Management of ERP Management of ERP solutionssolutions

Samo Bobek

Simona Sternad

ICMIS 2010Allahabad, India

OutlineOutline

ERP solutions and their implementation

CSF in ERP implementations

In general

According to different methodologies

According to distinct phases of implementation process

Management issues of ERP implementations

Conclusion

ERP solutionsERP solutions

Enterprise resource planning (ERP) solutions are defined as

customizable, standard application software which includes

integrated business solutions for the core processes and the

main administrative functions.

ERP can be also defined as comprehensive package software

solutions seek to integrate the complete range of a business

processes and functions in order to present a holistic view of

the business from a single information and IT architecture.

ERP solutions consist of more modules and they support

business processes on operative level in an organization.

Like many new fields in information systems, ERP solutions

have many synonyms, such as:

integrated standard software packages,

enterprise systems,

enterprise wide systems,

integrated vendor systems etc.

ERP solutions allow organizations to replace their existing

information systems, with a single integrated system.

ERP solutions implementation ERP solutions implementation

A project phase model (Parr and Shanks) divides ERP implementation into three major phases:

1. planning phase includes the selection of an ERP system,

assembly of a steering committee, determination of high-level

project scope and implementation approach, selection of a

project team and resource determination.

2. project phase has five sub-phases: setting up, reengineering,

design, configuration and testing, and installation.

3. enhancement phase may extend over several years and

includes the stages of system repair, extension and

transformation, and continuous improvement.

Shields also talks about three stages of ERP implementation projects:

1. first stage consists of pre-project activities including initial

commitment.

2. second stage deals with specific project implementation

activities: start, manage, analyze, configure, test, change,

support, prepare and go-life.

3. third stage is focused on post-project activities, which are as

important as the first two phases, since we have to perform

various activities for further improvement of the adopted system.

Bancroft, Seip and Sprengel defined a five phases model:

1. Focus Phase is essentially a planning phase, which includes

activities: setting up of the steering committee, selection and

structuring of the project team, development of the projects

guiding principles and creation of a project plan.

2. As-Is Phase includes analysis of current business processes in

the light of the ERP functions, installation of the ERP package,

mapping of business processes on to the ERP functions and

training of the project team.

3. To-Be phase consists of high-level design, detailed design,

followed by interactive prototyping.

3. Construction and Testing Phase consists of development of a

comprehensive configuration, its testing with real data

4. Implementation Phase itself consists of building networks,

installing desktops and managing user training and providing

support.

ERP solutions implementation ERP solutions implementation strategies strategies

ERP solutions are implemented according to following scenarios: big bang approach,

phased approach,

parallel approach,

process approach

hybrid approach

Strategy chosen depends on organization size/complexity, industry characteristics, implementation goals, resources provided and expected timeframe

ERP solutions implementation ERP solutions implementation methodologiesmethodologies

ERP vendors have developed their own methodologies that best

fit their package. Because of the leading market shares of SAP

and Microsoft Dynamics NAV ERP packages, we have focused

ourselves in their respective implementation methodologies:

SAP implementation methodology – ASAP

MS Dynamics implementation methodology - SureStep

SAP solution implementation SAP solution implementation methodologymethodology

Accelerated SAP (ASAP) implementation methodology promotes

project management principles, team members, business

process consultants, external consultants and technical areas

support. ASAP methodology provides roadmap, toolkit, service,

and support and training.

The roadmap is a detailed project plan that describes all

activities throughout the implementation which are organized in

five phases:

1. Project Preparation consists of enhancing organizational

readiness and preparation for the project.

2. Business Blueprint deals with the scope which is narrowed to fit

the industry-specific processes to reflect the future vision of a

business.

3. Realization means that the business blueprint becomes reality -

the system is configured and tested.

4. Final Preparation consists of refining the system, preparing go-

life plan, end-user training, knowledge transfer, system

administration, data migration, final testing and fine tuning

5. Go-live and Support - final checks should be done before and

after taking-off and also procedures and measurements are

developed to review the benefits of an ongoing basis.

Microsoft Dynamics solutions Microsoft Dynamics solutions implementation methodologyimplementation methodology

Microsoft has developed its own methodology for implementing

Microsoft Dynamics ERP packages (NAV and AX), called

Microsoft Dynamics SureStep.

SureStep methodology helps in reducing risk by making

implementation projects simpler, faster and more manageable as

it unifies project management terminology, tools, roles and

streamlines processes and communication among the project

stakeholders.

