ERP Implementation Life Cycle

Contents

What is ERP?

Objectives of ERP Implementation

 What is ERP life cycle?

 Block Diagram of Phases of ERP Implementation Life Cycle

Phases of ERP Implementation Life Cycle

 Why do many ERP Implementations fail?

 Bibliography

ERP Implementation Life Cycle

What is ERP?

ERP (Enterprise Resource planning) covers the technique and concepts employed for the
integrated management of business as a whole, from the viewpoint of the effectiveness use of
management resources, to improve the efficiency of an enterprise. ERP packages are integrated
software packages that support the above ERP concepts. An Enterprise Resource Planning
 ERP Implementation Life Cycle

system (ERP) is a collection of modules/components integrated together while utilizing one

database typically used primarily by medium to large manufacturing organizations with multiple
sites located worldwide. Connecting to one database allows users from all departments of the
organization located anywhere in the world to attain the necessary information to carry out their
responsibilities. This integration approach offers improved operational processes and
streamlined information to the fingertips of anyone with the security rights to access it. Paper
documents are reduced or eliminated as online documents travel throughout the system to the
appropriate department for updating and forwarding. Transactions pass through the system
automatically updating several modules/components in real-time to provide timely and accurate
data for users to access and share from any location in the world.

Enterprise Resource Planning

 ERP Implementation Life Cycle

Objectives of ERP Implementation

Objectives are the major high-level characteristics that can have a great impact upon the success
of an ERP project. The objectives include characteristics such as:

 Speed
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 Scope

 Resources

 Risk

 Complexity

 Benefits

Speed

The speed of a project is directly related to the amount of time that a company has before
the completion of the ERP implementation or the amount of time that it would like to take for the
implementation. The speed of the project in the context of this chapter is how much time the
company would like to take in implementing the system. The amount of time that the company
actually takes may be dramatically different. The amount of time that the company would like to
take should be figure used when developing a project plan.

Scope

The scope of the project includes all of the functional and technical characteristics that
the company wants to implement. A company installing a full-fledged ERP system would have a
much greater scope than a company installing a few modules.

Resources

Resources are everything that is needed to support the project. This includes people,
hardware, software systems, technical support and consultants. All the different resources of an
implementation have one thing in common-money.

Risk
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The risk of a project is a factor that impacts the overall success of the ERP
implementation. Success is measured by factors such as overall user acceptance, return on
investment (ROI), time to implement etc. High-risk situations are less likely to possess these
characteristics.

Complexity

Complexity is the degree of difficulty of implementing, operating and maintaining the

ERP system. Companies of different sizes, business environments and organizational cultures
have different levels of complexity. A multinational corporation that has production facilities and
team spread across different parts of the world and working in different time zones is generally
much more complex than a company with 50 employees occupying one geographical location.

Benefits

Benefits are the extent to which the company will utilize functionality of the ERP system
for software development, maintenance and other support activities. ERP tools automate almost
all aspects of organization’s activities; they make the job of the employees, managers and other
stakeholders easy and improve the development and productivity. Better integration of the ERP
system with the product design, development and production will result in high quality products,
reduction in number of defects, faster problem resolution, quicker incorporation of
enhancements, better customer service, etc. which leads to improved brand image, which will
lead to an increase in market share and profits.

What is ERP life cycle?

ERP lifecycle is in which highlights the different stages in implementation of An ERP.

The process of ERP implementation is referred to as "ERP Implementation Life Cycle".
There are different stages of the ERP implementation that are as give below:

Ø Pre-evaluation Screening

Ø Package Evaluation
 ERP Implementation Life Cycle

Ø Project Planning

Ø Gap analysis

Ø Reengineering

Ø Customization

Ø Implementation team training

Ø Testing

Ø Going Live

Ø End-User Training

Ø Post implementation

Block Diagram of Phases of ERP Implementation Life Cycle

Pre-evaluation Screening

Package evaluation

Project planning phase

Gap analysis
 ERP Implementation Life Cycle

Reengineering

Customization

Team training

Testing

Going live

End-user training

Post-implementation

Phases of ERP Implementation Life Cycle

1. Pre-evaluation Screening

Once the company has decided to go for the ERP system, the search for the package must
start as there are hundreds of packages it is always better to do a through and detailed evaluation
of a small number of packages, than doing analysis of dozens of packages. This stage will be
useful in eliminating those packages that are not suitable for the business process.

