The Impact of Critical Success Factors across the ES Life Cycle Sharmistha Dey

Last Week We Discussed Implementation Methods Advantages and Disadvantages Issues and Sins

Enterprise Systems Lifecycle What factors to consider here ? What factors caused the Productivity DIP? “Go-live” Productivity What factors are critical for increasing productivity? 18 Months ? Implementation ES “Shock” Benefits X? month preparation period Time

Life after going live Sharmistha Dey

Introduction After going live with the ERP implementation, it is not time to forget about ERP because it is “done”. Instead, at that time the organisation enters a stabilization period that typically drags down organisational performance. As a result, firms need to work to mitigate the negative effect.

Introduction The firm also needs to build an organisation to handle the day-to-day issues associated with the ERP system, and management needs to determine what else must be done and whether the implementation matches the system plan. Also management must address what upgrades, extensions, or linkages can or should be made to the ERP system. Finally, the firm needs to evaluate the success of the project.

The stabilization period After a system goes live there is what has been referred to as a “stabilization” period, that typically lasts from three to nine months. During that period most companies should expect some dip in their business performance at the time they go live and should expect that they will need to manage though that dip.

The stabilization period A recent survey from Deloitte Consulting found that, after ERP systems went live, one in four firms suffered some drop in performance.

The stabilization period During the stabilization period, all those processes that once were just plans are now being used. New software and processes may be unfamiliar to the users. Hence, there may be problems with the quality and quantity of the work, and consequently the system may not operate as hoped.

The stabilization period The problems of the dip may come from: Training (training too early may not be remembered, but training too late may not be in time) Hardware limitations and novelty Process changes Transparency of duties Undiscovered problems

ES support organisation When the system goes live, the implementation team needs to remain in order to support the users. Activities of the support organisation can include: Detecting and responding to system bugs; Answering user questions (help desk); Making changes in the system parameters as the organisation changes;

ES support organisation Managing different ERP input and output capabilities (e.g. responding to changes in reporting needs) This is different to a legacy system WHY ? Maintaining and updating the documentation and training materials; and Maintaining and upgrading the software.

Determine what remains to be done or revised Data conversion Process bottlenecks Documentation and training

Compare the plan with reality Why would there be differences? Implementation compromises System design and implementation Compare planned and actual use Compare system functioning: expectation versus reality

Compare the plan with reality Another source of information about what still needs to be done is the comparison between plans and reality. BUSINESS CASE For ES, this comparison has at least three dimensions: Systems design and implementation, Planned and actual use, and Expect versus actual capabilities. Sedera Gable Chan (2003) @ the International Conference in Information Systems, Seattle, USA on ES success The basic nature of this comparison roughly equates the comparative analysis to an audit, possibly by different personnel or even an outside source.

Compare the plan with reality (Cont.) These comparisons are critical. If there are marked differences between plans and reality for any of the dimensions, engagement success may be compromised. As an example, the ES decision may have been made assuming certain changes in best practices, which were expected to lead to organisational improvements in efficient and effectiveness. However, if the ERP was not implemented as planned, then those benefits will not be attained. As a result, the basic reason(s) for choosing the ES may not have been addressed.

Establish linkages, upgrades, and extensions After stabilization, resources devoted to implementation can now be used to facilitate linkages to other systems and to extensions of the ERP system that have been identified. Throughout this process, the importance of different upgrades, linkages, and extensions should be prioritized so that maximum benefit can be generated from expenditures and priorities are consistent with the firm’s overall vision.

Upgrades In some situations, upgrades to different system versions must be made so that additional features can be implemented.

Linkages Although ES are designed to function independently of other systems, they still can be linked to a range of such other systems. In order to ensure that the ES goes live at the planned time, those linkages are sometimes not made until after the “go live” date; such linkages can be pursued after the implementation.

Extensions (New features and functions) Enterprise Systems have become the information system “backbone” in many firms, providing processing capabilities for virtually all of a firm’s transactions. Over time, ES vendors have extended in a number of different directions.