Implementation phases according to SureStep are:

Diagnostics deals with gathering information in order to prepare

an adequate implementation proposal (detailed requirements and

gap/fit analysis).

Analysis Phase defines functional requirements.

Design Phase includes the design of both the overall solution

configuration and the design of specific customizations and

integrations needed to cover business requirements; it also

includes mapping and designing of data migration processes

Development Phase includes the actual development of

customizations, integrations and data migration processes that

are set through design specifications.

Deployment Phase includes all activities related to final system

and testing, training of end users, and the actual cut-over to the

new production environment.

Operation Phase deals with the transition and on-going support

Success of ERP implementation Success of ERP implementation projectsprojects

The implementation of an ERP system is a huge, strategic and

complex project involving considerable risks reflected in the time,

scope, and cost of project implementation.

Because of the complexity of ERP implementation it is critical not

to focus exclusively on the implementation methodology steps

but also to create conditions in which the chosen solution can be

implemented in the expected time, scope, and budget. This

means that organizations should be aware of critical success

factors (CSFs) in ERP implementation.

Organizations have to know which factors are critical and

important for them

according to the implementation methodology used by the ERP

vendor and

within distinct implementation phases.

Critical success factors in ERP Critical success factors in ERP implementation projectsimplementation projects

Over the past several years considerable research has been published on CSFs in ERP implementation. Fourteen CSFs were mentioned by majority of authors:

Top management support and involvementTop management support and involvement

Top management support is critical because top managers have

to make fast and effective decisions, resolve conflicts, bring

everyone to the same thinking to promote company-wide

acceptance of the project, and build co-operation among the

diverse groups in the organization.

Clear goals, objectives and scopeClear goals, objectives and scope

Clearly defined business and strategic objectives are in the most

cases very important critical factor. Having a clearly defined

vision and mission, and a formulation of the right policies and

strategies, serves as the blueprint for organizational success.

Clear goals and objectives should be specific and operational

and have to indicate the general directions of the project. They

should also provide a clear link between business goals and IS

strategy. Well-defined objectives help to keep the project

constantly focused, and are essential for analyzing and

measuring success.

Project team competence and organizationProject team competence and organization

Selecting and motivating the right employees to participate in

implementation processes is critical for the implementation’s

success. Teams must consist of the right mix of business

analysts, technical experts, and users from within the

organization and consultants from external companies, chosen

for their skills, past accomplishments, reputations, and flexibility.

User training and educationUser training and education

A lack of user training and understanding of how ERP systems

work appears to be major reason for many problems and failures

in ERP implementation. Several authors highlight cases of

inadequate training. If the employees do not understand how a

system works, they will invent their own processes using the

parts of the system they are able to manipulate. The full benefits

of ERP is not realized until end users are using the new system

properly.

Business process reengineeringBusiness process reengineering

Despite ERP systems are essentially developed as instruments

for improving business processes such as manufacturing,

purchasing, or distribution and are built around best practices in

specific industries, they may not necessarily fit an organization’s

business. ERP implementation is a matter of transforming

business practices. So implementing an ERP system involves

reengineering the existing business processes to fit best

business practices.

Change managementChange management

The existing organizational structure and processes found in

most companies are not compatible with the structure, tools, and

types of information provided by ERP systems. These changes

needed may significantly affect organizational structures,

policies, processes, and employees and can cause resistance,

confusion, redundancies, and errors if not managed effectively.

Many ERP implementations fail to achieve expected benefits in

part because companies underestimate the effort involved in

change management.

Effective communicationEffective communication

The importance of communication across different business

functions and departments is well known in the information

technology implementation literature, because communication

has a significant impact on the process by minimizing possible

user resistance. Communication has to cover the scope,

objectives, and tasks of an ERP implementation project.

Effective communication is required in project teams and within

the organization (i.e. weekly team meetings, postings on the

company intranet etc.)

User involvementUser involvement

Because ERP systems cross functional and departmental

boundaries, cooperation and involvement of all people in the

organization are essential. Because there is always threat to

users’ perceptions of control over their work involving users in

defining organizational information system needs can decrease

their resistance to ERP systems. Users often perceive their role

in ERP implementation as central in their judgment about new

system.

Data analysis and conversionData analysis and conversion

The quality of pre-existing data and information systems is very

important factor in successful ERP implementation. If problems

with data are not solved in old legacy systems they will hardly

be solved during ERP implementation and therefore the quality

of implemented system will be questionable. Data problems

could even rise because modules in ERP solution are

interlinked.

