Success and Failure of ERP

Success and Failure Factors of ERP Implementation

Modern businesses face data-driven problems that can be impossible to imagine. It is becoming increasingly difficult to deal with the data using legacy systems. Enterprise Resource Planning (ERP), which consolidates business data, documents, and communications and makes it easy to organize these data in an era of rapid technological advancement, is a good option. This new system allows an organization to leverage its data to make profitable business decisions. It could also increase its Return on Investment (ROI), and operational efficiency.

Implementing these systems can be difficult. Organizations often fail to prepare adequately for ERP implementations. Organizations need to be able to recognize and comprehend key success factors, which are listed below. This will allow them to develop a solid foundational strategy that can be used throughout the project.

The key success factors

  1.   Start-Up Strategy and Project Strategy
  2.   Management Commitment
  3.   Project Scope
  4.   Project Team
  5.   Training, Communication, and Change Management
  6.   Customizations/Modifications
  7.   Budget
  8.  Project Closure
  1. Project Strategy and Start-up

The definition of success is achieving what you want through ERP implementation on time, within budget, and with a satisfactory return on investment.

Think about the requirements and goals involved in creating an ERP strategy that will serve as a basis for project leaders to take actionable first steps. Before the work begins, ensure that all information is prepared, and communicated to the appropriate personnel, as well as obtaining management approval.

Recommendations:

  • Create an ERP strategy and delineate a project scope (more details are provided in the sections below).
  • A solid strategic foundation is crucial for any ERP implementation. You can find more information about how to create an ERP strategy.
  • Use the most effective change management strategies and techniques to ensure that your organization is ready for any process changes or new system.
  1. Management Commitment

ERP implementations will have an impact on how companies operate by changing business processes and modifying system transactions. The IT department should not be responsible for project delivery. While they might be the most involved, they must also be able to draw on input from other areas of the company to achieve business goals. Senior and mid-level managers should be involved in the project from its inception to completion and provide constant communication/guidance from the top down. This gives the project visibility and emphasis.

Recommendations:

  • Management should be involved in project sponsorship, steering committees, and issue resolution. This is to ensure management support and keep them informed about project progress.
  1. Project Scope

Your ERP system might not meet all your requirements initially. Your implementation strategy should be tailored to your company’s priorities. Keep in mind your business objectives, any other tools and systems you use, and what ERP components might work well. Describe the scope of your project and include any plans.

Recommendations:

  • Identify the core business requirements and plan how they will be met. Then, determine how to get there. To define your scope, you should focus on the most important business use cases and how users will interact with those processes.
  • Prioritize the organization and align with it. Which delivery will get you the implementation 85-90% of your way to immediate derive results? These are the initial benefits.
  • You should also consider other business requirements, such as data management, business intelligence, and social media. You could meet your requirements down the line or with future enhancements
  • Document items that aren’t in scope. Also, explain how they might fit in a future release. This will enable project personnel to feel heard, and their feedback can be used to improve the product.
  • Don’t forget to consider the possibility of retiring legacy applications/tools. Make sure you coordinate and align with new systems.
  1. Project Team

Full-time staff should make up the core project team, which should include a strong project manager and other representatives from the core areas of business and IT. The core project team must have a strong and collaborative working relationship with any consultant. You should also identify resources from different areas of the business or IT that can provide subject matter expertise to help you make project-specific decisions. Implementation will be easier if there are clear responsibilities and a strong team.

Recommendations:

  • Implementation tools and methods that have proven to work for your project are used. The implementation team is empowered to make decisions.
  • To facilitate communication, the core project team should be in the same place.
  • Identify subject matter specialists (SMEs) in relevant areas within the organization
  • The project team must have a good working relationship with the consultants
  1. Communication, Change Management, and Training

Not only will the ERP project result in system and process changes, but also organizational changes. An organization will need a dedicated team or workstream that is focused on change to manage the volume of impact/change. The size of this team will depend on the size and number of changes. Training falls under the umbrella of change management. The most popular method ERP vendors use today is the “train the trainers” concept. Software vendors and consultant integrators train only selected employees, who are then expected to share their knowledge in a pyramid-Esque manner with others. While this approach is often the most efficient for vendors to reach the first and second levels, it takes a lot of time and effort to reach the entire company. Prepare.

