ERP implementation and E-business

ERP Implementation: Six Deadly Sins

Not understanding the true significance of what you have

taken on.
Not committing the right resources to the project.
Not managing the change effectively.
Not managing the benefits.
Not embracing integration.
Not planning for the end of the project before you start.
Project Management Fundamentals

Co-ordination Balancing
 Tasks  Scope

 Equipment  Time

 Products  Cost

 People  Quality

 Time  Needs vs.. Expectations

 Money  Needs & Expectations

of stakeholders
ERP Project Management – 10-Step Estimation Process

Step 1: Define the Scope of the Project

Step 2: Estimate Staffing to Lead the Project and Support Each Process Area
Step 3: Estimate Custom and Interface Development
Step 4: Assess Data Conversion Magnitude
Step 5: Estimate Project Duration
Step 6: Assess External Connectivity Requirements
Step 7: Estimate Supplemental Staffing
Step 8: Create a Time-Phased, Resource-Loaded Project Plan
Step 9: Estimate Resource Rates and Apply Them to the Plan
Step 10: Estimate Travel, Contingency and Final Project Costs
ERP PM – 10-Step Estimation Process (continued)

Step 1: Define the Scope of the Project

• Typical Macro-Processes Identified as Part of an ERP
Implementation
• Sample Process Decomposition

Step 2: Estimate Staffing to Lead the Project and Support Each

Process Area
Step 3: Estimate Custom and Interface Development
• Custom Development
• Interface Development
ERP PM – 10-Step Estimation Process (continued)

Step 4: Assess Data Conversion Magnitude

• Code Tables
• Master Tables
• Transaction Tables

Step 5: Estimate Project Duration

• Project Planning and Preparation
• Phase 1: Standard Solution Design
• Phase 2: Standard Solution Development
• Phase 3: Pilot Deployment
• Phase 4: Rollout
• Project Management
ERP PM – 10-Step Estimation Process (continued)

Step 6: Assess External Connectivity Requirements

Step 7: Estimate Supplemental Staffing
• Point Staffing for Custom Development
• Point Staffing for Data Conversion
• Point Staffing for End-User Training

Step 8: Create a Time-Phased, Resource-Loaded Project Plan

Step 9: Estimate Resource Rates and Apply Them to the Plan
Step 10: Estimate Travel, Contingency and Final Project Costs
Change Management: Of Vital Important
 ERP Success Factors: Top Ten Findings
Findings and Conclusions ERP enables better, faster decisions by unleashing the
power of the integrated enterprise
6
1 Going live is not the end of
the ERP journey
ERP provides a backbone to further extend
7 functionality through bolt-ons and other solutions
2 ERP delivers significant tactical
and bottom-line strategic benefits
8 Issues and obstacles show dramatic shifts in
3 ERP also yields significant returns from emphasis after going live
unexpected benefits

9 An ERP implementation is at its core a people

4 Companies should anticipate a project
temporary dip in performance
after going live There are twelve best practices for
10
accelerating, maximizing, and sustaining
5 There are three distinct stages the benefits of the ERP journey
in each wave after going live
12 best practices for sustaining the benefits of ERP

1 Focus on Benefits 7 Process Expertise

Alignment Extending Capabilities

2 8
Breadth of Change
Commonality
3 9
Business Case

Using Capabilities
4 Post-Implementation Plan
10
Role Transition Benefits Ownership
5
11
Metrics
6 12
Implementation: ERP The Next Wave

ERP 2: The e-business challenge

 Information Sharing – ERP focus is on internal information , e-

business provides ability to share info internally & externally
 Optimization Focus – ERP focus is across one value chain, e-
business focus is on multiple value chains
 Internet Substitute – ERP “one in all in application” opposed to
“standalone apps” linked on internet backbone
 Technology Obstacle – Closed client/server vs. open standards
 ERP Trends: Combined ERP & E-business Benefits

TANGIBLE BENEFITS INTANGIBLE BENEFITS

Increased revenue Improved customer and employee

Reduced costs, inventories, and
collection efforts
Shorter cycle times
satisfaction
Frees employees to work on tasks
requiring human creativity and
judgment
Continuous operation

