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MIS Presentation 2012 An Evaluation of ERP Systems Failures Group: ERP Advisors

MIS Presentation 2012 An Evaluation of ERP Systems Failures Group: ERP Advisors. Objectives. What is an ERP system ? What are the Benefits of an ERP system ? Who are the ERP vendors ? What aspects constitute a successful implementation?

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MIS Presentation 2012 An Evaluation of ERP Systems Failures Group: ERP Advisors

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  1. MIS Presentation 2012An Evaluation of ERP Systems FailuresGroup: ERP Advisors

  2. Objectives • What is an ERP system? • What are the Benefits of an ERP system? • Who are the ERP vendors? • What aspects constitute a successful implementation? • What factors are associated with ERP failuresand how to overcome them?

  3. What is an ERP systems? • “They are systems designed to process an organisation transactions and facilitate integrated and real time planning, production and customer response.” • ERP Characteristics • ERPs are packaged software designed for a client server environment. • ERPs integrate the majority of a business processes • ERPs process a large majority of an organization’s transactions • ERPs use an enterprise wide database that typically stores each piece of data at once. • ERPs allows access to the data in real time. (O’leary, 2000)

  4. Functional Aspects of an ERP Source : http://www.inixion.com/images/features3.jpg

  5. ERP life cycle • Deciding to Go ERP • Choosing and ERP system • Designing ERP systems • Should business process or current ERP software be changed • Choosing Standard Model and Process • Implementing ERP: Big Bang versus phased • After Going Live • Training (O’leary, 2000)

  6. Why Implement an ERP system? Tangible Benefits: • Reduce Labour Costs • Reduced material Costs • Improve in Sales and Customer Service • Efficient Financial Management Intangible Benefits: • Information supply chain visibility • New/improved business processes • Product and Process design • Production and Material Management Source : (Leon, 2008 and Cruz-Cunha 2010)

  7. Why Implement an ERP system? • What are ERP Vendors marketing: • Improve alignment of strategies and operations • Reduce costs through increased flexibility • Achieve an end-to-end view across all your lines of business • Drives value for your business • Delivers agility in the face of rapid change Source: http://www.epicor.com/uk/Company/PressRoom/Pages/SuccessStories.aspx • Cast Studies • Drallim – Fluid Controls / • Over 4,400 hours saved per year through process improvements and 21% cut in support costs • Vita Liquid Polymers/ • 80% of customers now pay invoices a week earlier and automated processes mean tighter processes and proactive credit checking

  8. Who are the ERP vendors?

  9. Who are the ERP vendors? Source: Panorama Consulting, 2011 Guide To ERP Systems And Vendors

  10. ERP Vendors Market Share 2010 Source: Panorama Consulting, 2011 Guide To ERP Systems And Vendors

  11. Payback Period By Vendor Tier up to 2010 Source: Panorama Consulting, 2011 Guide To ERP Systems And Vendors

  12. ROI and ROA Performance comparison Pre- and post-adoption for 63 ERP Systems: Source : (C. Jones, Kalmi and Kauhanen, 2011)

  13. How to Measure ERP success? • Lyytinenand Hirschheim(1987), categorized IT project success by assessing the resulting system against • Planned objectives, • User expectations, • Project budget

  14. Highlights from a 2010 ERP Benchmark • Over 40% of organizations are dealing with significant change form ERP system rollout. • Over 60% of organizations suffer from poor visibility to data and poor integration in their old systems. • Organizations expect a lot from their ERP systems. • Most companies are not yet ready for the organizational changes of ERP software.

