Enterprise Resource Planning

University Degree Business and Administrative studies

Abstract

ERP systems implementations are very delicate in nature, although the size and range of implementations are different with respect to size of business organization and divisions operating in it. These implementations are vulnerable and susceptible to the internal factors. Those internal factors form the integral part of any business processes. These internal factors range from slightest change in business process to the worse cases of change management, over budgeting, implementation delays and so forth.

This research paper is based on the study of above mentioned factors that prevent the organizations from implementing ERP systems into their businesses and the strategies that helps in changing failure of implementation into critical success factors of implementation.

Introduction

Enterprise Resource Planning is a system, which support and serve various business functions and processes with the help of different modules of software packages specifically designed for the need of businesses. In this system, software packages or modules range from financial accounting, inventory management, orders, purchasing, and human resources.

Why businesses need this system?

Before the evolution of these types of systems, every business process had to be done manually or through any other proprietary software which does not integrate into whole business processes as a result, businesses productivity and efficiency decreases. With the help of ERP software businesses give more concentration on their functions, increase over all efficiency and put their business into profit gear.

ERP Systems can improve communication, accountability and responsibilities in the business organizations (Koch 2002).

ERP Implementation

The biggest problems are business problems, companies fail to reconcile the technological imperatives of the enterprise system with the business needs of the enterprise itself.’ Before the implementation of any system, managers should sit down and think over each core business processes and information in the company.

Successful implementation of ERP system reduces cycle time, increase production, improve customer support, and increase overall efficiency. Apart from ongoing benefits to the organizations there are other factors that must be kept in consideration in order to have successful implementation of new systems or upgrading of existing system.

Critical Success Factors In Relation to ERP Implemention

Some of the factors associated with systems implementation are:

Long Implementation Delays
Implementation Costs Product Support/ vendor selection
Technical Issues
Failure Rates
Organizational Acceptance
Change Management
Project Management
Leadership
Integration and Testing
Data Conversion

Implementation Cost

Every project needs to be funded, require good budgeting and forecasting. Overlooking this factor can result in unanticipated costs, over budget expenses that can further result in legal/professional complexities and even project termination. If this mission critical factor is given due attention such adverse results can be avoided ...

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Critical Success Factors In Relation to ERP Implemention

Some of the factors associated with systems implementation are:

Long Implementation Delays
Implementation Costs Product Support/ vendor selection
Technical Issues
Failure Rates
Organizational Acceptance
Change Management
Project Management
Leadership
Integration and Testing
Data Conversion

Implementation Cost

Budget allocation is a very critical and complex task. For the foreseeable future budgets are prepared depending upon the prevailing market trends and also organization’s last fiscal year or quarter performance. ERP projects require substantial amount of budget allocation. Company’s previous experience with ERP systems should be considered, while evaluating cost of implementing ERP systems (Nolan and Norton 2000)

Variations exist in different companies. If businesses choose to hire consultants that can be very expensive option because consultants ‘make business as a profitable docking station’ and once the managers are dependent on the consultants either for minor issues or technical issues there is no turn back point. They charge for their expertise that results in an unanticipated cost of implementation

While evaluating the budget for ERP system projects other costs related with the project should also be considered. These additional costs associated with the projects are: Training, Integration and testing, data analysis and data conversion (Slater 1998 and Koch 2002).

Further more consult with vendors for the education, technical support, maintenance, and also check their alignment with budget and schedule. The following are the average costs of ERP system project:

Hardware cost: 10-20%, software cost: 40-50% of total project costs, training cost: 24-30%, consultant cost 40-60%, Maintenance costs: 12-15% of software costs (Stenbeck 1998).

Their importance is inevitable and their denial can be in massive unanticipated cost that can lead to the failure of ERP project (Slater 1998).

Long Implementation Delay

ERP implementation requires long implementation time and patience depending upon the size of organizations and number of modules required for organization’s department or division.

ERP implementations usually take nine to 12 months for small companies, 12 to 14 months for medium sized businesses, and three years or more for large, multidivisional organizations.

