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ERP: Striking it right
The main causes for ERP failure are not technical or integration
issues. The success of ERP depends on how one handles change, as one's organization
migrates from a legacy system to ERP. by Brian Pereira
ERP became a buzzword in the mid-90s and most of the
large companies readily opted for it. However, many implementations failed for
various reasons. In one instance, a company was driven to bankruptcy because
its ERP project dragged on endlessly. At one point of time, some even had the
nerve to say, "ERP is dead."
Today, many companies boast about their successful
ERP implementations, and can talk endlessly about benefits. So how do these
companies navigate around potential 'problem areas' and strike it right?
ERP software attempts to integrate all departments
and functions across the enterprise onto a single computer system that serves
the individual requirements of different departments. Instead of having discreet
systems for finance and HR, it provides a common system for all.
So if required, the materials department can view pending
orders and instantly calculate the quantity of raw materials to be purchased.
This keeps inventory levels within safe limits and hence controls costs.
While all this may sound like a silver bullet to enterprises,
ERP has gone sour for many companies in the past. The problems have been primarily
with integration. Also, the software required people to change their business
processes too drastically.
Current generation ERP
With the current generation of ERP software there are
fewer integration problems, so ERP projects fail or drag on for other reasons.
Most companies considering ERP today are looking at
migrating processes and data, from legacy systems to modern computer systems
running an ERP application. Fresh ERP implementations, or 'greenfield' implementations,
are rare. And migration brings along a whole set of problems, the primary one
being people.
An ERP implementation impacts people, systems, and
the organization as a whole. And barriers are expected from these areas since
work processes are expected to be altered when ERP is introduced. Business processes,
roles, and responsibilities would undergo change. And when this happens, the
organization will encounter a sticky issue called 'resistance to change.'
Since ERP introduces transparency in operations and
brings about more discipline, people who are empowered are bound to oppose it.
People who are very used to a particular system or a certain set of processes,
won't accept an alternative like ERP so easily and won't adapt to the new system.
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Prashant Karkhanis, Global Head-Business Consulting
at Mahindra Consulting
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Besides employees, people from the extended enterprise
will also protest. Vendors for instance may not take to the idea of updating
data in the ERP system through a Web interface. Change is welcome if it reduces
workloads or gets the job done faster. But ERP does not offer exactly that.
ERP consultants say the resistance to change can be
minimized through initiatives like change management, periodic training, 'hand-holding,'
organization preparedness, and of course, management support.
Change management
Change management is about handling the issues arising
due to differences in legacy processes/ systems and the new ERP system. Business
processes may have to be re-engineered for ERP, something that's bound to draw
disapproval, especially from function heads.
User organizations and consultants think of ways to
motivate employees and get them to accept the new system. Rewarding employees
with cash incentives is one such approach. Another approach is to involve all
users, right from the beginning, or even before the project begins. This helps
get the 'buy-in' for ERP.
Mahindra Consulting, organizes workshops for users
at various levels (end-users, operational managers, executives), within the
organization. This helps to involve them in the processes of business process
design, systems configuration, and testing.
"Such involvement helps us get their buy-in for
the changes in the business processes, system, and roles & responsibilities,"
said Prashant Karkhanis, Global Head-Business Consulting at Mahindra Consulting.
Nalakumar R.S., Corporate Champion, IT & E-business,
Emerson Network Power (India) said, "You have to ensure that there is a
business buy-in for any process changes that you are bringing in. The business
benefits must be realized at the user level. This must be done before you roll
out ERP or before implementing a new change."
Satish Gaonkar, Head-Consulting Services Practices,
Blue Star Infotech feels the HR department can play an important role in handling
change among employees. But HR must be involved at the beginning of implementation.
Top management commitment
The other important requirement to handle change is
top management support or commitment. ERP should be treated as a business project—not
an IT project driven by the Information Systems department.
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Jason Gonsalves, General Manager-IT & Costing,
Goodlass Nerolac Paints
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"ERP requires top management commitment and it
should be business-driven. So it's important to get the involvement of the function
heads and top business executives," said Zoeb Adenwala, Chief-IT, Pidilite
Industries.
Dhruv Chadha, Enterprise Solutions-Marketing, Infosys
Technologies, said an ERP implementation initiative is generally triggered by
business need to increase productivity and cut operational costs. "However,
the ROI is generally not reflected in the company bottom-line immediately, and
thus most of these projects don't have complete support from top management,
which is imperative for such change initiatives."
