OMIS 455

Disadvantages of ERP

-TCO -ERP deployments take 6 months to 4 years to get completed and fully functional. -Prevents changes in business processes -Once an ERP systems is implemented it becomes a single vendor lock-in for further upgrades, customizations etc. -The cost savings/ payback may not be realized immediately after the ERP implementation & it is quite difficult to measure. -ERP implementations are difficult to achieve in decentralized organizations with disparate business processes and systems. -75% of ERP implementations "fail"

Balanced IT Scorecard Criteria

1. From the corporate financial perspective, e.g., ROI 2. The customer/user perspective (e.g., on-time delivery rate, satisfaction) 3. Business process (e.g., purchase invoices per employee) 4. An innovation/learning perspective (e.g., rate of cost reduction for IT services) 5. From the systems project perspective (e.g., on-time, quality, cost) 6. A technical perspective (e.g., implementation efficiency, capacity utilization, response times)

"If any big problems have occurred during an implementation process"

31.7 percent have answered yes and 68.3 percent have answered no.

Poor Project Design and Management

A major mistake is to short-cut critical events in the project plan, such as time for documentation, redefining and integrating processes, or testing before "going live."Another common mistake is made when a company leaves out the self-examination of business processes and uses ERP to cover-up weaknesses. It is easier to buy software than to perform the more difficult task of identifying weaknesses and opportunities for improvement.

Big Bang

All modules, all locations, all users at the same time

Accelerated SAP (ASAP)

An approach resulting in a quick, cost effective implementation of SAP ERP

Enterprise Resource Planning - (ERP)

An integrated information system that serves all departments (functional areas) within an organization (enterprise). Thus, a single system does the work of what multiple systems did before All tied to a single, common database Manages the administrative side of an organization Helps manage scheduling and transactions Provides reporting and helps to control business processes Supports decisions within the organization

Miscalculation of Time and Effort

Another cause of ERP implementation failure is the miscalculation of effort and time it will take to accomplish the project. Companies who treat an ERP selection, evaluation and implementation comparable to buying a washing machine are doomed to failure.

Inadequate Training and Education

Another of the biggest causes of ERP implementation failure is inadequate education and training, which are almost always underestimated. ERP-related training is crucial as most employees must learn new software interfaces and business processes which affect the operation of the entire enterprise. The corporate culture is impacted by changes in the company's business processes, and shortchanging this part of the ERP implementation leads to much pain and suffering downstream.

Ill-advised Cost Cutting

Another of the key causes of ERP implementation failure is ill-advised cost cutting. In an effort to avoid temporary conversion costs, some companies take a very risky route and go live at multi-plant sites simultaneously, subjecting all plants or some plants to a total shutdown should there be a false start-up. This is suicidal. Others attempt to unrealistically compress the schedule in order to save on expenses, only to eventually overrun both schedule and budget. We feel that ROI should take a "back seat" when upgrading an important part of a company's infrastructure: the information system. Instead the implementation should be treated as an upgrade to the company infrastructure that is necessary to maintain or gain a strategic and competitive advantage.

Unrealistic Expectation of Benefits and ROI

Another significant cause for ERP implementation failure is the unrealistic expectation of benefits and return on investment. Software providers are notorious for overstating the benefits in terms of ROI, when the total costs of the project have been understated. Often left out of the total costs are costs of planning, consulting fees, training, testing, data conversions, documentation, replacement staffing, and the learning curve performance drop. When this happens, a company doesn't stand a chance of achieving the ROI it anticipated.

Information system

Any combination of IT and people's activities that support operations, management, and decision making for an organization.

Process measurement

Attributes of the current process are measured. These are a baseline for assessing improvements.

Main reasons for ERP Failure

Budget Schedule Functionality Out-right failure

Process change

Changes to the process that have been identified during the analysis are introduced.

