Definition and Analysis of Critical Success Factors for ERP Implementation Projects

Abstract:

ERP is one the latest technologies that many organizations have undertaken. Typically,
Enterprise Resource Planning (ERP) systems are software packages composed of several
modules, such as human resources, sales, finance and production, providing cross-
organizational integration of transaction-based data management throughout embedded
business processes support. These software packages can be customized up to a certain limit
to the specific needs of each organization. ERP was characterized as the most important
development in the corporate use of technology in the 1990s. Unfortunately, many ERP
projects have not been effective enough and hence have been unable to achieve all the results
envisaged. As the cost of an ERP implementation project is very high, it is critical for an
organization to make the project a success and start obtaining benefits out of it as fast as
possible. But what is it that makes an ERP implementation project successful?

To address this issue we propose the use of a Critical Success Factors (CSF) approach to
manage ERP implementation projects. After an extensive literature review on ERP research
and ERP implementation project studies, we have studied and have proposed results along the
following issues:

• The identification and definition of a comprehensive list of CSF.

• The relevance of CSF along the typical ERP implementation phases.

• The definition of Key Performance Indicators (KPI) for CSF.

• The analysis of CSF management in some organizational contexts.

A theoretical framework was developed in order to aid the process of answering the implied
research questions. In order to accomplish the research aims of this research, we have
proposed an interpretive research approach and a “multimethod” research framework that
combines various research methods, both quantitative and qualitative, with predominance of
qualitative ones. Several results have already been produced out of our research project, with
our chosen theoretical and research framework:

• An annotated bibliography on ERP research.

• A CSF unified model for ERP implementation projects.

• A CSF relevance schema along the typical ERP implementation phases.

• A new criticality indicator for Process Quality management (PQM) method.

• A tentative set of KPI for some CSF and a systematic approach to develop the rest of
KPI.

• An ERP implementation model.

 • A CSF management analysis in two organizational contexts: a small and midsized
enterprise and a public higher education institution.

With regard to the case studies conducted, the first was a pilot case study of an ERP
implementation in a Portuguese small and midsized enterprise. The second one was an in-
depth case study of an ERP implementation in a big Spanish public higher education
institution. The different organizational contexts provided valuable insights in CSF
management as well as implications from the emergence of patterns of communality between
both case studies. The research results evidence that:

• Most of the problems that arise in ERP implementation projects are associated with
the activities identified as CSF in this research,

• The main concerns are organizational rather than technological.

• The management of CSF is influenced by the context and,

• When managers have taken into account the CSF identified, some of project problems
have been avoided or their impact significantly reduced in ERP implementation
projects, and the organization is more likely to use more effectively the ERP system
after its implementation.

• A CSF approach is also helpful to avoid problems on the long term since most of the
CSF identified are strategic.

It is hoped that future ERP research and ERP implementations can draw upon and learn from
this thesis.
 Fig. 1. Research Diagram.

Some Results:

Strategic Tactical
- Sustained management support - Dedicated staff and consultants
- Effective organizational change - Strong communication inwards and
management outwards
- Good project scope management - Formalized project plan/schedule
- Adequate project team composition - Adequate training program
Organizational
- Comprehensive business process redesign - Preventive trouble shooting
- Adequate project sponsor role - Appropriate usage of consultants
- Adequate project manager role - Empowered decision-makers
- User involvement and participation
- Trust between partners
- Adequate Infrastructure and interfaces
- Adequate ERP implementation strategy -Adequate legacy systems knowledge
Technological - Avoid ERP customization - Formalized testing plan
- Adequate ERP version - Adequate data migration process

Fig. 2. A Critical Success Factors Unified Model for ERP Implementations.

Fig. 3. Critical Success Factors Relevance Along SAP Implementation Phases(ICEIS 2001,
AMCIS 2001).

Figure - Most relevant CSFs along ERP implementation phases.

 Fig. 4 - ASAP Work Packages Criticality Analysis Along ASAP Phases (ICEIS 2002 conference paper).

Fig 5. Relationship between ERP project sponsor, project manager and ERP project success
(ECIS 2002).
Fig. 6 - An ERP training monitoring and evaluation framework (ECITE 2002).

Fig. 7 - BPR concerns in the ERP context (AMCIS 2002).