Extensions (New features and functions) For example, ES vendors have moved to provide supply chain integration and sales force automation support. In some cases, these extensions were known of when the software was chosen and may even have influenced the final choice of software.

Extensions (New features and functions) In other cases there may be new extensions to the ES software that the firm needs to go back and examine in order to determine whether or not the options should be considered and implemented.

Critical Success Factors Four Dimensions REF: T Jace, Ernst & Young : People & Organisation Process Knowledge Technology

People & Organisation Considerations Address business unit autonomy quickly and frequently Define and publish staff selection criteria Highlight behavioral attributes, not just technical competency Identify and openly discuss new organizational alignments Comprehensive communication plans are mandatory Tailor to various audiences with a focus on aligning stakeholders Symbolize the new identity Structure training to include facets of all four dimensions Realize that pessimism will prevail until certainty is in sight (senior management support)

Process Considerations Adopt best and leading practices (eg. workflow, imaging) and constantly evaluate outsourcing options Involve future staff in detailed redesign and re-engineering when appropriate Detail the processes at a low level, encompassing: standardized business rules and control performance metrics non-SAP activities Clearly differentiate hand-offs between shared services and business partners and ensure consistency amongst the business partners

Technology Considerations Quickly establish enterprise-wide (world-wide?) communications backbone Manage to an integrated SAP / BPR implementation methodology Focus on integration testing Minimize modifications while balancing differentiating business requirements Evaluate Electronic Commerce opportunities rigorously Double, triple, then double again your sizing estimates

Knowledge Management Considerations Institute controlled scope and issues management through use of chartering and groupware Couple the site selection process with the re-engineering initiative Adopt strict data capture and version control Build a culture of quick decision making Centralize the communication mechanism to key stakeholders Prioritize knowledge transfer through use of user ‘champions’ and client configuration

Critical Success Factors of ES Top Management Support Project Champion User Training and Education Management of Expectation Vendor and Customer Partnerships Use of Vendor Development Tools Selection of the appropriate package Project Management Steering Committee Use of Consultants Minimal Customization Data analysis and Conversion

Critical Success Factors of ES (Cont.) Business Process Re-engineering Defining the Architecture Dedicated Resources Project Team Competence Clear Goals and Objectives Change Management Education on New Business Processes Inter-departmental Communication Inter-departmental Corporation On-going Vendor support

1. Top Management Support The role of top management in IT implementations include developing an understanding of the capabilities and limitations of IT, establishing reasonable goals for IT systems, exhibition strong commitment to the successful introduction of IT, and communicating the corporate IT strategy to all employees.

2. Project Champion The success of technological innovations has often been linked to the presence of a champion who performs the crucial functions of transformational leadership, facilitation, and marketing the project to the users. Project champions should own the role of change champion for the life of the project and understand both the technology as well as the business and organizational context.

3. User Training and Education ERP projects appear to have a six-month learning curve at the beginning of the project. At a minimum, everyone who uses ERP systems needs to be trained on how they work and how they relate to the business process early on in the implementation process. Many companies use consultants to help during the implementation process, it is important that knowledge is transferred from the consultant to internal employees.

4. Management of Expectation IS failure has been defined as “the inability of an IS to meet a specific stakeholder group’s expectations”. Expectations of a company may exceed the capabilities of the system. ERP systems may fail to meet expectations despite positive contributions to the organization if the system are “oversold” by the vendor. Careful deliberation of success measurement as well as management of expectation by the implementation manager of ERP projects are important factors.

5. Vendor/Customer Partnerships The relationship between the software buyer and vendor should be strategic in nature with the ERP provider enhancing an organization's competitiveness and efficiency. Research ahs shown that a better fit between the software vendor and user organization is positively associated with packaged software implementation success and that organizations should attempt to maximize their compatibility with their vendors.