Recommendations:

  • Establish a consistent communication channel between the project team members and the entire organization using internal sites like Yammer, SharePoint, Yammer, etc. Newsletters, newsletters, roadshows, lunch and learns, as well as office hours, can all be used to help you deliver your message.
  • As this will help in the acceptance of changes, key users must be involved in the project’s progress.
  • Continue to strengthen the ERP strategy/business case that shows the changes in system functionality and the benefits; share the business case with the appropriate people within the organization
  • Hire a third party to conduct an organizational readiness assessment
  • You should be prepared to train throughout the project, and even after go-live.
  1. Customizations/Modifications

Many ERPs incorporate industry standards and best practices. This is because ERPs are designed to simplify processes and provide valuable data. Prioritize the most important business functions before you consider customizations. If they are necessary, make sure to justify them as they can reduce the effectiveness of best practices. Do not be confined to statements like “This is how we do things” or “This is how it’s always been”. Keep in mind the overall strategy and business objectives. These modifications can also increase the scope or budget.

Recommendations:

  • Examine other ERP implementations and determine what customizations are required. Next, perform a gap analysis of your requirements. Prioritize the gaps according to your strategic vision and scope.
  • Establish clear expectations about the company’s position on customizations. What is in scope for release 1? What could be in the scope of releases 2 or 3?
  • Make sure to create a process where a business case is created for each customization
  • These modifications should be kept current as new software versions are released by the vendor
  1. Budget

Organizations must create realistic budgets to cover all costs associated with the implementation of ERP projects. Most companies will expect an ERP project to have a quick ROI (or at minimum, projected profitability). To increase the ROI, some companies decrease the project budget. This is often done to reduce costs associated with change management, training, and project management. However, this is risky and unwise. It could lead to project failure due to a lack of employee buy-in and adoption.

Recommendations:

  • Keep a close eye on the cost of implementation and make sure you have a realistic estimate. Monitor and review your implementation costs regularly.
  • Avoid cutting costs on project management, change management, and training. Consult implementers can offer quick implementation tools and methods.
  1. Project Closure

A project close is as important as its start-up. Clear communication between personnel and the systems decommissioned is essential. This is also true for the introduction of new business procedures. Document well during the engagement, and keep this documentation accessible to all members of your project team.

Recommendations:

  • It is important to communicate clearly when the new system/processes will be live and when the old one is being retired
  • Prepare to transfer system support functions to the ongoing system support structure from the project structure
  • To ensure that the system and processes are running as intended, audit them.
  • For post-go-live support, create a competency center

Many people don’t realize how complicated an ERP implementation can be. Here are some common mistakes that can be avoided to increase your chances of success.

The causes of ERP failure

  1. Poor software fit/inaccurate needs
  2. The implementation is not the responsibility of business leadership
  3. Insufficient team resources
  4. Inability to take timely and high-quality decisions due to lack of accountability
  5. Investment in change management is not enough
  6. Insufficient training/support
  7. Insufficient funding
  8. Insufficient data cleansing
  9. Persistence in making ERP look like a legacy
  10.  Inadequacy of testing
  1. Poor software fit/inaccurate needs

Your requirements are essential for a successful ERP implementation. Talk to managers, users, and senior executives from all disciplines. Advocates pursue issues where there is pain that can be solved today. Analyze plans and forecasts to anticipate similar pains. You can now reduce that list to a list of both required and optional features.

Before you start looking for an ERP system, make sure that you have a detailed and complete list of all system requirements. Ask as many questions as possible. ERP vendors are likely to be optimistic about the product’s suitability for your needs. Do not choose bells and whistles over the essentials. Keep looking if an ERP system does not meet your needs.

  1. The implementation is not the responsibility of business leadership.

This commitment is essential for the organization to succeed. Instead of gambling leadership attitudes, recommend postponement.

The ERP project can be allocated by the executive management. They can also re-allocate resources as the conditions change. If they refuse to pay ERP, then the project will be put on hold. People are also a crucial resource. ERP implementation will require the assistance of valuable people. Temporary replacements are needed for those positions or recognition that not all tasks can be done the same way.

ERP implementation is a company-wide task. ERP implementation cannot be viewed as information services or manufacturing. Therefore, all employees must agree to use every resource.

  1. Insufficient team resources

This could be the number of resources available, but it is equally important to ensure that your ERP team has the right talent and experience. If the enterprise does not have the right resources, the ERP implementation is likely to fail. While you have the option of hiring additional employees or contractors, or if the company has the resources to do so, the ERP implementation will likely fail. You can use existing resources but their “day jobs” should still be done and the ERP implementation should be their main task. These resources can also be used for outside assistance, such as data conversion programming. A team manager is an essential resource that should not be overlooked. This person will coordinate all efforts and provide reports to the executive management and steering teams on the progress of each project.

