Enterprise Resource Planning (ERP) – Past, Present, Future and successful implementation

Brief History and introduction

ERP’s origins can be traced to the beginning of the Database and Material Requirements Planning (MRP), in particular, relational databases and its founder Edgar Frank “Ted” Codd. Good current examples are SAP, Oracle (Click for Oracle Database History) and Microsoft Dynamics. The concept has evolved around Data warehouse functionality. ERP software attempts to link all internal business processes into a common set of applications that share a common database. It is the common database that allows an ERP system to serve as a source for a robust data warehouse that can support sophisticated decision support and analysis.

Data Warehouse design can also involve a process of Extract, Transform, load (ETL) that allows business intelligence software to perform its queries and predictive analysis.

Recently, Business Intelligence (BI) has driven the adoption of ERP systems due to its ability to sit on top of a data warehouse and perform intelligent querying of data through Data Mining, OLAP and Business Performance Management (BPM). In particular, it is the BPM aspect that MDs/CEOs utilise the most as it becomes a decision support system, providing dashboards for all sorts of performance indicators allowing management quick synopsis of any given situation, allowing quicker decision making.

For more information on ERP design, Click here

For more information on Data Warehousing and ERP, Click here

Current Consolidation, who owns who and how it will affect the future of ERP

The IT market is undergoing significant reshuffle and consolidation. This has led to a great deal of confusion on who owns who, especially if you are not actively following the IT industry. For the uninitiated and for the benefit of everyone, I will now clarify. ERP system supplier consolidation has meant that Microsoft has bought Navision and Great Plains. SAP now owns BI vendor Business Objects (BI). Oracle is the supplier that is the most influential as far as acquisitions are concerned as it has bought, Sun Microsystems, PeopleSoft (Therefore JD Edwards), Siebel, Primavera and Hyperion (BI). I will also mention that IBM bought Cognos (BI) as it is software for business intelligence (BI).

How this consolidation will affect ERP and the IT market in the future is uncertain at the moment. For example, Oracle has acquisitioned over 100 businesses in the last few years; the test for Oracle will be on how well it can leverage all these acquisitions for competitive advantage. Even with all this consolidation, a newcomer arriving with a new product that upsets the applecart is all too common within the IT arena.

The businesses of the future will be very different to the businesses of today and will have to think long and hard about other areas as well such as a mobile workforce and mobility (Smart phones), social networking and Cloud Computing.

Lessons learnt that allow future successful implementations

While challenges may exist, project leadership can mitigate risks with a strong plan that remains focused on the buyer’s goals and objectives. A spirit of cooperation between the vendor and buyer for mutual benefit is often quoted as the single most important factor for success. It is interesting that on average an ERP implementation takes approx 20 months and that only 7% of projects finish on time while 68% took “much longer” than expected.

I have studied many successful/unsuccessful ERP implementations, interesting statistics and as there is a body of existing knowledge, I am concluding this article by suggesting that a new ERP implementation is done by splitting the project into three discrete areas. Planning, Change and Review. The areas below will on occasion be conducted in parallel. Successful ERP is best done when the focus is to do it right, first time as in many cases by the second round the damage is often irreparable.

Planning –

The business needs to appoint a steering committee to conduct a thorough SWOT and STEP (PEST) analysis with a view to setting up an ERP capability. It can then be used to identify gaps that need to be addressed. For example, if the STEP analysis highlights that politically, many departments aren’t interested or do not know about the new ERP implementation, it needs to be addressed. It also needs to be recorded in the SWOT analysis as a threat. This will highlight how prepared the business is for the required change and the next step can take these findings and ensure:

1. A senior Executive is appointed – Ensure project is top driven (Senior exec – CEO etc) and not bottom up (IT driven)
2. Business strategy is clearly defined.
3. IT ERP system fits within that strategy.
4. Definition of goals/objectives of introducing the ERP system (Ensure questions such as what do we hope to achieve at the end? How will we know that we have arrived? – are answered, i.e. clearly define business requirements in detail and set realistic business benefits to manage expectations better.
5. Processes in 6, 7 and 8 need to be aligned to the overall business/IT strategy by involvement from both senior managers of functions and experienced users who understand the processes.
6. Processes are analysed for alignment to business vision and business/IT strategy and fixed accordingly.
7. Processes that are not captured by existing systems are captured.
8. Processed are improved.
9. Resources both human and technical – Ensure miscalculation of time/effort is minimised, manage delivery timeframe expectations.
10. The above steps have been completed and a realistic budget is assigned.
11. ERP Package selection is according to business requirements/process mapping.
12. ERP software is aligned to user procedures (May require new procedures)

Change –

1. Ensure that all interested parties are engaged and feel involved (Business buy in) and that resistance to change is reduced and addressed accordingly. (This can be accomplished by creating a steering committee that has reps from both senior management (each function) and a super user who understands current processes. The super user needs to have taken the time to create his/her steering committee to analyse current processes and suggest improvements (See item 5 under planning).
2. How do we communicate that this change is required (Education)? – On going communications with all stakeholders.
3. How will training elements be addressed? What is the current process (Manual/IT based system and if it is an IT system, are there any problems in the way that the system is used?
4. Reviews, for example, Gateway Reviews should be conducted to deliver a “peer review” where independent practitioners from outside the programme/project use their experience and expertise to examine the progress and likelihood of successful delivery of the programme or project.

Review –

Once the project has been delivered successfully, a yearly review should be conducted to enhance or improve the system allowing for continuous improvement. Minor modifications, tweaks and fixes can be performed as business as usual.