Post on 22-Dec-2015
transcript
MIS Presentation 2012An Evaluation of ERP Systems Failures
Group: ERP Advisors
Objectives
What is an ERP system?
What are the Benefits of an ERP system?
Who are the ERP vendors?
What aspects constitute a successful
implementation?
What factors are associated with ERP failures
and how to overcome them?
What is an ERP systems? “They are systems designed to
process an organisation transactions
and facilitate integrated and real time planning,
production and customer response.”
ERP CharacteristicsERPs are packaged software designed for a client server environment.ERPs integrate the majority of a business processesERPs process a large majority of an organization’s transactionsERPs use an enterprise wide database that typically stores each piece
of data at once.ERPs allows access to the data in real time.
(O’leary, 2000)
Functional Aspects of an ERP
Source : http://www.inixion.com/images/features3.jpg
ERP life cycle
Deciding to Go ERP Choosing and ERP system Designing ERP systems
Should business process or
current ERP software be changedChoosing Standard Model and Process
Implementing ERP: Big Bang versus phased After Going Live Training (O’leary, 2000)
Tangible Benefits: Reduce Labour Costs Reduced material Costs Improve in Sales and Customer Service Efficient Financial Management
Why Implement an ERP system?
Source : ( Leon, 2008 and Cruz-Cunha 2010)
Intangible Benefits: Information supply chain visibility New/improved business processes Product and Process design Production and Material Management
Why Implement an ERP system?
Source: http://www.epicor.com/uk/Company/PressRoom/Pages/SuccessStories.aspx
What are ERP Vendors marketing: Improve alignment of strategies and operations Reduce costs through increased flexibility Achieve an end-to-end view across all your lines of business Drives value for your business Delivers agility in the face of rapid change
Cast StudiesDrallim – Fluid Controls / • Over 4,400 hours saved per year through process improvements and
21% cut in support costs Vita Liquid Polymers/ • 80% of customers now pay invoices a week earlier and automated
processes mean tighter processes and proactive credit checking
Who are the ERP vendors?
Who are the ERP vendors?Tier I Tier II Tier III
SAP Oracle
Oracle e Business Suite Oracle JD Edwards Oracle Peoplesoft Microsoft Dynamics
Epicor Sage Infor IFS
QADLawson
Ross
ABASActivant Solutions Inc.
BaanBowen and Groves
Compiere ExactNetsuite Visibility Blue
Cherry ExactHansaWorld Intuitive
SysproOpen Source ERP software
OpenERP, Compiere, Open Bravo, Apache OFBix/opentaps, ERP5, OpenMFG, OpenPro, etc
Source: Panorama Consulting, 2011 Guide To ERP Systems And Vendors
ERP Vendors Market Share 2010
<25M
25M-50M
50M-100
100M-500M
500M-1B
>1B
0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% 100.00%
22.20%
24.50%
32.10%
31.30%
33.30%
47.00%
23.00%
13.70%
16.70%
15.30%
31.30%
31.80%
16.30%
15.70%
11.50%
16.80%
4.20%
4.00%
11.80%
17.60%
16.70%
16.80%
16.70%
8.60%
26.60%
28.40%
23.10%
19.80%
14.60%
8.60%
SAP Oracle Microsoft DynamicsTier II Tier III
Source: Panorama Consulting, 2011 Guide To ERP Systems And Vendors
Payback Period By Vendor Tier up to 2010
No cost Recouped
1-2 years 2-4 years 4-7 years above 7 years
-20.00%
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
1.40%
25.30%
42.60%
13.80%5.50%
2.60%
30.30%
50.00%
6.50%
1.30%3.10%
59.40%
18.70%
8.30%
1.00%
Tier III
Tier II
Tier I
Source: Panorama Consulting, 2011 Guide To ERP Systems And Vendors
ROI and ROA
Performance comparison Pre- and post-adoption for 63 ERP Systems:
Pre
Post1
Post2
Post3
5.341
4.448
4.916
4.899
8.576
7.691
7.533
8.002
Source : (C. Jones, Kalmi and Kauhanen, 2011)
How to Measure ERP success? Lyytinen and Hirschheim (1987),
categorized IT project success by assessing the resulting system against Planned objectives, User expectations, Project budget
Highlights from a 2010 ERP Benchmark Over 40% of organizations are dealing with significant change form
ERP system rollout.
