Objectives

 What is an ERP system?

 What are the Benefits of an ERP system?
 Who are the ERP vendors?
 What aspects constitute a successful
implementation?
 What factors are associated with ERP
failures and how to overcome them?
What is an ERP systems?
 “They are systems designed to
process an organisation transactions
and facilitate integrated and real time planning,
production and customer response.”

 ERP Characteristics
 ERPs are packaged software designed for a client server
environment.
 ERPs integrate the majority of a business processes
 ERPs process a large majority of an organization’s transactions
 ERPs use an enterprise wide database that typically stores each
piece of data at once.
 ERPs allows access to the data in real time.
(O’leary, 2000)
Functional Aspects of an ERP

Source : http://www.inixion.com/images/features3.jpg
ERP life cycle
 Deciding to Go ERP
 Choosing and ERP system
 Designing ERP systems
 Should business process or
current ERP software be changed
 Choosing Standard Model and Process
 Implementing ERP: Big Bang versus phased
 After Going Live
 Training
(O’leary, 2000)
Why Implement an ERP system?
Tangible Benefits:
 Reduce Labour Costs
 Reduced material Costs
 Improve in Sales and Customer Service
 Efficient Financial Management

Intangible Benefits:
 Information supply chain visibility
 New/improved business processes
 Product and Process design
 Production and Material Management

Source : ( Leon, 2008 and Cruz-Cunha 2010)

Why Implement an ERP system?
What are ERP Vendors marketing:
 Improve alignment of strategies and operations
 Reduce costs through increased flexibility
 Achieve an end-to-end view across all your lines of business
 Drives value for your business
 Delivers agility in the face of rapid change

Cast Studies
Drallim – Fluid Controls /
• Over 4,400 hours saved per year through process improvements and
21% cut in support costs
Vita Liquid Polymers/
• 80% of customers now pay invoices a week earlier and automated
processes mean tighter processes and proactive credit checking
Source: http://www.epicor.com/uk/Company/PressRoom/Pages/SuccessStories.aspx
Who are the ERP vendors?
Who are the ERP vendors?
Tier I Tier II Tier III
ABAS
SAP Epicor Sage
Activant Solutions Inc.
Oracle Infor IFS
Baan
Oracle e Business Suite QAD
Bowen and Groves
Oracle JD Edwards Lawson
Compiere Exact
Oracle Peoplesoft Ross
Netsuite Visibility Blue
Microsoft Dynamics
Cherry Exact
HansaWorld Intuitive
Syspro
Open Source ERP software
OpenERP, Compiere, Open Bravo, Apache OFBix/opentaps, ERP5, OpenMFG,
OpenPro, etc

Source: Panorama Consulting, 2011 Guide To ERP Systems And Vendors

ERP Vendors Market Share 2010
>1B 47% 31.80% 4% 8.60% 8.60%

500M-1B 33.30% 31.30% 4.20% 16.70% 14.60%

100M-500M 31.30% 15.30% 16.80% 16.80% 19.80%

50M-100 32.10% 16.70% 11.50% 16.70% 23.10%

25M-50M 24.50% 13.70% 15.70% 17.60% 28.40%

<25M 22.20% 23% 16.30% 11.80% 26.60%

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% 100.00%

SAP Oracle Microsoft Dynamics Tier II Tier III

Source: Panorama Consulting, 2011 Guide To ERP Systems And Vendors

Payback Period By Vendor Tier up to
2010
120.00%

Tier III
18.70%
100.00%
Tier II
59.40%
80.00%
Tier I
50.00%

60.00%

40.00% 30.30%

8.30%
20.00% 42.60%
6.50%
3.10% 25.30%
1.00%
13.80% 1.30%
2.60%
1.40% 5.50%
0.00%
No cost Recouped 1-2 years 2-4 years 4-7 years above 7 years

Source: Panorama Consulting, 2011 Guide To ERP Systems And Vendors

ROI and ROA
Performance comparison Pre- and post-
adoption for 63 ERP Systems:
ROI ROA
8.002
Post3
4.899

7.533
Post2
4.916

7.691
Post1
4.448

8.576
Pre
5.341

Source : (C. Jones, Kalmi and Kauhanen, 2011)

How to Measure ERP success?
 Lyytinen and Hirschheim (1987),
categorized IT project success by assessing
the resulting system against
 Planned objectives,
 User expectations,
 Project budget
Highlights from a 2010 ERP
Benchmark
 Over 40% of organizations are dealing with significant change
form ERP system rollout.
 Over 60% of organizations suffer from poor visibility to data and
poor integration in their old systems.
 Organizations expect a lot from their ERP systems.
 Most companies are not yet ready for the organizational changes
of ERP software.

