10 things you should know about implementing an ERP

system

Takeaway: Enterprise resource planning systems permeate almost all operational

aspects of the enterprise, and great care and planning are needed to successfully
effect such radical organizational changes. But with the right strategy and a little
patience, you can reap many rewards. These pointers and caveats will help guide
your ERP efforts.

ERP implementations can take years to complete

and the process can be delayed or derailed by
faulty planning and execution. Businesses rarely
remain static and requests for changes in scope
during the project can get out of control. The technology may work, but many
organizations miscalculate the impact of process change. Incomplete needs analysis
almost always results in understated costs of ERP implementations. Infrastructure
and integration requirements, if incomplete, can also result in hidden costs. Managing
time, scope, and money is truly a challenge. Here are 10 key considerations that
organizations need to keep in mind when they undertake an ERP system
implementation.

#1: When ERP projects go wrong, the results can be disastrous

Doing it right can be rewarding; failing can be devastating. For example, one
company went millions into the red as a result of technical problems with the rollout of
a supply chain system, leading to inventory shortages and incomplete orders filled.
Another company took a several million dollar hit on profits as a result of a product
oversupply related to problems with an ERP system. The software itself is rarely the
cause of big problems. The root cause is often due to the huge business and process
change required with ERP implementations.

Presentation by Ganesh Srinivasan; for

Knowledge Exchange and not for any Page 1
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 10 things you should know about implementing an ERP
system
#2: Prior to implementation, make sure you understand the "why"

Understand the value proposition and the business case for your ERP system. What
are the key deliverables and objectives? What is driving the project? Where is the
win? What assumptions does the sponsor hold? The answers to these questions will
help the team understand the target and the expected results.

#3: Make sure you have a strong sponsor

Your sponsor's level of commitment and support can have the greatest impact on the
delivery of an ERP system. Issues and risks will likely get escalated to the sponsor if
they aren't resolved earlier. Your sponsor can also serve as the champion for the
project when conducting status briefings and training across the enterprise.

ERP systems can stretch resources beyond capacity, so you must have a rational
project plan not padded by wishful thinking. Roles and responsibilities must be crystal
clear to the sponsor and stakeholders. Strong sponsorship and project management
can dramatically affect the outcome, as critical decisions are often required.

#4: Gap analysis is a must have

What are the gaps between the "as-is" and the "to-be" systems? Has the existing
system been customized? Identifying functional and nonfunctional gaps between the
existing and planned systems is one of the first major tasks to be completed. It's
highly recommended that the gap analysis be reviewed and approved by the
executive sponsor.

An incredible number of details are involved in the implementation and integration of

ERP systems. The vendor may provide an "off-the-shelf" implementation plan, but it
doesn't know your integration requirements or functional gaps. So it's up to you to
make sure you fully understand and accept the functionality to be delivered. Leave no
surprises to surface after it's too late. Gap analysis is a major means of avoiding
scope creep down the road and preventing delays due to misunderstood deliverables.

#5: Vanilla is best

Stay with vanilla at all costs and use the standard off-the-shelf package with as little
customization as is feasible. Once the enterprise has implemented the core modules
(GL, AP, AR, payroll, etc.), it can phase in new features and build things around the
edges, such as remote Web interfaces and wireless networking.

Presentation by Ganesh Srinivasan; for

Knowledge Exchange and not for any Page 2
commercial gains
 10 things you should know about implementing an ERP
system
Plugging a vanilla system into a legacy system can be tricky, as there may be years
of customization built into the original system. Some say that businesses building too
much complexity into ERP systems can spend up to 30 percent more per employee
on finance operations.

#6: Success = change

Success means delivering change. Functionality must enable existing processes, or

processes must change. Business process implications cannot be glossed over, no
matter how arduous the task of process mapping/process engineering. What
processes and functions are in scope?

Socialize change across the organization with key stakeholders and those most
affected by change. Whether the changes entail the processing of payroll exceptions
or creating journal entries, involve the most experienced end users as much as
possible.

Organizations that focus on technology and ignore the human element of

implementations often fail. ERP by definition is about people, not just technology and
organizations. Minimize the people side and run a larger risk of missing the target. In
fact, process change is often part of the case for the ERP investment.

#7: "Center of excellence" team

Create a center of excellence--an oversight team in addition to the project

management office (PMO). Vital to the success of an ERP implementation is a strong
tactical team that can manage change and drive toward stability. Most businesses are
not prepared to manage the impact to their day to day functions during the
implementation. This team is responsible for help desks, testing, training,
documentation, database administration, and many other operational issues and
"fires."

This team's functions are all closely coordinated with the go-live handoff for each
module/milestone, and it can act as the "super-user" from day-one to help avoid
chaos.

Presentation by Ganesh Srinivasan; for

Knowledge Exchange and not for any Page 3
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 10 things you should know about implementing an ERP
system
#8: Invest in business intelligence

In addition to managing operations more efficiently, common data enables ERP

software to support more detailed analysis and reporting. Business intelligence (BI) is
the engine--the database of business rules that need to be defined for the benefits to
be achieved. Building it takes time and enterprise-level decision making.

Often, ERP systems are required to integrate with existing databases. The customer
helps lead the BI effort and actively participates in integration. Some things can't be
accomplished by the IT pro alone.

#9: Manage risks

There are many flavors and complexities of ERP. Know where the major pain points
lie for your situation. The risks to the plan must be clearly defined and include an
escalation plan. Are there technology risks? Are scarce skills required? Is there a
migration path? Many risks can be mitigated via thorough testing. Testing business
cycles is, by nature, a long process. Be certain to have a fallback plan for each
implementation milestone where there are risks to mitigate.

If the ERP system is for a small/medium size business (SMB) with little or no legacy
systems integration, the task is less risky. However, if a replacement of a large highly
integrated, highly customized system is required, get ready for the unexpected. An
ERP project should never begin without a clearly defined risk management plan that
has the sponsor's approval.

#10: Consider compliance

Because ERP systems are accounting/financial based, there are a number of areas
to consider for audits and compliance. Sarbanes-Oxley is the primary act that
regulates financial systems. Specific IT controls affect ERP systems implementations
as well as the ongoing management of those systems.

This is a big topic, but suffice it to say that in Section 404 of the Sarbanes-Oxley act,
compliance is measured by a set of controls that will likely be on the external audit
team's list. Any significant conversion, upgrade, or implementation of a financial
system is fair game. The project "artifacts" must also be preserved as evidence of
due diligence and adherence to the controls throughout the project. These include but
are not limited to project plans, issues/risk logs, data conversion plans and results,
and signoff on significant financial reports.

Presentation by Ganesh Srinivasan; for

Knowledge Exchange and not for any Page 4
commercial gains