BY JENNIFER MCQUISTON
IMPLEMENTING an ERP solution can be a costly endeavor for companies, many of which pay a high premium for benefits that are not fully realized. However, project management efficiency can diminish the probability of negative results. Fifty-one percent of 232 responding companies that implemented an ERP system (or were in the process of uploading one) felt their ERP efforts were unsuccessful, based on a 2001 Robbins-Gioia LLC study. Fifty-six percent of the these respondents’ companies had project management offices (PMOs) in place, and of this subset, only 36 percent felt their ERP implementation was unsuccessful.
Even with these potential pitfalls, companies continue to invest in enterprise resource planning capabilities because, when integrated successfully, ERP software is one of the most efficient and useful tools available to large- and mid-sized organizations. Notwithstanding the cost and risks, companies find that ERP software helps them handle their process needs faster and more efficiently. Examining the wealth of information about enterprise resource planning can help project managers avoid costly mistakes.
Wanchai, Hong Kong-based construction and industrial materials distributor and processor Van Shung Chong (VSC) Holdings Ltd. went live with an ERP system in 2002 after an extensive six-month rollout process. It harnessed the power of a robust system to manage finance, orders, inventory, supply chain, manufacturing, purchasing, human resources and customer relationship management. The implementation was successful because the rollout was a gradual process, says Sean Wan, VSC’s CIO.
“Instead of taking a big-bang approach, we deployed in phases, installing the finance applications first, then the order management/purchasing, manufacturing, and so on for each business unit dictated by business priority,” he says. “Also, we have the users involved in every phase to make sure the ERP can support their business process.”
➔ Before the rollout, the implementation team studied the business process and worked with users to make recommendations for possible improvements as part of the business process reengineering. After users fully tested and endorsed the customized system model, the team trained end users and performed data conversion before going live.
Changes in the company's output and efficiency were immediate, Mr. Wan says. The Web-based system not only provided the management team with a wealth of client information, but also gave members accurate and timely information that they could access anywhere in the world via the Internet. “In many instances we have more than doubled productivity, cut down on paper use in our offices, and we were able to get near-realtime information regarding our business,” Mr. Wan says.
➔ Thorough, ongoing training is critical to the success of an ERP implementation.
➔ ERP implementations can fall prey to negative feedback if expectations are not adequately managed.
➔ Sufficient resource allocation, continuous executive support and strong project leadership ensure a successful ERP rollout.
In addition, other VSC divisions have a full view of other business operations through the Internet, and this transparency helps meet the company's goals to have greater access to enterprisewide information, use resources effectively and improve intelligence on sales and marketing activities. This capability also allows the company to perform a thorough analysis that keeps it ahead of competition. “The ERP system helped us in standardizing processes and improved efficiency and effectiveness,” Mr. Wan says.
Sometimes the issues behind an ERP implementation are not totally unexpected or unmanageable, and a project still can be executed efficiently and with positive results. The city government of Tacoma, Wash., USA, spent two and a half years painstakingly evaluating solutions for its IT systems. After receiving 26 responses to its 700-plus-page request for proposal, it chose an ERP vendor that would replace 102 of the city's legacy systems—many of which were close to 25 years old—with one comprehensive solution. The $50 million implementation took place over 20 months and was helmed by a full-time project team of 87 city employees, not including consultants. The system went live in October 2003 with a 1 percent budget overrun and at 70 percent of its full functionality.
The project team allotted 24 to 36 months post-implementation for customization and overall stabilization. To date, the city has spent $700,000 adjusting and adding features and functionality, which Karen Larkin, Tacoma's assistant director of public works who served as the business systems information project manager during the ERP implementation, says was expected.
If we did anything wrong, it was not managing everyone's expectations.
Assistant Director of Public Works, Tacoma, Wash., USA
“Some people said we went live too early, and I disagree; you can keep playing with the system and tweaking, but until you turn it on, you don't really know where you stand,” she says, noting that the inherent diversity and complexity of divisions and functions within city government make the scope of an ERP implementation so wide that some answers can be gleaned only once the system goes live.
In the few months after the system went live, certain functionalities experienced a 2 percent error rate that Ms. Larkin says was well within predicted levels. She says data conversion and end-user input errors, and an unusually large project scope, accounted for the other glitches and technical hangups.
➔ Overall, Ms. Larkin believes this should be considered a successful rollout; however, perceptions based on individual experiences or isolated scenarios have shadowed most of the project's success. “We met or exceeded all our goal-based metrics except for our end-user training goals,” Ms. Larkin says. “The issue is that people expected things would be online 100 percent from the start, and the people complaining about the system are the people who don't know how to use it.”
Employees must be involved in the planning process and go through rigorous ERP training during the rollout of the system.