  15. Some People might have different views

  16. ERP project failure classification ERP project failure could be classified as one of four levels: • Process failure, when the project is not completed within the time and budget. • Expectation failure, when the IT systems do not match user expectations. • Interaction failure, when users attitudes towards IT are negative. • Correspondence failure, when there is no match between IT systems and the planned objectives. (Aloin et al, 2007)

  17. What factors are associated with ERP failures and how to overcome them? Risk categories associated with enterprise-wide/ERP projects: • Organizational Fit • Skill mix • Management structure and strategy • Software systems design • User involvement and training • Technology planning/integration (Sumner, 2000 ; Ojalaet al, 2006)

  18. Risk category : Organizational Fit Risk Factors • Failure to redesign business processes to fit the software • Failure to follow an enterprise-wide design which supports data integration (Sumner, 2000 ; Ojalaet al, 2006) Case Study Hershey Foods Corporation (Wailgum, 2009) Minimising Strategies • Commitment to redesigning business processes • Top management commitment • Following an enterprise-widedesign which supports data integration (Sumner, 2000 ; Ojalaet al, 2006)

  19. Risk category : Skill Mix Risk Factors • Insufficient training and reskilling • Insufficient internal expertise • Lack of business analysts with business and technology knowledge • Failure to mix internal and external expertise effectively (Sumner, 2000 ; Ojalaet al, 2006) Case Study Lumber Liquidators (Kanaracus,2010) Minimising Strategies • Effective use of strategies for recruiting and retaining specialized technical personnel • Obtaining ‘business analysts’ with knowledge of application-specific modules • Effective use of external consultants on project teams (Sumner, 2000 ; Ojalaet al, 2006)

  20. Risk category :Management structure and strategy Risk Factors • Lack of senior management support • Lack of proper management control structure • Lack of a champion • Ineffective communications (Sumner, 2000 ; Ojalaet al, 2006) Case Study The City of San Diego (Krigsman, 2009) Minimising Strategies • Obtaining top management support • Establishing a centralized project management structure • Assigning a ‘champion’ (Sumner, 2000 ; Ojalaet al, 2006)

  21. Risk category : Software systems design Risk Factors • Failure to adhere to standardized specifications which the software supports • Lack of integration (Sumner, 2000 ; Ojalaet al, 2006) Case Study Levi Strauss (Clarke, 2008) Minimising Strategies • Commitment to using project management methodology and ‘best practices’specified by vendor • Adherence with software specifications (Sumner, 2000 ; Ojalaet al, 2006)

  22. Risk category : User involvement and training Risk Factors • Insufficient training of end-users • Ineffective communications • Lack of sensitivity to user resistance • Failure to emphasize reporting (Sumner, 2000 ; Ojalaet al, 2006) Case Study Dorset County (Anonymous, 2010) Minimising Strategies • Effective user training • Full-time commitment of users to project management roles • Effective communications (Sumner, 2000 ; Ojalaet al, 2006)

  23. Risk categories : Technology planning/integration Risk Factors • Inability to avoid technological bottlenecks • Attempting to build bridges to legacy applications (Sumner, 2000 ; Ojalaet al, 2006) Case Study Dillard's Inc (Jarzemsky, 2010) Minimising Strategies • Acquiring technical expertise • Acquiring vendor support for capacity planning and upgrading • Planning for client–server implementation including client workstations (Sumner, 2000 ; Ojalaet al, 2006)

  24. Other Aspects: In 2004, HP's project managers were aware of the risks associated with the ERP rollout. But they could not plan for so many events to happen at once. The project eventually cost HP $160 million in order backlogs and revenue loss that accumulated to five times the project's estimated cost. (Gilles Bouchard CIO of HP's global operations) (Wailgum, 2009)

  25. Strategic critical success factors • Top management commitment and support • Visioning and planning • Build a business case • Project champion • Implementation strategy and timeframe • Vanilla ERP • Project management • Change management • Managing cultural change (Finney and Corbett, 2007)

  26. Tactical critical success factors • Selection of ERP • Consultant selection and relationship • Training and job redesign • Troubleshooting/crises management • Data conversion and integrity • System testing • Post-implementation evaluation • Balanced team • Project team: the best and brightest • Communication plan • Empowered decision makers • Team morale and motivation • Project cost planning and management • BPR and software configuration • Legacy system consideration • IT infrastructure • Client consultation (Finney and Corbett, 2007)

  27. Summary • ERP Systems are not an IT solution but a system that would transform the company into a more efficient and effective organization. • Successful implementation of ERP is complexly tied to multiple factors that needs to be understood by management who are setting the strategic direction of the implementation process. Furthermore, A continuous support and monitoring of the implementation process is required at each stage. • The most important issue in a successful ERP project is an understanding of the company’s business and context requirements.

