Implementing ERP Systems



Enterprise resource planning (ERP) systems, which are
often termed as
early retirement planning, are today considered to
be the basic infrastructure to run any enterprise, be it large or small, private
or public. Currently, large business enterprises in India are in the process of
implementing ERP systems. ERP systems promise benefits that range from increased
efficiency to transformation of quality, productivity and profitability.
However, implementation poses some unexpected organizational challenges and
changes that can be structural as well as cultural in nature. ERP helps to
establish world-class best business practices and brings about transparency but
also calls for empowerment and flexibility in the decision making process.

Prof
M P Jaiswal

"A
third of all ERP implementation program worldwide fail. That’s
because they are viewed as automation drives, and not programs that
will have to manage change…"

The most promising argument is that to thrive in the e-commerce world,
companies need to transform their internal business processes with the
deployment of ERP systems. Hence, ERP is considered the backbone of e-business.
In mid-1998, a survey stated that 70% of Fortune 1000 companies have
either implemented or are in the process of implementing ERP systems. Gartner
says 90% of top companies have made purchases from at least one vendor.

A
Deloitte & Touche consulting group named ICS has defined a common set of
principles for enabling large-scale change in an enterprise. Change occurs at
several levels in an organization: strategy, process, people and technology.

In India, only the MNCs and private companies have so far
been able to implement ERP successfully. Most of these organizations have chosen
the technology enabled reengineering approach to implement ERP systems. Critical
success factors (CSF) and reasons for failure of ERP implementation have now
been widely researched. The CSF in ERP implementation is discussed below:

Global
Studies on ERP
Meta
Group Survey of 63 Fortune 500 companies:

Average implementation time was more than 23 months.
60%
respondents indicated negative return on investment.
n A
drop in business performance observed for at least one in four cases
lasting for about three to nine months after going live.
Booz-Allen
& Hamilton Survey:

Only 10% ERP projects worldwide are implemented in time and within the
budget.

About 55% ERP projects incur time and cost overruns, and the remaining 35%
are cancelled after taking off.

n Need
and growth of ERP solutions:
In India, different companies went in for ERP
for different reasons. Many companies implemented ERP as a replacement of their
existing IT infrastructure. However, some companies recognized the capabilities
of ERP in terms of reengineering business processes and adopting the best global
business practices that are in built in ERP packages. Also, there are many
well-thought out, business-driven ERP projects such as M&M, HLL, Godrej,
TISCO and L&T that have resulted into enhanced productivity gains as well as
business benefits.
n
 Managing ERP implementation. Is
it about installing new software systems? If yes, then why is the installation
cost three to six times more than that of the product? Should it be taken as an
IT project or as a change management program? In early 1997, one of the largest
Indian PSUs spent over Rs 50 crore on its ERP project, only to realize later
that it was not about IT.

An ERP project should be top management driven as a business
and change management initiative and should not to be viewed as an IT project
for merely automation. It should be people driven, process oriented,
technology-enabled, and a business-innovation and transformation program.

Prof
M P Jaiswal

The author is associate professor (IT) at MDI, Gurgaon.

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