Hour 6: ERP Implementation & Training User Training Maintenance

BENEFITS OF ERP Shang and Seddon, AMCIS 2000 Proceedings Operational Managerial Strategic IT Infrastructure Organizational

Organizational Benefits Cost reduction Cycle time reduction Productivity improvement Quality improvement Customer services improvement

Managerial Improvement Improved resource management Better decision making –Hard to prove Better planning Performance improvement

Strategic Improvement Support business growth Support business alliances –If they have the same system Build business innovations –? System can be constraining Build cost leadership Generate product differentiation –?? Over time, only if you customize Build external linkages –? If they have the same system

IT Infrastructure Improvement Build business flexibility –??? ERP inherently a rigid system IT cost reduction –The main reason CEOs adopt ERP Increased IT capability

Organizational Support organizational change –FORCE organizational change!! Facilitate business learning –BPR does a good job of this Empower employees –Within the system!! Build common vision –FORCES common vision

Organizational Change from ERP 1.Productivity decline Jobs redefined, new procedures established, ERP fine tuned, organization learns to process new information streams 2.Productivity gain Develop new skills, structural changes, process integration, add bolt-ons 3.Payoff –Transform organizational operations to efficient level

ERP Project Failure FoxMeyer DrugBankrupt Hershey’s 19% drop in profit 29% increase in inventory City of OaklandErroneous paychecks Miller Industries Inefficient ERP – operating loss WW Grainger IncEarnings dropped $11 million

Critical Success Factors What the organization must do well to succeed For IS Projects: –Top management support Inherent in ERP –Clearly stated objectives Inherent in ERP –End User involvement

CSF Taxonomy Al-Mashari et al. (EJOR 2003) SETTING UP –Management & Leadership –Visioning & Planning IMPLEMENTATION EVALUATION –Performance evaluation & management

IMPLEMENTATION Financial –ERP package selection Behavioral –Communication –Process management –Training & education –Cultural & structural changes Technical –Project management –Legacy systems management –Systems integration –Systems testing

Features of Successful ERP Implementation Willcocks & Sykes [2000] IT Leadership Business systems thinking Relationship building Have needed technical platform Ability to troubleshoot Informed buying Contract efforts coordinated Suppliers held accountable Long-term relationships with suppliers

Factors to Reduce Risk Martin & Cheung [Business Process Management Journal, 2000] Business case –Justify need for system, establish objectives Benchmark –Import best practices Implementation strategy –Align system with corporate strategy Project management Change management BPR Installation

ERP Critical Success Factors Umble et al. [EJOR 2003] 1.Clear understanding – strategic goals 2.Top management commitment 3.Project management implementation 4.Great implementation team 5.Cope with technical issues 6.Organizational commitment to change 7.Extensive education & training 8.Data accuracy 9.Focused performance measures 10.Resolution of multi-site issues

Levels of IS/IT Failure Corresponding failure –Don’t meet design objectives Process failure –Not on time &/or not within budget Interaction failure –System not used as designed Expectation failure –Return not what stockholders expected

Factors in ERP Implementation Failure Willcocks & Sykes [2000] ScenarioCIO/IT FocusTypical outcome Technological determinism TechnicalFail to gain business benefits Supplier/consultant driven DisregardedCost overruns Outdated relationships & capabilities Insufficient talentChaos

Strategies to Attain Success User vs. Specialist focusUsers over IT staff Governance & StaffingHigh level of support Champion present Time-box philosophyShort (6-9 months if can) Dolphins, not whales Supplier/consultant rolecontrolled

User Training Focus on business processes –Not on using system Explain why Don’t skimp on time Show why new system superior to old

Training Delivery Formats Web-based virtual training Computer-based training Video courses Self-study books Pop-up help screens

Implementation Strategy Options Markus et al. [2000] Business Strategy –Total local autonomy –Headquarters control – financial only –Headquarters coordination –Network coordination –Total centralization Software Configuration –Single/multiple financial/operations Technical Platform –Centralized/Distributed Management Execution –Big bang/Phased rollout

Implementation Strategies Mabert et al. [2000] StrategyMonths% Big bang1541 Phased rollout by site3023 Phased rollout by module2217 Mini big bang17 Phased rollout by module & site252

Implementation Strategies Big bang seemingly cheapest –Dangerous –Often makes sense in ERP if carefully planned Phased rollout reduces risk –Especially good for large organizations

ERP Maintenance Nah et al. (2001) Corrective –Incorporate vendor patches, fix problems Adaptive –Implement new features, internal customization, implement interfaces Perfective –New versions Preventive –Monitor response time, errors, track maintenance activities

ERP System Migration Over time, need to adopt changes –Minor modifications –Maybe system replacement –Vendors change products WHY –The longer the time between upgrades, the harder –Easier to support a smaller number of software versions –Migrations can increase sales of seats, add-ons

User Reasons to Migrate Added functionality Compliance with new standards Discontinued vendor support Customer problems in linked systems

Summary Time, cost, functionality tradeoff –In ERP, functionality the most important Critical success factors –Top support & clear objectives inherent in ERP –Need User Involvement Phased implementation reduces risk –but increases time Once installed, still many pitfalls –Vendors change products –User training critical