Over 60% of organizations suffer from poor visibility to data and poor
integration in their old systems.
Organizations expect a lot from their ERP systems.
Most companies are not yet ready for the organizational changes of
ERP software.
2009 Average 2010 AverageTake longer than expected 35% 61%Implementation Duration 18.4 Months 14.2 MonthsCosts exceeds budget 51.4% 74.1Benefit Realized Under 50% 48% 67%
Some People
might have
different views
ERP project failure classification
ERP project failure could be classified as one of four levels:
(a) Process failure, when the project is not completed within the time and budget.
(b) Expectation failure, when the IT systems do not match user expectations.
(c) Interaction failure, when users attitudes towards IT are negative.
(d) Correspondence failure, when there is no match between IT systems and the planned objectives.
(Aloin et al, 2007)
What factors are associated with ERP failures and how to overcome them?
Risk categories associated with enterprise-wide/ERP projects:
Organizational Fit Skill mix Management structure and strategy Software systems design User involvement and training Technology planning/integration
(Sumner, 2000 ; Ojala et al, 2006)
Risk category : Organizational FitRisk Factors Failure to redesign business processes to fit the software Failure to follow an enterprise-wide design which supports data
integration
Case Study Hershey Foods Corporation
Minimising Strategies Commitment to redesigning business processes Top management commitment Following an enterprise-wide design which supports data integration
(Wailgum, 2009)
(Sumner, 2000 ; Ojala et al, 2006)
(Sumner, 2000 ; Ojala et al, 2006)
Risk category : Skill Mix
Risk Factors Insufficient training and reskilling Insufficient internal expertise Lack of business analysts with business and technology knowledge Failure to mix internal and external expertise effectively
Case StudyLumber Liquidators
Minimising Strategies Effective use of strategies for recruiting and retaining specialized technical
personnel Obtaining ‘business analysts’ with knowledge of application-specific modules Effective use of external consultants on project teams
(Kanaracus,2010)
(Sumner, 2000 ; Ojala et al, 2006)
(Sumner, 2000 ; Ojala et al, 2006)
Risk category :Management structure and strategy
Risk Factors Lack of senior management support Lack of proper management control structure Lack of a champion Ineffective communications
Case Study The City of San Diego
Minimising Strategies Obtaining top management support
Establishing a centralized project management structure
Assigning a ‘champion’
(Krigsman, 2009)
(Sumner, 2000 ; Ojala et al, 2006)
(Sumner, 2000 ; Ojala et al, 2006)
Risk category : Software systems designRisk Factors Failure to adhere to standardized specifications which the
software supports Lack of integration
Case Study Levi Strauss
Minimising Strategies Commitment to using project management
methodology and ‘best practices’ specified by vendor Adherence with software specifications
(Clarke, 2008)
(Sumner, 2000 ; Ojala et al, 2006)
(Sumner, 2000 ; Ojala et al, 2006)
Risk category : User involvement and training
Risk Factors Insufficient training of end-users Ineffective communications Lack of sensitivity to user resistance Failure to emphasize reporting
Case Study Dorset County
Minimising Strategies Effective user training Full-time commitment of users to project management roles Effective communications
(Anonymous, 2010)
(Sumner, 2000 ; Ojala et al, 2006)
(Sumner, 2000 ; Ojala et al, 2006)
Risk categories : Technology planning/integration
Risk Factors Inability to avoid technological bottlenecks Attempting to build bridges to legacy applications
Case Study Dillard's Inc
Minimising Strategies Acquiring technical expertise Acquiring vendor support for capacity planning and upgrading Planning for client–server implementation including client workstations
(Jarzemsky, 2010)
(Sumner, 2000 ; Ojala et al, 2006)
(Sumner, 2000 ; Ojala et al, 2006)
Other Aspects:
In 2004, HP's project managers were
aware of the risks associated with the
ERP rollout. But they could not plan for so many events to happen at once.
The project eventually cost HP $160 million in order backlogs and revenue loss that accumulated to five times the project's estimated cost.