ERP Critical Success Factors

Clear understanding - strategic goals Top management commitment Project management implementation Great implementation team Cope with technical issues Organizational commitment to change Extensive education & training

Advantages of ERP

Complete visibility into all the important processes across various departments of an organization Identify problems/opportunities Business process re-engineering/business process improvement Automatic and coherent work-flow from one department / function to another to ensure smooth transition/ completion of processes. Single Database Easier to back up Security issues Reduces costs from having multitude of applications E-commerce integration Modular software Better customer service Better supplier integration

Vendor Selection

E.g. Executives often choose ERP vendors based on what competitors have chosen Not a decision to be made quickly

Waterfall Strengths

Easy to understand, easy to use Provides structure to inexperienced staff Milestones are well understood Sets requirements stability Good for management control (plan, staff, track) Works well cost or schedule are most important

How is effectiveness to be judged?

Effectiveness criteria: Balanced IT Scorecard

Physical Scope

Establishes which sites will be addressed, the geographical locations of the sites, and the number of users.

Why do you want to implement ERP?

Executives need to make decisions based on: Objective, unbiased information rather than gut feel In many cases ERP will not solve a company's business problems If the business strategies or key processes are flawed, the most advanced IT system is not going to help In such case, improving processes and redesigning the organizational structure, may be more cost-effective and lower-risk MOV Business Case

Implementation Stage

Focus is on installing and releasing the system to the end-users and on monitoring the system release to the end-users. System conversion (4 Phases) Phased Pilot Parallel Direct Cut or big bang

Functional Interfaces

Functional Interfaces: points of connection between departments This is where the "baton" gets passed from one department to another These connections are not given enough attention in most businesses These functional interfaces present the greatest opportunities for performance improvement

Technical Scope

How much modification will be done to the ERP software? What processes will be utilized as is and which will be customized?

Resource Scope

How much time and budget is allocated for the project?

Big Bang - Disadvantages

Huge resource requirements Project management more difficult and complex with larger team Lack of focus on individual modules All modules implemented, can't give each module a lot of attention Big Bang = Big (Potential) Failure No way to go back to legacy system Once turned off, legacy systems can't be reactivated.

Scope and Commitment Stage

In addition to conducting the feasibility study, a scope of the ERP implementation is developed within the resource and time requirement. Characteristics of the ERP implementation are defined. Develop a long-term vision for the new system and a short-term implementation plan

Modules

In software a module is a part of a program, and programs are composed of one or more independently developed modules that are not combined until the program is linked. ERP software typically consists of multiple software modules that are individually purchased, based on what best meets the specific needs and technical capabilities of the organization. Each ERP module is focused on one area of business processes, such as inventory control or HR.

Middle-of-the-Road ERP Implementation Plan

Involves some changes in the core ERP modules and a significant amount of business process re-engineering

Organizational Change Management

It can be very difficult to introduce change to an organization. Failure to recognize and deal with this fact has been the cause of many project failures. 15% of the workforce is eager to accept it 15% of the workforce is dead set against it 70% is sitting on the fence, waiting to see what happens

Maintenance Tasks

Major upgrades Service packs Problem solving Security administration Workflow administration Archiving

Business Process Reengineering (BPR)

Management approach that promoted radical redesign of workflow within and between enterprises in order to achieve dramatic performance improvement.

Accelerated SAP (ASAP) Benefits

Minimizes the length of time between installation and production start up Maximizes the utilization of SAP resources Incorporates a process oriented approach to training Results in a repeatable "model" that can be used with other implementations of SAP ERP

Phased Approach

Modules implemented one at time or in small groups Sometimes, only selected locations implement the module Modules are implemented in a sequence Requires significant attention to existing systems

Comprehensive ERP Implementation Plan

Most expensive, lengthy, and costly approach Involves implementation of full functionality of the ERP software Requires a high level of business process re-engineering

Big Bang - Advantages

No need for temporary interfaces (to legacy systems) Limited need to maintain legacy systems Resources more fully engaged for shorter time Functionality Linkage All ERP functions will be available (unlike phased approach) - faster time to benefit Enforce process change Shorter implementation time ERP implementations sometimes fail due implementation time Changing requirements (as business changes) Personnel turnover Political maneuvering Cost can be lower under certain conditions

Poor Communications

One of the causes of ERP implementation failure is poor project communications, beginning with a failure to announce the reason for the up and coming effort, and continuing to advise the organization of the progress and importance of the ERP implementation to the company. Poor communications prevent different parts of the organization from assessing how they will be impacted by changes in processes, policies, and procedures. Communications are a vital part of managing change in a corporate environment.

