Objectives

What is an ERP system?

What are the Benefits of an ERP system?

Who are the ERP vendors?

What aspects constitute a successful
implementation?

What factors are associated with ERP
failures and how to overcome them?
What is an ERP systems?

“They are systems designed to
process an organisation transactions
and facilitate integrated and real time planning,
production and customer response.”

ERP Characteristics
 ERPs are packaged software designed for a client server




environment.
ERPs integrate the majority of a business processes
ERPs process a large majority of an organization’s transactions
ERPs use an enterprise wide database that typically stores each
piece of data at once.
ERPs allows access to the data in real time.
(O’leary, 2000)
Functional Aspects of an ERP
Source : http://www.inixion.com/images/features3.jpg
ERP life cycle
Deciding to Go ERP
 Choosing and ERP system
 Designing ERP systems

 Should business process or
current ERP software be changed
 Choosing Standard Model and Process
Implementing ERP: Big Bang versus phased
 After Going Live
 Training

(O’leary, 2000)
Why Implement an ERP system?
Tangible Benefits:
Reduce Labour Costs
 Reduced material Costs
 Improve in Sales and Customer Service
 Efficient Financial Management

Intangible Benefits:




Information supply chain visibility
New/improved business processes
Product and Process design
Production and Material Management
Source : ( Leon, 2008 and Cruz-Cunha 2010)
Why Implement an ERP system?
What are ERP Vendors marketing:
 Improve alignment of strategies and operations
 Reduce costs through increased flexibility
 Achieve an end-to-end view across all your lines of business
 Drives value for your business
 Delivers agility in the face of rapid change
Cast Studies
Drallim – Fluid Controls /
• Over 4,400 hours saved per year through process improvements and
21% cut in support costs
Vita Liquid Polymers/
• 80% of customers now pay invoices a week earlier and automated
processes mean tighter processes and proactive credit checking
Source: http://www.epicor.com/uk/Company/PressRoom/Pages/SuccessStories.aspx
Who are the ERP vendors?
Who are the ERP vendors?
Tier I
Tier II
SAP
Epicor Sage
Oracle
Infor IFS
Oracle e Business Suite
QAD
Oracle JD Edwards
Lawson
Oracle Peoplesoft
Ross
Microsoft Dynamics
Tier III
ABAS
Activant Solutions Inc.
Baan
Bowen and Groves
Compiere Exact
Netsuite Visibility Blue
Cherry Exact
HansaWorld Intuitive
Syspro
Open Source ERP software
OpenERP, Compiere, Open Bravo, Apache OFBix/opentaps, ERP5, OpenMFG,
OpenPro, etc
Source: Panorama Consulting, 2011 Guide To ERP Systems And Vendors
ERP Vendors Market Share 2010
47%
>1B
33.30%
500M-1B
100M-500M
31.30%
50M-100
32.10%
25M-50M
<25M
0.00%
31.80%
24.50%
22.20%
10.00%
SAP
31.30%
15.30%
13.70%
Oracle
30.00%
11.50%
15.70%
23%
20.00%
4.20%
16.80%
16.70%
50.00%
16.70%
14.60%
16.80%
19.80%
16.70%
17.60%
16.30%
40.00%
4% 8.60% 8.60%
60.00%
Microsoft Dynamics
23.10%
28.40%
11.80%
70.00%
Tier II
26.60%
80.00%
90.00%
100.00%
Tier III
Source: Panorama Consulting, 2011 Guide To ERP Systems And Vendors
Payback Period By Vendor Tier up to
2010
120.00%
Tier III
18.70%
100.00%
Tier II
59.40%
80.00%
Tier I
50.00%
60.00%
30.30%
40.00%
42.60%
20.00%
6.50%
3.10%
0.00%
8.30%
1.40%
25.30%
1.00%
13.80%
2.60%
No cost Recouped
1.30%
5.50%
1-2 years
2-4 years
4-7 years
above 7 years
Source: Panorama Consulting, 2011 Guide To ERP Systems And Vendors
ROI and ROA
Performance comparison Pre- and postadoption for 63 ERP Systems:
ROI
Post3
Post2
Post1
Pre
ROA
8.002
4.899
7.533
4.916
7.691
4.448
8.576
5.341
Source : (C. Jones, Kalmi and Kauhanen, 2011)
How to Measure ERP success?