The involvement of top management can be at different
levels. For instance, one company conducted 'sunset meetings' for functional
heads and key users during the implementation phases. The chairman would attend
these meetings for a few minutes to review the day's work, and hence showed
he was involved in the roject.
In another instance, the functional heads would enter
data into the new system rather than leave this tedious task entirely to other
users.
"The important thing is that management support
should be visible," said Ravi Kathuria, General Manager, Enterprise Solutions,
Baan Info Systems India.
Organization preparedness
An organization must also be prepared for ERP and be
clear about its requirements. This necessitates knowing the business objectives
and goals, and mapping the processes to these. ERP is just the enabler that
automates the entire process.
The objective for ERP must also be identified, documented,
and communicated.
"For selecting ERP, the critical business processes
should be identified. The ERP solutions considered for evaluation should at
least meet these requirements," said Ravi Kathuria (Baan Info Systems India).
Satish Gaonkar (Blue Star Infotech) said assessing
the readiness of an organization has to be done from three dimensions: People,
Systems & Infrastructure, and Processes in the organization.
Ganesh Pandit, Sr. Consultant, CSP, Blue Star Infotech
said, "In the evaluation stage users should articulate their business requirements
and see whether a particular ERP solution meets their needs. This way you close
the gap between what the package offers and your business requirements. Implementation
should not begin without this."
Often, employees have high expectations and think ERP
will solve most business problems. Consultants say it is necessary to make realistic
and accurate expectations before embarking on an ERP project.
"This is addressed by preparing a project charter
stating the realistic expectations, and key performance parameters to be focused
on during the project, and project measurement. Having defined this, it is necessary
to communicate this to the stake holders in the ERP project," said Prashant
Karkhanis (Mahindra Consulting).
Communication & training
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Nalakumar R.S.,
Corporate Champion, IT & E-business, Emerson Network Power (India) |
As we've said before, most issues that arise while implementing
ERP concern the people in the organization. That's why it is important to communicate
the benefits and improvements that ERP can bring in. Users must also be trained
to use ERP.
There has to be good communication between the project
team, end-users and customers. This will ensure continuous feedback so that
problems are sorted out quickly. Poor communication has often been the reason
for failed ERP projects.
Arun Gupta, Senior Director, Business Technology, Pfizer,
said, "It is important to communicate the benefits and functionality of
ERP to users. This should be done through continuous training sessions."
Before implementing ERP it's important to get a consensus
from all employees in the organization.
"We handled this by maintaining strong communication
channels with every employee. There were feedback and training sessions where
doubts and difficulties were cleared. We also told employees that there was
no second option," said Jason Gonsalves, General Manager-IT & Costing,
Goodlass Nerolac Paints.
Parting wisdom
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Ganesh
Pandit, Sr. Consultant, CSP, Blue Star
Infotech |
ERP implementation has lots to do with business processes,
change management, people, and the organization as a whole. Rather than spending
too much time evaluating ERP solutions, it would be best to visit sites that
have successfully implemented ERP and have benefited from it.
Talk to people who were/ are in the core team. Talk
to functional heads and core users.
If possible, study cases in companies that are in your
industry and try to identify parallel environments.
Read up as much as possible, about the key issues that
can lead to ERP failure. Industry persons can also offer advice on what you
should consider before evaluating ERP solutions.
Brian Pereira can be reached at brianp@networkmagazineindia.com
| There are certain issues that, if not tackled
well enough, can lead to a failed ERP project, or one that drags on forever.
An old adage says 'Experience is the best teacher,' so we can learn from
the mistakes committed by others. We spoke to experienced users (one was
involved in three ERP projects over a nine year period), consultants and
vendors to find out what these issues were.
Planning
The importance of good planning can never
be overemphasized. Planning enables you to identify the associated risks,
so that you can mitigate these in advance. Planning also ensures that
ERP yields tangible or intangible benefits.
"We advise our clients to plan the implementation
exercise, thinking through the complete implementation cycle, giving due
attention to the change management and user training issue," said
Dhruv Chadha (Infosys Technologies).
Monitoring
Once ERP is implemented there is a period
of stabilization. This is when you should monitor the system and observe
how users adopt it.
Data continuity
You also need to ensure that business is
not interrupted or affected during the ERP project. To do this you need
a smooth transition as you migrate data and processes to the ERP.
Preparation
You can best leverage on an ERP system if
the input data is accurate. Some like to use the term 'data cleansing.'
This could involve checking the Bill of Materials and other masters.
