ERP IMPLEMENTATION SESSION 2

By Vishnu Tunuguntla B.Tech, MBA, PMP, CSSBB,CQA, (Ph.D)

Major items in the Agenda

Identification of ERP Technologies Product Evaluation Challenges involved in selection of technology and how to handle them Business case Management
Business case preparation & Analysis Stakeholders involvement in Business case preparation Challenges in preparing the Business case and benefit quantification and how to handle them Review of the business case and articulation of the value indicators and approval of the business case

Vendor Management

Identification of ERP Technologies

Discussions with the Subject Matter Experts Participation in the technology forums to understand the best practices and Lessons Learned Interfacing with the Consulting Firms to understand various options

Product/Technology Evaluation

Identify High Level Requirements

Detail Requirements

Map Requirements With each Product

Supported Modification 3rd party Future release Not supported

Develop rating for Each product

Check if Product is supporting all req in this release

Allocate Priority details for each requirement

Evaluate the Ratings

Select the Product

Field Visits where the Product is working

Challenges involved in selection of technology

Ownership of the selection Process Business or IT
Business often wants to take the lead as they intend to leverage the tool as a transformation enabler and hence want to see how the tool can facilitate continuous optimization of business processes, provide abstraction and reuse of business logic, and enable change in near real time On the other hand, IT wants to ensure that the tool fits into the larger enterprise architecture, integrates well with the enterprise systems and meets performance and scalability expectations. So the solution would be having the right level of participation from both sides is the best approach and ensures the tool is well accepted and adopted over a period of time.

Features crucial for the selection process

Convincing the Business Units about Common Requirements

Business Case Management

Alignment

Financial Benefits

Fact Sheet
Non Financial Benefits

Optimizing Risk and Return

Documentation Risks

Maintenance

Business Case
Financial Benefits:
Business Level:
Increase of Revenues Increase of Volumes effecting the fixed cost per unit & productivity Risk Mitigation resulting in lower failure cost

Operational Level:
Identify the Current Cycle time and Estimated Cycle time for the Target Process. Collect the Cost being incurred in each step (effort) Estimate the effort that would be incurred at each step in the Target Process Identify the Pain Points in each Process and quantify the impact of these items in dollar terms. Describe how the pain points would be minimized / eliminated in the Target Process

Business Case
Non financial Benefits:
Enhancement of the Process functionality Improved Governance of Processes Increase in Brand Image Availability of data/information Relationships improvement with customers and suppliers Increase in Quality of services Increase in Customer satisfaction

Major Investments/Expenditures
Investments/Expenditures
Technology-related expenditures: hardware, software, installation and configuration costs, start-up and training cost. Direct Operating and Maintenance Cost Expenditures related to business process redesign, training and adoption Cost of Risk Mitigation and adjustments in the control framework Time & money lost in the Parallel run

Alignment Analysis
Alignment With Strategic Objectives Contribution of IT-related investments to atleast one of the strategic objectives
Contribution to the current objectives and priorities of the organization. Contribution to the objectives of a parent company or larger context within which the organization is operating Contribution to the achievement of a desired future state or business vision

Alignment Analysis
Enterprise Architecture: The enterprise architecture refers to the way relationships among components of an organization, including processes, people and technology, work together to create services and/or products. Alignment With Enterprise Architecture
Evaluation of the extent to which investments in IT-enabled change are moving in the direction of the target architecture.
Comparison of alignment with the Target area for each business unit

Articulation of Value Indicators

Identification of Critical Business Processes Articulation of expectations with respect to these processes (Cycle time or defects, interface problems etc) Quantify the expectation Define as a Value Indicator and track this during the implementation and demonstrate as part of benefit realization this contributing to Business Strategy

Computation of the Financial Indicators

Conversion of Non financial benefits in to Dollar terms using suitable assumptions. Make suitable adjustments to the cash inflows/cash outflows Compute Net Present Value/Internal Rate of Return/ Payback period

Risk Management
Major Categories of Risk:
Delivery riskThe risk of not delivering the required capabilities
Are we doing things the right way ? This identifies the risk of inconsistency with other current or potential programs and with existing capabilities Are we getting them done well? This identifies traditional project risk - budgets, schedules and meeting required specifications and quality standards

Benefits riskThe risk of the expected benefits not being obtained

Are we doing the right things? This identifies the risk of error or lack of clarity in the desired business outcomes in a changing environment. Are we getting the benefits? This identifies the risks around the business being realistically able to realize the expected benefits of the program.

