CRITICAL

ISSUES AFFECTING AN
ERP IMPLEMENTATION
Implementing an ERP causes massive change that needs to be carefully
managedtoreapthebenefitsofanERPsolution.Criticalissuesthatmustbe
carefully considered to ensure successful implementation include
commitment from top management, reengineering of the existing
processes,integrationoftheERPwith otherbusinessinformationsystems,
selection and management of consultants and employees, and training of
employeesonthenewsystem.

Authiors:PrasadBingi;ManeeshK.SharmaandJayanthK.Godla

Prasad Bingi works in the Department of Management and Marketing at

Indiana University Purdue University, Fort Wayne
Maneesh K. Sharma works in the Department of Accounting and Finance
at Indiana University Purdue University
Jayantha K. Godla works at PricewaterhouseCoopers LLP in Bloomfield
Hills, MI.

THE ENTERPRISE RESOURCE planning (ERP) software market is one of the fastest growing
marketsinthesoftwareindustry.Ithasseenarockystartwithseveralprojectfailuresanda
hugeshortageofskilledandexperiencedworkers.TheERPmarketispredictedtogrowfroma
current $15 billion to a gigantic $50 billion in the next five years. The estimated longterm
growthratesforERPsolutionsareastratospheric36percentto40percent.Someestimates
puttheeventualsizeofthismarketat$1trillion.RecentlymajorERPvendorssuchasSAPAG,
Baan,andOraclehavereportedsignificantfinancialresults.Contributingtothisphenomenal
growthistheestimationthat70percentoftheFortune1000firmshaveorwillsooninstallERP
systemsandtheinitiativesbyERPvendorstomoveintomediumtosmalltierindustrieswith
gross revenues less than $250 million. ERP vendors are aggressively cutting deals with these
industriestomaketheirproductsmoreaffordable.Forexample,SAP,oneoftheleadingERP
vendors,recentlystartedsellingitsproductstocustomersinthe$150millionto$400million
revenuerange.
Companies could spend hundreds of millions of dollars and many years implementing ERP
solutionsintheirorganizations.OnceanERPsystemisimplemented,goingbackisextremely
difficult;itistooexpensivetoundothechangesERPbringsintoacompany.Thereareseveral
failed ERP attempts, and companies lost not only the capital invested in ERP packages and
millions paid to outside consultants, but also a major portion of their business. Recently
UnisourceWorldwide,Inc.,a$7billiondistributorofpaperproducts,wroteoff$168millionin
costs related to an abandoned nationwide implementation of SAP software.(n12) FoxMeyer
Drug,aformer$5billiondrugdistributor,wentbankruptin1996andhasfileda$500million

lawsuitagainstSAP.FoxMeyerchargedtheERPgiantthatitspackagewasa"significantfactor"
thatledthefirmintofinancialruin.(n14)DellComputerCorp.hasrecentlyabandonedamuch
publicized SAP implementation following months of delay and cost overruns. Dow Chemical,
afterspendinghalfabilliondollarsoversevenyearsofimplementingSAPR/2,themainframe
version, now has decided to start all over again on the new client/server version (R/3).
ImplementinganERPsystemisacarefulexerciseinstrategicthinking,precisionplanning,and
negotiations with departments and divisions. It is important for companies to be aware of
certain critical issues before implementing any ERP package. Careful consideration of these
factorswillensureasmoothrolloutandrealizationoffullbenefitsoftheERPsolution.

