Infosys-Oracle Blog

ERP Implementations are generally time consuming and expensive - more so if the implementation involves multiple geographies with different languages, different business processes, legal requirements and accounting norms. Companies typically go for ERP implementations with the aim of integrating disparate systems spread across different business functions so that the top management can get an integrated view of the operations of the organization. Optimal usage of an ERP system also leads to reduction in operational costs and supports strategic planning.

Let us look at some important factors that an organization should consider for successful ERP implementation.

1. Determine if it is worthwhile to invest in a new ERP system: Most organizations would have an existing system that they use to support their current business operations- it could be a mainframe based application, a homegrown ERP or a part manual and part automated system. Once an ERP system is implemented, the business is bound to adapt to it. Therefore it is necessary that the ERP application leads to efficiency in existing business operations. 

Sometimes business users are so used to working with the old system that they find it difficult to adapt. For example in many Japanese production systems, material replenishment is inherently linked to their production systems - if a material runs out of stock, users typically use a Kanban card for signaling material shortage requests to their supplier. Though an ERP system can replicate the same functionality, business users who are used to the manual system for several years may not see need for investment in a new system.

Before an organization makes the choice of an ERP, it should carefully evaluate the extent to which its current processes in all areas - human resources, planning, order management, procurement, financial reporting and customer management can be mapped in the ERP. The extent and ease by which customizations can be developed in the ERP is also an important factor. The organizations' capacity to expand and grow should be enhanced & not limited by the ERP application they decide to choose.

2. Do the necessary groundwork: The most important activity in this stage should be to identify the "pain points" of using the existing system. The pain points can be analyzed from two perspectives - one is improving the underlying efficiency of the current business processes and the other would be to look at the difficulties that end-users face in using the existing system(s).
When the intended cost of investment in a new system is very high, it would make sense to do a pilot implementation in one business unit/geography and gradually roll-out the implementation to other geographies in a phased manner.

3  Define Scope & get buy-in from all important stakeholders: In a large organization, application development and IT decisions are typically made by a dedicated IT/implementation department. When it comes to making the important decision of implementing an ERP, it is necessary that business analysts and end users are involved during the decision making and implementation process at all times.

When the ERP vendor is mapping business processes for a department, business analysts and end-users from multiple departments should be involved. For example when the forecasting process is being mapped to the system and decisions regarding level of forecast are being made, the order management and procurement department should also be involved to decide if granular or aggregate forecasting is required.

Similarly the organization may currently have different existing external systems for forecasting, manufacturing execution, shipping etc. It may make sense to do away with some of these external systems and replicate the functionality in the ERP. Some external systems might be difficult to replace and so it will be necessary to pull/push data from the ERP to them. These kind of decisions should have buy-in from all concerned stakeholders so that there is no conflict in expectation.
Key decisions may be necessary during an implementation process such as:

(i) Do we change a business process to implement it on the ERP or continue using an external system with the existing  business process and develop interfaces to integrate the system with the ERP
(ii) What is the cost-benefit of buying an add-on reporting application with rich graphical features vis-a-vis developing custom reports in the ERP
(iii) Do we require suppliers to change their systems to meet the file format data requirements in the ERP or allow them access to the new ERP system through a user interface

The implementation decision should be driven from the top management so that budgets, timelines and strategic program direction can be controlled centrally. Middle management and business leads should also pass on inputs to the top management at key checkpoints in the process so that key decisions as those listed above can be taken quickly.

4.  Setup a Project/Program Management Office involving all IT partners:The ERP project should be aligned with the organization's strategic business and IT roadmap. The Executive sponsor should ensure organization leadership support throughout the project and bridge the gap between the ERP project management team and top leadership for funding and resources. There should be explicit project management efforts for "Risk Management" in the ERP implementation and “change control” before, during and post implementation.

If there are multiple parties involved because of integration needs between the ERP and different systems, the communication matrix & the responsibility of each vendor should be clearly defined so that any integration issues can be quickly resolved. Design and development standards for development of custom features should be defined before the start of the project so that uniformity is maintained.