Misfit of Application Software with Business Processes

One of the main causes of ERP implementation failure is the misfit of application software with the company business processes. This failure -- to examine underlying business process flaws, and integrate the applications with the business processes, causes loss of productivity and time, and ultimate benefits.

Business Case

Organization feasibility Whether a new IT is aligned with business strategy and plans for the organization Technical feasibility Economic feasibility TCO Why are we implementing the system? MOV

ASAP Implementation

Phase 1: Project Preparation - Provides initial planning and preparation for your R/3 project. Phase 2: Business Blueprint - In this phase, you create the Business Blueprint, which is detailed documentation of the results gathered during requirements workshops. Furthermore, the Business Blueprint serves to document the business process requirements of the company. On this basis, you will achieve a common understanding of how the company intends to run their business within the R/3 System. Phase 3: Realization - In this phase, you implement all the business and process requirements based on the Business Blueprint. You configure the system step by step in two work packages, Baseline and Final configuration. Phase 4: Final Preparation - In this phase, you complete testing, end user training, system management and cutover activities to finalize your readiness to go live. Furthermore, the Final Preparation phase serves to resolve all critical open issues. Upon successful completion of this phase, you will be ready to run your business in your live R/3 System. Phase 5 Go Live and Support - Transition from a project-oriented, pre-production environment to successful and live production operation.

Waterfall Development

Plan, Analyze, Design, Implement, System

Poor ERP Package Selection

Poor package selection occurs when a company has inadequately developed functional requirements definitions. It also occurs when staff members assigned to ERP projects do not take the time to run the screens of the new system, as they would during their daily work tasks, to find out if the software package features are adequate for their needs.

phases of ERP implementation

Pre-Evaluation Gap-Analysis Package Evaluation Project Planning Phase Reengineering Configuration

Flowcharting Process Models

Problem: when is a model a 'good' model? Good correspondence. Parsimony. Flow chart Clear, graphical representation of a process from beginning to end Uses a standardized set of symbols Specifically refers to activities occurring within an existing business process

What is the purpose of evaluation?

Purpose of evaluation: judge IS success

Phased Approach - Advantages

Resource requirements less Smaller project team time Focus on module functionality Lower Risk No chance of enterprise-wide failure Legacy System Fallback Legacy system can run in parallel mode Knowledge Transfer Project team has time to learn Faster time to working system

Agile SDLC's

Speed up or bypass one or more life cycle phases Usually less formal and reduced scope Used for time-critical applications Used in organizations that employ disciplined methods Extreme programming (XP)

From whose perspective is effectiveness being judged?

Stakeholder: senior management

Process Modeling

Step 1: Define the process boundaries. Step 2: Document the job titles of people involved in the process. On the left-hand side of a piece of paper, list the job titles of all the people who work in the process. Step 3: Add process details. For each job title in your chart, insert a box representing what that person does in the process. Inside the box, use verb-noun combinations to describe what that person does. For example, "Receive application" or "Set up file." Insert diamonds representing decisions people must make while carrying out the process. Inside the diamonds, use questions to represent the decisions. For example, "Is file complete?" or "Was log-out OK?" Step 4: Show the sequence of activities. Number each box and diamond in your flowchart to indicate the sequence in which activities are carried out during the process. Position can also be used to indicate sequence

total cost of ownership

Sum of all direct and indirect costs associated with an asset or acquisition over its entire life cycle.

Inadequate Requirements Definition

Surveys have shown that inadequate definition of functional requirements accounts for nearly 60% of ERP implementation failures. This is simply a matter of not comprehensively and systematically developing a quality set of functional requirements definitions. This leads to the second greatest cause of ERP implementation failures: poor package selection.