ERP SOLUTIONS
An ERP system can be thought of as a companywide information system that integrates all
aspectsofabusiness.Itpromisesonedatabase,oneapplication,andaunifiedinterfaceacross
the entire enterprise. An entire company under one application roof means everything from
human resources, accounting, sales, manufacturing, distribution, and supplychain
managementaretightlyintegrated.Thisintegrationbenefitscompaniesinmanyways:quick
reaction to competitive pressures and market opportunities, more flexible product
configurations, reduced inventory, and tightened supplychain links. The Earthgrains Co.
implementedSAPR/3andreportsthatitsoperatingmarginsimprovedfrom2.4to3.9percent
and pushed its ontime product delivery rate to 99 percent in 1997.(n13) The company also
reportsbettermanagementinformationandhappiercustomers.Similarly,atParIndustriesin
Moline, IL, an ERP system allowed management to base production on current customer
orders rather than forecasts of future orders. The delivery performance improved from 60
percentontimetomorethan95percent,leadtimestocustomersreducedfromsixweeksto
two weeks, repair parts reduced from two weeks to two days, workinprocess inventory
dropped almost 60 percent, and the life of a shop order dropped from weeks to mere
hours,(n1) IBM Storage Systems division, after implementing an ERP system, was able to
repriceallofitsproductsinfiveminutescomparedwithfivedayspriortotheimplementation.
Italsoreducedthetimetoshipareplacementpartfrom22daystothreedays,andthetimeto
performacreditcheckfrom20minutestothreeseconds.(n2)
ThefirsttierplayersintheERPmarketareSAP,Baan,Oracle,andPeopleSoft,whilethesecond
tier players are vendors such as J.D. Edwards, Lawson, and QAD. SAP, a German company,
holds about onethird of the market share and is the leading vendor of ERP products. SAP's
ERPproductisR/3andthecurrentcommercialversionisrelease4.0b.Worldwidethereare
more than 16,500 SAP R/3 installations. The product has a strong international appeal with
capabilities to support multiple currencies, automatic handling of countryspecific
import/export,tax,andlegalandlanguageneeds.ThecompletesuiteofSAPR/3applications
is available in 24 languages, including Japanese (Kanji) and other doublebyte character
languages.
ThecurrentERPsystemshaveanopenclient/serverarchitectureandarerealtimeinnature,
i.e., clients can process information remotely and the results of a new "input" will "ripple"
throughthewhole"supplychain"process.Theappealofsuchsystemsforbusinessesisthatall
employees of a company will have access to the same information almost instantaneously

throughoneunifieduserinterface.ERPsystemssuchasSAP/R3includenotjustthefunctional
modules that "crunch" the numbers but also the most advanced technologies and
methodologies.Implementingsuchasystemresultsinbenefitsfromthe"integrated"natureof
the system as well as from the "reengineering" of the business practices and the entire
"culture"ofthebusiness,allatthesametime.
ThepopularityofERPprogramscanbeattributedtoanincreasingtrendtowardsglobalization,
mergers and acquisitions, short product life cycles, and the fear of looming disasters from
aging legacy systems that cannot handle dates beyond the end of this century (commonly
know as Year 2000 problem). To be successful, a global enterprise must have accurate real
time information to control and coordinate the farflung resources. ERP systems have the
capabilitytointegratefarflungoutpostsofacompanyalongwiththesupplychainactivities.
Thisintegrationallowssharingofinformationinastandardformatacrossmanydepartments
inthehomecountryaswellasacrossthenationalbordersregardlessoflanguageandcurrency
differences. In this era of global competition and uncertain markets, companies are merging
forcompetitiveadvantage.IntheUnitedStates,thepastcoupleofyearshaveseenabout$1
trillion in mergers annually, many of which involved overseas firms. These newly formed
corporationsoftenhaveverylittleincommonotherthanacorporatelogo.Toachievesynergy
across national boundaries and product lines, these businesses must implement a set of
standard business applications and consistent data definitions across all business units. ERP
packages are extremely useful in integrating a global company and provide a "common
language" throughout the company. Digital Equipment Corp. is implementing PeopleSoft's
humanresourcessystemacrossits44locationsworldwide.Digitalisnotonlyimplementinga
standardized human resources application but is also moving to a common architecture and
infrastructure. For many companies, a global software rollout is a good time to do some
serioushousecleaningandconsolidationoftheirITinfrastructurearoundtheworld.Digitalis
expecting a return on investment of 27 percent from this global rollout.(n5) If the merging
companies have already implemented the same ERP solution, then they will save a
tremendousamountincostandtimewhenintegratingtheirsystems.Recently,DaimlerBenz
AG and Chrysler Corp. merged to form Daimler Chrysler AG. The new company could dodge
five to ten years of integration work because the companies use the same computeraided
designsystemsandSAPfinancialapplications.(n15)
Companies are also finding that the ERP solutions help them get rid of their legacy systems,
mostofwhicharenotYear2000compliant.Sometimesitcostslessforcompaniestoreplace
their dinosaur systems than fix them. AlliedSignal Turbocharging Systems, a Californiabased
turbocharger manufacturer, had more than 120 legacy systems, and the average age of the
company'slegacysystemswas18years.Inadditiontotheselegacysystems,thecompanyhad
several homegrown applications that had little or no source code documentation. These
systems were so disparate and inefficient that running them not only drove IT costs up but
alsoincreasedthetimetofillcustomerorders.AlliedSignalisimplementingSAPR/3toreplace
its 120 legacy systems in 15 of the company's 17 facilities worldwide. Company officials
estimateafullpaybackonthe$25millionprojectinalittlemorethantwoyears.Ithasalready
startedseeingthebenefitsoftheERPimplementationinthefirstsitesthatwentlivewiththe
new system. It is able to reduce the order fulfillment process to lust a day from its previous
weeklyprocedure.(n8)

