Management of ERP solutions

1. Management of ERP solutions Samo Bobek Simona Sternad ICMIS 2010 Allahabad, India

2. Outline • 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

3. ERP 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.

4. 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.

5. ERP solutions implementation A project phase model (Parr and Shanks) divides ERP implementation into three major phases: • 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. • project phase has five sub-phases: setting up, reengineering, design, configuration and testing, and installation. • enhancement phase may extend over several years and includes the stages of system repair, extension and transformation, and continuous improvement.

6. Shields also talks about three stages of ERP implementation projects: • first stage consists of pre-project activities including initial commitment. • second stage deals with specific project implementation activities: start, manage, analyze, configure, test, change, support, prepare and go-life. • 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.

7. Bancroft, Seip and Sprengel defined a five phases model: • 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. • 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. • To-Be phase consists of high-level design, detailed design, followed by interactive prototyping.

8. Construction and Testing Phase consists of development of a comprehensive configuration, its testing with real data • Implementation Phase itself consists of building networks, installing desktops and managing user training and providing support.

9. ERP solutions implementation strategies ERP solutions are implemented according to following scenarios: • big bang approach, • phased approach, • parallelapproach, • process approach • hybrid approach Strategy chosen depends on organization size/complexity, industry characteristics, implementation goals, resources provided and expected timeframe

10. ERP solutions implementation methodologies 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

11. SAP solution implementation methodology 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:

12. Project Preparation consists of enhancing organizational readiness and preparation for the project. • Business Blueprint deals with the scope which is narrowed to fit the industry-specific processes to reflect the future vision of a business. • Realization means that the business blueprint becomes reality - the system is configured and tested. • 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 • 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.

13. Microsoft Dynamics solutions implementationmethodology 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.

14. 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.

15. 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

16. Success of ERP implementation projects 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.

17. 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.

18. Critical success factors in ERP implementation 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 involvement • Clear goals, objectives and scope • Project team competence and organization • User training and education • Business process reengineering • Change management • Effective communication • User involvement • Data analysis and conversion • Consultants • Project management • Project champion • Architecture choice (package selection) • Minimal customization

19. Top 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.

20. Clear 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.

21. Project 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.

22. User 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.

23. Business 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.

24. Change 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.

25. Effective 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.)

26. User 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.

27. Data 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.

28. Consultants 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.

29. Project 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.

30. Project 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.

31. 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.

32. Minimal 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.

33. Research of CSF in SAP and MS Dynamics 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.

34. Finding concerning the use of SAP 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).

35. Research 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.

36. ERP implementation CSF in SAP projects In companies in our sample where SAP solution were implemented with the ASAP methodology, CSFs were ranked as follows: • Clear goals, objectives, scope, and planning • Top management support and involvement • Project team • Project champion • Communication between project team and organization • User involvement • Consultants • Communication inside project team • Business process reengineering • User training and education • Minimal customization • Project management • Data analysis and conversion • Change management • Architecture choice

37. ERP implementation CSF in MS Dynamics NAV projects In companies in our sample where MS Dynamics NAV solution were implemented with the SureStep methodology, CSFs were ranked as follows: • Clear goals, objectives, scope, and planning • Top management support and involvement • Project team • User involvement • User training and education • Communication inside project team • Business process reengineering • Data analysis and conversion • Communication between project team and organization • Project champion • Minimal customization • Consultants • Project management • Change management • Architecture choice

38. Comparing ERP implementation CSF in SAP 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. MXN, MXS = represents arithmetic mean

39. Comparing ERP implementation CSF in SAP 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.

40. Comparing ERP implementation CSF in different implementation phases Arithmetic mean for CSF’s regarding phases of SureStep methodology and ASAP methodology R1- Clear goals, objectives, scope, and planning R2 - Top management support and involvement R3 - Project champion R4 - Project team R5 - Project management R6 - Communication inside project team R7 - Communication between project team and organization R8 - Consultants R9 - User involvement R10 - User training and education R11 - Change management R12 - Business process reengineering R13 - Architecture choice R14 - Minimal customization R15 - Data analysis and conversion

41. Comparing ERP implementation CSF in different 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.

42. 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.

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

44. Management issues of ERP implementation projects – why particular ERP 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.).

45. Management issues of ERP implementation projects – implementation 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.

46. Management issues of ERP implementation projects – satisfaction with 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.

47. Management issues of ERP implementation projects – changes in business practice because of ERP implementation 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.

48. 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.

49. Management issues of ERP implementation projects – duration of implementation Most durations of ERP implementations reported were between 3 month and one year (66.7 percent). 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).

50. Management issues of ERP implementation projects – was ERP 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