ConsultantsConsultants

The success of a project depends strongly on the capabilities of

the consultants because the consultants are the only one with in-

depth knowledge of the software. Consultants provide a very

valuable service by filling gaps, providing expertise, and thinking

out-the-box. They are specialized and can usually work faster

and more efficiently than others involved in the implementation

process.

Project managementProject management

ERP projects are huge, complex, and risky, so effective project

management is crucial. Approximately 90% of ERP

implementations are late or over-budget, which may be due to

poor cost and schedule estimations or changes in project scope.

Project championProject champion

Project champions or sponsors are individuals who have a clear

understanding of what is going on; they are very critical to

implementation success. Champions ideally should have

experience in previous implementation efforts to manage

conflicts that arise before and after implementation. Project

champions perform the crucial functions of transformational

leadership, facilitation, and marketing the project to the users.

Project champions play a critical role in the acceptance of the

technology and he/she is usually at senior management level so

they have the authority to make substantial organisational

changes occur.

Architecture choice (package selection)Architecture choice (package selection)

All ERP packages have limited capabilities. Some packages are

more suited for larger companies while others fit smaller firms

better. Some packages have become a “de facto” standard in

certain industry. Some have a stronger presence in certain parts

of the world. To increase the probability of success, management

must choose software that most closely fits its requirements.

Minimal customizationMinimal customization

Most companies significantly underestimate the effort required

for code modification. Vendor’s code should be used as much as

possible, even if this means sacrificing functionality, so upgrades

from release to release can be done easily. Therefore, every

modification request should be carefully evaluated and

approved, or rejected, after considering all the options.

Research of CSF in SAP and MS Research of CSF in SAP and MS Dynamics NAV projectsDynamics NAV projects

To research the importance of ERP implementation CSF’s according to project phases, and to analyze the importance of distinct CSFs for different methodologies, we conducted an empirical study. We used a web questionnaire, which was mailed to companies that implemented an ERP solution in the recent past. Our sample consisted of companies which implemented SAP (54 companies), or MS Dynamics NAV (117 companies). Forty-five questionnaires were returned for a return rate of 26.3 percent.

Finding concerning the use of SAP Finding concerning the use of SAP and MS Dynamics NAV and MS Dynamics NAV

Because SAP solution is known as ERP solution for large

companies and Microsoft Dynamics NAV solution is known as

ERP solution for SMEs, it has been checked if there is

correlation between them in our data. Therefore it has been

found that there is positive relationship between solution and

size of the company (r=.644, p<0.01).

Research questionnaireResearch questionnaire

Respondents have been asked to rank fifteen of the most

important CSFs of ERP implementation according to sources on

ERP implementations; the rank should correspond to the

importance of distinct CSF to their organization.

CFS effective communication has been divided on two CSFs, the

first is communication between a project team and an

organization and the second is communication within a project.

ERP implementation CSF in SAP projectsERP implementation CSF in SAP projects

In companies in our sample where SAP solution were implemented with the ASAP methodology, CSFs were ranked as follows:

ERP implementation CSF in MS ERP implementation CSF in MS Dynamics NAV projectsDynamics NAV projects

In companies in our sample where MS Dynamics NAV solution were implemented with the SureStep methodology, CSFs were ranked as follows:

Comparing ERP implementation CSF in Comparing ERP implementation CSF in SAP and MS Dynamics NAV projectsSAP and MS Dynamics NAV projects

Our research confirmed that the importance of CSF is different within SAP implementation projects and within MS Dynamics NAV implementation projects.

SureStep ASAP

MXN Rangen MXS Ranges

Clear goals, objectives, scope, and planning 3.45 1 1.70 1Top management support and involvement 5.64 2 3.40 2Project champion 9.40 10 7.20 4Project team 6.18 3 4.00 3Project management 10.70 13 9.33 12Communication inside project team 7.55 6 8.22 8Communication between project team and organization 8.73 9 7.30 5

Consultants 10.10 12 8.00 7User involvement 6.82 4 7.44 6User training and education 7.09 5 8.78 10Change management 11.20 14 11.10 14Business process reengineering 8.27 7 8.33 9Architecture choice 12.80 15 13.30 15Minimal customization 9.80 11 8.80 11Data analysis and conversion 8.64 8 9.89 13MXN, MXS = represents arithmetic mean

Comparing ERP implementation CSF in Comparing ERP implementation CSF in SAP and MS Dynamics NAV projectsSAP and MS Dynamics NAV projects

Findings show that the most important CSFs corresponding to both methodologies are: clear goals, objectives, scope, and planning; top management support and involvement; and, project team.