CRITICAL IMPLEMENTATION CONCERNS

Eveninasinglesite,implementingERPmeans"EarlyRetirementProbably."AnERPpackageis
so complex and vast that it takes several years and millions of dollars to roll it out. It also
requiresmanyfarflungoutpostsofacompanytofollowexactlythesamebusinessprocesses.
Infact,implementinganyintegratedERPsolutionisnotasmuchatechnologicalexercisebut
an "organizational revolution." Extensive preparation before implementation is the key to
success.Implementationscarriedoutwithoutpatienceandcarefulplanningwillturnouttobe
corporate root canals, not competitive advantage. Several issues must be addressed when
dealingwithavastERPsystem,andthefollowingsectionsdiscusseachofthemindetail.

Top Management Commitment

The IT literature has clearly demonstrated that for IT projects to succeed top management
supportiscritical.(n4)ThisalsoappliestoERPimplementations.ImplementinganERPsystem
is not a matter of changing software systems, rather it is a matter of repositioning the
company and transforming the business practices. Due to enormous impact on the
competitive advantage of the company, top management must consider the strategic
implications of implementing an ERP solution.(n2) Management must ask several questions
beforeembarkingontheproject.DoestheERPsystemstrengthenthecompany'scompetitive
position? How might it erode the company's competitive position? How does ERP affect the
organizationalstructureandtheculture?WhatisthescopeoftheERPimplementationonly
a few functional units or the entire organization? Are there any alternatives that meet the
company's needs better than an ERP system? If it is a multinational corporation, the
management should be concerned about whether it would be better to roll the system out
globallyorrestrictittocertainregionalunits?Managementmustbeinvolvedineverystepof
the ERP implementation. Some companies make the grave mistake of handing over the
responsibilityofERPimplementationtothetechnologydepartment.Thiswouldrisktheentire
company'ssurvivalbecauseoftheERPsystem'sprofoundbusinessimplications.
It is often said that ERP implementation is about people, not processes or technology. An
organizationgoesthroughamajortransformation,andthemanagementofthischangemust
becarefullyplanned(fromastrategicviewpoint)andmeticulouslyimplemented.Manyparts
of the business that used to work in silos now have to be tightly integrated for ERP to work
effectively.Cuttingcornersinplanningandimplementationisdetrimentaltoacompany.The
top management must not only fund the project but also take an active role in leading the
change. A review of successful ERP implementations has shown that the key to a smooth
rolloutistheeffectivechangemanagementfromtop.Interventionfrommanagementisoften
necessary to resolve conflicts and bring everybody to the same thinking, and to build
cooperation among the diverse groups in the organization, often times across the national
borders. Top management needs to constantly monitor the progress of the project and
provide direction to the implementation teams. The success of a major project like an ERP
implementationcompletelyhingesonthestrong,sustainedcommitmentoftopmanagement.
Thiscommitmentwhenpercolateddownthroughtheorganizationallevelsresultsinanoverall
organizational commitment. An overall organizational commitment that is very visible, well
defined,andfeltisasurewaytoensureasuccessfulimplementation.

