ERP Implementation Effor Estimation

Estimating
Enterprise Resource Planning

SEPG 2006
David Seaver
PRICE Systems LLC
Technical Director
Information Technology Estimation Solutions
2
PRICE Systems LLC, 2005-2006, All Rights Reserved
Overview
1. Background Information and Definitions
2. The real Cost of ERP Deployment
3. Using True Planning to estimate ERP Costs
3
Process Overview
Step 1: Document purpose of the estimate
Step 2: Develop size estimate
Step 3: Document pertinent project parameters
Step 4: Develop estimate effort and schedule
Step 5: Review estimate with Stakeholders
4
Review of a Software Estimate - 1
What is the estimated size of the software?
What metric was used and what analogies exist to
support this number?
Is there reuse in this project and
How were the reuse percentages derived ?
Is the percent of design adapted >= percent of code
and test adapted?
If not, is there a rationale for this?
Where will the software be operating
Manned Space
Space
Airborne
Ground
What domain Commercial, Civilian Agency, DoD?
5
What is the functional complexity of the software?
How was this value derived?
What analogies exist to support this number?
What activities and resources are included in this
estimate?
If any were eliminated what was the rationale?
Do any need to be added, if so what is the rationale?
Were activity or resource requirement multipliers used for
this estimate?
If yes, what was the rationale?
What labor rates were used for the estimate?
6
What value for Organizational Productivity was used?
How was it derived?
How does it compare to the organizations historical
data?
How was historical data collected, normalized and
used for this estimate?
Is it within the ranges expected from prior efforts?
If not is there a reasonable explanation?
Are there truly project constraints and will these
constraints push the state of the art beyond typical
capability of hardware and software?
Are there schedule constraints?
If so, what is the impact to cost?
7
How the integration activity was assessed for
COTS/GOTS items.
Is there an analog to support these assumptions?
What assumptions have been made regarding:
Development teams experience
Tools
Product familiarity
Other complicating factors?
How was the integration complexity quantified?
What assumptions were made about the integration
teams experience and the difficulty of the task?
8
Enterprise Resource Planning Defined
Enterprise Resource Planning (ERP) is a
business management system that integrates the
operational components of an organization.
ERP provides wider access to more accurate
information while enabling organizations to
standardize and improve its business processes.
It is important to note that ERP is more than a
software package. ERP enables business process
re-engineering, focuses on industry common best
practices, and facilitates process improvements.
9
What is ERP
ERP is a Commercially available business software
solution that ...
Provides consistent & timely information for decision making &
performance measurement
Automates & integrates business processes
Produces & accesses data in a near real-time environment
Shares common data & processes across the enterprise
Examples of ERP
SAP the market leader
Oracle
Peoplesoft (J ust purchased by Oracle)
J DEdwards (Part of Oracle)
Sieble CRM (Purchase recently initiated)
SSA BAAN (Manufacturing)
10
Benefits of ERP
Improved data accuracy
Automation & integration of an organizations business
processes
Sharing of common data and practices across the enterprise
Increased visibility of information in a real-time environment
Improved insight into total costs of operations, leading to
improved decision making
Quicker adjustment of personnel to changes of duty through
use of common processes and tools
11
ERP Issues and Risks
(US Navy Example)
An important aspect of implementing an ERP solution for an
organization as large and diverse as the Department of Navy
is determining how legacy systems and new commercial
off-the-shelf (COTS) systems will pass data.
It is safe to assume that no single COTS package can
handle all of the functionality required by the DON, and
there is the additional challenge of interfacing with mandated
Department of Defense (DOD) systems.
Therefore, any solution must be designed to interface
with custom software as well as the many COTS
solutions required to build an enterprise solution for the
Department of the Navy.
12
Programs/Sites
P
r
o
c
e
s
s
e
s
Material Material
Financial Management Financial Management
Budget Budget
Asset Management Asset Management
Planning Planning
Procurement Procurement
Property Property
Human Resources Human Resources
Results:
Software that is set up to
meet your specific business
needs
Standard Processes and
tools across the enterprise
for all programs/products
Common data, real time
integrated across the
processes
Software that is supported
commercially and
constantly improving
Hundreds of Best
Commercial Practices
Thousands of Software
Engineers support
Benefits:
Improved decision making
Efficient processes
Enables management of the enterprise
6
The Promise of ERP
13
Definition Bolt On
Bolt On: Another application designed to
work seamlessly with the ERP Systems.
Two types-ready made bolt-ons (ready to go)