Cross Functional Flowchart

Swimlane flowchart* Depicts team members (functional areas) across the top Each step is aligned vertically under the appropriate employee or team Clearly identifies each person's tasks in the process

What is the system being evaluated?

System: the entire ERP system

Phased Approach - Disadvantages

Temporary interfaces to legacy systems Cost Risk Ongoing legacy system maintenance Can't shut off legacy systems until late in implementation Turnover Longer overall timeline Legacy system fallback Longer project

Process analysis

The current process is assessed and bottlenecks and weaknesses are identified.

Resistance to Change/Lack of Buy-in

The lack of a change management approach as part of the program can prevent a program from succeeding. Resistance to change is quite often caused by (1) A failure to build a case for change, (2) Lack of involvement by those responsible for working with changed processes (3) Inadequate communication (4) Lack of visible top management support and commitment, and (5) Arrogance. A lack of buy-in often results from not getting end-users involved in the project from the very start, thereby negating their authorship and ownership of the new system and processes.

Lack of Top Management Commitment

The propensity of top management to delegate the oversight of an ERP implementation to lower management levels often results in (1) being "out of touch" with critical events, or (2) the lack of understanding of the size, scope, and technical aspects of the project, and subsequently, the lack of proper commitment of time and resources required for a successful implementation. The result is a failure waiting to happen.

Inadequate Resources

The third greatest reason for ERP implementation failures is inadequate resources. Many companies will attempt to "save dollars" by doing everything on an overtime basis, whether or not there are adequate skills within the company, extending individual work loads to 150%. This approach can be a "kiss of death" for the program. Time and time again we run across this mistake in ERP implementations. The financial and emotional drain of what seems sometimes to be perpetual extensions, reschedules and delays of implementations takes its toll. People burn out after having put in extensive hours over a long period of time.

Gap Analysis

This is the most crucial phase for the success of the ERP implementation. Simply it is the process through which companies create a complete model of where they are now, and in which direction they want to head in the future. The trick is to design a model which both anticipates and covers any functional gaps.

TESTING

This is the phase where you try to break the system. Here we reach a point where we are testing real case scenarios. The system is configured & now we must come up with extreme case scenarios- system overloads, multiple users logging on at the same time with the same query, users entering invalid data, hackers trying to access restricted areas & so on. The test case must be designed specifically to find the weak links in the system & these bugs should be fixed before going live.

Project Planning Phase

This is usually the phase where consultants become helpful. This is the phase that designs the implementation process. Time schedules, deadlines, etc. for the project are arrived at. In this phase the details of how to go about the implementation are decided. The project plan is developed, roles are identified and responsibilities are assigned.

What time frame is employed? (short, long)

Time frame: costs and benefits to date, plus costs and benefits for the next 2-3 years (including software and hardware upgrade costs)

What are the hidden costs of ERP?

Training Integration and testing Customization Data conversion Consultants New employees Implementation teams never stop

Functional systems

Typically contained within a department Islands of automation - used to improve operations Applications independently developed and deployed Driving force: availability of servers, PCs Can still be found in organizations today: SCM - supply chain management system (EDI) MRP - manufacturing resource planning system CRM - customer relationship management system E-commerce web sites Support areas: AIS - accounting information system, HR systems, etc

Vanilla ERP Implementation Plan

Utilizes core ERP functionality and exploits the "best practice" business processes built into the software Business process re-engineering is eliminated. Simply align business process to ERP system

Implementation Scope

Which modules should be implemented? How should the modules be connected to the existing system?

BPR Scope

Will the current processes be refined, replaced, or eliminated? What users, departments, sites will be affected?

Customer analytics

a process by which data from customer behavior is used to help make key business decisions via market segmentation and predictive analytics. This information is used by businesses for direct marketing, site selection, and customer relationship management.

Systems Development Life Cycle (SDLC)

a systematic process of planning, designing, and creating an information system for organizations

Hierarchical modeling

ability to flexibly describe a business process in greater or less detail, depending on the task at hand

Business process "value chain"

set of steps a business performs to create value for customers.

Cycle time

total time a process takes from begin to end. = setup time + wait time + move time + queue time + process time + other time