, compressors etc)

History

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Company facts

Company established in 3 cities

Michigan, Detroit,Shanghai

Number of employees increasing (600) Nearly a customer base of 2500 in the world

A need for ERP To manage the increasing complexity

Remain competitive

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Consultation

Company A then took the package of priorities toconsultants

Worked closely with the ERP team and steering committee

researched available ERP systems for company accordingto the size and scope of the company

Now the final selection task was on the ERPteam of the company

ERP team selected four staffers who would be the key usersof the new system

Meticulous process followed for ERP selection

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Meetingwith CEO and BU Heads

Understand following

Objectives

Expectations Constraints

Apprehensions andRisks

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Objectivesand Expectations

Facilitate better customer relationship

Enhance collaboration with supplier

Improve interdepartmental coordination

Improve productivity

Reduce operational costs

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Constraints

Budget $20 million

Go live within 15-18

monthsMust be employee friendly

Easy to conduct training

Should be low on maintenance

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Apprehensions

System should be able to incorporate future upgrades

Less customization

Less BPR

Switch from reliable legacy systems to a new ERP

Scalability of the new system

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RiskAnalysis for ERP Selection

Misunderstandingbetween Mojilco

and vendor

System difficult forusers to operate

Huge costs formaintenance

System too rigid toallow smooth day to

day operation

Misfit of thepackage for the

organization

Face to facemeeting

Demo to be shown

Industry standard

ERP package

Fix maintenance

contract

Demo to be shown

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ERP deliveryoptions

On-site ERP

Hosted on company premises

Ability to configure and customize as needed

Expensive

SaaS

Subscription based, hosted on cloud

Less expensive

Less flexibility to customize

Hosted ERP

Company specific ERP hosted on external site

Combines flexibility of on-site ERP with outsourced model ofSaaS

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Checklist

Is there a need for a customized solution?

Is there a need to integrate with legacy apps?

Is the usiness model dynamic?

Is the deployment significantly large?

Is the IT infrastructure adequate?

Is there a need to control IT systems in house?

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ERP deploymentmodel

Compan

y A

As they had ahuge customerbase, they decidedto go for Onsite

ERP

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Finalizingthe requirements

Meeting with managers and BU Heads

Categorization of features

Must Have Valuable

Nice to Have

Pareto analysis to estimate requirements prioritization

Not every requirement was marked as Must Have.

80% of benefit was generated from 20% of effort (requirements). 20% (138) of the total requirements (688) gathered was prioritized

as Must Have

Manufacturing and CRM modules : the most crucial

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ERP Package Selection

Framework

Initialscreening ConsultantResearch Thoroughevaluation SelectedPackage

RFI RFP RFQ

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Initial Screening

Cost

Reputation

Org. Fit

No. of users

Industrystandards

Consultant

knowledge

Shortlisting Process 8 packagesRFI

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Consultant Research

RFP

Industry

standards

Prev.Customerresponse

Module wiseanalysis

SAPOracle E-Business Suite

MS Dynamics

VendorPresentation

s

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Thorough Evaluation

RFQ

Contract

terms

Cost

User

feedback onDemo

Oracle E-Business Suite

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ComparativeAnalysisSAP Oracle E- business

suiteMicrosoft Dynamics

Rank 1 2 3

Market share 35 % 28% 14%

Avg ERP

satisfaction level

and benefit

realization

75% 60% 58%

Avg cost to

maintain and

implement

$16 million $12 million $3 million

Avg implementation

time duration

15 months 13 months 12 months

Business risk factor 50% 52% 58%

If the company has

unlimited resources

Best option 2nd best option 3rd best option

Flexibility &

upgradability

3 1 2

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PurchaseAgreement with Oracle

Post implementation support for 3 years

SLA : Penalties, rewards

Complete documentation

Include an end user acceptance clause

Incremental costs in case of additional upgrades/licensing beyond 2-3 years

Conduction of training

Guaranteed performance, stability and scalability

NDA

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Company Overview

Global Banking & Financial Services group based inEurope

Financial services to Personal, Private, Business &Commercial, Corporate & Institutional customers

Worldwide operationsy more than60 countriesy more than 25 million customers

Services:y General Bankingy Asset & Wealth Managementy Transaction Bankingy Investment Bankingy Investment Management for Private clients

