Critical success factors in ERP System

How does one increase the likelihood of ERP success and ERP benefits realization? Many assume success or failure is the fault of the software you purchase, but in reality, 95% of a project's success or failure is in the hands of the company implementing the software, not the software vendor. Here are just a few ERP implementation critical success factors that we have seen:

1.       Focus on business processes and requirements first. Before reviewing how the new system performs business functions, organizations should not only review their current processes but define their ideal process. Current business processes may have been designed to fit a particular system; you may support the system but do nothing for your business needs. Once you have your future processes defined you can perform a fit/gap with the new software measuring against where you want to be rather than where you have been.

2.       Focus on achieving a healthy ERP ROI (Return on Investment), including post-implementation performance measurement. This requires doing more than just developing a high-level business case to get approval from upper management or your board of directors. It also entails establishing key performance measures, setting baselines and targets for those measures, and tracking performance after go-live. This is the only way to maximize the business benefits of ERP.

3.       Strong project management and resource commitment. At the end of the day, your company owns the success or failure of a large ERP project, so you should manage it accordingly. This includes ensuring you have a strong project manager and your "A-players" from the business to support and participate in the project. Strong Project managers know the project inside and out, they always think beyond the scope of the project. They are able to think far ahead and map out potential risks.+ They create and seek opportunities (whether it is efficiency gains, increased team spirit, cost reduction) to improve themselves, the team, the project or the outcome.

4.       Commitment from company executives. Any project without support from it's top-management will fail. This is especially true with a program that affects the functional area of the organization. Top managers must not only offer moral support to ERP development, they must offer functional support through planning time for cross-functional development teams. Support from a CIO or IT Director is fine, but it's not enough. No matter how well-run a project is, problems arise (such as conflicting business needs), so the CEO and your entire C-level staff needs to be on board to drive some of these - Motivational incentives are often necessary to get employees in each department to accept changes in their work flows and job processes.

5.       Take time to plan up front. An ERP vendor's motive is to close a deal as soon as possible. Yours should be to make sure it gets done right. Too often, companies jump right in to a project without validating the software vendor's understanding of business requirements or their project plan. The more time you spend ensuring these things are done right at the beginning of the project, the less time you'll spend fixing problems later on.

6.       Ensure adequate training and change management. Changing software means changing processes, procedures and even policy. Organizations willing to change are most successful with ERP implementations. Change must be accepted and communicated from the top of the organization to the bottom. So, ERP systems involve big change for people, and the system will not do you any good if people do not understand how to use it effectively. Therefore, spending time on money on training, change management, job design, etc. is crucial to any ERP project.

7.       Make sure you understand why you're implementing ERP. Similar to other prominent 21st century enterprise-wide business systems like customer relationship management (CRM) and supply chain management (SCM), ERP success begins with the establishing of clear objectives. It's easy to see that many big companies are running SAP or Oracle and maybe you should too, but it's harder to consider that maybe you don't need an ERP system at all. Perhaps process improvement, organizational redesign, or targeted best-of-breed technology will meet your business objectives at a lower cost. By clearly understanding your business objectives and what you're trying to accomplish with an ERP system, you will be able to make a more appropriate decision on which route to take, which may or may not involve ERP.

Concept Selling

CONCEPT SELLING:- The whole philosophy of concept selling is to reach a new level of market place whom were unaware of the true benefits of our clients products or services, prior to our initial contact with them. There are many benefits associated with our ‘concept selling’ approach, however, we recognise that they are based around the following principals:-

1) Automating, Improving or streamlining a business process.

2) Reducing labor and operational costs.

3) Improving overall operational business efficiency.

4) Optimizing total efficiency within a company business model.

5) Alleviating process headaches or intricate reporting procedures.

6) Increasing operational productivity verses profitability.

7) Improvements to reduce costs and alleviate pressures put on them by their clients demands.

8) Business Improvements ‘knock-on-effect’ will increase customer satisfaction & retention.

9) Competitive & Strategic advantage.

10) Many other benefits.