5. Define parameters for measuring success of the implementation: Since IT funding in most companies is borne by income generated out of the business, it is imperative that business users and the management is able to see tangible benefits of implementing an ERP. These measures should be defined as a goal before the implementation journey is undertaken so that there is no conflict in expectation. Some sample benefits could be:
- Reduce Order processing time by 15%
- Eliminate all errors in the forecasting process
- 10% reduction in safety stock inventory
- $500 million growth in margins (resulting from operational efficiency) over the next 3 years
- Have the ability to generate financial reporting in multiple currencies through the ERP

The top management should also promote more and more usage of the ERP by introducing - competition between different business units/ divisions (the same can be measured on different KPIs – for example  %receipts created against ASN, %purchases against global blanket agreements for the procurement function). The designated KPIs for each business function should be evaluated and published in a monthly scorecard.

6. Define a timeline and stick to it: ERP implementations can at times go through schedule delays because of systemic issues or difficulty in implementing a desired functionality in the base ERP (resulting in the need for a complex customization), conflict in functionality desired across cross functional modules, delays in solving technical issues because of new technology etc.

It is necessary therefore, to classify requirements from the business into different categories such as critical, important but not critical & nice to have. In case there are schedule delays, the requirements that can be deferred should be moved to the next release so that the “core” implementation does not result in delays.

7. Keep future growth strategies in mind: Organizations with inorganic growth strategies could consider an ERP with the consideration that it should be scalable, flexible & easy to roll out from the acquired entities. Otherwise, it should have ease of integration with the acquired entity’s systems to leverage on economies of scale and also information efficiency for the key decision makers in the senior management.

The factors listed above, is by no means exhaustive. I welcome your opinion on what other factors organizations should look at, to ensure that failures in ERP implementation do not happen.

Update at - http://infosysblogs.com/oracle/2008/11/key_factors_for_success_of_erp_2.html#more

Posted by Samir Das at 11:22 AM | Permalink | Comments ( 25 ) | TrackBacks ( 0 )

With the current slowdown being accelerated by the financial turmoil, companies are increasingly looking at avenues to cut costs yet maintain profitability against all odds. This is a tricky situation given the fact that any decision leads to a bullwhip effect owing to the integrated nature of today’s supply chain. One of the time tested techniques to achieve this is through Reverse Auctions which is quite prevalent in the High Tech industry.

A reverse auction is a strategic Sourcing tool used in industrial business-to-business procurement. It is a type of auction in which buyer invites bids from sellers, with the primary objective to drive purchase prices downward.

Posted by Sandeep Chatterjee at 8:53 AM | Permalink | Comments ( 2 ) | TrackBacks ( 0 )

ERP implementations are a special breed of projects. They are often characterized by aggressive timelines, high budgets and involvement of diverse teams. This emphasizes the need to have a reliable tool to measure the performance of ERP implementations throughout the execution phases.

Earned Value Analysis, with its basis in cost, benefit and timeline is a good financial tool for Project managers. I have recently written a white paper that establishes the key concepts of Earned Value analysis. Metrics such as EV, PV, AC, CPI, SPI are explained at an overview level. In this paper Earned value analysis is applied to the individual phases of a typical ERP implementation using an illustrative project. Each phase of the implementation such as, requirements gathering, is analyzed by giving an overview of the phase, describing the major activities and then describing the EVM(Earned Value Management) activities that need to take place in that phase.

This paper highlights how Earned value analysis can be used for ERP implementations with a focus on the phases of ERP implementation.

Read More in the White Paper titled - Eaned Value Managed for ERP Implementations,available at http://www.infosys.com/oracle/white-papers/default.asp 

Posted by Venu Kotamraju at 2:35 AM | Permalink | Comments ( 1 ) | TrackBacks ( 0 )

We often see ERP Implementations failing because of lack of user acceptance for the new system. The user community is not convinced about the utility of the ERP System simply because they feel that they take a long time to execute the transactions in the new system.

Is there a solution to this? How do we make sure that from day one users start advocating about the new system. The answer to this question starts from the time the future state design of business processes is started. First question that any implementer should ask is" Is this the most efficient and lean way to deploy this process". "Are we deploying the correct tools and techniques offered by the package to design the future state business process?"

When we say that the deployments should be "lean enabled" we are not just talking about ERP Manufacturing deployments. Lean principles are applicable accross business functions like Logistics, Supply Chain, Procurement, Order Entry and Financials. In fact some of these other areas opportunities for waste reduction are more if proper tools and techniques are used.

You can check out my white paper on "Going Lean the ERP Way" by clicking on link below:

http://www.infosys.com/oracle/white-papers/default.asp

Do you think that this is the right approach for deploying ERP? Can you share your experinces where using this approach has ensured a much smoother acceptance from user community and the implementation was a true "success"?

