Factors influencing the success of ERP implementation

The Enterprise Resource Planning (ERP) system has evolved over the past two decades. By ERP I meant a system with a user base of at least 200+ and more than a million dollars in investment.

The approach to implementation can be step-by-step.

Stage 1:

ERP implementation has its own set of challenges from the conceptualization stage to actual usage and beyond. I thought of sharing my views on what can primarily contribute to the success of ERP implementations.

These factors listed below are more related to project management, especially the software implementation part.

Management support and trust: This is the most important factor that determines the success of an ERP project. Any entity or company must invest effort and time to analyze the need for an ERP system before making an ERP system decision. A company capable of investing more than a million dollars would definitely have some kind of legacy system. You would run the ERP function through legacy assets to some extent, so it is important to do the following as a first step.

1. Cost-Benefit Analysis.

2. Return on Investment.

When considering implementation costs, besides licensing and consulting costs, it is important to consider post-implementation maintenance costs, and these also depend on the size of the implementation.

Both need to be worked out and I would suggest only if management is happy with the above estimates and anticipates that a new ERP system will be needed.

Selection of an ERP product: Once the decision has been made to implement an ERP, the next step is to find the right ERP product for the company. Some factors that I believe are essential when choosing ERP products are:

The suitability of the product for its business, the support provided by the vendor, future upgrades and scalability, cost and availability of consultants to provide support in the future must be considered in addition to pricing before selecting the product.

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Implementation Approach: ERPs can be customized to meet the needs of an organization, this is commonly referred to as “customization”. Customization can close the gap from the business solution perspective. However, it is always better to avoid customization or at most keep it to a minimum considering the following factors.

• Additional costs for development and testing.

• Maintenance costs even after use in production.

• Any business process change could affect the customization and this would require customization improvement and thus costs.

• For future upgrades, the customization must also be updated, which would incur costs.

All of the above factors require management to play an important role in the success of the implementation and they can be considered as the pre-phase or phase 1 of the ERP project implementation.

Stage 2:

“One Team”: Once the decision to deploy ERP has been made, the next step is to set up a steering committee, which will play an important role in following the project through to the successful implementation of the ERP system and proactively addressing risks. Ideally, the steering committee should have appropriate representation from management and various vendors associated with the project. An ERP project can have different providers such as:

• Hardware

• servers

• Operating systems

• Networks

• Software

• Licensing

• Consulting or IT service for implementation, training & support

It would be a good option to have a project management office (PMO) that takes care of the daily coordination reporting to the project board. Each of these tasks performed by providers depends on the other provider’s launch. Therefore, the PMO office should properly control all the tasks performed by the vendors.

Schedule, budget, scope: From this phase of the project, project management plays an important role in the success of the project. Preliminary budgeting would have been done in “Phase 1” of the project, but these would be more of an approximate number (20-25% variation). At this stage, a more accurate estimate needs to be worked out.

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The ERP implementation also has another stream that depends on the successful implementation of the project. Project management tools/software can be used to track some of the key project related parameters.

Project services, sign-off & change requests:

The project as such can be divided into different phases with a work breakdown structure (WBS) with deliverables defined for each milestone or phase, the sign-off and change request process agreed with all stakeholders. This should be brought about by the PMO team and agreed upon with the “Steering Committee”.

Up to about phase 2, it’s more about setting the ground rules for a successful implementation of the project. All of this can take a lot of time.

Stage 3:

Business process engineering or re-engineering: An ERP system needs to be configured to work as expected. The business processes must be assigned and set up for the ERP product.

The process from requirements gathering to deployment requires a coordinated effort between the functional consultant and the business process area owners through workshops. An iterative approach must be followed, ie the system must be set up 2 to 3 times to reflect the requirement and refined if necessary before actually doing the setup in the production system. Such iterative approaches to assigning companies to systems are referred to as “Conference Room Pilots” (CRP).

Data migration from the legacy system and its strategy, interfaces to the previous system must be defined, coordinated and tested.

Training: Sometimes end-user training is overlooked. Inadequate training is one of the causes of bottlenecks in successful implementation. When proper training is in place, it can be seen that more than 60-80% of post-go-live issues are related to clarification, therefore proper importance must be given to training. If possible, it is better to devise a strategy for measuring training effectiveness. There are some considerations that training can be done towards production relocation. However, it is better to provide training from the business process definition stage, so that the user can appreciate the changes even if the business process changes.

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Support Team & Cutover Planning. It is equally important that a plan is also drawn up for the support team to be on site after go-live. Normally the implementation team would be handed over to the support team. The support team is either internal or outsourced.

Transition planning means the activities that would be carried out up to the time when users stop going into the legacy system and by the time the user starts using the new ERP system. Efforts must also be made towards cutover planning, particularly the activities of how the reconciliation of the old and new ERP systems would be carried out after go-live, and what activities would be carried out during the cutover period with each assigned owner task.

Go-Live and Beyond: Beyond go-live, there is a period of time required for the system to stabilize. It’s also easier said than done. Although these can be guidelines for a general scenario, each ERP project is unique and has its own set of challenges and changing situations based on various factors. This is where project managers and PMO can play a crucial role in getting the project safe and thereby achieving the end goal of a successful implementation.