Implication of ERP systems on Business organizations:

Enterprise applications have been in existence for a very long time. The advancements of enterprise applications are none other than the popular Manufacturing resource planning, material resource plans and the latest throb enterprise resource planning. The only distinguishing feature of one after the other is that they undergo improvement constantly and out beat in some aspect.

Some of the enterprise applications are as follows

●      Management Information Systems
Management Information Systems are the systems that help in canalizing the data and processing them into information. This includes systems and operations as well. It is important both from the academic and industry point of view. The functioning of management information systems is like that of a computer. Infact management information systems are itself an important component for the working of a computer. It is for this reason MIS is citied to be an important factor study in Information technology and engineering. Management information systems have to be implemented after careful planning.

●      Information Integrated Systems
They are helpful in ensuring that the information processed reaches the concerned persona and in the proper time and place. They are instrumental because if they are not properly done it defeats the very objective of management Information Systems. They are implemented by way of discussing with committees. Companies do the mistake of neglecting their suggestions or dropping them (the committee members) halfway. It is strongly advised to refrain from both.

●      Executive Information systems
This is an enterprise application that is aimed at helping the executives in taking decisions quickly. This is strategically designed in a manner that it provides the required information to the executives and senior managers so that they can immediately act upon or forward the proposals if any to the board of directors in the company. This system is designed in such a manner that it helps the executives by conveying it in a form understood by them.

Example:-

Here are few general rules to remember when selecting an ERP vendor. we should keep these issues in mind throughout your selection and evaluation process:

●      There is no such thing as a “one size fits all” ERP system, since each should be tailored to the needs of the individual company.

●      For many, risk mitigation is a priority in the ERP vendor selection process. This is a valid goal. Careful planning, clear communication rigorous vetting of candidate vendors is a good initial step in minimizing the risk of an implementation disaster.

●      Realize that getting people to change how they do their daily jobs is the most formidable challenge in getting any ERP system successfully implemented. That’s why it is critical to have high levels of involvement in your company from the beginning.

●      All products have specific strengths and weaknesses that are more dependent on your objectives than they are on technology.

●      Most systems are either built to specialized needs or have evolved from a specialty application, meaning they are naturally stronger in some areas and weaker in others.

●      Beware of any software vendor that says their suite of applications can totally fulfill all of the unmet needs your organization has for an ERP system. There is no perfect fit—every company’s needs are slightly different and customization is always required.

●      You might need help. Its fine to solicit help from a third-party consultant, but be diligent about who you choose. Be sure that they really are totally impartial, vendor neutral and objective. Many can bring certain biases or prejudices to the party.

●      Beware of turnkey implementation promises. You should be heavily involved in the implementation so that you can be sure you will derive the value you paid for.

●      Your final selection will more than likely come down to certain intangibles, such as your level of trust with one vendor versus another.

●      Ask for several references in your specific industry, and then visit those implementations (if possible) in person to see how they are using the ERP system to attain their goals.

●      Finally, there is your team. Remember that an ERP system will touch or affect almost everyone in your company at some point. Almost every business function will need to interface with, be directed by, supply information to, or extract decision-support information from your system.

ERP Selection Methodology refers to the process and steps you take to evaluate and choose a new Enterprise Resource Planning System.

Phase I – Strategy and Requirements Definition

This phase develops the vision for the future ERP system taking into consideration the key drivers for the company from both inside and outside the company.

The following are the major tasks that occur in this first phase:

●      Develop a clear understanding of your current business and information systems

●      Interviews are scheduled and held to understand the company’s future plans and focus

●      Working with top management, develop the top four or five strategic objectives required to achieve the company’s plans for the future

●      Review technology status and trends based on your understanding of the “best of class” organizations

●      Develop a high-level “Future State” model that describes the attributes of the future system required to support the company’s vision for the future.