  28. What's the future will be like?

  29. Reference List: • Lyytinen, K. (1988) "Expectation Failure Concept and Systems Analysts' View of Information System Failure: Results of an Exploratory Study", Information & Management, 14, 1, pp 45-56. • Leon, A. (2008). Enterprise Resource Planning. 2nd ed. New Delhi: Tata McGraw-Hill. pp. 42 • Cruz-Cunha, M. (2010). Enterprise Information Systems for Business Integration in SMEs. USA: Business Science Reference. pp. 155 • Derek C. Jones, PanuKalmi, AnttiKauhanen, International Journal of Production Economics, Volume 130, Issue 2, April 2011, Pages 159-168 ) • Sumner, M. “Risk factors in enterprise-wide/ERP Projects,” Journal of Information Technology, 2000, vol. 15, pp. 317-327. • Wailgum,T. (2009) Focus: ‘10 Famous ERP Disasters, Dustups and Disappointments ‘. CIO [online] Available at: < http://www.cio.com/article/486284/10_Famous_ERP_Disasters_Dustups_and_Disappointments> [Accessed 25 Feb 2012]. • Kanaracus, C. (2010) Focus: ‘ERP Woes Blamed for Lumber Company's Bad Quarter‘. IDG News [online] Available at: < http://www.pcworld.com/businesscenter/article/209886/erp_woes_blamed_for_lumber_companys_bad_quarter.html > [Accessed 25 Feb 2012]. • Krigsman, M . (2009) Focus: ‘San Diego fires Axon over ERP implementation problems‘. Zdnet [online] Available at: < http://www.zdnet.com/blog/projectfailures/san-diego-fires-axon-over-erp-implementation-problems/1960 > [Accessed 25 Feb 2012]. • Clarke, G.(2008) Focus: ‘Levi's suffers profit meltdown in midst of SAP embrace Pants ERP system leaves it without pants‘. Theregister[online] Available at: < http://www.theregister.co.uk/2008/07/10/levis_erp_costs/ > [Accessed 25 Feb 2012]. • Anonymous. (2010) Focus: ‘Dorset County Council computer problems continue ‘. Dorsetecho [online] Available at: < http://www.dorsetecho.co.uk/news/localnews/8625142.Dorset_County_Council_computer_problems_continue/ > [Accessed 25 Feb 2012]. • Jarzemsky, M. (2010) Focus: ‘JDA Software Hit With Judgment in Dillard's Dispute ‘. The wall street journal [online] Available at: < http://online.wsj.com/article/SB10001424052748704198004575310463149768320.html> [Accessed 25 Feb 2012]. • Ojala,M.Vilpola,I. and Kouri,I.(2006) “ Risks in ERP Project – Case Study of IS/ICT Management Capability Maturity Level and Risk Assessment” • Aloin,Di.Dulmin,R.Mininno,V. (2007) Risk management in ERP project introduction: Review of the literature, Information &amp; Management, Volume 44, Issue 6, September 2007, Pages 547-567 • O'Leary,D. ( 2000) Enterprise Resource Planning Systems: Systems, Life Cycle, Electronic Commerce, and Risk, Cambridge University Press • Finney,S. and Corbett,M. (2007) "ERP implementation: a compilation and analysis of critical success factors", Business Process Management Journal, Vol. 13 Iss: 3, pp.329 - 347

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