Lecture 5 ERP Life CycleMethods to adopt ERP

ERP Life CycleDeclining PhaseEval.Extending ValueImplement Phase IIMaintaining ValueImplement Phase ICustomi zationEvalu ationProduct License & MaintChange Mgmt.Project ManagementTrainingCustomi zationTrainingCustomizationEvaluation: Prepare RFP, evaluateImplementation I: Select consulting partner, implement core functionality, assess go-live readinessImplementation II: Re-evaluate consulting partner, continue implementing 2nd tier functionalityExtending Value:Upgrade to current ERP releases and additional functions.Maintaining Value:Few changes to adapt ERP to changing business, fresh look at business processes and continuing to customize the solution where justifiedDeclining Value:Value declines as the ERP ages and new business requirements and technologies emerge. Upgrading is nearly as costly as implementing a new ERP. => Evaluation PhaseTrainingLicense & MaintenanceLicense & MaintProject Management

RFP (Request for Proposal) Table ContentIntroduction and backgroundBackground of companyOverview of industryOverview of needDescription of business needExpected business benefitsOverview of system requirementDescription of technical req.Operating environmentHardware specificationMaintainability requirementsDescription of functional req.Specification of primary functionSpecification of information outputSpecification of user interfaceDescription of general requirementsMaintenance and support Documentation & trainingFuture releasesRequest provider and project informationRequest for statement of work and project scheduleRequest for reference list for providerDetails for submitting the proposalTime requirementEvaluation criteria and processExcepted time for evaluatingMethod of evaluation

METHODS TO ADOPT ERPOPTION 1 MAKE [Using Internal resources]Developing a custom-built ERP package, specific to the requirements of the organization, with the help of the in-house IT department

OPTION 2 BUY Going for Tailor-made ERP packages available in the market like SAP, Oracle applications, Baan, PeopleSoft etc.

OPTION 3 MAKE [using External resources]Developing a custom-built ERP package, specific to the requirements of the organization, with the help of a software solution provider

ERP Building using Internal resourcesLack of adequate & qualified manpowerNot driven with clear focus on expectations, time & costPoor software project management Lack of seriousness with the Management & the IT TeamHigh employee turnoverLot of schedule gaps during Project executionNormally project life is moreFrequent change in the scope with the approval of the Management

Tailor-made ERP solutionsAbout this optionERP Product selection PhaseProduct selection ParametersPitfalls & Points of ConcernCritical Success factors

AboutGeneralized off the shelf application s/w packagesModules based on rich functionalities for all business functionsUser tested with lot of installationsNo lead time requirement for software developmentTuned for more users/networks with adequate & in- built security Parameterized for flexibilityCan sit on latest hardware & software platformsUp-gradation of functionalities

ERP Product selection Phase ERP Team formation for selection Appointment of Consultants [if needed] Scoping study Product selection Implementation partners selection Hardware/Communication cost estimation

Product Selection - Parameters Reputation of the ERP product No.of installations in the geographical vicinity % of the overall functional availability Customization possibilities After sales support Your investment plan & budget Implementation partners track recordPackage Evaluation

ERP product acceptance - optionsAdapting directly, all the functions available in the ERP Product [Applicable for startup companies]

2. Change the way the firm does the business to fit the product [Compromising]

3. Customize the ERP product to suit the business Processes. [Customization]

Pitfalls & Points of concernCostly comparing to custom-built optionsLot of hidden costsChances of cost & time overrun are highThe Level of customizationCompulsion to pay for redundant modules/featuresLinking historical data offline & painfulThe requirement of Change Management is a mustDependency on outsiders is high IT department Poor grip on the Implemented systems

Critical Success FactorsThe firm & optimistic approach of the Management on adapting the ERP product driven methodologies on customization on monetary commitments The dedicated Team Good Training Strict adherence to the Project schedules Right technical infra-structure Change Management

Building ERP using Ext.sourcesAbout this option The Principle! The Steps Why? Points of Concern Software Vendor selection Critical Success factors

AboutHere the whole package is designed & built

By keeping a specific enterprise & its business Practices in mindBy incorporating the improvements/additions with due integration Without compromising or changing the current way of doing the businessProviding flexibility to accommodate your business fluctuations

The Principle!The best as seen elsewhere, need not be the best for you.

What is your best is what,can be successfully implemented

The StepsSoftware vendor selectionDetailed study by the vendor

Package Evaluation

Why?Very economical while comparing the cost of implementing tailor-made ERP solutionsLess prone for hidden-cost hitsThe company can opt for its choice of Hardware, Software & communication platforms based on the skill availabilityThe company and the software vendor have the direct relationship during the project execution. IT department has good control over the ProjectThe existing practices & applications can be tuned and linked with the proposed package Maintenance & improvements are easy & less costlier. Even IT team can maintain the setup after getting the source code

Points of ConcernSoftware development vendor selectionRequirement/scope finalization Less chances of Value additionNot time testedChances of Prolonged project duration

Software Vendor SelectionThe following traits should be considered while selecting the software vendor for building the ERP application Technical expertise Domain knowledge Adequate manpower Project management skills Long existence in the field Extra skills [e-biz & workflow]

The Critical Success FactorsClear Vision & support of the ManagementCapabilities of the software development vendorStrict implementation schedules & periodical monitoringThe involvement of the IT & functional teams