Reengineering
Implementing an ERP system involves reengineering the existing business processes to the
best business process standard. ERP systems are built on best practices that are followed in
theindustry.OnemajorbenefitofERPcomesfromreengineeringthecompany'sexistingway
ofdoingbusiness.Allthe processesin acompany must conformtothe ERPmodel. The cost
and benefits of aligning with an ERP model could be very high. This is especially true if the
companyplanstorolloutthesystemworldwide.Itisnotveryeasytogeteveryonetoagreeto
the same process. Sometimes business processes are so unique that they need to be
preserved, and appropriate steps need to be taken to customize those business processes.
HydroAgriNorthAmerica,Inc.implementedSAPR/3in1994,andsincethenthecompanyis
fighting against the integration SAP provides because some of the company's processes are
veryunique.TryingtofittheSAPmoldresultedinalotofpainandfewerbenefits.NowHydro
Agri will either build a different frontend application or use a different package whenever
their processes clash with that of the SAP.(n7) The companies also face a question as to
whethertoimplementtheERPsoftware"asis"andadopttheERPsystem'sbuiltinprocedure
orcustomizetheproduct tothespecificneedsofthecompany. Researchshowsthat evena
bestapplicationpackagecanmeetonly70percentoftheorganizationalneeds.Whathappens
to the rest? An organization has to change its processes to conform to the ERP package,
customizethesoftwaretosuititsneeds,ornotbeconcernedaboutmeetingthebalance30
percent.Ifthepackagecannotadapttotheorganization,thenorganizationhastoadapttothe
packageandchangeitsprocedures.Whenanorganizationcustomizesthesoftwaretosuitits
needs, the total cost of implementation rises. The more the customization, the greater the
implementation costs. Companies should keep their systems "as is" as much as possible to
reducethecostsofcustomizationandfuturemaintenanceandupgradeexpenses.

Integration
ThereisastrongtrendtowardasingleERPsolutionforanentirecompany.Mostcompanies
feelthathavingasinglevendormeansa"commonview"necessarytoservetheircustomers
efficiently and the ease of maintaining the system in future. Unfortunately, no single
applicationcandoeverythingacompanyneeds.Companiesmayhavetouseotherspecialized
software products that best meet their unique needs. These products have to be integrated
along with all the homegrown systems with the ERP suite. In this case, ERP serves as a
backbone, and all the different software are bolted on to the ERP software. There are
thirdpartysoftware,calledmiddleware,whichcanbeusedtointegratesoftwareapplications
fromseveralvendorstotheERPbackbone.Unfortunately,middlewareisnotavailableforall
the different software products that are available in the market. Middleware vendors
concentrate only on the most popular packaged applications and tend to focus on the
technicalaspectsofapplicationinteroperabilityratherthanlinkingbusinessprocesses.Many
times, organizations have to develop their own interfaces for commercial software
applicationsandthehomegrownapplications.Integrationsoftwarealsoposesotherkindsof
problems when it comes to maintenance. It is a nightmare for IS personnel to manage this
softwarewhenevertherearechangesandupgradestoeitherERPsoftwareorothersoftware
thatisintegratedwiththeERPsystem.Foreverychange,theITdepartmentwillbeconcerned