Preparation also means cleaning up business
processes and making them more efficient before mapping them to the ERP.
Core team
ERP's success also depends on the type of
people in the core team. Select the brightest and the best from IT and
business functions. It would be even better if those in the core team
are relieved from regular duties during the course of the project. Preferably,
the core team should work undisturbed from another site, away from their
respective work stations.
Big bang approach
A mistake that some organizations make is
to try to implement all modules of ERP in the first phase. Some even dare
to implement SCM, CRM, or business intelligence before users get familiar
with ERP.
Arun Gupta (Pfizer) said, "The big bang
approach is not going to work. It has to be incremental and sustained
releases."
Gupta, who has been involved in various ERP
projects, said organizations that chose end-to-end implementations realized
their mistake mid-way through their projects.
Over-customization
This has been the cause for failure especially
with traditional ERP. Businesses that expected too much out of ERP would
customize it repeatedly, and would then run into a whole set of technical
problems. Then they would call in consultants to sort out the mess and
pay hefty sums for such services.
"You should be willing to change your
processes rather than change the package. That means redefining roles,
re-engineering processes, and restructuring the organization," said
Jason Gonsalves, General Manager-IT & Costing, Goodlass Nerolac Paints.
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| Sanjay Agarwala, Director, Eastern Software
Systems said:
"Since ERP covers a wide range of functions,
and each function has a large requirement set, it is very important that
the roll-out plan be defined correctly, in consultation with the ERP implementation
team. A phased roll-out, where experiences from the previous phases are
applied to subsequent phases, is an efficient way of implementing ERP."
Ravi Kathuria, General Manager, Enterprise
Solutions, Baan Info Systems India said:
"Before going in for ERP, align your
IT strategy with the business strategy. Unless you do this you won't get
any real benefit from ERP."
Tariq Farooqui, Country Manager, JD Edwards
India (a PeopleSoft company) said:
"The most important thing to understand
is that ERP is a people's project. The success or failure of a project
depends 60 percent on people, and to a lesser extent on hardware, software,
and other elements."
Geet Lulla, Industry Head, Discrete Manufacturing,
SAP India Pvt Ltd. said:
"During implementation you should avoid
'scope creep.' Define the scope at the beginning of implementation and
the time to complete the work. If you need to make additions, do that
during phase two."
SBS Grover, Senior Director for E-business,
Oracle India said:
"When you are hiring an implementer,
ensure that they have suitable experience and check what implementations
they have done in the past."
Yash Nagpal, Managing Director, Navision
Software India said:
"A readiness assessment should be performed
before you spend time and money analyzing your business processes and
selecting software."
Arun Gupta, Senior Director, Business
Technology, Pfizer said:
"The big bang approach is not going
to work. It has to be incremental and sustained releases."
Jason Gonsalves, General Manager-IT &
Costing, Goodlass Nerolac Paints said:
"Every vendor or partner can bring to
the project certain skills and competencies. The organization should recognize
those skills and bring all those skill sets and synergies together."
Ajay Seth, CIO, Escorts Agri Machinery
Group said:
"Get agreement on your business processes
from the people who are going to be using them. Try to clean up those
processes and make them more efficient before implementing ERP."
Sethumadhavan I., CEO, TEI Technologies
said:
"Spend time understanding what the ERP
solution can and cannot do for you. Then decide if you want to do the
customization immediately or in the second phase."
Nalakumar R.S., Corporate Champion, IT
& E-business, Emerson Network Power said:
"Take the modular approach during ERP
implementation. Look at all the modules in the package carefully and see
which ones suit your business processes."
Mani B. Mulki, General Manager (Information
Systems), Godrej Industries said:
"Don't spend too much time evaluating
ERP packages. Have a short evaluation phase, but do it in a structured
manner."
Prashant Karkhanis, Global Head-Business
Consulting at Mahindra Consulting said:
"It is very important to define realistic
expectations from ERP investment."
Dhruv Chadha, Enterprise Solutions-Marketing,
Infosys Technologies, said:
"Accurate planning is very crucial to
the project. The cost and time overruns have a great impact on the expected
returns."
Satish Gaonkar, Head-Consulting Services
Practices, Blue Star Infotech said:
"You need to select the best and brightest
for your project implementation. These people should be good communicators
and should be passionate about their work."
Ganesh Pandit, Sr. Consultant, CSP, Blue
Star Infotech said:
"During evaluation, users should articulate
their business requirements and see whether a particular ERP solution
meets their needs. This way you minimize the gaps between what the package
offers and your need."
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