Success of ERP Projects

Enterprise Resource Planning or ERP as it is more popularly known has been prominent in the Industry for quite some time. We often hear of successful implementations and at other times learn about the devastating impact that a failed ERP implementation can have.

It is important to reflect on what is meant by a successful implementation and how an implementation is considered to be a failure.

Despite best efforts and abilities of ERP consultants, ERP implementations don’t take off the grand way it is supposed to do. There are many deterrent parameters that often result in a negative ROI.

The most important of these are the human factors that impact application value. The basic tenet of empowering an organization with new technology: if the end-users won’t use the application, the ROI will likely be negative needs to be realized by ERP consultants worldwide, be it on any platform.

We broadly categorize 4 categories of human barriers faced in ERP implementations:

• Individual – this pertains to the willingness of individuals of the organization in sharing knowledge and information. Individual employees often feel insecure in doing so perceiving that their domain knowledge once incorporated in the ERP would render them dispensable.
• Structural – Groups within the organization may not share information freely and technology alone will not change them. This usually happens more between departments that worked in isolation Pre-ERP.
• Hierarchical – ERP leads to transparency across the organization and this contradicts the usual hierarchical barriers of managers and line staff. ERP changes these ideologies.
• Cultural – This refers to ERP implementations integrating the enterprise with suppliers and customers across the globe. Different countries have different cultures and initially cultural barriers also prevent the ROI from reaching its potential.

Our implementation experience has shown that human factors can influence upto half the potential value to be derived from the ERP.

To maximize this return value, the organization must devote as much energy, to addressing human barriers during deployment and the first operational year, as they did to select the ERP. Issues such as this come under the purview of Change Management. It is extremely important to educate end-users about the concept and the ideology of a ERP.

Most implementations begin with users not aware of what they are going in for. This results in a gap between expectation levels of the client team and implementers. Training sessions on how to adapt to the changing environment and making users aware, help in reducing the shock of the changes that the ERP brings.

Factors which are critical to the success of the project / RoI of the project includes:

Business Process Enhancement (BPE): The biggest advantage of implementing a ERP package is that, it brings with it time-tested streamlined Business processes which are standards across countries and across sectors. Sector specific verticals come as add-on’s to give thrust to that particular industry. The challenge lies in the organizations adaptability to the new post-implementation business scenario

Technology Upgrade (TU): Another important factor is keeping with times and changing the way business is done, by means of advanced technology. Technology has proved to be a boon and benefits derived from this include, better and more efficient manner of execution of tasks, better reliability, better availability, more productivity and less manual intervention. But this is also a volatile component, because only the right kind of technology for the right company will be beneficial.

Spectrum of Application (SoA): · he organization needs to thoroughly analyze the scope of implementation. The spectrum that would be impacted by the implementation is a key factor of ROI. More mature organizations will get higher ROI from wide Application Spectrum whereas less mature organizations with less IT infrastructure and awareness will get higher ROI from a limited Application Spectrum. The best solution for these less mature organizations is to incorporate an iterative model of ERP implementation with “a module – at – a time” approach. The change management becomes easier and less tech-savvy employees can take their time to grasp the new system. With successful implementation of each module, the acceptance factor reaches a high, and in turn gives a high ROI.

Human Resource Maturity and Learnabilility (HRML): · The organization should go in for external consultation for assessing this factor, unbiased. The people of the organization can have a radical impact on the ROI of ERP. With this factor in mind, the implementation process needs to be selected, in order to provide high ROI. The process adjustment would negate low HRML index, and will be matured enough to introduce the ERP in a gradual comprehensive manner.

Payback Period (PP): · The payback period is the period from inception of implementation to the point when the ERP begins to give pertinent answers to business problems. The shorter the payback period, the higher is the ROI, which means these are inversely proportional to each other.

Organizational Factor (OFac): Every organization is unique, and would have organization specific factors, which will impact the ROI of ERP. In our implementation experience, we have witnessed this and found it difficult to classify. This is therefore a generic factor, which will be decided by the organization, if found to have a bearing on the ROI.