about which link is going to fail this time. Integration problems would be severe if the
middlewarelinkstheERPpackageofacompanytoitsvendorcompaniesinthesupplychain.
Maintaining the integration patchwork requires an inordinate and ongoing expenditure of
resources.Organizationsspendupto50percentoftheirITbudgetsonapplicationintegration?
Itisalsoestimatedthattheintegrationmarket(productsandservices)equalsthesizeofthe
entireERpmarket.(n3)Whencompanieschooseboltonsystems,itisadvisabletocontactthe
ERP vendor for a list of certified thirdparty vendors. Each year, all the major ERP vendors
publish a list of certified thirdparty vendors. There are several advantages to choosing this
option,includingcontinuousmaintenanceandupgradesupport.
OneofthemajorbenefitsofERPsolutionsistheintegrationtheybringintoanorganization.
Organizations need to understand the nature of integration and how it affects the entire
business.Beforeintegration,thefunctionaldepartmentsusedworkinsilosandwereslowto
experiencetheconsequencesofthemistakesotherdepartmentscommitted.Theinformation
flowwasratherslow,andthedepartmentsthatmadethemistakeshadampletimetocorrect
them before the errors started affecting the other departments. However, with tight
integrationtherippleeffectofmistakesmadeinonepartofthebusinessunitpassontothe
otherdepartmentsinrealtime.Also,theoriginalmistakesgetmagnifiedastheyflowthrough
thevaluechainofthecompany.Forexample,theerrorsthattheproductiondepartmentofa
company made in its bill of materials could affect not only the operations in the production
department but also the inventory department, accounting department, and others. The
impact of these errors could be detrimental to a company. For example, price errors on
purchaseorderscouldmisleadfinancialanalystsby givingadistortedviewof howmuch the
company is spending on materials. Companies must be aware of the potential risks of the
errorsandtakepropersteps,suchasmonitoringthetransactionsandtakingimmediatesteps
to rectify the problems should they occur. They must also have a formal plan of action
describingthestepstobetakenifanerrorisdetected.Apropermeanstocommunicatetoall
the parties who are victims of the errors as soon as the errors are detected is extremely
important. Consider the recent example of a manufacturing company that implemented an
ERP package. It suddenly started experiencing a shortage of manufacturing materials.
Production workers noticed that it was due to incorrect bills of materials, and they made
necessary adjustments because they knew the correct number of parts needed to
manufacturer.However,thecompanydidnothaveanyprocedurestonotifyothersincaseany
errorswerefoundinthedata.Thedominoeffectoftheerrorsstartedaffectingotherareasof
business.Inventorymanagersthoughtthecompanyhadmorematerialthanwhatwasonthe
shelves,andmaterialshortagesoccurred.Nowthecompanyhasmandatorytrainingclassesto
educateemployeesabouthowtransactionsflowthroughthesystemandhowerrorsaffectthe
activitiesinavaluechain.Ittookalmosteightweekstocleanuptheincorrectbillsofmaterials
inthedatabase.
Companies implementing electronic supply chains face different kinds of problems with
integration of information across the supplychain companies. The major challenge is the
impactautomationhasonthebusinessprocess.Automationchangesthewaycompaniesdeal
withoneanother,fromplanningtopurchasingtopaying.Sharingandcontrolofinformation
seem to be major concerns. Companies are concerned about how much information they
need to share with their customers and suppliers and how to control the information.

Suppliersdonotwanttheircompetitorstoseetheirpricesorordervolumes.Thegeneralfear
isthatsharingtoomuchinformationhurtstheirbusiness.Regardingcontrollinginformation,
companiesareawarethatitisdifficulttocontrolwhattheyownletalonecontrolwhattheydo
notown.Companiesneedtotrusttheirpartnersandmustcoordinatewitheachotherinthe
chain. The whole chain suffers if one link is slow to provide information or access. The
management also must be concerned about the stress an automated supply chain brings
within each organization. For instance, a sales department may be unhappy that electronic
ordering has cut it out of the loop, while manufacturing may have to adjust to getting one
week'snoticetoorderchangesandaccommodatethosechangesintoitsproductionorders.