●      Develop a detailed list of specific and distinctive requirements that must be supported by the new ERP software system

●      Develop a Long List (8-10) of ERP Vendors based on initial understanding of your requirements

●      Research each vendor’s product functionality and features as well as key vendor issues/deficiencies to arrive at the short-list finalists

●      Identify the two vendors who shall provide an end-to-end demonstration of how they will support your future vision

●      Optionally, evaluate ERP software Value Added Resellers (VARS) for each candidate software to participate as potential implementation partners

●      Based on the requirements and business processes, a demonstration script is developed

●      Optionally, develop a high-level business case to justify the investment in a new ERP system

Phase 2 – System Evaluation and Selection

This phase is the detailed analysis and comparison of the two software vendors chosen above.  As project manager ensure that the information provided by the vendors during their demonstrations, functionality and features discussion, hardware configuration recommendations and reference assessment is as accurate and factual as possible.

During the vendor evaluation phase, the following key tasks need to occur:

●      Review the demonstration script with the selected vendors

●      Create scoring sheets based on the demonstration script

●      Manage the vendor demonstrations closely.  Work to avoid exaggeration and embellishment and keep the demonstrations on course

●      Score and rate the vendors

●      Conduct reference checks

●      Visit and interview vendor customers at their site

●      Rank the two vendors based on all the relevant business and technical criteria

●      Review vendor proposals and determine key areas for negotiation

●      Hold software vendor contract negotiations

●      Prepare a high-level implementation plan, schedule, and budget

●      Communicate to vendors the selection outcome

Understanding the global economic scenario and its impact on Human Resource

 The Indian Human Resource Convention 2010 was held on 12 April 2010 at, Pune. This event was very successfully arranged by The Human Excellence Network and Tackyon IT Consulting Private Limited. It focused on Human Resource Excellence in current economic scenario. Here we share the learning and understanding from the session on ‘Understanding the global economic scenario and its impact on Human Resource’. This session was facilitated by Mr. Anuj Joshi, Vice President World Medical Network & GBG Inc. He shared the following points along with a case study, where he had implemented an HR Intervention and its outcome. He began with what is required of the HR managers which includes,

●      HR manger’s competence – Understanding, appreciating and applying strategic though as business facilitator and Being a realist .It is very important that the HR Manager communicate accurately with proactive information sharing to reduce stress. Often we have seen that the information, when clogged causes bottlenecks for performance. Hence the HR Managers needs to act as a gateway. Furthermore it is important that the HR Manager inculcate skills of other functions such as Finance.

●      Managing Knowledge workers – The HR manager should understand, appreciate and ensure that workforce irrespective of their place of belonging can align to the organizational objectives. It is very important to manage the expat workforce, ensuring a seamless transfer within the intercontinental or inter-country offices. Policies such as internal mobility, benefits and retrials needs to be relooked.

●      Managing technological changes which impacts HR policy and planning – The Industrial relations perspective to the technology may get completely outdated. Technology should be considered as a game changer which can impact style and work expectation. It requires more HR understanding of this impact and communicates it to all the stakeholders in order to plan changes and policies. e.g. – When email was first introduced in a company Mr. Anuj Joshi worked, the mail department which employed more than 200 employees was to be closed down in phases. This required a lot of sensitive communication made within the company to avoid any kneejerk reaction from the employees.

●      Leadership Development- A measurement tool and a policy on groom is quintessential. Investment plans for training in three critical area which includes domain specific , behavioral and technical. The entire program needs to be based on the Job Training Experience.

●      Change Management – A holistic approach to Tactical changes such as downsizing, benefits reduction, right sizing and other reaction to business realities is required .

Take a hard look on how we spend a day in HR – It should include

●      Administrative expert initiatives where cost and the qualities in the Functions has to be looked into

●      Strategic Business Partner where HR connects the decision made in the conference room to the shop floor.

●         Employee Champion  - The voice of the employee is heard by the management

●      Player – Coach, architect design , facilitate and be a leader

●       Change agent – Shape processes to increase an organization’s capacity for change

Few HR Strategic Initiatives –

●      Using a real, verified Job Description and metric of new hires against cost and existing vendors

●      Complete a competition – check the leading and the lagging factors within the HR Functions.

●      Build Bad Management Identification – Talents join company and leave people

●      Create and deliver your own EVP – Employee Value Proposition, by focussing on Compensation and benefit, affiliations creating from trust and transparency and work content.