To be developed using ERP API
14
Definition RICEF
RICEF
Reports
Interfaces
Conversions
Extensions/Enhancements
Forms
Workflow
Data Warehouse (Reports & Objects)
Enhancements to existing ERP functionality
1. Configuring ERP for organizations language
2. Augmenting functionality
3. Can include custom development (not recommended)
15
The Real Costs of ERP Deployment
The Problem
Solution Methodology
Implementation and Customization Activities for ERP
Systems
Deployment and Maintenance Activities for ERP
Systems
Conclusions
16
The Problem
ERP Systems are plug and play just another
instance of Commercial Off the Shelf Software
(COTS) Must be low cost to deploy and maintain
right?
ERP Systems provide infrastructure and lots of
possibilities but for a successful implementation
you need
Decisions
Customization
Interfaces
All of these things take time and money what
are the things we need to consider when planning
for an ERP implementation?
17
Solution Methodology
Our standard cost research approach
1. Understand and bound the problem
2. Understand the process of deploying ERP Systems
and identify the activities associated with this
process
3. Identify the factors that drive costs for these
activities
4. Construct a mathematical model to determine cost
from these cost drivers
5. Test the mathematical model against actual data
and refine the model
18
1. Understand and Bound the Problem
Cost and Management Challenges when Fielding and
ERP System
1. Expensive
2. Deciding between changing business processes to
conform to new software or modification of software
to match present business processes (dont go over
20%)
3. Getting buy in to new business processes (Change
Management)
4. Training employees
19
2. Activities associated with deploying ERP
For a successful ERP Deployment
1. System Requirements
and Design
2. Identify, evaluate and
select ERP
Components
3. Purchase / Lease /
License the ERP
components
4. Tailor ERP Components
- RICEF
6. Identify and Interface
with Bolt-ons
7. Customization
8. Integration and Test
9. Deployment
10.Maintenance
3. Identify the factors that drive
costs for these activities
21
System Requirements and Design
Determine the scope of ERP Implementation
what functions will the system perform
Examine needs to end-users and stakeholders
to determine what types and extent of capability
required to meet need
Determine what requirements can be met with
ERP components and RICEFs can
accommodate
How much functionality is required?
What kind of functionality is required?
Target environment
Other project constraints
Called Blue Printing by ERP Community
22
RICEF Reports
Simple: Less than 5 standard SAP tables. As
many as 1 external file. Straightforward data
retrieval.
Medium: Between 5-9 standard SAP tables. As
many as 3 external files. Some cross-checking.
Logic: Multiple-level drill down capability.
Moderate calculation, sorting. Some
customization (i.e., company-wide). Field
translations required.
Complex 10 or more standard SAP tables. 3 to 4
external files. Data from multiple functional areas.
23
RICEF Interface
Simple:
1 external file. Fewer than 3 different record types.
Logic: No translations of codes. Batch. Data read from
less than 5 tables
Medium:
2 to 4 external files. 3 to 5 more difficult record types.
Logic: Batch. Moderate translations of codes. Data
read from 5 to 9 tables.
Complex:
5 or more external files. 6 or more different record
types.
Logic: heavy translations. Near real-time or real-time.
Triggering via user exits. Data read from 10 or more
tables.
24
RICEF Conversions
Simple: Data is pre-extracted and formatted. Up to
2 input files/record types. Logic: Use of standard
SAP load programs (BDC, LSMW). Loading basic
master data. Single load program. Assume zero,
until identified.
Medium: Data is pre-extracted and formatted. Up
to 2 input files/record types. Logic: Use of
standard SAP load programs (BDC, LSMW).
Loading basic master data. Single load program.
Assume zero, until identified.
Significant reformatting is required. 5 or more
input files/record types. Logic: Moderate ABAP
(moderate validation). Loading lowest level master
data. Single load program.
25
RICEF Extensions
Simple: Manipulation of 1 standard SAP table.
Logic: Does not require user exits. Initial and
detail screen. Menu extensions. No database
updates. One version suits all requirements.
Non-SAP
Medium: Manipulation of 2 standard SAP tables.
Logic: User exits to capture data only. Initial and
detail screen. Function exit. Update database.
Some customization (i.e., company-wide).
Complex: Manipulation of 3 or more standard
SAP tables. Logic: User exits with substitution
logic. Step-loop to maintain header and detail.
Initial screen with sub-screens. Dynapro
extension. Some customization (i.e., plant-wide).
26
RICEF Form
Simple: SAP standard forms (i.e., invoice, quotation, etc.).
No custom database access is required. Logic: Minor
modification to the SAP standard forms. Printing of forms
is configured into SAP, no custom ABAP programming
required.
Medium: Non-SAP standard forms (i.e., new invoice form).
Accesses one logical database. Logic: Creating a form
from scratch, and printing it on pre-printed paper. No
need to create cosmetics such as grids or boxes. Printing
of forms may require custom work.