Capability to manufacture to actual Improved supplier relationships

demand
Improved cash management
E-business Models and Disintermediation
Pure e-business play?
 The case of Amazon.com

Click-and-mortar
 Hybrid of the pure e-business and the brick-and-mortar model
 Dependence of e-business and physical facilities

Disintermediation
 Manufacturers interact directly with consumers, bypassing intermediaries such as
wholesalers and retailers
 Impact on a company’s business processes
 Warehouse must now manage a large number of low-volume orders
 Accounts receivable must now process a large number of invoices and accommodate
increased collection activity
 Customer service may be inundated with calls
 Customer returns must now be managed by manufacturer
The E-business Platform – Extreme Demands
Operating demands place a strain on e-business platforms.
 Fluctuating traffic.

 Frequent system changes.

 24 x 7 operation.

Flawless system stability.

 True 24 x 7 availability requires 99.999% reliability.

Scalable.
 Dramatic spikes in site traffic.

Security.
 Exposure of corporate resources on the Web.

Robust Design.
 Testing tools available.

Examples of AOL, E*Trade, Charles Schwab and eBay.

ERP and E-business: Adaptive vs. Disruptive Technology

E-business is a revolution
 Internet (4 years to reach 50 million users)
 Television (13 years)
 PC (16 years)
 Radio (38 years)
Adaptive technologies move earlier technologies forward incrementally
while Disruptive technologies change the way people live or the way
businesses operate.
 ERP is adaptive while e-Business is disruptive.
 Touch-tone telephone was adaptive while telephone itself was
disruptive.
 Electric train was adaptive while the train itself was disruptive.
 Life Cycle of Adaptive versus Disruptive Technologies

(5)
Critical Mass Critical mass
achieved.
Mass marketing
(3)
Impact New wave of
Technology and
equipment
(2)
Learning, (4)
Experimenting, Infrastructure
(1) investing consolidation
Initial hype

Time Disruptive technology

Adaptive technology
ERP & E-business Recap

Structured approach to optimizing a company’s internal value chain.

Organize, codify and standardize a company’s business processes and data.
Collate and transform transactional data into useful information for analysis.
Not intrinsically strategic; rather, it is an enabling technology.
Business process re-engineering or re-design (BPR) often accompanies ERP
projects to eliminate non-value-adding work, thus improving a company’s
financial performance through operational improvements.
ERP implementation requires employees to be willing to new technology, &
also new ways of working.
 This forces employees to upgrade their skill sets.
ERP implementation with BPR affects a company’s organizational structure.
 Affects individual roles within the organization.
 Staff reductions are often seen, or staff may be moved into other areas (in
expanding companies).
Change management is key to successful implementations.
ERP & E-Business Re-cap (continued)
E-commerce
 Leverage an Internet-based sales channel to enhance marketing and sell
products or services, or leverage the Internet to make purchasing more
efficient.
 Ideally, with minimal disruption to organizational culture and business processes
 e-storefront, e-catalog, e-billing, e-payment, e-procurement
 Focuses on efficiency in selling, marketing and purchasing

E-business
 Uses IT and open standards to connect suppliers and customers at all steps
along the value chain.
 Requires trust among business partners, and agreement on standard ways of
working.
 Focuses on effectiveness through improved customer service, reduced costs
and streamlined business processes.
 Many companies enter e-business by first engaging in e-commerce.
Complementary Technologies of ERP and E-Business

ERP and Internet technologies are rapidly coming together.

 Merger is still incomplete and its exact nature unclear
ERP is the internal technological hub of a single enterprise.
 Web-based technology extends each enterprise’s organizational boundaries.
ERP is focused on internal process efficiency and effectiveness while E-
Business is focused on external, cross-enterprise process efficiency,
operational effectiveness, and product promotion.
ERP technology supports current business strategy while E-business opens
the door to new strategic opportunities.
E-business is best supported by a well-tuned ERP system.
 What lies behind the web page is important.
 ERP is necessary to fulfill the promises made on the Web page, that is, the promise
of e-business.
 Enterprises need some sort of internal transaction engine to match the internal
information flow with the actual flow of goods and/or services.
 Key issue is to blend ERP and Web-based technology successfully and to push each
to achieve its maximum benefit.
ERP complements E-Business