Finally there was a discussion on of creating the EVP within the GBG Inc. Mr. Anuj Joshi shared that every employee was explained ‘What’s in it for me in the job ‘shifting the focus from ‘What it means to work here’. He created a process wherein every offering within the organization was benchmarked with its global competitors and shared to the employee. He stressed upon the individual perspective of the organizational Goals and This led the transparency in the processes and better decision making for the employee.

MIS integration for disciplines :

An information system is open, purpose system that produces information using the input process output cycle. The minimal information system consists of three elements – people, procedure and data.

People follow procedure to manipulate data to produce information.

Today an information system is an organized combination of people, hardware, software, communication networks and data resources that collect transform and disseminates in an organization.

Management information system also called information reposting system were the original type of management information system.

MIS produce information product that support many of day today decision making need of management.

Reports, charts, graphs, displays and responses produced by such system provide information that manager have specified in advance. Such predefine information satisfies the need of manager at the operational level of the organization who are faced with structured type of decision making.

Key Issues for better ROI:-

The three key issues that could determine the success of an ERP implementation and work towards delivering quicker and better ROI ARE:

1 .Functionality: The ability of the package to support the best business practices followed in the company’s line of business would be crucial factor in determining the smoothness of implementation customizations that could put time schedules and budgets off track. A focused evaluation exercise at the selection stage would help eliminate incompatible choices. The quality and commitment of business consultants and product consultants involved in the ERP implementation would also be a very critical factor in ensuring its success.

2. Technology. Scalable ERP solutions that support open, non proprietary technology standards would provide for protection of investment and ensure minimal risk. They should support different kinds of operating systems, databases and operate on moist major client/server hardware platforms, local area networks (LAN) and user interfaces (ASCII Motif, Windows 95, etc) so as to minimize risk towards technology obsolescence. The ERP package¶s programming language; software development tools should permit ready adaptation of the system in response to ongoing changes in production and operational processes. To minimize customization effort and time, the development tool-set for the application should be easy to use.

3. Implement ability of the solution. This would be the most crucial and significant factor as customer satisfaction and the benefit of ERP would depend not only on functionality but also on ease of configuration and the software¶s flexibility to support optimization of business processes. Much of the complexity of a software implementation process has also to do with setting of parameters, designing menus and authorizations. The roles and responsibilities of different employees have to be clearly identified, understood and configured in the system. The involvement and willingness of the employees to accept and use these new procedures laid by the ERP would, to a great extent, determine the success of the implementation. Simple, easy to use processes and procedures go a long way in creating user trust and confident. There have been instances of large and complex packages failing to deliver on implementations because of the misgivings users had in terms of difficulty of configuration and usage. When organizational changes takes place the software solution should grow and adapt to the change in demands of information needs. The ability of ERP package to mange and support dynamically changing business processes is a critical and vital requirement for the organization

ERP - PRE AND POST IMPLEMENTATION ISSUES:

PRE IMPLEMENTATION ISSUES:-

●      Managers must conduct a feasibility study of the current situation to assess the organization’s needs by analyzing the availability of hardware, software, databases, and in-house computer expertise, and make the decision to implement ERP where integration is essential. They must also set goals for improvement and establish objectives for the implementation, and calculate the break-even points and benefits to be received from this expensive IT investment.

●      The second major activity involves educating and recruiting end users to be involved throughout the implementation process.

●      Managers form a project team or steering committee that consists of experts from all functional areas to lead the project.

POST IMPLEMENTATION ISSUES:-

●      After a decision is made to implement ERP, a team of system consultants will be hired to evaluate the appropriateness of implementing an ERP system, and to help select the best enterprise software provider and the best approach to implementing ERP. In most Situations, the consultant team also recommends the modules that are best suited to the company’s operations (manufacturing, financials, human resources, logistics, forecasting, etc.), system configurations, and Business-to-Business applications such as supply-chain management, customer relationship management, e-procurement, and e-marketplace.

●      Adequate employee and manager training must be provided to all business, stakeholders, including managers, end users, customers, and vendors, before the system is implemented. Such training are usually customized and can be provided by either internal or Outside trainers.

●      The system installation process will address issues such as software configuration, hardware acquisition, and software testing.