Posted by Somnath Majumdar at 10:50 AM | Permalink | Comments ( 5 ) | TrackBacks ( 0 )

There is often a dilemma in the customer’s mind,whether to go for Localization or do a Customization. Here are  some of the pros and cons of these two options:

Localization comes pre-built with the product and does not need to be developed. While it can be assumed to have already been tested, effort needs to be estimated for the further rounds of testing.

This is beacuse,Localizations are add-on features which might not have been time-tested to the extent the base application features are.Also,Regional requirements change, all the implications of which might not have been addressed in the Localization in a timely manner. There can always be a lead time between a new requirement and its solution through Localization.

As Localization definitely saves on development and testing effort vis-a–vis a customization, there is an inherent inflexibility in Localization so as to meet a specific requirement of the customer. Customizations, however, are designed to meet specific customer requirements.

In case regional requirements change, product vendors take care of the changes in the Localization, while if these requirements are addressed through a custom solution, the onus is on the SI partner/ customer to modify and maintain them.

     Also Localization cost, as part of License, update and AMC of the software is much less compared to the custom solution development, testing and maintenance.

Since, Localization is offered as a part of the vanilla product, implementation timeline can be shorter vis-a-vis the customization route.

Hence the recommendations here would be:

1. Streamline the business processes to save the development, testing and maintenance effort and hence the time and costs.
   
2. Pursue the product vendors to address the gaps in Localization to suit specific needs and follow up for a one-off quick fix.
   

Posted by Debashis Dey at 10:20 AM | Permalink | Comments ( 2 ) | TrackBacks ( 0 )

 If we look at the world's 2 leading large ERP packaged suites, they are huge applications that offer tremendous flexibility to handle just about all possible kinds of manufacturing systems and business processes spread across all kinds of industries. Can these ERP systems be readily adapted by small & medium-sized companies and how do large ERPs really differ from those that are used by the SMB segment?

 Organizations that operate in the SMB revenue segment usually don’t have the scale (volume of transactions) and breadth (variety of business functions) that large global conglomerates have. They typically deal with a limited number of (and often niche) products. Though large ERP systems are very flexible and can be used to adapt to nearly any business process, mid-sized customers prefer to use specialized ERP applications available for their segment, instead. Typical reasons are not that difficult to find. One, because large ERP systems are so generic, use the latest in technology and have taken years to build, they are very expensive. Two, since they are highly modularized and setup driven, setting up the application and making it ready for use is time consuming. Three, adding custom features (reports/forms etc) needs a significant degree of skill/training. In most cases, it also requires additional expenditure on an IT vendor for implementation expertise apart from the initial investment of purchasing the ERP.

In addition to being relatively inexpensive, easy to use & set-up, mid-sized systems need to be agile and preferably should have the ability to hook-up with large customer/supplier systems. To give an example of the agility that a mid-sized manufacturer needs, consider a supplier who sells components to one of the world's leading automobile giants. Due to technological advancement, the manufacturer changes the specifications of the components that he procured from the supplier. The supplier doesn’t have the necessary expertise at that point in time to manufacture the component by himself - so he sub-contracts part of the work to another supplier. This signifies a change in business process that will require the ERP system to adapt quickly. Sometime business process changes might be such that an upgrade might be required to a higher version of the software. Though upgrades and change to business processes can also be easily handled by large ERP systems, it normally would take relatively longer for the organization implementing the ERP, to develop customizations or to test their entire business cycle “on the system” because of the complexity and linkages between modules in such systems.

The current market scenario is witnessing intense competition between midsized ERP vendors (like Intuit,Infor,The Sage Group) and Tier1 vendors like SAP, Oracle and Microsoft in the battle for clients in the SMB sector.  Both Oracle & SAP who are also leaders in the large ERP segment, have ERP solutions for mid-sized companies and are gradually capturing significant market-share. SAP Business ByDesign is a low-cost adaptable ERP solution that allows customer to quickly adapt to market changes. Similarly, Oracle Accelerate Industry Applications offers an industry-focused, easy-to-use and affordable solution that can be used by SMB enterprises. The fact that big ERP players have specialized offerings for the SMB community outlines the fact that this segment represents an attractive business opportunity to them. What do you think the future holds - will Tier1 ERP vendors  dominate the SMB segment or will midsized vendors be able to hold on to their market share?

Posted by Samir Das at 10:54 AM | Permalink | Comments ( 1 ) | TrackBacks ( 0 )