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Challenges in Implementing Enterprise Resource Planning

Question:

Discuss about the Challenges in Implementing Enterprise Resource Planning.

Answer:

Introduction:

Enterprise Resource Planning (ERP) is one of the fastest growing software industries (Sumner, 2008) and one of the biggest revolutions in the corporate world in the last two decades (Ray, 2011). An enterprise is often used to indicate a business (O'Sullivan and Sheffrin, 2003); usually, a large-scale one, and specifically in the computer industry it is a catch-all term for businesses of all sizes, government departments, non-profit institutions and other types of non-individual entities (Rouse, 2005). An ERP software encompasses the length and breadth of the enterprise, covering all departments and all rungs of hierarchy (Beaubouef, 2011), and this is the reason for the word Enterprise in ERP (Sheldon, 2005). An ERP integrates the organisation, and this has the promise of many benefits, as well as some issues. The organisation needs to look into the issues before realising the benefits, and that too in a cost-effective way.

This paper explores ERP from the point-of-view of the enterprise wishing to implement it. The paper will look into the processes an enterprise should go through for selecting an ERP, issues that crop up, and recommendations for solving and managing the issues.

ERP is not only a planner and provider of information but also a facilitator of execution. As mentioned before, an ERP system helps manage the whole enterprise. An ERP is an integrated solution with a shared database that is accessed by all using a shared computing infrastructure to enable effective information flow among all stakeholders and efficient usage of the enterprise's resources (Ray, 2011). An ERP is used to manage an enterprise's data (Sumner, 2008)  and helps in every business function. Also, ERP brings with itself better procedures and techniques for achieving the tactical, operational and strategic goals of the enterprise. These procedures and techniques may not be in conformity with the existing (relatively inefficient) procedures and are sometimes compared to a battering ram (Koch, n.d.), as the ERP redefines the business processes completely (Ghosh, 2012).

An ERP is a costly investment (Koch, n.d.), and the rate of failure is high (Nafeeseh and Al-Mudimigh, 2011). The incentives for a sincere and whole-hearted endeavour to ERP are huge unless some sabotage is going on. The academic literature and the industry have studied the ERP implementation in detail as it is a concern which has much financial impact. Following are the recommended steps for increasing the chances of a successful ERP implementation.

Vendor Research, Information Gathering, and Initial Shortlisting

For the initial step, make an exhaustive list of vendors without any consideration for any factor like the size, market reputation, or history of vendor companies. The later steps will shortlist this originally compiled list. Techniques for arranging a list include a thorough search on the Internet using popular search engines, ERP-focused forums and support groups, and case studies. Searching on the Internet is an inexpensive way to research and gain knowledge about the marketplace. Also, managers in the organisation, especially senior staff will be helpful and consulted for their preferences in ERP. Also, consultation with end-users is useful, which may also aid in a certain small measure of their buy-in. After compiling the exhaustive list of suppliers, arrange details of the listed vendors on various factors. These factors include financial position, implementation philosophy and support issues, hardware and software infrastructure used to support the ERP, release and upgrade strategies, and development and maintenance resources of the vendor. All this is done using case studies, whitepapers published by consultancies, and other publicly available resources.

The enterprise has some requirements which are general in an industry as well as some requirements which are pertinent to the organisation in question. As mentioned earlier, an ERP can be like a battering ram which seems to be like destroying the existing procedures. This revamping of existing (inefficient) procedures may be a good thing. Documenting legacy systems or business process re-engineering is utilised to come up with the requirements of the enterprise. The requirements thus formalised are compared to the features of the ERP vendors identified. The list is trimmed using the data collected so far.

The enterprise should have a manageable number of sellers in consideration after the above exercise. Request For Proposal (RFP) is sent to these providers. In all likelihood, the vendors will be more than willing to pitch their products to the enterprise. A detailed demonstration of the proposed ERP with the senior officials of the company, head of departments, and subject experts is scheduled with each of the suppliers. Unwillingness for a demonstration results in removal from consideration. This removal from potential vendors is so because an ERP is a complex and mammoth project and an agile supplier, who is quick to respond to requests, is preferable. Some concerns are relevant for a demo and will help in rejecting less suitable suppliers. The questions to ask a vendor include the possibility of phased implementation, handling of technical problems and training, costs of hardware and software replacements, and mobile capabilities (SelectHub, 2016).

The vendors provide a quote for the total cost of ownership of their product. Finally, a contract which clearly mentions the deliverables, schedule, penalties for missing quality or deadline, and other legalities are sorted out. Then, the actual implementation/customisation of the ERP begins, which is outside the scope of this paper.