6. Use of Vendors’ Development Tools There are indications that rapid implementation technologies and programs provided by the vendors can significantly reduce the cost and time of deploying ERP systems.

7. Careful Selection of the Appropriate Package The choice of the package involves important decisions regarding budgets, timeframes, goals, and deliverables that will shape the entire project. Choosing the right ERP packaged software that best matches the organizational information needs and processes is critical to ensure minimal modification and successful implementation and use.

8. Project Management The vast combination of hardware and software and the myriad of organizational, human and poetical issues make many ERP projects huge and inherently complex, requiring new project management skills. A proper mange of scope is critical to avoid schedule and cost overruns and necessitates having a plan and sticking to it.

9. Steering Committee A project management structure with a “steering committee” consisting of senior management from across different corporate functions, project management representatives, and end users who will have daily contact with ERP, is an effective means of ensuring appropriate involvement. A steering committee enables senior management to directly monitor the project team’s decision making by having ratification and approval rights on all major decisions, thereby ensuring that there are adequate controls over the team’s decision making processes.

10. Use of Consultants Consultants may be involved in various stages of the implementation: performing requirements analysis, recommending a suitable solution, and managing the implementation. While opinions vary with respect to what third parties should be able to control, the company should keep control and accept full responsibility for all phases of the project.

11. Minimal Customization A recent survey of Fortune 1000 companies regarding ERP customization policies indicates that 41% of the companies re-engineer their business to fit the application, 37% of the companies choose applications that fit their business and customize a bit, and only 5% customize the application to fit their business. Customizations are usually associate with increased IS costs, longer implementation time, and the inability to benefit from vendor software maintenance and upgrades.

12. Data Analysis and Conversion Data problems can cause serious implementation delays, and as such, the management of data entering the ERP system represents a critical issue throughout the implementation process. Finding proper data for the new ERPS; Selection data format for conversion; and Ability for data to communication with the legacy system.

13. Business Process Reengineering In order to maximize the benefits of ERP investments, the supplementary redesign of business processes promises the highest ROI, but also increases the level of complexity, risks and costs.

14. Defining the Architecture Key architectural considerations, which should occur very early in the implementation process, revolve around centralization or decentralization, compatibility of existing tools within the enterprise with the ERP system, and identification of bolt-ons such as data warehouses. Architecture planning as a core IT capability that cannot be cast aside to ERP suppliers.

15. Dedicated resources An organization's failure to commit the required financial, human and other resources has been found to be a problem in reengineering implementations. Resource requirements need to be determined early in the project and often exceed initial estimates and the inability to secure resource commitments up front may doom project efforts.

16. Project Team Competence The skills and knowledge of the project team is important as is the use of consultants to provide expertise in areas where team members lack of knowledge.

17. Clear goals and objectives Goals should be clarified so they are specific and operational, and to indicate the general directions of the project. It is important to set the goals of the project before even seeking top management support. The “triple constraint” of project management specifies three often competing and interrelated goals that need to be met: scope, time, and cost goals. Many ERP installations face scope creep as a result of lacking a clear plan.

18. Change Management Companies need to adopt a comprehensive approach toward the large-scale process and system changes associated with the ERP implementations and make change everyone’s first priority.

19. Education on New Business Processes When considering implementation coupled with business process reengineering, it is imperative for managers to educate and communicate their goals and long-term perspectives in order to win support of all members of the organization affected by the changes.

20. Interdepartmental Communication Communication is the oil that keeps everything working properly. Poor communication between reengineering team members and other organizational members was found to be a problem in business process reengineering implementations.

21. Interdepartmental Cooperation As ERP systems cross-functional and departmental boundaries, cooperation and involvement of all involved appears to be critical. ERP potential cannot be leveraged without strong coordination of effort and goals across business and IT personnel.

22. Ongoing Vendor Support There will always be new modules and versions to install and better fits to be achieved between business and system. Consequently, vendor support represents an important factor with any packaged software including extended technical assistance, emergency maintenance, updates, and special user training.