2009 Average 2010 Average

Take longer than expected 35% 61%
Implementation Duration 18.4 Months 14.2 Months
Costs exceeds budget 51.4% 74.1
Benefit Realized Under 50% 48% 67%
Some People
might have
different views
ERP project failure classification
ERP project failure could be classified as one of four
levels:
(a) Process failure, when the project is not completed
within the time and budget.
(b) Expectation failure, when the IT systems do not
match user expectations.
(c) Interaction failure, when users attitudes towards IT
are negative.
(d) Correspondence failure, when there is no match
between IT systems and the planned objectives.

(Aloin et al, 2007)

What factors are associated with ERP
failures and how to overcome them?
Risk categories associated with enterprise-wide/ERP projects:

 Organizational Fit
 Skill mix
 Management structure and strategy
 Software systems design
 User involvement and training
 Technology planning/integration
(Sumner, 2000 ; Ojala et al, 2006)
Risk category :
Organizational Fit
Risk Factors
 Failure to redesign business processes to fit the software
 Failure to follow an enterprise-wide design which supports data
integration
(Sumner, 2000 ; Ojala et al, 2006)
Case Study
Hershey Foods Corporation

(Wailgum, 2009)
Minimising Strategies
 Commitment to redesigning business processes
 Top management commitment
 Following an enterprise-wide design which supports data
integration
(Sumner, 2000 ; Ojala et al, 2006)
Risk category : Skill Mix
Risk Factors
 Insufficient training and reskilling
 Insufficient internal expertise
 Lack of business analysts with business and technology knowledge
 Failure to mix internal and external expertise effectively
(Sumner, 2000 ; Ojala et al, 2006)
Case Study
Lumber Liquidators

(Kanaracus,2010)

Minimising Strategies
 Effective use of strategies for recruiting and retaining specialized technical
personnel
 Obtaining ‘business analysts’ with knowledge of application-specific modules
 Effective use of external consultants on project teams
(Sumner, 2000 ; Ojala et al, 2006)
Risk category :Management
structure and strategy
Risk Factors
 Lack of senior management support
 Lack of proper management control structure
 Lack of a champion
(Sumner, 2000 ; Ojala et al, 2006)
 Ineffective communications
Case Study
The City of San Diego

(Krigsman, 2009)

Minimising Strategies
 Obtaining top management support
 Establishing a centralized project management structure
 Assigning a ‘champion’
(Sumner, 2000 ; Ojala et al, 2006)
Risk category :
Software systems design
Risk Factors
 Failure to adhere to standardized specifications which the
software supports
 Lack of integration
(Sumner, 2000 ; Ojala et al, 2006)
Case Study
Levi Strauss

(Clarke, 2008)

Minimising Strategies
 Commitment to using project management methodology
and ‘best practices’ specified by vendor
 Adherence with software specifications
(Sumner, 2000 ; Ojala et al, 2006)
Risk category :
User involvement and training
Risk Factors
 Insufficient training of end-users
 Ineffective communications
 Lack of sensitivity to user resistance
 Failure to emphasize reporting (Sumner, 2000 ; Ojala et al, 2006)

Case Study
Dorset County

(Anonymous, 2010)
Minimising Strategies
 Effective user training
 Full-time commitment of users to project management roles
 Effective communications
(Sumner, 2000 ; Ojala et al, 2006)
Risk categories : Technology
planning/integration
Risk Factors
 Inability to avoid technological bottlenecks
 Attempting to build bridges to legacy applications

(Sumner, 2000 ; Ojala et al, 2006)

Case Study
Dillard's Inc

(Jarzemsky, 2010)

Minimising Strategies
 Acquiring technical expertise
 Acquiring vendor support for capacity planning and upgrading
 Planning for client–server implementation including client
workstations
(Sumner, 2000 ; Ojala et al, 2006)
Other Aspects:
In 2004, HP's project managers were
aware of the risks associated with the
ERP rollout. But they could not plan
for so many events to happen at once.