ERP Consultants
Because the ERP market has grown so big so fast, there has been a shortage of competent
consultants.Theskillshortageissodeepthatitcannotbefilledimmediately.Findingtheright
people and keeping them through the implementation is a major challenge. ERP
implementationdemandsmultipleskillsfunctional,technical,andinterpersonalskills.Again,
consultants with specific industry knowledge are fewer in number. There are not many
consultants with all the required skills. Since the ERP market in the United States started
approximately five years ago (and is growing at an astronomical rate), there are not many
consultantswiththreeormoreyearsofexperience.Thishassentthecompensationforskilled
SAP consultants through the roof. One year's experience brings in $70,000 to $80,000
annually.Threetofiveyears'experiencecouldcommandupto$200,000annually.Onemight
find a consultant with a stellar reputation in some areas, but he may lack expertise in the
specific area a company is looking for. Hiring a consultant is just the tip of the iceberg.
Managingaconsultingfirmanditsemployeesisevenmorechallenging.Thesuccessorfailure
oftheprojectdependsonhowwellyoumeetthischallenge.(n10)

Implementation Time
ERP systems come in modular fashion and do not have to be implemented entirely at once.
Severalcompaniesfollowaphaseinapproachinwhichonemoduleisimplementedatatime.
For example, SAP R/3 is composed of several "complete" modules that could be chosen and
implemented, depending on an organization's needs. Some of the most commonly installed
modules are sales and distribution (SD), materials management (MM), production and
planning,(PP),andfinanceandcontrolling(FI)modules.
Theaveragelengthoftimefora"typical"implementationisabout14monthsandcantakeas
much as 150 consultants. Corning, Inc. plans to roll out ERP in ten of its diversified
manufacturingdivisions,anditexpectstherollouttolastfivetoeightyears.(n11)Thelengthof
implementationisaffectedtoagreat extentbythenumberof modulesbeingimplemented,
thescopeoftheimplementation(differentfunctionalunitsoracrossmultipleunitsspreadout
globally), the extent of customization, and the number of interfaces with other applications.
The more the number of units, the longer implementation. Also, as the scope of
implementation grows from a single business unit to multiple units spread out globally, the
duration of implementation increases. A global implementation team has to be formed to

preparecommonrequirementsthatdonotviolatetheindividualunit'sspecificrequirements.
Thisinvolvesextensivetravelandincreasesthelengthofimplementation.
TheproblemwithERPpackagesisthattheyareverygeneralandneedtobeconfiguredtoa
specific type of business. This customization takes a long time, depending on the specific
requirements of the business. For example, SAP is so complex and general that there are
nearly8000switchesthatneedtobesetproperlytomakeithandlethebusinessprocessesin
a way a company needs. The extent of customization determines the length of the
implementation. The more customization needed, the longer it will take to roll the software
outandthemoreitwillcosttokeepituptodate.Thelengthoftimecouldbecutdownby
keeping the system "plain vanilla" and reducing the number of bolton application packages
that require custom interfaces with the ERP system. The downside to this "plain vanilla"
approach is conforming to the system's mold, which may or may not completely match the
requirementsofthebusiness.
For small companies, SAP recently launched ReadytoRun, a scaleddown suite of R/3
programspreloadedonacomputerserver.SAPhasalsointroducedAcceleratedSAP(ASAP)to
reduce implementation time. ERP vendors are now offering industryspecific applications to
cuttheimplementationtimedown.SAPhasrecentlyoutlinedacomprehensiveplantooffer
17 industryspecific solutions, including chemical, aerospace and defense, insurance, retail,
media,andutilitiesindustries.Eventhoughthesespecificsolutionswouldabletosubstantially
reducethetimetoimplementanapplication,organizationsstillhavetocustomizetheproduct
fortheirspecificrequirements.

Implementation Costs
Eventhoughthepriceofprewrittensoftwareischeapcomparedwithinhousedevelopment,
the total cost of implementation could be three to five times the purchase price of the
software.Theimplementationcostswouldincreaseasthedegreeofcustomizationincreases.
The costofhiring consultantsandall thatgoeswith itcan consumeup to30 percentof the
overall budget for the implementation. According to Gartner Group, total cost of an outside
SAPconsultantisaround$1600perday.GoingforinhouseSAPtrainedtechnologistscreates
its own worries. Once the selected employees are trained after investing a huge sum of
money, it is a challenge to retain them, especially in a market that is hungry for skilled SAP
consultants. Employees could double or triple their salaries by accepting other positions.
Retention strategies such as bonus programs, company perks, salary increases, continual
trainingandeducation,andappealstocompanyloyaltycouldwork.Otherintangiblestrategies
suchasflexibleworkhours,telecommutingoptions,andopportunitiestoworkwithleading
edgetechnologiesarealsobeingused.Manycompaniessimplystrivetocompletetheprojects
quicklyforfearofpoachingbyheadhuntingagenciesandothercompanies.

