© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-1 Enterprise Resource Planning, 1 st Edition by Mary Sumner Chapter 8: Managing an ERP Project

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-2 Objectives Acknowledge the importance of project management and control Examine the process of organizational change

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-3 Factors Influencing Information Systems Project Success Number of modifications Effective communications Authority for project implementation Business management Ability to generate additional funds to cover implementation

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-4 Factors Causing Information Systems Project Failures Poor technical methods Communication failures Poor leadership Initial evaluation of project

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© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-6 Risk Factors Organizational factors –Changes in scope –Sufficiency of resources –Magnitude of potential loss –Departmental conflicts –User experience Management support –Changing requirements and scope –Lack of commitment Software design –Developing wrong functions, wrong user interface –Problems with outsourced components

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-7 Risk Factors, continued User involvement –Lack of commitment –Ineffective communication –Conflicts –Inadequate familiarity with technologies Project management –Size and structure –Control functions Project escalation –Societal norms –Continue pouring resources into sinking ships

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-8 Implementation Risks Technology –Consistencies with current infrastructure Organizational –Customization increases risks –Redesign of business processes to fit package decreases risk Human resource factors –IT staff skills and expertise Project size

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-9 Managing Large-Scale Projects MRP or ERP –Package implementation differs from custom implementation Vendor participation User skills and capabilities –Management commitment Project champion Communication with stakeholders –Training in MRP –Good project management

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-10 Managing ERP Projects Implementation factors –Re-engineering business processes –Changing corporate culture –Project team Include business analysts on project team –Management support –Commitment to change Risk management

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-11

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-12 Factors in Successful ERP Projects Customization –Increases time and cost –BPR advantage from best practices adoptions lost Use of external consultants –Offer expertise in cross-functional business processes –Problems arise when internal IT department not involved Supplier relationship management –Need effective relationships to facilitate and monitor contracts Change management –People are resistant to change –Organizational culture fostering open communications Business measures –Create specific metrics at start of project

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-13 Project-Related Factors Project division into subprojects Project leader with proven track record Project focus on user needs instead of technology Project champion Slack time in project schedule

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-14 Additional Factors in the Success of a Project User training –Focus on business, not just technical –Critical Management reporting requirements –May need to add query and reporting tools Technological challenges –Data conversion –Interface development

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© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-16 FoxMeyer versus Dow Chemical FoxMeyer –Project went over budget because of new client –Implemented two new systems at same time –Technical issues with the ERP software –No open communications –Unrealistic expectations on ROI Dow –Had project implementation problems –Dow had strong leadership and project champion –Was able to adjust scope and maintain control –Fostered open communications

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-17 Featured Article: FoxMeyers Project Was a Disaster. Was the Company Too Aggressive or Was It Misled? Was FoxMeyer misled? What strategies could have been put into place to avoid the project disaster? What business misjudgments occurred? Was FoxMeyers failure due to technology failure or business failure?

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-18 Featured Article: FoxMeyers Project Was a Disaster. Was the Company Too Aggressive or Was It Misled?, continued Nations fourth largest pharmaceutical distributor –1990s engaged in enterprise-wide software and warehouse automation project –Filed Chapter 11 in 1996 Claimed to be misled by SAP, Anderson Consulting, Pinnacle Automation –Claimed vendors oversold capabilities –Computer integration problems topped $100 million –Vendors blame management

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-19 Featured Article: FoxMeyers Project Was a Disaster. Was the Company Too Aggressive or Was It Misled?, continued Background –FoxMeyer had orders for over 300,000 items per day, anticipated much growth Processing hundreds of thousands of transactions each day –Old system was Unisys mainframe –Wanted scalable client/server system –Tested SAPs software on both DEC and HP against benchmarks –Implementations scheduled by Andersen for 18 months Modules to be implemented in 2-3 months –Unrealistic – could take up to 12 months –All modules fast-tracked

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-20 Featured Article: FoxMeyers Project Was a Disaster. Was the Company Too Aggressive or Was It Misled?, continued –Two systems for most important business systems SAP supplied the accounting and manufacturing software –Claims volume was issue Warehouse system from McHugh Software International –Purchased through Pinnacle »Pinnacle also supplied some hardware Added complexities to project Functional holes in systems

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-21 Featured Article: FoxMeyers Project Was a Disaster. Was the Company Too Aggressive or Was It Misled?, continued FoxMeyer strategies –High volume –Low price –Anticipated savings from new computer system –Wanted to win market share by further price-cutting –Hoped new system would be more efficient, but did not improve processes

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-22 Featured Article: FoxMeyers Project Was a Disaster. Was the Company Too Aggressive or Was It Misled?, continued –FoxMeyer got major new client Out of capacity of mainframe Issues on balancing system traffic Unisys-based management system eventually failed Information wasnt being received timely FoxMeyer suffered losses in transferring inventory to new centers Customers received incorrect shipments New customer didnt deliver expected volume FoxMeyer overspent

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-23 Summary A number of factors will effect the success or failure of a systems project –Operational methods and techniques –Business management and style –Leadership and communications Risk factors effecting projects must be considered –Organizational factors, management support, software design, the levels of user involvement, and the scope and size of the project itself –Implementation risks for technologies, the organization, and human resource

© Prentice Hall, 2005: Enterprise Resource Planning, 1 st Edition by Mary Sumner 8-24 Summary, continued Success in ERP projects includes factoring in –Consideration of customizations, use of external consultants, management of supplier relationships, establishing metrics, and change management –Project-related concerns –Technological changes, user training, and management requirements