Initially the project team suggested to the project's oversight committee, which was made up of the city manager and all department heads, that all users participate in mandatory training before they could get an access code and password to the system. However, the executive committee vetoed this idea, and employees were able to receive access information after doing a brief online training that was designed only as a supplement to a more intensive training program. Only 60 percent of the 1,800 end users attended any on-site training sessions in the four months before the ERP system went live, and the project team had set a minimum goal of 80 percent attendance.
To counteract this lack of training, the project team instituted emergency sessions with selected divisions after the system went live, working with individuals after business hours and on weekends. Ms. Larkin acknowledges that initially executing the training sessions in this way—with the project team going directly to the end users rather than letting them opt for the type or degree of training they received—may have yielded more buy-in from the start. But in the end, regardless of how well this project was planned, the implementation struggled because of misguided, misdirected and mismanaged expectations.
“If we did anything wrong, it was not managing everyone's expectations,” says Ms. Larkin, stressing that the city's ERP system currently processes 100’s of thousands of transactions a day. “Even a year after implementation, we still don't have end users taking advantage of the available training. We should have continued to press the point that end-user training would affect the overall success rate of the project.”
People of the Enterprise
Berwyn, Pa., USA-based tax service software provider Vertex Inc. researched the success and struggles of other corporations when it began to contemplate uploading an end-to-end ERP system to manage all of its customer touches, such as leads, ordering, complaint resolution, financials, shipping, gathering feedback and aiding new product development.
“To get us where we needed to be to go live, we borrowed the agile project management methodology, pulled all of our project coordinators into a room and used some project management tools, such as daily morning reviews and regularly checking in with the whole team; it forced everyone to work together,” says John Viglione, Vertex chief technology officer. “When we went live, it was almost a non-event. No one was panicking, there were no emergency triage sessions.”
A year later, Mr. Viglione says that overall, the implementation was successful and smooth, and the company already is witnessing the program's ability to save time and resources, boost efficiency and gather information about customers.
➔ One of the best ways to increase the likelihood of the smooth integration of an ERP software package is to support the people behind the systems, including end-users, vendor representatives and project managers. In Vertex's case, senior management made it a point to cater to the needs of the project management team. They realized the amount of energy the team was spending on the project and the subsequent time spent away from families and felt that recognizing the team's efforts and easing its stress would contribute to success.
When we went live, it was almost a non-event. No one was panicking, there were no emergency triage sessions.
Chief Technology Officer, Vertex Inc., Berwyn, Pa., USA
“We tried to have lots of communication and lots of face time; a lot of the executives went in with the project team to listen to them,” says David DeStefano, Vertex chief financial officer. “We had all of their lunches, snacks and dinners catered during the entire process. Doing anything to make their lives easier was our priority because it was the project teams’ cross-functional view that made the project the success it was.”
Forty-six percent of respondents who had or were in the process of implementing an ERP system did not feel their organization understood how to use the system to improve the way they conduct business, according to the previously referenced Robbins-Gioia study. The Vertex management team worked closely with all employees who would be using the software, taking time to show them how the new system would improve their business.
“You have to get everyone to buy into it,” Mr. DeStefano says. “We went to all of our employees and stakeholders and did a lot of selling up front about the reengineered processes that would result. For us, if the folks in shipping weren't open to the system, it would have been a hard sell and a difficult process.”
Employees must be involved in the planning process and go through rigorous ERP training during the rollout of the system, according to “Reducing ‘Time to Proficiency’ in Global ERP Deployments,” a report by Lion-bridge Technologies Inc., Waltham, Mass., USA.
“Return on a company's ERP investment is only maximized [when] all of the employees, vendors and business partners who work with the system can use it effectively,” according to the report. “Training accelerates the adoption of global business processes, ensuring that users come up to speed quickly and interact easily with the ERP system. By partnering with a vendor who has domain-specific expertise in ERP-related projects, companies can ensure productivity-enhancing training for their users without large investments in additional staff, software and equipment.”
ERP Lessons Learned
Just as Vertex learned from other companies’ experience with ERP systems, it also has insights from its own implementation.
“You cannot understate the time it takes to change to an enterprise system,” Mr. DeStefano says. “If you underestimate the commitment, you'll end up with a very difficult implementation. Don't underestimate the time and budget; budget more time and internal resources than you think you'll need for the implementation and plan how to compensate when those resources won't be available to the rest of the company. You'll need to backfill the normal workload of the implementation team.”
In addition, a company's commitment to integrating the system within the company's culture and with its people can't end once the system goes live. “Commit, put together the right team and make sure ERP is part of the culture of the company through top-down commitment and bottom-up supports,” he says. “ERP implementation is an ongoing process, and we will continue to upgrade and deepen the use of ERP and customer relationship management systems for our corporation as part of our company culture. ERP is not an automatic cure-all; success lies in executive commitment and having the right team.”
“Change management is the key,” Ms. Larkin says. “Leadership is what will define a project, not the technical issues.You have to manage expectations from the start.” PM
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PM NETWORK | JUNE 2005 | WWW.PMI.ORG