In my career of over 25 years; I have seen & experienced transitions in “Business Applications” of Computers from COBOL to Database to RDBMS to Client / Server to Web to Cloud.
In the early 90’s, the industry was automating each individual department & preparing for a transition to more robust & secure RDBMS based applications. However, some of the group companies / subsidiaries of the Fortune 500 in India started implementing ERP solutions in the early/mid 90’s.
Over a period, the concept of ERP penetrated in the SME segment. In spite of the availability of various online resources; ERP is still perceived as an IT initiative. In fact, for Business Applications, IT is just an enabler. The Management should dive deeper & think that these systems run your organization. If your ERP stops, your production stops, dispatch stops and the invoicing process comes to a standstill.
All the success stories will reassure a fact that whenever the company’s top management is involved in the entire process including the selection process to the post go-live phase; the organization has not only rolled out a successful ERP implementation, but also has derived continuous benefits. Because ERP is not an event, it is an ongoing process.
“Who needs an ERP?”
Many Entrepreneurs, Owners, Directors feel that ERP is meant for large organizations. Some of them also feel that it is for the companies that have very complex business processes. But this is just an illusion. Any company that is growing or a company that has work-flows that involve lot of inter-department transactions or the one which has many locations, can also benefit from strongly integrated ERP software.
There could be many more reasons for adopting an ERP solution e.g. sudden business growth, suffering customer service because of lack of a good system, need for a better data security, automation of approval process, restricted access to transactions etc. and especially when you need a robust system that can be audited properly.
What should be the budget for an ERP?
There is nothing like a budget to turnover ratio or turnover to budget ration to establish a benchmark to justify the figures. I have seen many companies with smaller turnovers that have taken a risk to invest in an ERP by allocating a special budget. And they could reap huge benefits in 18-24 months after go-live. Better visibility ensured they grew not only in sales turnover and operating margins, but also achieved operational efficiency & better customer service. I have also seen companies that, in spite of having good cash reserves, made half-hearted investments resulting in one or multiple unsuccessful attempts to implement.
How should I start?
As mentioned earlier, it has to be a “Management Initiative”. Some companies choose to appoint a consultant to evaluate ERPs. But not all the companies will have the budgets to do so. As a small beginning, the CEO or the M.D. of the organization should make sure that the idea of such kind of automation is communicated well to all the department heads. Ideally, all the department heads should independently prepare a basic list of all their business functions & more so the list of pain areas or challenges or issues faced in day to day operations due to lack of automation.
Once this list is ready, the top management should invite all the department heads in one room & try to identify and consolidate the list of major business processes & the list of pain areas.
Once this list is ready, the top management should invite all the department heads in one room & try to identify and consolidate the list of major business processes & the list of pain areas.
Once this exercise is done, the CEO must appoint a Project Coordinator who will monitor further activities. Please remember that the Project Coordinator should be a Senior Manager of an important department. He can take the help of the IT Manager in inviting vendors, coordinating for meetings, collate data etc.
How do I plan?
Post homework, the project coordinator can check for available solutions which suit the company’s business automation needs. With the availability of internet it has become extremely easy to get latest information on who are the vendors, the products they offer, the kind of infrastructure required and some benchmark on budgets.
My personal suggestion is not to get carried away with online blogs & comments of the users who are either extremely happy or extremely disappointed with a specific product or a vendor.
The next step should be contacting the vendors. For branded products; you may also check for the local partners in your area.
The organization can then plan for a budget for licensing & other fees, IT and communication infrastructure.
Short-listing the product & the vendor:
It is always a good idea that you are transparent with your vendors in terms of your expectations of the product features, timelines, and budgets. Many business owners think that disclosing their budgets to the vendor may trigger price escalations. But it is not so. You can always cross-check whether the vendor is offering a fair price.
Sharing your business processes & challenges helps the vendor to map it with the product & demonstrate the solution closer to your business scenarios. The vendor can also tell you whether your expectations in terms of timelines are realistic.
Selecting a product is the tricky part of the whole exercise. A good product demonstration with an ordinary product can sometimes have an edge over a poor demonstration of an extremely good product. Please ensure that the demonstrator explains your business scenarios rather than giving a generic demo.
Selection of the vendor is relatively easy. You can check their technical competence & verify the same with good number of customer references. Please remember the vendor with the lowest price may not be the best. If they are offering you huge discounts; they will definitely compromise on the quality of resources and hence the project delivery. A good consultant deployed on the project can offer a real value-add. There are many instances where the ERP has been implemented like accounting software.
Planning for the project:
It is expected that the vendor explains the execution methodology & project management in detail. This is very important because ERP implementation is not just a customer-vendor relationship. Unless the players on both the sides i.e. the vendor & the customer act as a team success is difficult.
Please ensure that the implementation vendor submits a detailed project plan to enable you to internally plan for availability of your staff members. Do ensure, before the project begins, that the critical dates of the major milestones do not overlap with activities like external audits, accounts finalization etc.
If, looking at the project plan, you conclude too many issues to handle in a short time; please break-up the project in phases. If you try to automate too many things at one go; it may either result into extended timelines or you may have to postpone the project. If the project drags beyond a particular time; everyone loses interest & enthusiasm. It will then be difficult to gain the same momentum like in the beginning.
Some key elements to remember after the project kick-off:
Let me repeat, ERP implementation is not an event; it is an ongoing process. Please don’t expect automation of too many features in a short time or some miracles immediately after the Go-Live.
Another question that comes to the customer’s mind is about “Business Process Improvement” or “Business Process Re-engineering (BPR)”. Should the BPR happen before, during or after the implementation? In my opinion, if you have spent enough time on the product fitment, go ahead & adopt the best practices recommended by the product developer. If the product is matured; it will automatically bring in lot of discipline in your organization’s working. Some of the common features like automated work-flow, approval processes, automatic re-conciliation of customer / vendor accounts should not only improve the operational efficiency, but also avoid human errors to a great extent.
It is very important that the staff members of the customer have a proactive approach. The users must remember that some of the following key elements will play a major role and hence they must:
- Provide all possible details to the implementation partner during business process study.
- Provide requested information on time.
- Provide accurate data.
- Attend all the training sessions with complete involvement.
- Prepare maximum possible test cases / scenarios for testing.
- Take active part in User Acceptance Tests.
- Avoid demanding unreasonable features once the solution scope is frozen.
The top management’s commitment to the project should be continuously demonstrated and they must ensure that the team adheres to the project plan.
Finally, assuming that the solution has been developed & tested thoroughly by the partner; it is evident that a) Rigorous training & practice sessions and b) Clean Master & Cut-Over data are pillars on which the success of the project is largely dependant.
I have one last humble suggestion. Please don’t ignore the “Human” factor. Please ensure you continuously motivate your team so that issues arising out of discrepancies are resolved in the Project Office amongst the team members & not escalated to the top management.
© Aug 2015 Vinay Kulkarni, INFINX Services Pvt. Ltd. contact@infinxinc.com
