Nov. 2nd, 2006. ERP Implementation(phase 5&6)

This week we continued with Implementation. It is important to measure the success of an ERP implementation because different companies measure their ERP implementation success in different ways. It is important to know their measurement system. Some do not even bother to ask questions about the success.
There are some warning signs that can tell a company is their ERP implementation might face failure. For e.g. Negative attitudes, Long process time, problems with data integration, Technical issues, etc.

After the implementation, comes the Stabilization period (Phase-6). Generally every ERP system takes about 3-9 months to work without bugs/crashes. They are treated for consistency, documentation, hardware and software upgrade, etc. This requires the company to have the cost allocated for these activities.

Risk occurs at every phase of ERP life cycle. Major portion of it comes into play in the Implementation. There have been a lot of ERP implementation failures, the credit for which goes to, not accounting for risk during implementation.
There are three basic types of risks:
Technical Risk: Risk of performance due poor Information Technology.
Business Risk: Risk from the newly adopted process.
Organizational Risk: Risk from the environment in which the system is placed.
A survey shows that companies rate Organizational risk as the biggest risk, followed by Business risk, and Technical Risk.

Oct. 26th, 2006. ERP Implementation

This week’s we covered the phase 5 (transition) of ERP implementation.
Transition: Most complex and difficult step in the ERP life cycle and involves high risk. It is basically the switch over from the legacy system to the new ERP system. The three pillars of any implementation are:

Process: Best Practices, Modeling tools, BP improvement
People: Management, Project Team and Consultants
Technology: State of the art infrastructure.
It is very important for all these three pillars to stand together and work together for any implementation to be successful. There are 4 different implementation options based on scope and function.
1) Incremental: One module at a time.
The fundamental behind this approach is improvement overtime, by testing the software in modules.

2) Process Phasing: Few modules at a time.
The key behind this implementation is running the old and new system in parallel, so as to avoid any data losses due to bugs in the new system. The legacy system then, acts as kind of back up system. This gives the advantage of more resources to fewer modules being implemented, with freedom to explore the new system, because the legacy works as a backup. All these features thereby reduce the risk of failure of the mundane processes.

3) Big Bang: Entire suite at a time.
A Three step process; all processes implemented, system is tested, legacy system is pulled out. The advantage of big bang is that it does not require interaction with the legacy system, and thereby saves on costs of running and maintaining two systems. I think, cost is one area where this approach takes a leap over the phased implementation, but also takes a risk of failure along with it. There is no doubt that this approach is the fastest way to implement and maintains the integrity of the project team.

4) Business Unit Phasing: This approach takes geographical considerations in implementations.

A Survey by Mabert et al. [2000] shows that 41% of the companies go with a Big Bang approach followed by 23% phased rollout by site. Phased rollout by module and mini big bang contribute 17% each.

Certain objectives like time to implement, Scope, Available Resources, Complexity, Risk and benefit of an implementation can have a great impact on the success of ERP.

Rest, To be continued in the next class…

Oct. 12th, 2006. ERP Evaluation

This week’s class was about ERP evaluation. It tells us about ERP v benefits. We analyze cost by calculating the Return on Investment (ROI). It is the ratio of the project’s benefit to the value of project’s cost. The major problem while calculating ROI is that we cannot account for the intangible benefits and costs. For the same reason ROI is sometimes considered as a waste of time.
Other approaches besides ROI are Net Present Value (NPV), and Internal Rate of Return (IRR). By far ROI has proved to be the most widely used method for calculations.

It is difficult to calculate the returns from an ERP implementation because the company perceives of profit in different way. The returns expected are not monetary but intangible benefits such improvement in the processes, efficient and effective work environment.

A large share of the cost is the “Professional services” offered by the vendor followed by “in-house staff costs”. Other costs include IT infrastructure and software licensing.

Some facts about ROI pointed by Peerstone Survey tell us good and positive things about ROI. When asked 200 companies; 63% companies achieved some form of benefit. 39% of these companies achieved ROI. Successful implementation have shown to have their ROI target before launch of the ERP project. Companies that use ROI have shown more success than others.