An initiative the size and extent of an ERP, which fundamentally changes the business' processes (Ghosh, 2012), is ripe for mistakes which may result in failure. Academia and industry are taking an interest in the field of ERP and are looking backwards to history and looking forward to future to provide guidelines which can aid a better and more promising implementation of ERP, discussed as follows.

Lack Of Commitment From Senior Management

Lack of dedication from the senior management is one of the fundamental reasons which doom an ERP project,(Seo, 2013), (Kripaa, 2011), (Bingi, Sharma and Godla, 1999) even if the other factors are satisfactory (Sheldon, 2005). The senior management buy-in is critical as ERP transforms the entire enterprise's working. The intentions for such a disruption are noble, but require the leadership and authority of managers and the company brass to stamp out any anxiety or resistance. This support manifests itself in not only the funding of the project but also the leadership, monitoring and intervention by the top management (Bingi, Sharma and Godla, 1999).

ERP and its successful installation is a required part of success, but that goes only as far as the hands that will be using it day in and day out. Training staff often comes out later as a surprise work but is a core part of the ERP implementation. In a non-ERP scenario, staff is trained in that their actions have local effects and are isolated from the entire organisation. ERP software is nothing like a regular software, say Microsoft Excel, and are extremely complex and require rigorous training (Bingi, Sharma and Godla, 1999). The employees must be made to appreciate their role in the moving river of business processes, where now in the ERP scenario, their actions have enterprise-reaching effects. Understanding this new responsibility and power is essential, and this will not happen until sincere efforts are expended. Certain mistakes include teaching a few staff and hoping they will disseminate the knowledge, or holding quick orientation sessions in batches (Ghosh, 2012).

Lack of Clarity on Requirements

Lack of clear requirements is the bane of software engineering, and ERP industry is not isolated from it. The lack of clarity is not a trivial concern. ERP vendor SAP and Waste Management, a garbage disposal giant, had to go to courts for a value of $100 million in which the customer claims misleading sales and the subsequent failure, while SAP counter-claims, among other, poorly defined requirements (Kanaracus, 2010). Unclear requirements lower developer morale, encourage general solutions which do not fit well into the enterprise's exact requirements, increases delays, costs, and result in an inferior quality of software (Ghosh, 2012).

In the present-day software industry, off-the-shelf software meets most of the requirements of users and is cheaper since the costs are distributed among a large number of customers. Such is the case with ERP also. However, no ERP, howsoever industry-specific it may be, can meet an organisation's requirements completely. This mismatching of the general software's aims and the organisation's specific needs leads to customisation. Now, customizations in an existing software are a disruptive process. Thus, customizations must be kept minimum to enable a stable software. However, selection of a product which deviates from the enterprise's requirements by a great deal endangers the success of the endeavour by that much. Selection of improper packages leads to failing or slow operations and remedial of which requires the expense of further resources (Ghosh, 2012).

Also, there are other factors at play which represents a mix of skills, project management and control, user involvement and training, organisation fit, planning and software design (Seo, 2013).

Recommendations

As discussed in this paper, an ERP is a huge endeavour, and the chances of failure are high, which become more painful to bear considering the financial impact and the time lost, in addition to becoming a case study for a long time to come. The academia and industry are taking an interest in ERP and are providing guidelines which aid a successful implementation of ERP, as discussed next.

Commitment from senior management is one of the foundations on which a large structure like an ERP can be successfully built. It is recommended that an initiative like ERP only be attempted if the top management is positively sure of the mission and strategic planning indicates good Return on Investment (RoI).

Presence Of Executive Level Team Members

The presence of people with actionable authority is essential and recommended. One of the successes in ERP, ExploreCo in Australia (Motiwalla, 2008) had an official with the official title of Project Champion. His role was a clearly defined, unencumbered by any other official duties and he had executive powers. All of these factors were instrumental in sorting things and bringing all employees and processes on the same page.

It is recommended that the team that is chosen for ERP be a balanced mix of skills, personalities and motivations. Also, the team members must be relieved of their current official duties so that they can concentrate wholeheartedly on the ERP task lest the ERP becomes the straw that broke the camel's back or just another to-do in their daily schedule. This consideration for the people is essential because it is easy to overlook the human factor, which is equally important as the technical factor.

Clear requirements are a service to all concerned and help the two parties (vendor and the customer) stay out of courts over a failed implementation (Kanaracus, 2010). To help in the development of clear requirements, techniques like documenting legacy systems or business process re-engineering can be helpful. Also, prototyping, use cases, meetings and interviews are useful for understanding and formalising clear requirements (Ghosh, 2012).