ERP Vendors
As there are about 500 ERP applications available and there is some company consolidation
goingon,itisallthemoreimportantthatthesoftwarepartnerbefinanciallywelloff.Selecting
a suitable product is extremely important. Gartner Group has BuySmart program, which has

more than 1700 questions to help a company choose a suitable ERP package. Top
managementinputisveryimportantwhenselectingasuitablevendor.Managementneedsto
ask questions about the vendor, such as its market focus (for example, midsize or large
organization),trackrecordwithcustomers,visionofthefuture,andwithwhomthevendoris
strategically aligned. For a global ERP rollout, companies need to be concerned about if the
ERP software is designed to work in different countries. Also, the management must make
sure the ERP vendor has the same version of the software available in all the countries the
company is implementing the system. Vendor claims regarding global readiness may not be
true,andtheimplementationteammayneedto crosscheckwithsubsidiary representatives
regardingtheavailabilityofthesoftware.Vendorsalsomaynothavesubstantialpresencein
thesubsidiarycountries.Itisimportanttoevaluateifthevendorstaffersinthesecountriesare
knowledgeable and available. If there is a shortage of skilled staff, bringing people from
outsidecouldsolvetheproblem,butitwouldincreasethecostsofimplementation.

Selecting the Right Employees

Companiesintending toimplementanERPsystem mustbewillingtodedicatesomeoftheir
bestemployeestotheprojectforasuccessfulimplementation.Oftencompaniesdonotrealize
theimpactofchoosingtheinternalemployeeswiththerightskillset.Theimportanceofthis
aspectcannotbeoveremphasized.Internalresourcesofacompanyshouldnotonlybeexperts
in the company's processes but also be aware of the best business practices in the industry.
Internalresourcesontheprojectshouldexhibittheabilitytounderstandtheoverallneedsof
the company and should play an important role in guiding the project efforts in the right
direction. Most of the consulting organizations do provide comprehensive guidelines for
selectinginternalresourcesfortheproject.Companiesshouldtakethisexerciseseriouslyand
maketherightchoices.Lackofproperunderstandingoftheprojectneedsandtheinabilityto
provideleadershipandguidancetotheprojectbythecompany'sinternalresourcesisamajor
reasonforthefailureofERPprojects.Becauseofthecomplexitiesinvolvedinthedaytoday
running of an organization, it is not uncommon to find functional departments unwilling to
sacrificetheirbestresourcestowardERPprojectneeds.However,consideringthatERPsystem
implementationcanbeacriticalstepinforginganorganization'sfuture,companiesarebetter
offdedicatingtheirbestinternalresourcestotheproject.

Training Employees
Training and updating employees on ERP is a major challenge. People are one of the hidden
costs of ERP implementation. Without proper training, about 30 percent to 40 percent of
frontlineworkerswillnotbeabletohandlethedemandsofthenewsystem.(n6)Thepeople
at the keyboard are now making important decisions about buying and selling important
commitments of the company. They need to understand how their data affects the rest of
company. Some of the decisions frontline people make with an ERP system were the
responsibilityofamanagerearlier.Itisimportantformanagerstounderstandthischangein
theirjobandencouragethefrontlinepeopletobeabletomakethosedecisionsthemselves.
Training employees on ERP is not as simple as Excel training in which you give them a few
weeksoftraining,putthemonthejob,andtheyblundertheirwaythrough.ERPsystemsare

extremely complex and demand rigorous training. It is difficult for trainers or consultants to
passontheknowledgetotheemployeesinashortperiodoftime.This"knowledgetransfer"
gets hard if the employees lack computer literacy or have computer phobia. In addition to
beingtaughtERPtechnology,theemployeesnowhavetobetaughttheirnewresponsibilities.
With ERP systems you are continuously being trained. Companies should provide
opportunitiestoenhancetheskillsoftheemployeesbyprovidingtrainingopportunitiesona
continuousbasistomeetthechangingneedsofthebusinessandemployees.