Lyytinen and Hirschheim (1987),
categorized IT project success by assessing
the resulting system against
 Planned objectives,
 User expectations,
 Project budget
Highlights from a 2010 ERP
Benchmark




Over 40% of organizations are dealing with significant change
form ERP system rollout.
Over 60% of organizations suffer from poor visibility to data and
poor integration in their old systems.
Organizations expect a lot from their ERP systems.
Most companies are not yet ready for the organizational changes
of ERP software.
2009 Average
Take longer than expected
35%
Implementation Duration
18.4 Months
Costs exceeds budget
51.4%
Benefit Realized Under 50% 48%
2010 Average
61%
14.2 Months
74.1
67%
Some People
might have
different views
ERP project failure classification
ERP project failure could be classified as one of four
levels:
(a) Process failure, when the project is not completed
within the time and budget.
(b) Expectation failure, when the IT systems do not
match user expectations.
(c) Interaction failure, when users attitudes towards IT
are negative.
(d) Correspondence failure, when there is no match
between IT systems and the planned objectives.
(Aloin et al, 2007)
What factors are associated with ERP
failures and how to overcome them?
Risk categories associated with enterprise-wide/ERP projects:
Organizational Fit
 Skill mix
 Management structure and strategy
 Software systems design
 User involvement and training
 Technology planning/integration
(Sumner, 2000 ; Ojala et al, 2006)

Risk category :
Organizational Fit
Risk Factors


Failure to redesign business processes to fit the software
Failure to follow an enterprise-wide design which supports data
integration
(Sumner, 2000 ; Ojala et al, 2006)
Case Study
Hershey Foods Corporation
(Wailgum, 2009)
Minimising Strategies



Commitment to redesigning business processes
Top management commitment
Following an enterprise-wide design which supports data
integration
(Sumner, 2000 ; Ojala et al, 2006)
Risk category : Skill Mix
Risk Factors




Insufficient training and reskilling
Insufficient internal expertise
Lack of business analysts with business and technology knowledge
Failure to mix internal and external expertise effectively
(Sumner, 2000 ; Ojala et al, 2006)
Case Study
Lumber Liquidators
(Kanaracus,2010)
Minimising Strategies



Effective use of strategies for recruiting and retaining specialized technical
personnel
Obtaining ‘business analysts’ with knowledge of application-specific modules
Effective use of external consultants on project teams
(Sumner, 2000 ; Ojala et al, 2006)
Risk category :Management
structure and strategy
Risk Factors




Lack of senior management support
Lack of proper management control structure
Lack of a champion
Ineffective communications
(Sumner, 2000 ; Ojala et al, 2006)
Case Study
The City of San Diego
(Krigsman, 2009)
Minimising Strategies
 Obtaining top management support
 Establishing a centralized project management structure
 Assigning a ‘champion’
(Sumner, 2000 ; Ojala et al, 2006)
Risk category :
Software systems design
Risk Factors


Failure to adhere to standardized specifications which the
software supports
Lack of integration
(Sumner, 2000 ; Ojala et al, 2006)
Case Study
Levi Strauss
(Clarke, 2008)
Minimising Strategies
 Commitment to using project management methodology
and ‘best practices’ specified by vendor
 Adherence with software specifications
(Sumner, 2000 ; Ojala et al, 2006)
Risk category :
User involvement and training
Risk Factors

Insufficient training of end-users
 Ineffective communications
 Lack of sensitivity to user resistance
 Failure to emphasize reporting
(Sumner, 2000 ; Ojala et al, 2006)
Case Study
Dorset County
(Anonymous, 2010)
Minimising Strategies



Effective user training
Full-time commitment of users to project management roles
Effective communications
(Sumner, 2000 ; Ojala et al, 2006)
Risk categories : Technology
planning/integration
Risk Factors


Inability to avoid technological bottlenecks
Attempting to build bridges to legacy applications
(Sumner, 2000 ; Ojala et al, 2006)
Case Study
Dillard's Inc
(Jarzemsky, 2010)
Minimising Strategies



Acquiring technical expertise
Acquiring vendor support for capacity planning and upgrading
Planning for client–server implementation including client
workstations
(Sumner, 2000 ; Ojala et al, 2006)
Other Aspects:
In 2004, HP's project managers were
aware of the risks associated with the
ERP rollout. But they could not plan
for so many events to happen at once.
The project eventually cost HP $160 million in
order backlogs and revenue loss that
accumulated to five times the project's estimated
cost.
(Gilles Bouchard CIO of HP's global operations)
(Wailgum, 2009)
Strategic critical success factors









Top management commitment and support
Visioning and planning
Build a business case
Project champion
Implementation strategy and timeframe
Vanilla ERP
Project management
Change management
Managing cultural change
(Finney and Corbett, 2007)
Tactical critical success factors










Balanced team
Project team: the best and
brightest
Communication plan
Empowered decision makers
Team morale and motivation
Project cost planning and
management
BPR and software
configuration
Legacy system consideration
IT infrastructure
Client consultation







Selection of ERP
Consultant selection and
relationship
Training and job redesign
Troubleshooting/crises
management
Data conversion and integrity
System testing
Post-implementation
evaluation
(Finney and Corbett, 2007)
Summary

ERP Systems are not an IT solution but a system that would
transform the company into a more efficient and effective
organization.

Successful implementation of ERP is complexly tied to multiple
factors that needs to be understood by management who are
setting the strategic direction of the implementation process.
Furthermore, A continuous support and monitoring of the
implementation process is required at each stage.

The most important issue in a successful ERP project is an
understanding of the company’s business and context
requirements.
What's the future will be like?
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14.
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