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PREAMBLE

GAP ANALYSIS, ERP AND CONSTRUCTION SECTOR

19 Jul 10

This analysis is made wrt the small and medium enterprises (proprietorship and private limited) from construction sector. ERP in this market is in nascent stage only. Higher implementation failure rate is discouraging the sales and stemming the entry of the new ERP vendors. But the ERP will be an necessity, like the Tally (successfully implemented by the auditors pressure for their own advantages for systematic accounting in most of the micro, small and medium enterprises). There are more weak areas where ERP can be the right replacement. But this will require strategic planning for the ERPs for long term success. All these are discussed in this matrix.
LEGEND ERP > ERP vendors; MD > MD of the construction company; Company > Construction companies

REASONS FOR THE GAP (CONSTRUCTION COMPANY)

CLOSING THE GAP

01

Culture = Industry works on approximate data/information; most of the decisions are taken by the MD or VP/CEO (next to MD level in a few cases) at the eleventh hour, when it is more important to decide something rather than taking a right decision. = MDs are accustomed for this culture. Hence they would not find any value in ERP ROI on ERP = Reservations to invest in this intangible asset as the ROI is not encouraging = Those who start to consider ERP would withdraw on hearing the failure stories from their circle (associations, clubs) = Even the rare success stories are not shared truly due to narrow-mindedness in this highly competitive industry.

Choosing right companies = ERPs should target companies managed by those who are keen for accurate information and data, prefer systematic operations; younger generation MDs may be tried on priority. = An analysis of the MD will be required to start the potential sales efforts = Senior level marketing executives can meet the MDs for the purpose of buying flats will help judge the MDs priorities. Strategic selling efforts = Selling efforts should be started with MD or their advisors (most of the MDs in the industry hire advisors either working or retired govt officials) = Rather than trying to sell all the modules together at a higher budget, modular sales and implementation will overcome this hesitation to invest and encourage trying it out = Chances are brighter for sales module to be a quick success compared to the inventory module in which the failure chances are higher. (module wise analysis in page 4) = True stories from other industry sector on reduction in manpower, improved decision making process through correct and right data/info could expedite the convincing process

02

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GAP ANALYSIS, ERP AND CONSTRUCTION SECTOR

CLOSING THE GAP

19 Jul 10

REASONS FOR THE GAP (CONSTRUCTION COMPANY)

03

Non cooperative teams = Team heads those who feel insecure, prefer non clarity in data/information = They prefer to avoid correct and accurate information reaching MD to keep their hold intact or with vested interests. = Juniors/freshers (from construction company) used for data entry and initialization work are diverted (either intentionally or not) which delay the implementation = Junior members (from ERP) are engaged to follow the implementation who are not matured enough to report this to the MD (customer) directly and resolve the issues

Preparing the MDs = MDs should be appraised of this aspect and should be encouraged to remove this insecured feeling from the minds of the top executive team; they put a constant pressure on the team in implementation of ERP = If the top level team is found to have vested interests, such companies should be removed from the target customers = Initialization work should be carried out by the ERP team; deputing dedicated and senior level member (with junior level support) will expedite implementation = Senior member can understand the non cooperative situation better and can handle this delicate issue efficiently as he will be able to approach the MD and resolve directly == This senior member should be reporting the MD regularly to keep the non cooperative members discouraged in attempting anything against the implementation. = = The rapport developed thus with the MD will help selling further modules later Customized implementation = Implementation should be so designed that the MD can realize the benefits of ERP quickly, say in a week = ERPs should have readymade templates like Bill of Materials, sales terms etc which are almost common to all the companies, thus reducing the initialization work = Flexible implementation plan is essential to address the MDs priority needs through the ERP Proper demo = ERP will be the ideal solution to this manpower problem ERP being a deskilled format, will relieve the MDs from human resource management problems. = They can hire an average skilled manpower yet can have correct and right information/data at right time through system. Comparative data on manpower with and without ERP to be presented to evince interest in MDs = ERPs should explain the possibilities and convince the MDs on meeting these unavoidable industry needs; This should be first few features that will evince the

04

Delayed results = Delayed realization of the investment upsets the MD

05

Incomplete appreciation of ERP by MDs = MDs could not fully appreciate the extent of the ERP in reducing the clerical manpower required

= Doubt on the flexibility in accounting (unavoidable needs like prior date invoicing, under invoicing)

interest in MDs in ERP

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GAP ANALYSIS, ERP AND CONSTRUCTION SECTOR

CLOSING THE GAP

19 Jul 10

REASONS FOR THE GAP (ERP VENDORS)

01

Slow ROI = High cost for this intangible asset and long implementation make MDs vexed

Strategic sales = Module wise selling would remove the hesitation; Selling modules in the order of successful implementation and as per the priority of the MD will also help. Most MDs will be pleased to get their sales systemized first; in favor of ERP, the non cooperation in implementing sales module is less in the industry; it will be easier to resolve such issues as MD will be closely interacting with the sales team rather than the inventory team (refer module wise analysis matrix, page 4) = Strategic costing - Pricing the first modules attractively low (may be even at zero margin) to motivate the MD to decide and the later modules higher covering the target margin

02

Sluggish implementation = Junior/freshers are assigned implementation interactions, inviting importance at customer end

for less

Hi tech implementation = Appointing senior civil engineers well versed in ERP who can command respect and capable to interact with the MD (of construction company). This higher cost can be compensated by the speed of implementation, which will expedite the sale of further modules. Flexible team = The sales team should be able to implement. Once adequate orders are obtained, sales team can switch over to implementation = Later when the first modules are implemented, these members can prepare the minds of the MD/top level team to buy further modules = Senior members should be hired rather than depending on freshers. The cost equation would be higher team cost x shorter implementation time rather than lower team cost x longer time Readymade templates = Like bill of materials, quotes, discount structures, payment pattern invoicing etc will help faster implementation

03

Rigid teams (hence higher overheads) = The sales team can do only sales but not capable of taking it further like implementation

04

Poor preparedness = Despite most of the process and data like bill of material are common in this industry, the ERPs start from zero with every

customer, taking longer implementation time 05 No extra mileage = ERPs get isolated from the day to day problems experienced by the customers which in turn will affect the implementation of the ERP Tempting incentives = Eg: Payments are allowed in installments with interest worked in different patterns by different customers. Senior level accountants are required to calculate these interests. MDs have to waste their valuable time in managing these senior accountants. These interest calculations can be easily designed in excel sheets. Providing such excel work sheets that can be easily integrated with ERP will evince interest in MDs. More such problem solving opportunities exist in this industry

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# ASPECT

GAP ANALYSIS, ERP AND CONSTRUCTION SECTOR

19 Jul 10

IMPLEMENTATION ASPECT MATRIX

SALES PROJECT PURCHASE INVENTORY QUALITY

01 02 03 04 05 06 07

MDs priority Cooperation by team to implement Data entry difficulties Getting requirements of ERP Preparing readymade templates Interaction with the team head by ERP team to get information Authority level of team head to interact with ERP team

I Good Less Easy Easy Easy Reasonable

II Very less High Very difficult Difficult Difficult Reasonable

III Less High Difficult Easy Very difficult Very less

IV Very less Very high Very difficult Easy Difficult Very less

V Good Less Easy Easy Easy Less

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