ERP Implementation

How and why of ERP failure & tips for

successful implementation
BY
JYOTINDRA ZAVERI
(COMPUTER ENGINEER
ENGINEER, GERMANY)
IT CONSULTANT.SINCE 1975

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How and why of ERP failures

Education
Not understanding what the new 'system' is designed
to achieve). At least 100 hrs of training is required for
key users. Preparing masters / transaction on practice
d
databases
b
to get the
h comfort
f
level
l
l and
d singing
i i
off
ff is
i
highly recommended. The CEO can make this
happen, if he / she personally take interest, otherwise
if left to users,
users the quality training does not happen and
then chances of success are reduced. In one company,
the training was given after the system was live.
Users were busy with ISO implementation and most
people saw the data entry screen for the first time
when the legacy was removed.

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How and why of ERP failures

Lack of Top Management commitment (management

being involved but not dedicated).

If the owner is not spending enough quality

time, then the ERP project is likely to be
unsuccessful. In one organization, the MD
hardly took part in the discussion with ERP
vendor and delegated the task to the General
Manager who in turn never wanted the ERP
Manager,
system, so he created all the roadblocks, and
the vendor got frustrated and finally left

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How and why of ERP failures

SRS
Inadequate SRS or System Requirements
Specification: Current processes are not
adequately addressed. User must write down
th requirements,
the
i
t which
hi h means taking
t ki
outt time
ti
and extra effort. The user usually explains
casually, verbally, and hurriedly, then how the
ERP can succeed
If sufficient time is not given for preparing the
SRS, ERP is likely fail
Chopping and changing of program codes after
the ERP goes Live is observed, if SRS exercise is
not done properly.

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How and why of ERP failures

Poor ERP Package Selection

The package does not address the basic
business functions of the client
The package should be totally integrated,
integrated
including accounts
Some organizations are so comfortable with
their
h
Rs. 10,000// wala
l account-centric package
k
that they do inventory and other functions in
ERP but ask for data transfer from ERP to such
accounting package!
Please do not connect bullocks to the car!!

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How and why of ERP failures

Internal Resistance
Resistance to changing the 'old' processes. This is
perhaps human nature
Unless proper confidence building is done (during
training) the user will still want to use the old
method (or the legacy way)
One ERP user (in a Mumbai based company) was
so adamant that the MD had to ask him to resign
(and he was the works manager who was expert
in fire fighting,
fighting but MD wanted to prevent fire
altogether).

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How and why of ERP failures

Give me moon
Unrealistic Expectations of the
Benefits
A user starts expecting moon
O
One
mustt draw
d
a line,
li
be
b
satisfied, at least in the first
phase, and let the system take
off.
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How and why of ERP failures

Return on investment. ROI?

Unrealistic Expectations of the ROI. People forget
to quantify the intangible benefit or they simply
expect
p
returns overnight
g
Most users do not know even, what the ROI is
For example

ROI can be
b reducing
d i
inventory
i
t
level
l
l by
b x percentage
t
or ROI can be preparing of Excise (TAX) Invoice quickly

and accurately
or ROI is
i to
t gett the
th correctt material
t i l requirement
i
t
planning. JIT.

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How and why of ERP failures

Time Frame
Unrealistic
li i Time
i
Frame Expectations.
i
ERP is like changing the wall itself (and
not changing
g g merely
y the paint
p
of the
wall)
CEO / CFO expect things to happen
overnight when they have not taken
trouble to define (in writing); to what
extent customization will be allowed
O
One
h
has to
t learn
l
to
t putt a full
f ll stop
t
to
t
chopping and changing.

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How and why of ERP failures

TCO - Money
Totall C
Cost off O
Ownership
hi iis not
understood
ERP vendor money is not paid in time
The ERP implementing company is
treated like any other supplier and ERP
project goes into a kind of negative
cycle
E.g.,
g , Think of a mobile phone:
p

When the SIM card charge is over it stops

working and needs to be charged by paying

additional amount.

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How and why of ERP failures

10

Budget is not sanctioned.

In one company (Rs.40 Crore turnover), the MD was
from old school. He never sanctioned the money
required for the Server, etc. for nine months even
after going live. His vice president was keen, but
project did not take off, because MD was not
convinced
TCO of ERP (Total Cost of Ownership) is not
understood.

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How and why of ERP failures

11

.By-the-way we will do ERP also.

User / top management safely assume that certain procedure
should be present in ERP. If the procedure is not explained
in the beginning, legacy is not given which it may not reflect
in the Business Blueprint (these reference guidelines) or in
the POC
If it is not in the Business Blueprint, it will not be there in ERP
p g
program
ERP project is taken as by-the-way project; whereas in
true sense it should be the only priority during
implementation phase.

Do not take ERP casually

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How and why of ERP failures

12

A Bottom-Up approach
h is
i employed
l
d ((the
h Process
is not viewed as a Top management priority).
In other words if architect has not shown the door and window, the
room will not have them. Due importance to these documents
should be given. For instance, ERP has many different types of sales
invoice and several types of purchase vouchers, but which one is
applicable in a particular business is known to that businessperson
only. Some time should be spent in the test run known as CRP run.
Later, modification will not only cost in term of money but also time.
Moreover, that time blame game starts and project suffers. It is
strongly recommended that all key users take the Business Blueprint
seriously
System Requirement Specification (SRS) should be reflected in the
reference g
guidelines. Every
y page
p g of this Business Blueprint
p
document should be signed.