Employee Morale
EmployeesworkingonanERPimplementationprojectputinlonghours(asmuchas20hours
perday)includingsevendayweeksandevenholidays.Eventhoughtheexperienceisvaluable
for their career growth, the stress of implementation coupled with regular job duties (many
times employees still spend 25 to 50 percent of their time on regular job duties) could
decrease their morale rapidly. Leadership from upper management and support and caring
acts of project leaders would certainly boost the morale of the team members. Other
strategies, such as taking the employees on field trips, could help reduce the stress and
improvethemorale.

CONCLUSION
ERPsolutionsarerevolutionizingthewaycompaniesproducegoodsandservices.Theyarea
dream come true in integrating different parts of a company and ensuring smooth flow of
informationacrosstheenterprisequickly.ERPsystemsbringlotofbenefitstoorganizationsby
tightly integrating various departments of the organization. Even though ERP solutions have
beenpopularinEuropeforsometime,NorthAmericancompanieshavebeenusingthemfor
onlyaboutfivetosixyears.SomeofthefactorsthathavecontributedtoERPgrowtharethe
trendtowardsglobalization,Year2000problems,andmergersandacquisitions.
ERPsystemsareverylargeandcomplexandwarrantacarefulplanningandexecutionoftheir
implementation. They are not mere software systems; they affect how a business conducts
itself.HowacompanyimplementsanERPsystemdetermineswhetheritcreatesacompetitive
advantage or becomes a corporate headache. The top contributor for a successful ERP
implementation is strong commitment from upper management, as an implementation
involvessignificantalterationstoexistingbusinesspracticesaswellasanoutlayofhugecapital
investments.Theotherimportantfactorsaretheissuesrelatedtoreengineeringthebusiness
processes and integrating the other business applications to the ERP backbone. Upper
management plays a key role in managing the change an ERP brings into an organization.
Organizational commitment is paramount due to possible lengthy implementation and huge
costsinvolved.Onceimplemented,anERPsystemisdifficultandexpensivetoundo.Sinceno
single ERP solution can satisfy all the business needs, organizations may have to implement
custom applications in addition to the ERP software. Integrating different software packages
posesaseriouschallenge,andtheintegrationpatchworkisexpensiveanddifficulttomaintain.
Selectingandmanagingconsultantsposeacontinuouschallengeduetotheshortageofskilled
consultantsinthemarket.ERPvendorsarebringingoutindustryspecificsolutionsandnewer

methodologiestocutthelengthandcostsofimplementation.Organizationscouldreducethe
totalcostofimplementationiftheyreducecustomizationbyadaptingtotheERP'sbuiltinbest
practices as much as possible. Selecting the right employees to participate in the
implementation process and motivating them is critical for the implementation's success.
Finally,itisimportanttotraintheemployeestousethesystemtoensuretheproperworking
ofthesystem.

References
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(n8.) Needleman, T., "AlliedSignal Turbocharges its Systems," Beyondcomputing, September
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(n9.)Radding,A.,"ThePushtoIntegratePackagedApplicationsPromisetoSpeedIntegration
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(n10.) Schwartz, K., "Putting Consultants on Your Team," Beyondcomputing, Vol. 7, No.6,
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(n11.)Stedman,C.,"GlobalERPRolloutsPresentCrossBorderProblems,"Computerworld,Vol.
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(n12.)Stein,T.,"SAPInstallationScuttledUnisourceCitesInternalProblemsfor$168MWrite
off,InformationWeek,January26,1998.
(n13.)Sweat,J.,"ERP EnterpriseApplication SuitesareBecomingaFocalPointofBusiness
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(n14.)Tiazkun,S.,"SAPSuedfor$500Million,"ComputerResellerNews,August26,1998.
(n15.) Wallace, B., "Now it's CostCutting Time," Computerworld, Vol. 32, No. 47, November
1998,pp.1&82.
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