It is recommended that resources for training the staff to be included in the budgeting from the start. As discusses elsewhere in the paper, lack of user training can break an otherwise successful ERP implementation. Thus, relevant end-user training with individual attention will maximise the efficiency of the ERP and help in quicker acceptance by the end--user.

As noted elsewhere in the paper, an ERP transforms the working of an organisation completely, and this means a lot of changes at all levels - strategic, tactical and operational. People will resist changes, especially to the routines and their silo-like operations which limit the immediate effects and visibility of their actions and thus allow for a lax attitude. An unwavering and dedicated upper management leadership to manage this change by providing guidance, orders, leadership, taking decisions will help in managing change and bringing the ERP project that much closer to success.

Conclusion

This paper talks about ERP, various processes that are suggested for a successful ERP implementation, the issues that are ready to break an ERP initiative. ERP is a massive project with huge financial and time investment. Thus, ERP, both success and failure cases, has been studied in depth, and this paper draws upon academia and industry to enumerate the issues prevalent in ERP implementations. Also, the paper provides recommendations which will help mitigate the risks and improve the chances of success of the ERP.

References

Beaubouef, G. (2011). Defining Scope for ERP Implementations. [online] ERP the Right Way!. Available at: https://gbeaubouef.wordpress.com/2011/02/13/defining-erp-product-scope/ [Accessed 27 Jan. 2017].

Bingi, P., Sharma, M. and Godla, J. (1999). Critical Issues Affecting an ERP Implementation. Information Systems Management, [online] 16(3), pp.7-14. Available at: http://carl.sandiego.edu/gba573/critical_issues_affecting_an_erp.htm [Accessed 27 Jan. 2017].

SelectHub. (2016). ERP Software Selection Criteria & Vendor Comparison Checklist. [online] Available at: https://selecthub.com/enterprise-resource-planning/erp-selection-criteria-checklist/ [Accessed 27 Jan. 2017].

Ghosh, R. (2012). A Comprehensive Study on ERP Failures Stressing on Reluctance to Change as a Cause of A Comprehensive Study on ERP Failures Stressing on Reluctance to Change as a Cause of Failure. Journal of Mar keting and Management, [online] 3(1), pp.123 - 134. Available at: http://www.gsmi-ijgb.com/documents/v3%20n1%20jmm%20p06%20-rittik%20ghosh%20-comprehensive%20study%20on%20erp%20failures.pdf.

Kanaracus, C. (2010). SAP, Waste Management settle lawsuit. [online] Computerworld. Available at: http://www.computerworld.com/article/2517917/enterprise-applications/sap--waste-management-settle-lawsuit.html [Accessed 27 Jan. 2017].

Koch, C. (n.d.). The ABCs of ERP - Getting started with Enterprise Resource Planning. 1st ed. [ebook] Available at: http://www.citi.columbia.edu/B8210/read26a/supp1-07/theabcsoferp.pdf [Accessed 27 Jan. 2017].

Kripaa, A. (2011). 7 Common Challenges Faced in ERP Implementation. [online] Blogs.ramco.com. Available at: http://blogs.ramco.com/7-common-challenges-faced-in-erp-implementation [Accessed 27 Jan. 2017].

Motiwalla, L. (2008). Enterprise Systems for Management. 1st ed. Pearson Education India, p.130.

Nafeeseh, R. and Al-Mudimigh, A. (2011). Justifying ERP Investment: The Role and Impacts of Business Case A Literature Survey. IJCSNS International Journal of Computer Science and Network Security, [online] 11(1), pp.185-193. Available at: http://paper.ijcsns.org/07_book/201101/20110128.pdf.

O'Sullivan, A. and Sheffrin, S. (2003). Economics. 1st ed. Needham, Mass.: Prentice Hall, p.29.

Ray, R. (2011). Enterprise resource planning. 1st ed. New Delhi (India): Mcgraw-Hill Pub.

Rouse, M. (2005). What is enterprise? - Definition from WhatIs.com. [online] TechTarget. Available at: http://searchwindowsserver.techtarget.com/definition/enterprise [Accessed 27 Jan. 2017].

Seo, G. (2013). Challenges in Implementing Enterprise Resource Planning (ERP) system in Large Organizations: Similarities and Differences Between Corporate and University Environment. 1st ed. [ebook] Composite Information Systems Laboratory (CISL). Available at: http://ic3.mit.edu/ResearchSamples/2013-07.pdf [Accessed 27 Jan. 2017].

Sheldon, D. (2005). Class A ERP implementation. 1st ed. Boca Raton, Fla.: J. Ross Pub.

Sumner, M. (2008). Enterprise resource planning. 1st ed. India: Prentice Hall.

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