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.

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About mubbisherahmed
I am passionate about IT and its ability to deliver cost effective, value for money solutions that can enhance performance and in many cases provide competitive advantage by using a range of solutions and approaches in innovative ways.

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

  1. Hello,
    1/Business driven, I agree,but bewore top-down approaches only, business bottom up approaches are also mandatory, because during implementations, the production, logistic and warehouse operations, close to the shop floor are incredibly important. Having a steering committee and a project team that only covers the higher echelons, can be very dammaging to the project. Enforcement from business top down, might reach such an oposition with the operational workers, that the project fails. “The decil is in the details” in the end.
    2/In multi site ERP implementations, always make your template or blue print according to the simpliest of your companies that you should implement and use plug-ins for the more complex companies. Do not make your template or blueprint to the needs of the most complex of the companies in the group, because afterwards the roll-out trough the other/simplier companies, will make them carry the burden of the more complex ones, requiring: more complex operations or added staffing in the business operations (which is not the meaning of an ERP system)

  2. mubbisherahmed says:

    Art Johnston, CIO ATC, after reading this article commented in one of the forums, I am a member of:

    Your point # 11 sums up the previous items. We built our RFP after our Steering Commitees along with Champions built the functional requirements and process maps. Sending them to 10 vendors with instructions to state which requirements were standard and which would require mods or API’s helped us build a scorecard. Along with the financial specs this helped us narrow it to two vendors which we then did a two week test of each of their applications with our data to review functionality and user friendliness. With the teams satisfied and Upper Management comfortable we did a phased approach by division that made the implementations go faster and smoother. The key was to finish the entire implementation in the same year to avoid double GL processing. P.S. we chose DynamicsAX.

  3. mubbisherahmed says:

    Corey Simpson, Senior Manager COMPtia, after reading this article commented in one of the forums, I am a member of:

    I enjoyed the article thoroughly. Especially the points regarding Senior Executive Project Sponsor and Business strategy clearly defined. All to often it seems not until after ERP projects are completed that business starts to provide true direction and a rework is needed to align the new system with Business Processes.

  4. Anil says:

    Dynamics AX based ERP solutions require around 2 dozen types of test to be performed. Following are a few testing types recommended by Microsoft in its guidelines for ISVs.
    1. Unit Testing
    2. Compliance Check to Coding Standards
    3. Compliance Check to Design & Architecture Guidelines
    4. Help Navigation (User Assistance) Testing
    5. User Experience and Usability Testing
    6. Verification of Business Intelligence / Reporting Standards
    7. Performance Testing
    8. Security Testing (including Threat Modelling Analysis)
    9. Authorization Testing
    10. Globalization Testing
    11. Localization Testing
    12. Platform Compatibility Testing
    13. Verification for Compliance to ISV Standards
    14. Installation Testing
    15. Backup and Restore Testing
    16. Extensibility Testing
    17. Functional Testing
    18. Regression Testing
    19. And many more…

    Does your TEST PLAN contain all required types of testing? Are you really have a Test Plan.

    Are you sure that your testing process is compliant to IBI / DAIM?

    Do you need the expert consultant to make your testing process compliant to IBI / Dynamics AX Implementation Methodology.

    An expert professional is available to help you both at Onsite and Offshore mode.

    Regards,
    Anil Kumar Gupta
    Lead auditor for ISO 9001: 2000 QMS,
    Certified Testing Professional – International Software Testing Qualification Board
    Author – Quality Assurance for Dynamics AX based ERP solution’ (ISBN: 1847192912)
    Author – ‘Software Testing : Understand Plan and Execute’ (ISBN: 1847193452) (Under publications)
    Member – PMI

    Phone: +91 99999 81613
    Email: sqaguru@gmail.com
    Skype: “sqaguru”
    MSN: “sqaguru”

  5. PK Jain says:

    any ERP Implementation project is busienss driven not IT Driven. sucess of the project depend upon the top level support and very good core team who can accept changes and map the busienss needs to product. prior to ERP , project case to be prepared with expectation and tangible benefits to be derived form Implementation

  6. mubbisherahmed says:

    PK Jain, Sr VP IT & CIO, Grasim VSF Adityabirla Group, after reading this article commented in one of the forums, I am a member of:

    Very good article and keep it up, comments given in the article itself.

  7. The main point for me is the business process realignment. Implementing ERP requires that you first of all make sure that all business users understand each others processes and how they affect one another. The ERP systems that have been built are mere technologies which should be slaves of the process. In most implementations, people start with the technology and then try to force the business processes to work in that way. What follows is major resistance and in most cases, confusion.

    However Ahmed, I was hoping to see how you were going to link the BI systems with ERP systems and what you were going to predict as the future for converged information management.

    • mubbisherahmed says:

      Hi Jeremiah et al,

      I would like to take this opportunity to thank everyone who has read the blog/provided feedback. I have found it very interesting to read all these comments and it will all help towards Part two. I am glad that Jeremiah has raised the important point regarding BI systems linking to ERP systems and how that will impact/assist converged information management. I am still getting feedback on this topic and in about 3-4 weeks time, I will be taking Jeremiah’s suggested topic – What will this topic be called? Well, I just need to think about that one but it will incorporate all the feedback that I will have collected to date while covering the area of converged information management and the role that BI and ERP systems could/should play.

      Keep these comments coming, I love reading them….

  8. Santosh Nair says:

    A very interesting consolidated information set. Most of what you have stated are true… although I believe that the elapsed time between the three phases your recommend is critical for the success of ERP acceptance by the organization.

    In today’s dynamic business environment where consolidation and multi-site implementation is becoming more common-place, it is necessary to ‘lock-in’ and ‘freeze’ the requirements and get on to an early start for ensuring quick-wins. The 3-phase approach is still applicable for greenfield projects but subsequent site roll-in (or roll-out – depends on which way you look at it!) should be accomplished in much shorter time frames.

    At the organization where I work, we embarked on a global consolidation of over 250+ instances of a leading ERP platform and through the experiences developed (and sell) a Consolidation & Harmonization concept (including implementation & subsequent reviews) to companies around the world. The last years of multi-cultural experience resulted in a very refined approach to dealing with such large scale implementations.

  9. mubbisherahmed says:

    Hi Santosh,
    I agree that for successful implementation, there would need to be an element of, as you said, ‘lock-in and freeze’. Without that there is always danger of ‘project creep’. Organisations need to agree where to stop the change and agree that any changes, new ideas etc will be captured in the next revision of the ERP system, which could be started as soon as the main implementation is completed, as it is a process of continuous improvement.
    Indeed, the last few years have seen refined approaches being applied and as the ERP marketplace matures, hopefully, lessons learnt can be rolled towards future implementations.

    • mubbisherahmed says:

      Doreen,

      Very nice of you to drop by and leave your kind thoughts. You cannot imagine how much those three words mean to me. It conveys me the message that all the hard work I input into my blogs is worth it. Many thanks.

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