Before jumping in the pool of tangible and intangible benefits to find a solution for ROI, there are certain questions that should be answered. Issues such as reasons for considering ERP, its scope, budget, timeframe and estimated income generation from the project should be answered beforehand.

Oct. 5th, 2006. ERP Life Cycle.

This class talked was about ERP life cycle. An ERP life cycle has six steps:
Initiation: origin of a business case, based on four rationales (Technology, Business process, Strategy, Competition)

Planning: Consists of formulating the team, its goals, and objectives. Teams take care of implementations as well as maintenance.

Analysis and Design : Analysis is done on the basis of “As Is”, “To Be” and “Gap” methods. For extensive reengineering “As Is” is not important, but for minimal reengineering “As Is” plays a very important role. The “To Be” model is Technology/ERP Driven.
Going straight to the “To Be” model is the way consultants are working these days.

Realization: Gather resources, customize the process and test it.

Transition: Implement the system with total change or through a gradual switch over.

Operations: Monitor ongoing performance and tune up the system.


There are various tools available for project management.
1) Critical Path method: Mathematics based chart used for scheduling tasks.
2) Gantt chart: Bar chart used to show project schedule. It shows overlapping activities very neatly.

While choosing an ERP system the most important factors that should be considered are:
Rank of the Software, its match with the proposed strategy, cost analysis, ease of use, and analysis of processes that would be critical to the organization.

Sept. 28th, 2006 ERP Infrastructure.

In this class the main topics of discussion were: Infrastructure,
Infrastructure, in its business terms describes the layout, configuration, and interrelation of the hardware in an organization. The major function is to apply the Enterprise architecture. The basic idea behind an infrastructure is the architecture on which it is made. An infrastructure should be reliable (robust), scalable (possibility of expansion), and accessible.
Talking about architectures, there are two major types of architectures. Open architectures and closed architectures. As the name suggests, open architectures allows easy connectivity to different systems, where as closed architectures are in house designs and are difficult to connect. Key point to note: open architecture is not the same as open source. Other factors of consideration in an ES system are its availability, flexibility, performance, and capacity planning.

There are various advantages of Enterprise system infrastructure, such as, integration, streamlining, time reduction, inventory management, and improved communication.
The main capabilities of an ES infrastructure are; its ability to have processes in modules. So if the organization wants, then it can implement only the selected modules. The database in an ES system is central, which covers all the problems of distributed data. In my opinion, the best feature is the availability to customize the system for different countries.
Companies can customize ERP systems to suit their needs. They can add/remove functionality and configure the system according to their business requirements.

Another advantage of Enterprise systems is the client/server architecture, where most of the data process and core work is done by the server. The client on the other hand generates process requests and accepts the result from the server. In earlier days, the clients were just dumb terminals, but now clients are also smart systems, which can do a lot of processing at their end. SAP works as a Distributed Function, which divides the work between the server and the client. All the application functions are performed on the local system and after that the main process communicates with the server.
This kind of architecture provides with improved processing power, and reduces work load. Also, it is user friendly and has high scalability.

SAP uses a three tier architecture which is as follows;
1) The first tier is the client,
2) The application (business rules), and
3) Data tier (server)

An interesting thing to know about operating systems; is the growing demand and application of “Linux”. It is good to know that finally people are moving towards a system that is reliable and robust. “To mess up a Linux box, you need to work at it; to mess up your Windows box, you just need to work on it”

Sept. 25st, 2006 "WSJ update"

Today, (Sep. 25th, 2006), in WSJ, Oracle has advertised that it is growing at the rate of 80% where as SAP has only 8%, according to their last quaterly "application growth report". Oracle's growth excluding acquisitions is 47%. It excludes revenues from Siebel, I-flex, and portal product lines.

A quote ,"We Lost Share - Henning Kagermann, SAP AG CEO", marks the catching point in the advertisement.