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Business Situation

Early 2000s

Frequent mergers and acquisitions

y Subsidiary taken over by Dutch Government

Growing customer base

Banking regulations compliance Baselnorms

Need for a robust IT framework

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Key Drivers

Customer integrationchallenging- complexIT architecture

Globalscaletransformation:leveragingsynergiesacross

geographies

Businessdrivers: faster timetomarket,outsourcingnon-core

functions

Financialdrivers: unifiedpricingapproach,yearlycostoptimization

Service delivery drivers: setup a Global Networked Delivery Model

Strategic objectives

ReducingIT cost base/operating costs

Processes streamlining and standardize business requirements

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Expectations

High quality,on-timedeliveryofintegration,validationand

verificationsoftware

Roundtheclocksupport for integrationand BusinessAs

Usualoperations, for businesscriticalapplications

Resultorientedco-ordination with multiplestakeholders

On-demandavailabilityof functionalandtechnicalexperts

Transparentmigration & activationofclientproducts with

negligible businessdowntime

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Business Requirements

Enterprise

Transformation

AGILITY IN PRODUCTS, SERVICES & OFFERINGS

REGULATORY & COMPLIANCE

EFFICIENCY MANAGEMENT

GROWTH

Business Focus IT FocusOptimize

Extend

Improve

SERVICE ORIENTED & AGILE

STANDARISED, OPTIMIZED & MAINTAINABLE

SCALABLE, RELIABLE & AVAILABLE

SEAMLESSLY INTEGRATED

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Managementsview

Modules to be operationalized using ERP

y HRM (non-core)

y CRM (banking and sales management)

Two vendors v/s single vendory Objective: cost base reduction in the long run

y Operational concerns: risk diversification

y Competitive concerns

Avoid monopoly, increase bargaining power

y Select the vendor with core competency

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There are five inter-related best practices, but each enterprise

is different depending on industry, size, and experience

Anticipatingandmanaging

change for end-users

Managingthetransition from

implementationtooperation

Documentingbusinessprocesses

Engagingteamsponsors

Preparing end-users is the most

important factor for ERP

implementation success. Start

the process early.

Many enterprises struggle with

shifting from the project-drivenimplementation cycle to a normal

process of operations.

Effectively understanding and

communicating what the business

does is important for both ERP

selection and implementation.

There are many parties in an ERP

project. The implementation teamis the most important.

Getting the buy-in of sponsors in

different business units is important

during both selection and

implementation.

3

1

24

5

Diligenceinselectingthe

implementationteam

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SteeringCommittee

Business heads

y verticals

y banking divisions

Consultant

2 end-users

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Selectioncriteria(Managementaspect)

Corporate vision

Business situation (M&A) Trends (Regulations and

compliance reqts.) Competitiveness (growing

numbers)

Vendor factors

Market Share and reputation:global leading bank

Industrial Credential: nomargin of error

Service and Support: time

critical bank applications Training solution: used bybankers

Soft skills (Dutch language)

Based on consultants prior experience/ research reports(Forrester / Gartner) and banks executives interviews

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Cost factors: Reducingoperational costs

Software/Hardwarecost

Annual MaintenanceCost

Staff training cost

Time factors: Businessdowntime notacceptable

Planning andpreparation time

Time for BPR andsystem tuning

Time for testing andgoing live

Selectioncriteria(Managementaspect)

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Selectioncriteria(ProductAspect)

Functionality Degree to which it satisfies statedor implied needs: suitability, accuracy,interoperability, compliance, security

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Must have requirements

- bankingindustry

Optimal use of system resources

Ease of software maintenancey configure, customize, test, upgrade non-banking

hours (time coverage )

Real Time changesy Online and batch processing capabilities Process

1.2 million data in 6 hours

User Friendly (users are not computer experts) Integration with other software/applications

(seamless data flow among different modules)y e.g. CRM to finance

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RFP (Request for Proposal)

Management chose SAP and Peoplesoft

Consultants added Siebel to the list

y SAP selected as SAP synonymous with ERP

y SAP costliest for one time investment, highest licensing fees

y Peoplesoft widely used in Europe, provided EU compliancespecific packages

y Peoplesoft upgrades easier to install, customized reports

y Siebel added because they wanted multivendors and Siebel

was experienced with CRM

(Oracle boughtPeoplesoft in 2005 and Siebel in 2006)

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RFPrequestedfrom allthree

vendors

Adherence to business requirements

Success stories

Value adds

Industry best practices

Implementation methodology

Scalability and Knowledge Management

Project plan

Resources and costing

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Analysis

Multi-criteria Decision Making Models: AHP(Analytical Hierarchy process)y AHP is a decision-making methodology for multi-attribute

and multi-alternative problems which is a structured

decision making problem, especially for complex softwaresystems like ERPs

Assign weights to each criteria (managementsand business priority)

Evaluate each ERP product w.r.t. the criteriay Business lead, financial manager and user perspective

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Result

At the end, the chosen ERPs were

y Peoplesoft (HRMS)

y Siebel (CRM)

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What are the true list prices of modules I am buying?