2. Package Evaluation

This stage is considered an important phases of the ERP implementation, as the package
that one selects will decide the success or failure of the project. Implementation of an ERP
involves huge investments and it is not easy to switch between different packages, so the right
 ERP Implementation Life Cycle

thing is ‘do it right the first time’. Once the packages to be evaluated are identified, the company
needs to develop selection criteria that permit the evaluation of all the available packages on the
same scale.

3. Project Planning

This is the phase that designs the implementation process. It is in this phase that the
details of how to go about the implementation are decided. Time schedules deadlines, etc for the
project are arrived at. The plan is developed, roles are identified and responsibilities are
assigned. It will also decide when to begin the project, how to do it and it completion. A
committee by the team leaders of each implementation group usually does such a planning.

4. Gap analysis

This is considered the most crucial phase for the success of ERP implementation. This is
the process through which the companies create a complete model of where they are now, and in
which direction will they opt in the future. It has been estimated that even the best packages will
only meet 80% of the company’s requirements. The remaining 20% presents problematic issues
for the company’s reengineering.

5. Reengineering

It is in this phase that human factors are taken into consideration. While every
implementation is going to involve a significant change in number of employees and their job
responsibilities, as the process becomes more automated and efficient, it is best to treat ERP as
an investment as well as cost cutting measure.

6. Team training

Training is also an important phase in the implementation, which takes place along with
the process of implementation. This is the phase where the company trains its employees to
implement and later, run the system. Thus, it is vital for the company to choose the right
 ERP Implementation Life Cycle

employee who has the right attitude- people who are willing to change, learn new things and are
not afraid of technology and a good functional knowledge.

7. Customization

This is the main functional area of ERP implementation. There is a bit of mystique
around the customization process and for good reason: the Holy Grail of ERP implementation is
synchronizing existing company practices with the package. In order to do so, business processes
have to be understood and mapped in such a way that the arrived-at solutions match up with the
overall goals of the company. But, companies cannot just shut down their operations while the
mapping processes take place. Hence the prototype-a simulation of the actual business processes
of the company-will be used. The prototype allows for through testing of the “to be” model in a
controlled environment. As the ERP consultants configure and test the prototype, they attempt to
solve any logistical problems inherent in the BPR before the actual go-live implementation.

8. Testing

This is the phase where one tries to break the system. One has reached a point where the
company is testing the real case scenarios. The system is configured and now you must come up
with extreme cases like system overloads, multiple users logging on at the same time, users
entering invalid data, hackers trying to access restricted areas and so on. This phase is performed
to find the weak link so that it can be rectified before its implementation.

9. Going Live

This is the phase where ERP is made available to the entire organization. On the technical
side the work is almost complete: data conversion is done, databases are up and running and on
the functional side, the prototype is fully configured and tested and ready to go operational. The
system is officially proclaimed operational even though the implementation team must have been
testing it and running it successfully for some time. But once the system is ‘live’ the old system
is removed and the new system is used for doing business.
 ERP Implementation Life Cycle

10. End-user Training

This is the phase where the actual users of the system will be given training on how to
use the system. This phase starts much before the system goes live. The employees who are
going to use the new system are identified. Their current skills are noted and they are divided
into groups based on the current skill levels. Then each group is given training on the new
system. This training is very important as the success of the ERP system is in the hands of the
end-user. So, these training sessions should give the participants an overall view of the systems
and how each person’s actions affect the entire system.