Project Management and Planning

Good project planning and management are the basic key factors in the success of any business. A good planning in conjunction with management can lead businesses towards the direction of prosperity, success and competitive advantage over competitors in the market. ERP project or system need to be properly planned and generally requires more time than any other Information System project. ERP projects are big and expensive, huge amount is invested in these projects and require substantial amount of time for the analysis of various business processes and skills required for operation of new software. Part of project management should be risk management this should be taken into serious considerations due to the reason of inherent risks associated with the large projects (Reed Elsevier Business Publishing, Ltd 2000; Computerworld, Inc 1999).

Co-ordination of ERP implementation team efforts and planning could be one of the success factors, which helps in reducing risk of failure. ERP implementation team should constantly review the original requirement in order to see that these are being met properly and in control. Senior management’s time and commitment is very important for the success of project (Reed Elsevier Business Publishing, Ltd). Build an executive management planning committee that understand ERP, efficiency, support cost, has decision-making powers through which all obstacles and hurdles should be removed can lead to success of ERP system project (Computerworld, Inc 1999).

Change Management

Training

Employee training is a major problem for many organizations. It’s the human nature that does not accept changes quickly. Most people do not want to come out of their comfort zone. They are reluctant in adopting new changes. In order to overcome this problem most organizations are following strict rules because training is the biggest expenditure due to the technology based nature of businesses.

To overcome the training factor, it must be done with the help of documentation and compiled with figures, which helps in resolving critical problems during normal operation of business. Vendor’s documentation should be used. Training should be the integral part of ERP project implementation, top-level management must give due consideration towards this issue. Considerable amount of money and time is required towards this issue. As one research shows it’s importance by devoting 24-30% of software cost (Stenbeck 1998 and AllenWeb 1998).

Training should be started before implementation. This will help employees in familiarizing with the new system. Not only user manuals are helpful, they require hands-on experience as well in order to perform business operation successfully. Familiarization with the system helps businesses in smooth implementation and prior gained knowledge of system can help in boosting of confidence. Educated and trained user will support the business (AllenWeb 1998).

Faster the implementation and learning process quicker will be the benefits for the organization (Macvittie 2001).

Technical Issues

Data Accuracy And Conversion

In order to implement an ERP system successfully data must be accurate and up-to date for proper functioning of system. Efficient and effective techniques should be in place to ensure data integrity and accuracy and this should form the primary priority of any ERP system implementation. Negligence will result in enormous delays in the process of implementation

Clean data are the requirement of the most ERP processes and this may require time and man hours, which in result cause unanticipated expense. (Stenbeck 1998 and Slater 1998)

Data integrity and accuracy in order to data transfer and conversion from current business system to ERP system can be done by two methods: manually and electronically. This transformation must be thoroughly analyzed. The best way to analyze these data is the group who owns and uses these data; any anomalies and defect will cause a risk in conversion for the organization (Hanes 2002).

Vendor Selection

Selection of ERP vendor involves complexities and high degree of evaluation. Businesses should keep their processes and their strategies in consideration while selecting any software vendor and should not overlook the usual business processes. This requires comprehensive strategy and methodology in selection of software vendors, very few organizations give time for recognizing their business needs (Donovan).

Selecting vendor is not an easy task many factors need to be considered apart from software functionality, durability, financial stabilization (AllenWeb 1998b). Most ERP vendors provide numerous support to businesses, some deal in one area of business, while other deal in different areas (Macvittie 2001). As a result it is crucially important that, ERP system should integrate with other ERP system packages if organizations are using any. Organizations should recognize their need from inception of ERP system project and select only those vendors that provide greater integration and full product support.

Conclusions

Implementation of new information system is often more difficult than anticipated because of organizational change requirement. Since information systems potentially change important organizational dimensions, including the structure, culture, power relationships, and work activities, there is often considerable resistance to new system.

Appropriate strategies can be applied to ensure the correct level of user participation in the systems development process and to minimize user resistance. Information system design and the entire implementation process should be managed as planned organizational change. Participatory design emphasizes the participation of the individuals most affected by a new system (Laudon 1996)

We often look to technology to solve what are fundamentally human and organizational problems. We often fail to realize that information technology is no better than the skills of knowledge and information workers who use it. Ultimately, the impact of computers is decided by the intelligence of the user. Information technology is a mirror for both organization and individuals.