Despite a rough 1999, ERP systems continue to dominate corporate IT software budgets.
Chances are that at some point in your career, you’ll have to work on an ERP implementation. What will happen when your company goes live with an ERP system? Do you anticipate any problems or will it be smooth sailing?
Experts caution that an ERP implementation can be disastrous if the right steps aren’t taken. Take their advice and avoid becoming a cautionary tale.
Research shows that ERP implementation will grow increasingly prevalent. Computer Economics’ annual survey of Information Systems and eBusiness Spending reveals that 18.9 percent of organizations across all industry sectors have already put ERP software in place. Another 34.1 percent is either researching, piloting, or implementing ERP software.
Why ERP implementations fail
A number of large organizations are reporting difficulties with their ERP implementations. For example, in recent months, Volkswagen AG had trouble delivering spare parts to car dealers in Germany after going live with SAP AG’s R/3 software in its central parts warehouse. Hershey Food Corp. also experienced problems processing orders during the lucrative Halloween and Christmas seasons after an installation of R/3. Whirlpool, Allied Waste Industries, and W.L. Gore & Associates—the makers of Gore-Tex—have all reported botched ERP software implementations in recent months.
Experts point out, however, that when massive ERP installations go wrong, the customer is often to blame. Many fail to understand the scale of the project or invest enough time or money to move from an outdated system to a new one. In many cases, management believes the company is merely investing in a new technical infrastructure.
“More often than not, executives give lip service and say they’re behind it,” said Claude Watson, president of the Enterprise Application Solutions Group of CIBER, Inc., an Englewood, CO.-based IT solutions firm. “They really don’t follow up their words.”
Most ERP systems run on a two- or three-tier client/server architecture using UNIX, AS/400, and NT operating systems. This leads to a potential problem during implementation, according Dr. John T. Whiting, managing director of New Jersey-based E-Business Management Consulting.
“Many customers have mixed mode operations that require compatibility between different hardware platforms,” he said. “Implementers need to be careful to test the functionality of their solutions to ensure that full integration is achieved.”
In addition to the issues mentioned above, Dr. John T. Whiting, of E-Business Management Consulting, pointed out problems that are likely to occur during an ERP implementation, such as:
- · Systems, hardware, and software incompatibility. More customers want to extend the benefits of ERP systems to non-ERP systems, many of which are legacy mainframe-based legacy systems that run unique company functions. This requires Enterprise Applications Integration, which can be both complex and costly because many of these non-ERP systems are custom-developed and require custom programming.
- · An IT infrastructure that lacks the power to support the demands of an evolving ERP system
- · Systems integration engineering and problem solving expertise
- · Financial limitation
- · Political obstacles
- · Time constraints
How to avoid problems
As ERP programs become more sophisticated and encompass more areas within the company, customers are realizing that it’s cost effective to have ERP consultants stay on after the "go live" phase to work out new requirements, new functionality, and new users—especially situations involving mergers, acquisitions, and entirely new implementations. Thus, a solid relationship with the ERP consultant is a must.
Andrew Clark, COO of Agresso Corporation, a Vancouver, B.C.-based provider of Business Information Management Systems, said both the vendor and the client must make a commitment to work through problems. A mistake many companies make is approaching an ERP implementation as simply a client. Clark said it’s critical for the client to buy in to the project and approach the vendor-customer relationship more as a partner.
“Every project has its bumps along the way,” Clark said. “It’s important for the project manager and the client to have a very good working relationship so that they feel they can easily sit down and discuss those things and work through them.”
- · Make sure new add-on applications from your ERP vendor have enough functionality to meet business needs.
- · Don’t try to do too much at once. Most users start with a single application or with limited rollouts of multiple products.
- · Ease of use and training should be top priorities, because add-on applications reach new users who may be unfamiliar with ERP systems.
- · Test for possible mishaps and find solutions prior to installation.
An ERP implementation will probably force changes on the company’s business processes. Clark said a reputable ERP vendor will make certain that clients are aware of this during the sales process.
“A lot of vendors have gotten into trouble when business process reengineering becomes part of an implementation like this. I’ll often ask a customer to tell me about their business processes,” he said. “Are they well-defined? Are they documented? Do you follow what’s documented? As you implement this new software, do you anticipate changing a lot of your business processes? What I encourage customers to do if they need to do business differently, [is complete] a significant portion of [the necessary changes] before they select a software package.
“Some ERPs will tell their customers, ‘Don’t change your processes until you finish implementing the software so you’ll understand the constraints of the software,’” Clark continued. “There is a difference between having the software drive your business and having what makes sense for your business drive the software you need and how it’s set up. We really push customers to make those changes in their processes before we get into the implementation.”
Next week, we’ll take a second look at ERP implementation, including the time it takes to restabilize, how to manage the expectations of senior staff and board members, and how to ensure that staff are properly trained on ERP systems.
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