The most noticeable differences in rankings is with the importance of the project champion. The project champion is ranked fourth for the ASAP methodology and tenth for the SureStep methodology.

A big difference in ranking between implementation methodologies also appeared for user training and education. This factor ranked fifth for MS Dynamics NAV and tenth for SAP.

Comparing ERP implementation CSF in Comparing ERP implementation CSF in different implementation phasesdifferent implementation phases

Arithmetic mean for CSF’s regarding phases of SureStep methodology and ASAP methodology

NAV I II III IV V VI SAP I II III IV V VIR1 3.40 3.13 3.00 2.67 2.80 2.93 R1 3.69 3.00 3.00 2.31 2.46 2.31R2 3.00 2.33 2.07 1.93 2.13 2.07 R2 3.31 2.54 1.54 1.62 2.77 2.38R3 2.40 2.33 1.80 2.07 2.00 1.93 R3 3.15 2.54 1.85 1.85 2.69 2.23R4 2.73 2.93 2.93 2.87 2.87 2.60 R4 1.77 3.23 3.31 3.38 3.46 3.00R5 2.53 2.47 2.53 2.20 2.20 2.00 R5 1.92 2.69 2.31 2.69 3.00 2.00R6 2.87 3.07 2.93 2.93 2.87 2.80 R6 1.77 3.54 2.92 3.00 3.31 2.92R7 2.67 3.13 2.53 3.07 2.93 3.07 R7 2.08 3.31 2.46 2.85 2.92 2.85R8 2.13 2.40 2.67 2.47 2.47 2.13 R8 2.08 2.92 3.31 2.46 2.85 2.23R9 2.33 2.47 2.33 3.00 3.00 2.73 R9 1.46 2.85 1.92 2.92 2.69 2.92R10 1.93 2.27 2.47 2.60 2.53 3.00 R10 1.46 1.69 1.85 2.69 2.77 3.08R11 1.87 2.07 1.93 2.00 2.27 2.33 R11 1.62 1.92 2.31 2.77 2.62 3.31R12 2.73 2.87 2.80 2.60 2.87 2.60 R12 2.54 3.15 2.23 2.46 2.62 2.54R13 2.73 2.07 2.13 2.00 1.93 1.73 R13 1.69 1.77 2.15 1.69 1.62 1.85R14 2.67 2.53 2.47 2.27 2.13 1.87 R14 2.31 2.77 2.62 2.23 2.23 2.15R15 2.53 2.33 2.47 2.53 2.80 2.13 R15 1.08 1.23 2.23 2.77 2.46 1.69

Comparing ERP implementation CSF in Comparing ERP implementation CSF in different implementation phasesdifferent implementation phases

If we compare the ranking of CSFs for those from companies which implemented SAP with the ASAP methodology and from companies which implemented Microsoft Dynamics NAV with SureStep methodology we see some similarities but each methodology has its own importance of CSF.

Project champion and change management are not as critical in any phase in Microsoft Dynamics NAV projects and also that architecture choice is not critical in any phase in SAP projects.

Clear goals, objective, and scope, project team, communication and business process reengineering are critical factors in every phase of ERP implementation Microsoft Dynamics NAV projects.

In last three phases of Microsoft Dynamics NAV projects critical factors are also user involvement and user training and education.

Very important factor is clear goals, objectives scope and planning in first three phases of SAP projects.

In all phases, except the while selecting the ERP solution, critical factors are the project team competence and organization and communication inside the project team in SAP projects.

Management issues of ERP Management issues of ERP implementation projects – reasons for implementation projects – reasons for

ERPERP

Answers to the question “ What are the reasons of a company to decide to implement ERP solution” were:

better access to data,

modernization of existing business processes with ERP solution,

single data entry,

incompatibility of previous information systems,

integrity of a solution, demand of owners,

better reports,

adaptability and flexibility of ERP solution

Management issues of ERP Management issues of ERP implementation projects – why particular implementation projects – why particular

ERP solution was chosenERP solution was chosen

Answers to the question “Why a particular ERP solution has been chosen” were:

integrity of a selected ERP solution,

efficiency and stability operation of an ERP solution,

support of an ERP vendor,

cost and price of an ERP solution,

and requirement of an owner or other business partners

(customers, vendors etc.).

Management issues of ERP Management issues of ERP implementation projects – implementation projects –

implementation scenario usedimplementation scenario used

Use of implementation scenarios (strategies) was as follows:

50 percent companies answered Big Bang Approach,

14.3 percent companies answered Phased Approach,

14.3 percent companies answered Approach,

2.4 percent companies answered Process Approach and

19 percent companies answered Hybrid Approach.