(Gilles Bouchard CIO of HP's global operations)
(Wailgum, 2009)
Strategic critical success factors
Top management commitment and support Visioning and planning Build a business case Project champion Implementation strategy and timeframe Vanilla ERP Project management Change management Managing cultural change
(Finney and Corbett, 2007)
Tactical critical success factors
Balanced team Project team: the best and
brightest Communication plan Empowered decision makers Team morale and motivation Project cost planning and
management BPR and software configuration Legacy system consideration IT infrastructure Client consultation
Selection of ERP Consultant selection and
relationship Training and job redesign Troubleshooting/crises
management Data conversion and integrity System testing Post-implementation
evaluation
(Finney and Corbett, 2007)
Summary
ERP Systems are not an IT solution but a system that would
transform the company into a more efficient and effective
organization.
Successful implementation of ERP is complexly tied to multiple
factors that needs to be understood by management who are setting
the strategic direction of the implementation process. Furthermore,
A continuous support and monitoring of the implementation process
is required at each stage.
The most important issue in a successful ERP project is an
understanding of the company’s business and context requirements.
What's the future will be like?
Reference List:1. Lyytinen, K. (1988) "Expectation Failure Concept and Systems Analysts' View of Information System Failure: Results of an
Exploratory Study", Information & Management, 14, 1, pp 45-56.
2. Leon, A. (2008). Enterprise Resource Planning. 2nd ed. New Delhi: Tata McGraw-Hill. pp. 42
3. Cruz-Cunha, M. (2010). Enterprise Information Systems for Business Integration in SMEs. USA: Business Science Reference. pp. 155
4. Derek C. Jones, Panu Kalmi, Antti Kauhanen, International Journal of Production Economics, Volume 130, Issue 2, April 2011, Pages 159-168 )
5. Sumner, M. “Risk factors in enterprise-wide/ERP Projects,” Journal of Information Technology, 2000, vol. 15, pp. 317-327.
6. Wailgum,T. (2009) Focus: ‘10 Famous ERP Disasters, Dustups and Disappointments ‘. CIO [online] Available at: < http://www.cio.com/article/486284/10_Famous_ERP_Disasters_Dustups_and_Disappointments> [Accessed 25 Feb 2012].
7. Kanaracus, C. (2010) Focus: ‘ERP Woes Blamed for Lumber Company's Bad Quarter‘. IDG News [online] Available at: < http://www.pcworld.com/businesscenter/article/209886/erp_woes_blamed_for_lumber_companys_bad_quarter.html > [Accessed 25 Feb 2012].
8. Krigsman, M . (2009) Focus: ‘San Diego fires Axon over ERP implementation problems‘. Zdnet [online] Available at: < http://www.zdnet.com/blog/projectfailures/san-diego-fires-axon-over-erp-implementation-problems/1960 > [Accessed 25 Feb 2012].
9. Clarke, G.(2008) Focus: ‘Levi's suffers profit meltdown in midst of SAP embrace Pants ERP system leaves it without pants‘. Theregister[online] Available at: < http://www.theregister.co.uk/2008/07/10/levis_erp_costs/ > [Accessed 25 Feb 2012].
10. Anonymous. (2010) Focus: ‘Dorset County Council computer problems continue ‘. Dorsetecho [online] Available at: < http://www.dorsetecho.co.uk/news/localnews/8625142.Dorset_County_Council_computer_problems_continue/ > [Accessed 25 Feb 2012].
11. Jarzemsky, M. (2010) Focus: ‘JDA Software Hit With Judgment in Dillard's Dispute ‘. The wall street journal [online] Available at: < http://online.wsj.com/article/SB10001424052748704198004575310463149768320.html> [Accessed 25 Feb 2012].
12. Ojala,M. Vilpola,I. and Kouri,I.(2006) “ Risks in ERP Project – Case Study of IS/ICT Management Capability Maturity Level and Risk Assessment”
13. Aloin,Di. Dulmin,R.Mininno,V. (2007) Risk management in ERP project introduction: Review of the literature, Information & Management, Volume 44, Issue 6, September 2007, Pages 547-567
14. O'Leary,D. ( 2000) Enterprise Resource Planning Systems: Systems, Life Cycle, Electronic Commerce, and Risk, Cambridge University Press
15. Finney,S. and Corbett,M. (2007) "ERP implementation: a compilation and analysis of critical success factors", Business Process Management Journal, Vol. 13 Iss: 3, pp.329 - 347