What discount should I get?

What are the main challenges ofnegotiating with the vendor?

How canI reduce my maintenance costs?

What clauses should we include in the contract?

Comparing competitor vendor costs?

How do we protect our long term interests?

Negotiations & Agreements

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Negotiations & Agreements

Post implementation support for 2-3 years free of charge

y SLA (Service level agreement)

Incremental costs in case of additional upgrades/licensing (to avoidhidden costs)

Well defined deliverables & documentation at every stage Include an end user acceptance clause

Scalability assured as per forecast

Minimize TCO to align with business objectives

y Fixed price contract + billable hours

Data Confidentiality assurance (for e.g.: Secured ODCs and policyimplementation)

Penalties if requirements not met or deadlines missed

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TheFinesseFittingsCompany

Market leader in manufacturing bathroom fittings

Organization has dedicated IT department not outsourced

The current ERP system is unsatisfactory for the company

ERP consultants were not employed

Requirements have changed over time

Requires replacement of the current ERP system

IT team is looking fornew ERP to suit their requirement and notto repeat the past mistakes

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Current ERP Issues

Their current ERP is not flexible and customization isdifficult

Upgrading current ERP system was found to be

expensive

Even people from IT department found difficult to getaccustomed

Support from the ERP vendor was below average

Current ERP system required customizations for eachhardware upgrade

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Expectations fromanew ERP

ERP should be easy to customize forthe needs of organization

It should not carry unnecessarymodules which company doesnt need

Company should have the option ofpick and choose the module

ERP vendor should provide an annualmaintenance contract

Vendor should provide initial training tothe IT department

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ERP Selection Process

ERP VisionStatement

The companys ERP vision statement should beclear

Set clear objectives for both consultants andcompany

ERP Strategy &Best Practices

License for 1000 users across global offices Users equally distributed among the required

departments

Documentation of training details to thedepartments

Our vision is to integrate primary functions of theorganization and make a common platformavailable for inter departmental and crossfunctional activities and reduce inventory leadtime and serve customers on time

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ERP Selection Process

Roadmap ofrequirements

Major departments should get their individual modules Production, Order processing,Inventory control, Project

managementAll departments should have visibility of each others activity Event histories should be registered automatically for documentation Implementation should be done within 10 months

ERP Metrics

Inventory cycle should be reduced by 30-40% from current level Backlog orders should be brought down to 3 weeks from 13 weeks Duplication of work should be reduced to minimal

Usage should be east even fornon-IT workers and senior managers

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Criteriaof Evaluation

Technology

and SystemArchitecture

Product

Functionality

Product

Cost

Service and

Support

Supplier

Longevity

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Technologyand Product

Functionality

Is the technology robust enough to handle current and futuretransaction load?Is it scalable?

Is source code provided so customizations or modifications can bemade without hefty charges?

Do customizations hamper upgrading to future software releases?

Does the software support multi-company, multi-division, and multi-currency environments?

Is the product overly complex or too sophisticated for the averageuser?

Does this package meet the overall requirements listing?

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Costand Support

Are annualmaintenance chargesreasonable and in line

with the industryaverage?

Are the license costsjustified given the

functionality offering?

Can the estimated ROIbe achieved with this

product?

Can the supplierprovide a completeturn-key solution?

Is 24/7 supportavailable?

Does the supplier offerbusiness process re-engineering as part of

the implementationprocess?

Are customerreferences available?

When was theproducts first release?

What is the currentrelease version being

quoted?

Does the supplier haveexperience in industries

similar to yours?

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ERP SelectionCycle

ERP vendors considered

y Oracle,SAP, Epicor, Jeeves SAP was selected out of this 4vendors

ERP/Features

Orac

leSA

PE

picor Jee

ves

Flexibility 2 1 3 4

Customization 1 2 3 4

Price 3 4 2 1

Upgradation 2 1 4 3

ImplementationTime

2 1 4 3

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erc_group2_final_v1

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