  1. Inability to take timely and high-quality decisions due to lack of accountability

It is important to establish early who is responsible for which level of decision-making. Poor quality or late decisions could lead to ERP failure. The team should make most of the decisions regarding your ERP implementation. The implementation process will be delayed if the executive management is not involved. People on the team will make the best decisions. They will have a better understanding of the system and will know what improvements will be made.

  1. Investment in change management is not enough

ERP is not something that the business case will tell you. The rank and file won’t be interested in it. Over-communicating and over-preparing is the only sensible course. Good communication will ensure that everyone is aware of the ERP implementation goals and the anticipated improvements. An ERP implementation that assumes people will support your plans and accept them can quickly fail.

Change is a psychological phenomenon. Some people will quickly see the future. Others cannot see other processes that are better than the ones they know and find satisfactory. As part of your team, consider hiring change management specialists. These specialists can recognize and work with different personalities to help staff embrace and accept the future.

  1. Insufficient training/support

ERP implementations require that users are trained. Users who are not properly trained will waste resources and cause problems for the implementation team. The implementation will fail as the support resources become less available.

  1. Insufficient funding

ERP implementations can be expensive. You should not waste money. The cost of an ERP failure can make implementation costs seem like pocket money. When you request a budget, make your best estimate of the cost. The initial cost of ERP software is just one factor. You will incur incremental payroll costs as the implementation progresses. Additionally, you will need to hire specialists and contractors in different disciplines. There will likely be additional costs for upgrading your network, hardware, and other infrastructures to make the new ERP work as it should. Your ERP developer will keep improving the system and fixing bugs as well as other issues that may be discovered over time. As you would expect with any large enterprise system, ERP will require ongoing support and maintenance. While savings can be expected over time, there will still be costs. These costs must be paid otherwise the implementation could fail.

  1. Insufficient data cleansing

Data cleansing and preparation can be a frustrating Catch-22. It requires patience and perseverance. The Catch-22 is that data cleansing and preparation require patience and persistence. Data cleansing and system building must be done in tandem. This could easily lead to a failed ERP implementation.

Start by separating your data into two types, dynamic and static. Static data is elements such as addresses of suppliers that can be entered once. Transactions are dynamic data.

All the static data you need in your ERP will be found in tables that are made up of data fields. Some fields will be required, while others may be optional depending upon your business’s specific needs. You will now need to map these fields back to legacy systems. Next, you’ll need to determine how to copy data from multiple legacy sources into your new ERP.

The concept of dynamic data transfers is similar, but there’s one important difference. Most likely, your legacy systems have decades or even decades’ worth of data. Now decide how much data you need to transfer to the new system. Most times, only the most recent records are required. It is not a good idea to load your ERP with data that has no value. If you have to access historical data, keep your legacy systems available on a read-only basis.

Before you load the data into the new ERP, make sure to carefully review all data. You can correct any errors or omissions you may have made in the past.

  1. Persistence in making ERP look like a legacy

Over-customization can increase every other cost and risk. It makes it more difficult to upgrade and test, and it reduces ERP functionality. Even though your users may be comfortable with the layouts of your legacy systems they are familiar with, there are better options. Your new ERP developers put in a lot of effort to use the best practices. Users will quickly adapt. Your requirements are the main goal, not cosmetics. The cost of customization is high and should be avoided if there is an alternative solution. Most ERP systems have easy configuration tools, which make customization much easier.

  1. Inadequacy of testing

Without serious, repeated testing, you will fail to build from a single test for every business process, and move on to volume tests and a mock-live that requires practice in synchronizing the old and new systems.

Data migration issues can also be detected during testing. Tests can fail if some data element is not in the correct format. Testing also includes data migration. As you work to solve testing problems, you will move data through several iterations. Then, you’ll reset the system for further testing. To ensure that the process is efficient and doesn’t take too long, you should document the migration flow. You will be ready to perform the most efficient data migration and get your company back on track quickly at go-live.

 

Automation can be used to automate much of the testing. This type of test can be run many times more than anyone can. Because of the large sample size, it is possible to find and fix potential problems, thereby avoiding any implementation failures.

You will be able to avoid many other pitfalls but your chances of an ERP failure are greatly improved if you do not make these ten mistakes.

Sanisoft Information Technologies after considering all the above factors successfully implemented SHAZ micro ERP software which supports 13 entities and is working fine.

Summary

These key success factors and suggestions are essential for ERP implementations. You will struggle to implement your ERP implementations without a strategy and detailed plans.

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