11. Post implementation

Once the implementation is over, the vendor and the hired consultants will go. To reap
the fruit of the implementation it is very important that the system has wide acceptance. There
should be enough employees who are trained to handle problems those crops up time to time.
The system must be updated with the change in technology. The post implementation will need a
different set of roles and skills than those with less integrated kind of systems. At a minimum,
everyone who uses these systems needs to be trained on how they work, how they relate to
business process and how a transaction ripples through the entire company whenever they press
a key.

However, an organization can get the maximum value of these inputs if it successfully
adopts and effectively uses the system.
 ERP Implementation Life Cycle

Why do many ERP Implementations fail?

ERP implementations fail miserably during the initial stages of the operational phase
itself or fail to deliver the promised benefits. Why does this happen? Given below are some of
the most common reasons:

 Lack of top management buy-in, commitment and support

 Improper planning and budgeting

 Use of wrong ERP tool

 Lack of training

 Work culture of the organization

1. Lack of top management buy-in, commitment and support

The top management must be clearly convinced about the importance of ERP and how
ERP could be used as a competitive weapon and how the company can fail if an ERP system is
not available to manage and control the business operations. If the management is aware of the
potential benefits of ERP and dangers of not having an ERP system, it will give the full backing
and necessary organizational resources to implement the best system possible.
 ERP Implementation Life Cycle

2. Improper Planning and Budgeting

Before starting the ERP implementation project, detailed planning involving all the major

stakeholders is necessary for the success of the project. It is during this phase that the decision`
regarding procedures to be followed, tool to be bought, the budget to be allocated for
implementation and maintenance, etc. are decided. If this planning is not done properly, then
there is every chance that many factors would be overlooked resulting in selecting the wrong
tool, insufficient funds, and inadequate team members and so on.

3. Use of wrong ERP tool

We have seen that no two organizations are the same and each organization requires an
ERP tool that is best suited for its organizational environment, work culture and procedures. So
the ERP planning team should take into account all these factors before deciding on a tool. They
should research the available tools, match them with the organization’s requirements, visit
companies where the tools are installed to see them in action, should discuss about end-user
training, tool updates and upgrades and so on. Only when all the members of the team are
convinced that a specific tool is best suited for the organization, the purchasing decision must be
taken.

4. Lack of Training

One of the main reasons ERP fails is due to the resistance of the user. This is often the
result of ignorance and fear-ignorance about the tool and fear of additional work or
unemployment. These factors can be corrected by giving proper training. Training should be
given at different levels on different aspects of the ERP Implementation. The top management
should address the employees’ fear of loosing their jobs as the tool automates many tasks.

5. Work Culture of the Organization

The Work culture of the organization is very important for the success of ERP. If the
organization has a workforce that is willing to learn new things and change to new technologies,
 ERP Implementation Life Cycle

then there will be no problems for ERP implementation. But if the employees resist change and
see the introduction of formal methods as a means to assign accountability, they will perceive
the new technology as something negative. So, the basic mindset of the workforce needs to be
changed. This is important not only for the success of ERP but also for the success of any
process improvement initiative. In changing the employee mindset the two critical factors
required are top management support and proper training.

BIBLIOGRAPHY

• Page No. 215-225, ERP Demystified, Alexis Leon, Second Edition, Tata McGraw-Hill
Publishing Company Limited, New Delhi.

• Chang. S., A comparative analysis of major ERP life cycle implementation, management
and support issues in Queensland Government, Journal of Global Information
Management, July 2002.

• Klee, A., The ERP Life Cycle: From Birth to Death and Birth Again, IT Jungle,
May2005.

Search Engines
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Websites Referred
• http://www.erpwire.com/erp-articles/erp-implementation-life-cycle.htm
• http://www.slideshare.net/apurvogourav/erp-implementation-life-cycle
• http://en.wikipedia.org/wiki/enterprise-resource-planning