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Issue of October 2003 
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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.

Prashant Karkhanis, Global Head-Business Consulting at Mahindra Consulting

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.

Jason Gonsalves, General Manager-IT & Costing, Goodlass Nerolac Paints

"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

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

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

Avoiding ERP doom
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.

Want ERP? Here's some advice
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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