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How and why of ERP failures

13

ERP is long term investment

Another
h reason off ERP failure
f il
is
i that
h user
ignores the long-term business goals to be
achieved and only focuses on the immediate
needs As a result asks for unnecessary
needs.
customizations. For example, it is necessary
to enter correct opening stock for each item
for each location (including third party
inventory)
However, user takes a unilateral decision that
this can be done later
later. Users will start
entering various transactions and goes live.
Even asks to remove the negative issue lock
y
from the system
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How and why of ERP failures

14

Tight linking (integration) is good

Another example, one user from marketing,
did not appreciate the link of quotation and
the sales order

He asked implementer to remove the link.

Later,
after six months, he realized his mistake and asked
to provide for the link

Sometime Director or CEO of the company

does not share his or her long-term
g
vision of
the company, with the middle management or
lower management.

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How and why of ERP failures

15

It iis necessary to
t identify
id tif yourself
lf and
d map
the same with the scope of ERP modules.

Follow the checklist given below:

What vertical (s) are you involved in?

List them. E.g.,

Make to stock or make to order. E.g. Continuous
process production or discreet production

What ERP modules are you looking for?

Write it down
from the scope
p list of ERP modules g
given by
y ERP
vendor.

Are you planning on replacing legacy software

applications? Within the next 3 years? Which ones?

Make list and plan to phase out out-dated software
ASAP.

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How and why of ERP failures

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What is the big picture?

Write your expectations - all of them. What objectives
that you wish to achieve by deploying ERP? List them
out in detail and discuss with users. Make department
wise list of reports expected from ERP
ERP. Once the list is
ready, share with the ERP vendor
ERP vendor should meet more then 80% of your
q
Be informed that rarely
y ERP
essential requirements.
will meet 100% of your wish list
There are some areas, which are not automated and
will have to be done manually
May be in second phase, after one or two years, you
can plan to automate some additional business
processes.

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How and why of ERP failures

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Information Technology and IT

infrastructure
What databases and operating systems do we have
expertise? What will the IT department agree to and
what is the long-term plan? List them
If you are not sure, consult I. T. expert. For instance,
in one corporate company EDP manager was asked to
select ERP. She was trained by Red Hat on Linux. She
i i t d th
insisted
thatt ERP should
h ld b
be on Li
Linux platform.
l tf
D
During
i
the ERP deployment, seven moths down the line, she
left the organization for greener pasture. Nobody knew
anything about Linux
Linux. ERP project was abandoned

One year later the company deployed ERP on Microsoft

platform.

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How and why of ERP failures

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Look at all of your options

In the implementation phase, we must educate users
not to become greedy and ask for everything. Because
this will effect his or her satisfaction level! What is the
i
impact
off ERP on your organization?
i
i ? Th
The iimpact iis
tremendous. It is like using a car instead of bullock
cart. A poor implementation could end up with major
delays in outbound shipments or even stoppages.
stoppages An
excellent implementation on the other hand is a
blessing. However, this comes only when all
stakeholders (users) and ERP implementation team
follows proper implementation methodology.

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How and why of ERP failures

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Learn about Technology

Technology has advanced, therefore the selection team
members will need to learn about workflow, TCP/IP, and
many other issues involved. ERP coordinator should be
trained in the following
g areas: basics of SQL. ERP can give
g
intelligent alerts automatically by email. This needs
understanding of email management settings (e.g., MS
Outlook or MS Exchange Server settings). It is expected that
ERP coordinator or I. T. support
pp
p
person knows about
networking of computers (LAN). If necessary, plan a
separate training for the Information Technology and new
techniques that are akin with ERP. E.g., UPS can be
connected to Server to shut g
give messages
g to users that
battery backup is low, so users can logout and shutdown
properly. E.g., using RFID technology and so forth. Embrace
technology with both hands. Do not be afraid of using new
gy May
y be attending
g seminars and train people
p p
technology.
continuously.
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How and why of ERP failures

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DAILY BACKUP
Make a disaster management plan. Nobody wishes that
accident should happen. Nevertheless, it is necessary to
have a written document in place. Especially, mention about
the backup and restore procedure.
procedure Do a rehearsal exercises.
exercises
For instance, one factory was near river. Floods came. ERP
server was on the ground floor and was damaged.
Fortunately, backup CD was taken home everyday. They
could restore the data on another computer and start the
work.
Selecting ERP.

Invest lot of time in the ERP selection process. It is not like buying
a mobile. If you do not like a cell phone, you can discard, and buy
new one. ERP is like a long-term partnership (marriage, shall we
say). There are going to be difference of opinion with the spouse.
This can be sorted out. Similarly, one cannot keep on changing ERP.

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How and why of ERP failures

21

DO YOUR HOME WORK WELL.

BY VARIOUS ERP COMPANIES

COMPARE ERP MODULES OFFERED

Do not get carried away by impressive PowerPoint

presentations. Marketing people are trained to
give Rosy
g
y picture.
p
The chief of ERP (main
(
sponsor) should know the limitation of ERP and its
customization. ERP implementers cannot deliver
Moon. Although
g sales team will promise
p
Moon and
Jupiter also. .

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How and why of ERP failures

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ERP is not bed of roses.

Business transformation is a painful

process. Do not underestimate. It is like
that scene of Jurassic
Jurassic Park II
II movie
movie. She
is amused when she is looking at the
Dinosaurs for the first time. She is told
that in beginning, it is always wah wah
but it ends up in screaming!

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How and why of ERP failures

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It is said that ERP implementation is a

journey and not the final destination

THANKS
PRESENTATION BY
JYOTINDRA ZAVERI
(C
(Computer
t Engineer,
E i
G
Germany))
I. T. CONSULTANT .. SINCE 1975
email j.zaveri@dnserp.com
j zaveri@dnserp com
www.dnserp.com
98909 42042

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How and why of ERP failures

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