Complex: Non-SAP standard forms (i.e., new invoice
form). Accesses two or more logical databases. Logic:
Creating a form from scratch, but printing it on plain
paper. Will need to create cosmetics such as grids or
boxes. Printing of forms may require custom work.
27
Definitions Workflow
The defined series of tasks within an organization
to produce a final outcome.
Sophisticated workgroup computing applications
allow you to define different workflows for
different types of jobs.
For example, in a publishing setting, a
document might be automatically routed from
writer to editor to proofreader to production. At
each stage in the workflow, one individual or
group is responsible for a specific task. Once the
task is complete, the workflow software ensures
that the individuals responsible for the next task
are notified and receive the data they need to
execute their stage of the process.
28
Definitions Data Warehouse
A collection of data designed to support
management decision making. Data warehouses
contain a wide variety of data that present a
coherent picture of business conditions at a
single point in time.
Development of a data warehouse includes
development of systems to extract data from
operating systems plus installation of a
warehouse database system that provides
managers flexible access to the data.
The term data warehousing generally refers to
the combination of many different databases
across an entire enterprise.
29
Identify, Evaluate, and Select
Identify solutions that satisfy requirements
Techniques for evaluation include:
Progressive filtering
Puzzle approach
Keystone components
Cost drivers are:
Amount of functionality being implemented?
How many different ERP vendors are being
evaluated
How much bolt-on capability requires evaluation?
Type(s) of evaluation taking place
Number and criticality of evaluation criteria
30
Purchase / Lease / License
Negotiation
Contract Resolutions
Cost Drivers
Size of organization
Number of licenses required
Procurement processes
Terms of contract
Negotiated purchase price
31
Tailoring ERP Components
Tailor ERP functions to your needs
Reports
Interfaces
Conversions
Enhancements
Forms
Cost drivers are:
Amount of functionality
Types of functionality
Complexity to learn and use ERP System
Quality of user documentation, vendor support and
training
Experience of personnel with ERP System
Implementations and this particular ERP System
32
Identify and Interface with Bolt-Ons
Bolt-Ons are external software packages that
supplement capability not delivered as part of the
ERP system
Links to Project management systems (Artemis)
Links to ADP payroll
Links to Business Objects reporting application
Bolt-Ons must be identified and interfaces must
be developed to integrate them into the system
33
Identify and Interface with Bolt-Ons
Cost Drivers
Number of Bolt-Ons being integrated
Amount of functionality delivered by Bolt-Ons
Types of functionality delivered by Bolt-Ons
Experience of team with ERP implementations
and integrations
Quality of user documentation, vendor support
and training.
34
Customization
Custom code needs to be developed when
Required functionality not available in ERP
System or through Plug Ins
Legacy code required adaptation to interface with
ERP System
Cost drivers for customization are the same as
for any software development with adjustments
for
Quality of documentation, training and support
Experience of integration team with ERP System
Maturity and stability of the ERP System
Vendor cooperation
35
Integration & Test
Before deployment, need to ensure that ERP
System satisfies requirements and operates with
out failures
Requirements relating to performance, reliability
and security could be problematic
Cost drivers are:
Total functionality being integrated
Quality, performance and reliability requirements
Integration team productivity
Integration difficulty
Number of components and bolt-ons
36
Deployment
Deployment includes:
Pilot programs
Installation throughout the organization
Training
Support
Change management
Cost Drivers
Number of geographical locations
Experience of deployment team
Vendor involvement and cooperation
Number and complexity of new business processes
37
Maintenance and Support
Deployment of vendor upgrades
Bug fixes for customized code and interfaces
Field support
Cost Drivers
Number of sites
Size of total functionality delivered
Amount of functionality that is custom built
Number of interfaces
Integration Complexity
38
Summary
ERP Systems are designed to save organizations
time and money when fielding complex systems
to achieve organizational effectiveness
Care should be taken to:
Select ERP Solutions that maximize satisfaction of
end user and stakeholder needs
Understand all of the activities and the respective
cost implications
Look at the long term and short term cost
implications
39
True Program Success
Our mission
is to ensure that no
Program is
deterred from their
mission due to
failures
in Program
Affordability
Management
David P. Seaver
Technical Director
PRICE Systems LLC
david.seaver@pricesystems.com
www.pricesystems.com

ERP Implementation Effor Estimation

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Enterprise Resource Planning

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