Management issues of ERP Management issues of ERP implementation projects – satisfaction implementation projects – satisfaction

with ERP functionalitywith ERP functionality

Answers to the question “In what extent chosen ERP solution

covers business processes of a company” were:

14.3 percent respondent answered completely,

73.8 percent answered almost completely

11.9 percent answered partly

Nobody answer badly.

Management issues of ERP Management issues of ERP implementation projects – changes in implementation projects – changes in

business practice because of ERP business practice because of ERP implementationimplementation

Answers to the question “In what extent business processes in companies which implemented ERP solutions have to be adapted to business processes of ERP solution chosen” were:

No one respond entirely

20.1 percent of companies respond say largely,

76.7 percent respond partly and

2.3 percent respond no adaptation.

These results have been expected because the fact that if

coverage between existing business processes and business

processes of ERP solution is under 60 percent, it is not

recommend to choose and implement a particular ERP solution.

Management issues of ERP Management issues of ERP implementation projects – duration of implementation projects – duration of

implementation implementation

Most durations of ERP implementations reported were between 3 month and one year (66.7 percent).

Months SAP NAV Answer PercentUnder 3 1 3 4 9.53 - 6 2 8 10 23.86 9 4 3 7 16.7 9 – 12 3 4 7 16.7More than 12 11 3 14 33.3Total 21 21 42 100

There is a positive moderate relationship between the time of

implementation and the size of a company (r = .464 p<0.01) and also

between time of implementation and the ERP solution (r=.426 p<0.01).

Management issues of ERP Management issues of ERP implementation projects – was ERP implementation projects – was ERP

implemented according to planed time implemented according to planed time

33.3% of implementations lasted longer than they have been

planned and the reasons for that were:

changing scope of implementation,

weak knowledge about functionality of ERP solutions,

passive collaboration within project team during the analyze

phase,

key users have been overloaded with daily tasks so they do not

have time to participate in the implementation process

Management issues of ERP Management issues of ERP implementation projects – changes in implementation projects – changes in

ERP functionality during the ERP functionality during the implementation implementation

Answers to the question “Wheatear scope of expected functionality has changed during the implementation” were:

14.6 percent answered small decrease according to planned functionality,

36.6 percent answered no changes – planned functionality implemented,

29.3 percent answered small increase according to planned functionality

19.5 percent answered big increase according to planned functionality.

nobody answered big decrease according to planned functionality

Major reasons reported for changing the functionality have been:

“during an implementation we found out new functionalities of the

ERP solution for which it would be foolish to release it out of the

project”;

“after analyzing and defining business processes key users

understand importance of the ERP solution better and that was

leading to the increase in scope”,

“bad analysis and defining processes, and bad cooperation with

top management”.

Management issues of ERP Management issues of ERP implementation projects – changes in implementation projects – changes in

costs costs

Answers to the question “Wheatear the costs of implementation

changed according to planned costs” were:

nobody answered much smaller than planned.

4.9 percent have answered a little smaller than planned,

26.8 percent have answered the same as planned,

46.3 percent have answered a little bigger than planned

22 percent have chosen much bigger than has been planned.

Major reasons reported for raising of costs were:

bigger scope of functionality than planned,

more consultants’ hours,

bigger number of interfaces with other information systems as

planned,

persistence at adaptation of ERP solutions to existent processes

and procedures.

Management issues of ERP Management issues of ERP implementation projects – major implementation projects – major unexpected problems during the unexpected problems during the

implementation implementation

To the question “If any big problems have occurred during an

implementation process”:

31.7 percent have answered yes and

68.3 percent have answered no.

Most often problems reported were:

user resistance for change,

bad training and bad user manuals,

unsuitable consultants, bad computer literacy,

poorly included middle management,

the solution has not been tested enough by users,

bad defining of business processes etc.

ConclusionConclusion

Organizations should select the ERP package which:

fits organization,

provides industry functionality,

supports changing business environment,

easily integrates with other information systems in organizations,

vendor implementation support

have availability of implementation accelerators such as training

materials, user procedures, help text, process models etc.

good support after implementation

To be successful with EPR implementation a company has to

take in account the:

implementation strategy,

implementation method (implementation process) and

implementation CSFs.

A lot of ERP implementations are failures, because companies

which bought ERP solutions think that ERP implementation is a

technological and not management issue. Failures in ERP

implementation showed that management issues are

underestimated.