Source: WSJ, Sep. 25, 2006.

Sept. 21st, 2006 BP Modelling & Improvement

This class was about “Process Modeling”. It intended to give a visual representation of a Business Process.

Basically it provides information flow in a graphical way, which is universally understood. It can either be used to depict the ongoing process or the desired process. It facilitates in identifying bottlenecks, gaps, and helps improve the Business Process.

There are various tools and ways available to develop a Business Process Model. Tools like Flowcharts, Cause and effect diagrams, Data flow Diagrams, EPC, and work flow diagrams are the most popular ones. These tools are nothing but diagrammatic representation of a Business Process.

Business Process Improvement as described in the last blog, is the improvement of an ongoing process. It encompasses the task of creating a plot that shows opportunities for improvement in the current business model. It evaluates the new BP on the basis of cost and time efficiency. Most importantly, it calculates the kind of value (Real value, Business value, No value) contributed by a particular process.

An improved BP runs activities in parallel, has less interruptions and duplications, no bottlenecks, reduced redundant and unused data. Sometimes the implementing the change can be costly and time consuming.

Sept. 14th, 2006 Business Process Reengineering

This week's topic was BPR (Business Process Reengineering). The basic idea behind the process is a thorough analysis and redesign of an exsisting business process, thereby improving its efficiency, and quality of service. The underlying factor behind BPR is the focus on "how" things are done, and not "why" things are done.

Suprisingly the failure rate of BPR is 50%-70%. Biggest contributor to this is the resistance to adapt to a new system, by the employees. Other factors are; Inappropiate staffing, Inadequate tools, Mismatch of startegy, lack of oversight, etc. The biggest disadvantage of BPR is the thought of "layoff" amongst the employees, when the company implements BPR. Companies undergo a BPR because they percieve the changing market and want to stay ahead of its competitors.

Business process Improvement on the other hand is the continous improvement of a business process for a period of time. After a time period when improvments do not bring a significant change in the process, it is then when BPR is implemented.

There are seven BPR principles by Michael Hammer are interesting to know, learn and implement.

Sept. 7th, 2006 Business Process

This week’s class focused on a term called BP. Business process is a task of activities that takes input and generates a meaningful output, which has either a business or real value. The key to a successful business process is data sharing. The process of evaluating one’s own process against others in the same sector, is known as Benchmarking.
Processes like Inbound logistics, Operations, Outbound logistics, marketing and sales add real value to the business. Real value is the value earned directly from a customer and which shows profit.
Processes like HR management, Technology development, and procurement earn Business value to the organization. Business value is the value earned to keep the business rolling. Its earned from various sources as well as the consumer, but its earned indirectly. Business processes are different from Business Functions, which state “what” needs to be done rather than “how” it should be done. Key difference is that a business process is a Horizontal chain of command, where as a Business function has a Vertical chain of command. Functions are task centered where as processes are customer centered.

Aug. 31, 2006 ERP basics

Hi all !
Our first class (Aug. 31, 2006) covered the basics of ERP.
The underlying factor behind ERP is the Integration of various independent processes/systems within an organization. For e.g Independent process like Manufacturing, Supply chain, CRM, Human Resources can be run as modules in an ERP. It helps the information flow across various departments in a organization. The combination of indenpendent systems, provides a single database thereby eliminating problems like data redundancy and time lag between information interchange. It also provides a single and standard interface to various departments which is easy to maintain (low cost). Other benifits of implementing ERP would include improved communication, high products quality and cutomer satifaction.
With so many advantages and benifits to the organization, ERP comes with its own set of disadvantages. Major issues with ERP are high cost of implementation, time to implement, computer security, and complexity of the new system.
An interesting and equally surprising fact about ERP system is that "consulting" sums to approximately 30% of the total cost of the system, where as the software costs only 15%. Hardware, implementation and training account to 55%. (source: Introduction to ERP by Dr. Vijay)
ERP can be implemented by taking different modules from different vendors. This is sometimes the best way to develop an ERP system but might come for a price.