Documentation
Create the Business case as per the suggested template and circulate it for review to all the stakeholders (Refer to the template given below.) The Business case is reviewed by the stakeholders and the review comments are provided. The modifications are done to the Business case as per the review comments and sent for approval The Business case is approved by Senior management and is base lined

Maintenance
Change the Business case whenever there is a change in the Projected Benefits ,Investments and risks. The business case document should be part of the stage gate review process and would be an important consideration whether to move forward with execution.

Vendor Selection
Creation of a manageable list of vendors for final review typically three to five Scheduled detailed product demonstrations A check of vendors references A visit to site where one of Vendors customers is using a similar ERP solution

Criteria for Vendor selection

Vendors stake in the market Vendors background, Previous experiences, clientele Cost of implementation, acquisition, support and upgrade Past Implementation record of the vendor, experience in a specific vertical Technologies with which they have experience Profiles of their consultants Past record Project delivery Risk mitigation plans and Business continuity assurances being offered Financial strengths and future goals of the Vendor

Vendor Management
Decide Scope of Requirements For ERP Identify Vendors (3-5) Establish Criteria for Vendor selection Send Request for Proposal

Fine Tuning of Proposals By Vendors

Negotiations with Vendor(s)

Vendor Short listing Yes

Evaluation of Proposals

Selection of Vendor

Prepare Service Level agreement

Review of service Level agreement

Any comments? No

Move to Next Phase of Implementation

OK

Review of results?
Not OK

Move to Ist Phase of ERP Implementation

Make Mile Stone Payment to Vendor

Take Corrective Action

Overall Flow - Recap

Analysis of Current State Quantify Current Process Cost Yes Any comments? No Business Case Approval Vendor Management Phase wise Implementation of ERP Solution Benefit capturing Business Case Review Business Case Preparation ERP Solution Evaluation Identify Cost of failures Define Target State

Move to Next Phase of Implementation

Yes

Inline with BC? No Take Corrective action

Change Management and Training. This was mentioned as the major problem with implementations. Changing work practices to fit the system is a major difficulty. Also mentioned were training across modules and starting training sooner To BPR or not to BPR It is difficult to draw the line between changing Business Processes to suit the system or retaining Business Processes and paying the cost, in dollars and time, to change the system. As time and cost squeeze the implementation, the usual path is to not modify the system, but to change the way people work. This feeds back into Change Management and Training. Poor Planning Planning covers several areas such as having a strong Business Case, to the availability of Users to make decisions on configuration, to the investing in a plan that captures all the issues associated with implementing it. Underestimating IT skills As most people are upgrading from old technology, the skills of the staff need to be upgraded as well. The upgrade is also going to place significant demands on a team who are geared to maintain an old but stable environment. Usually this effort is underestimated. Poor Project Management Very few organizations have the experience in house to run such a complex project as implementing a large-scale integrated solution. It usually requires outside contractors to come in and manage such a major exercise. It can be a fine line between abdicating responsibility and sharing responsibility. Many consulting firms do a disservice to their clients by not sharing the responsibility. Technology Trials The effort to build interfaces, change reports, customize the software and convert the data is normally underestimated. To collect new data, and clean the data being converted, will also require an effort that is beyond what is normally expected.

Low Executive Buy-in Implementation projects need Senior Executive involvement to ensure the right participation mix of Business and IT, and to resolve conflicts Underestimating Resources Most common budget blow outs are change management and user training, integration testing , process rework, report customisation and consulting fees. Insufficient Software Evaluation This involves the surprises that come out after the software is purchased. Organizations usually do not do enough to understand what, and how the product works before they sign on the bottom line. The Bleeding Edge ERP is so massive and integrated that reporting and linking to other systems (either your own or your customers and suppliers) can be much more difficult than you expect. Companies looking at ERP need to examine how they accept online feeds from a customer, or a customers' customer, and examine the technological enablers as well as the implications of these technologies inside of the Business. .