The project eventually cost HP $160 million in

order backlogs and revenue loss that
accumulated to five times the project's estimated
cost.
(Gilles Bouchard CIO of HP's global operations)

(Wailgum, 2009)
Strategic critical success factors
 Top management commitment and support
 Visioning and planning
 Build a business case
 Project champion
 Implementation strategy and timeframe
 Vanilla ERP
 Project management
 Change management
 Managing cultural change

(Finney and Corbett, 2007)

Tactical critical success factors
 Balanced team
 Project team: the best and
brightest
 Communication plan
 Empowered decision makers
 Team morale and motivation
 Project cost planning and
management
 BPR and software
configuration
 Legacy system consideration
 IT infrastructure
 Client consultation
 Selection of ERP
 Consultant selection and
relationship
 Training and job redesign
 Troubleshooting/crises
management
 Data conversion and integrity
 System testing
 Post-implementation
evaluation
(Finney and Corbett, 2007)
Summary
 ERP Systems are not an IT solution but a system that would
transform the company into a more efficient and effective
organization.

 Successful implementation of ERP is complexly tied to multiple

factors that needs to be understood by management who are
setting the strategic direction of the implementation process.
Furthermore, A continuous support and monitoring of the
implementation process is required at each stage.

 The most important issue in a successful ERP project is an

understanding of the company’s business and context
requirements.
What's the future will be like?
Reference List:
1. Lyytinen, K. (1988) "Expectation Failure Concept and Systems Analysts' View of Information System Failure: Results of an
Exploratory Study", Information & Management, 14, 1, pp 45-56.
2. Leon, A. (2008). Enterprise Resource Planning. 2nd ed. New Delhi: Tata McGraw-Hill. pp. 42
3. Cruz-Cunha, M. (2010). Enterprise Information Systems for Business Integration in SMEs. USA: Business Science
Reference. pp. 155
4. Derek C. Jones, Panu Kalmi, Antti Kauhanen, International Journal of Production Economics, Volume 130, Issue 2, April
2011, Pages 159-168 )
5. Sumner, M. “Risk factors in enterprise-wide/ERP Projects,” Journal of Information Technology, 2000, vol. 15, pp. 317-327.
6. Wailgum,T. (2009) Focus: ‘10 Famous ERP Disasters, Dustups and Disappointments ‘. CIO [online] Available at: <
http://www.cio.com/article/486284/10_Famous_ERP_Disasters_Dustups_and_Disappointments> [Accessed 25 Feb 2012].
7. Kanaracus, C. (2010) Focus: ‘ERP Woes Blamed for Lumber Company's Bad Quarter‘. IDG News [online] Available at: <
http://www.pcworld.com/businesscenter/article/209886/erp_woes_blamed_for_lumber_companys_bad_quarter.html >
[Accessed 25 Feb 2012].
8. Krigsman, M . (2009) Focus: ‘San Diego fires Axon over ERP implementation problems‘. Zdnet [online] Available at: <
http://www.zdnet.com/blog/projectfailures/san-diego-fires-axon-over-erp-implementation-problems/1960 > [Accessed 25 Feb
2012].
9. Clarke, G.(2008) Focus: ‘Levi's suffers profit meltdown in midst of SAP embrace Pants ERP system leaves it without pants‘.
Theregister[online] Available at: < http://www.theregister.co.uk/2008/07/10/levis_erp_costs/ > [Accessed 25 Feb 2012].
10. Anonymous. (2010) Focus: ‘Dorset County Council computer problems continue ‘. Dorsetecho [online] Available at: <
http://www.dorsetecho.co.uk/news/localnews/8625142.Dorset_County_Council_computer_problems_continue/ > [Accessed
25 Feb 2012].
11. Jarzemsky, M. (2010) Focus: ‘JDA Software Hit With Judgment in Dillard's Dispute ‘. The wall street journal [online] Available at: <
http://online.wsj.com/article/SB10001424052748704198004575310463149768320.html> [Accessed 25 Feb 2012].
12. Ojala,M. Vilpola,I. and Kouri,I.(2006) “ Risks in ERP Project – Case Study of IS/ICT Management Capability Maturity Level and Risk
Assessment”
13. Aloin,Di. Dulmin,R.Mininno,V. (2007) Risk management in ERP project introduction: Review of the literature, Information &amp;
Management, Volume 44, Issue 6, September 2007, Pages 547-567
14. O'Leary,D. ( 2000) Enterprise Resource Planning Systems: Systems, Life Cycle, Electronic Commerce, and Risk, Cambridge University
Press
15. Finney,S. and Corbett,M. (2007) "ERP implementation: a compilation and analysis of critical success factors", Business
Process Management Journal, Vol. 13 Iss: 3, pp.329 - 347