ERP: The hub of a single enterprise

 Integrates resource planning, supply-chain management, demand-chain management
and knowledge management.
 Achieved through tightly integrated modules for Finance, Manufacturing, Logistics,
Human Resources, and Sales & Marketing.
E-Business: The ideal extension to internal processes
 Enables improved customer focus (individualized service, low-cost products, short
cycle times, and accurate delivery dates) and customer relationship management
 Enables interactive relationships with value-chain partners
ERP boosts E-Business potential
 Communication with partners in the supply chain and customers in the value chain is
not enough.
 Collaboration and coordination are also important.
 Processing logic is required in order to respond to information available across the
Internet.
 ERP / E-Business Matrix
No Value
E-Business Channel Chain Industry
Capabilities Enhancement Integration Transformation Convergence
Greenfield

Non-integrated
systems

Limited / Single-
Function ERP

Integrated Business-
Unit ERP
Integrated
Enterprise ERP
 ERP / E-Business Organizational Issues:
Domain & Level Matrix
No Value
E-Business Channel Chain Industry
Capabilities Enhancement Integration Partnership Convergence

2. Enterprise Growth Limited

Greenfield 1. Start-Up
(High Risk = Opportunity)

Non-integrated
systems
4. High Cost Relative to Benefit
Limited / Single-
Function ERP 3. Customer Benefit Limited
(Reduced E-Options
Integrated Business- and Flexibility)
5. Optimize Business at Unit Level
Unit ERP

Integrated 6. Optimize across Enterprise

Enterprise ERP
 E-Business Examples

CHANNEL ENHANCEMENT
- Point solutions such as selling over the Web, providing customer self-service and conducting Web-based
indirect procurement. (e-commerce)

VALUE CHAIN INTEGRATION (e.g. Adaptec)

- Integrate customers’ and suppliers’ operations with their processes and systems (e-CRM and e-SCM).

INDUSTRY TRANSFORMATION (e.g. Solectron and Ingram Micro)

- Boundaries between companies and their partners become less pronounced as they link internal systems
through the Web, creating new markets, new opportunities, new customers and new products and services.
There is an intense relationship between the partners to create an environment for shared business
improvements, mutual benefits and joint rewards.. (Collaborative Advantage)

CONVERGENCE (e.g. Shell, Mobil, BP, GM and GE)

- Coming together of companies from different industries to provide goods and services to consumers. This
is not solely a function of e-business technologies: it is equally a function of industry deregulation,
globalization of business, evolving customer demand and new competitive tactics. However, it is helped by
decreasing costs and rapid adoption of technology. (Industry Convergence)
 Summary: ERP Vendor Responses to E-Business Challenges

Dimensions ERP Apps E-Business Apps

Employees Customers Vendors

Focus Inside Company Out Outside Company In

Release Process Periodic, Complex Continuous, Small

Upgrade Changes
Method of Integrating Through APIs or EDI Browser, Portals, IT
with Other Businesses
Business Processes Complex Simple

User Interface User Training RequiredIntuitive

Traditional ERP versus E-Business Applications

ERP Vendor Responses to E-Business Challenges (cont’d)

Extend ERP Functionality

 SCM
 CRM
 APS
 BI
 Internet-based Procurement

Build communities of users through portals and trading exchanges

 Public versus private
 Horizontal versus vertical
 Direct versus indirect materials
ERP Vendor Responses to e-business challenges (cont’d)

Create new ERP delivery and pricing models

 Traditional pricing includes initial license fee for a specified number of
employees, with annual maintenance fees
 Introduction of Role-based pricing (part of SAP’s mySAP.com strategy in which
users access the system through role-specific Workplaces)
 Industry-specific, pre-configured solutions to offset high implementation costs
(e.g. SAP’s Accelerated Applications and Oracle’s FastForward RPM)
 Pre-configured, pre-installed and pre-integrated (e.g. partnership between IBM
and vendors like J D Edwards, MAPICS, QAD and SAP)
 Traditional outsourcing (either through ERP vendors or their partners)

 Application service provision

 Third-party service provider typically licenses the software from the ERP
vendor and resells the package to many buyers for fixed, per-month, per-user
fee. Users access the offsite system via Internet.
 Internet-based delivery of basic ERP system (e.g. Biztone)