●      Data and information in the databases must be converted to the format used in the new ERP system and servers and networks need to be upgraded. A post implementation review is recommended to ensure that all business objectives established during the planning phase are achieved. Needed modifications are tackled during this phase too.

ERP: Post-Implementation

After an ERP implementation, organization should not sit back and relax. Depending on the scope of the ERP implementation exercises, several options can be explored to further maximize the gains.

The first thing that an organization should look forward to, after an ERP implementation, is improved morale of the workforce. Needless to say, it would have a cascade effect in terms of increased productivity and better customer response.

On the monetary side, depending on the level of success, ROI should also be on the way up. It is estimated that a well managed ERP project can have up to 200percent return on investment within a short period of time while a poorly managed ERP project can yield a return on investment as low as 25 percent.

During the phase of minimization, organizations move closer to best practices. Depending on the target environment design, which is governed by the ability to change, this effort could be a natural extension of the ERP implementation or it could be a separate project in itself. Process optimizations, and thus performance improvement, are a continuous exercise

Guidelines for ERP Implementation

Understand your corporate needs and culture.

 Complete business process changes.

 Communicate across the organization.

Provide strong leadership

Ensure an efficient and capable project

 Choose a balanced team.

 Select a good implementation methodology.

 Train everyone.

Commitment to adapt and change

ERP Implementation Methodology

Broadly, the steps involved in a total ERP implementation can be listed as follows:

1. Pre-evaluation Screening ± to limit the no: of packages

2. Package Evaluation ± µdo the right the first time

3. Project Planning Phase ± design the implementation process

4. Gap analysis ± crucial phase

5. Reengineering ±Human factor taken into account

6. Configuration ± main functional area

7. Implementation Team Training

8. Testing

9. Going Live

10. End User Training

11. Post Implementation

ERP CULTURAL IMPLEMENTATION ISSUES:-

Implementing an ERP causes massive change that needs to be carefully managed to reap the benefits of an ERP solution. Critical issues that must be carefully considered to ensure successful implementation include fundamental issues, organizational change process, people, and implementation cost and time and employee morale. The pertinent issues are:

Fundamental Issues

Implementation of an ERP system can be long, costly, and labor-intensive and can affect an organization's bottom line if done incorrectly. To ensure the success of any ERP implementation project, a project team consisting of an ERP consultant, internal auditing, and IT staff familiar with the company's business operations should be established and their role must be defined.

(a) Role of Manager

Managers must consider the fundamental issues of system integration by analyzing the organization’s vision and corporate objectives.

●      Does management fully understand its current business processes, and can it make implementation decisions in a timely manner?

●      Is management ready to undertake drastic business process reengineering efforts to yield dramatic outcomes?

●      Is management ready to make any changes in the structure, operations, and cultural environment to accommodate the options configured in the ERP system?

●      Is the organization financially and economically prepared to invest heavily in an ERP implementation?

(b) Role of an Auditor

Auditors play a proactive role in helping the organization laying the foundation for an initiative's success with their knowledge of internal control practices, compliance requirements, and business processes. In particular, internal auditors can:

●      Document abbreviations and their function.

●      Identify documents used in the organization's daily operations.

●      Compile a list of the organization's master data sets.

●      List the internal controls that are applied and adopted during each business process stage.

●      Create a list of currently used and recently generated management information reports.

(c) Top Management Commitment

Management needs to exploit future communication and computing technology issues in order to integrate the ERP system with e-business applications in their organization to decide on the key related implementation and business issues. Due to enormous impact on the competitive advantage of the company, top management must consider the strategic implications of implementing an ERP solution keeping in mind the size of the company and the modules installed. Management must ask several questions before embarking on project.

●      Does the ERP system strengthen the company's competitive position? How might it erode the company's competitive position?

●      How does ERP affect the organizational structure and the culture? What is the scope of the ERP implementation -- only a few functional units or the entire organization?

●      Are there any alternatives that meet the company's needs better than an ERP system?

●      If it is a multinational corporation, the management should be concerned about whether it would be better to roll the system out globally or restrict it to certain regional units?