Fig. 8 - A framework to evaluate and monitor training in ERP projects.
2

I have seen multiple ERP implementations each with varying degree of

success. I have seen multiple occasions where customers aren’t sure of what to
expect while implementing an ERP system. In some other instance, the
customers Technology Select the right technology and ERP package for
yourself. This is critical as the entire program is dependent on the choice that
you make at this stage. Also the following are the other salient points that your
should consider

• Does the ERP package has a fitment to your industry vertical?

• How easy is it to install access and maintain the infrastructure for this
package

• What is the level of customization that you foresee in the package to make it
suit your business process

The above questions will drill into whether the package is a fitment for you
and brings you value add by suggesting you a best practices.

Vendor Selection: Selecting a vendor with enough expertise is a key to

success. In many occasions client interview the key stakeholders from the
vendor to be sure of the depth of understanding of technology and business
domain. Recently, I have seen companies employing multiple vendors to avoid
vendor lock in.

People: You may have the best ERP package and the best solution, but until
and unless you have the right person to use it, it doesn’t work for you. You
should involve key end users right from the scratch. The key users should be
from entire cross section of the end user. These end users are often expected
to drive their respective departments to use the solution and resolve small and
non issues without having to resort to vendor for support.

Infrastructure: Since your end users may be geographically separate you

must ensure that the system behaves as expected across locations and across
business functions. For this you must ensure that your server and network is
properly sized vis-à-vis the number of users and their expected data
bandwidth. Usually you would do a rigorous performance test to ensure the
system response when multiple users login to the system and do transactions.

Project Financials and Change Control: You would have set up a budget
for your ERP program. In majority of cases you would end up exceeding it
until and unless you have a stringent PMO (project management office) and
rigorous change control process. On many occasion, business users give
requirement without thoroughly spending time on it. The change in
requirement after realization of the feature leads to enhanced time and effort
from the vendor and hence increased cost. Another key rule is that more you
customize the solution, lesser best business practices you inherit from the
package. So customize only if you think it is worth it.

The implementation of SAP software, such as SAP R/3 is almost always a massive
operation that brings a lot of changes in the organization. The whole process can take
up to several years. Virtually every person in the organization is involved, whether
they are part of the SAP technical support organization (TSO) or the actual end-users
of the SAP software. The resulting changes that the implementation of SAP generates
are intended to reach high level goals, such as improved communication and
increased return on information (as people will work with the same information). It is
therefore very important that the implementation process is planned and executed
with the usage of a solid method. There are various SAP implementation methods. An
example of how one company, Robert Bosch GmbH, implemented SAP R/3 over 10
years is available. This study shows that designing IT architecture is very critical in
SAP implementation practices.

The data table below provides a summary of all the concepts addressed in the process-
data diagram.

Concept Definition
CHANGE ***Activities involved in (1) defining and installing new
MANAGEMENT values, attitudes, norms, and behaviors within an
organization that support new ways of doing work and
overcome resistance to change; (2) building consensus
 among customers and stakeholders on specific changes
designed to better meet their needs; and (3) planning,
testing, and implementing all aspects of the transition from
one organizational structure or business process to another.
(www.gao.gov)
All documentation that is required and being delivered
CHANGE whilst performing change management, e.g. the functional
MANAGEMENT test cases and all the other documents a new end-user of
DOCUMENTATION. SAP requires and the various tools and approaches used to
manage change by the TSO. (Anderson, 2003)
Determination of where and when the costs are inquired
COST OF OWNERSHIP within the context of the SAP solution stack and ongoing
ANALYSIS operations. The analysis addresses all internal and external
costs, both one-time as well as recurring (Anderson, 2003)
The process of transitioning from one system to a new one
CUTOVER
(Anderson, 2004)
All documentation related to planning, preparing and
executing cutover, describing how to lock down the system
CUTOVER PLAN from a technical change management perspective, preparing
the TSO for its new role and rolling out the SAP graphical
user interface to all future end users. (Anderson, 2003)
A data center is a facility used for housing a large amount
DATA CENTER of electronic equipment, typically computers and
communications equipment. (www.wikipedia.org)
A requirement for the SAP data center, i.e. a physical
DATA CENTER requirement like power requirements, a rack requirement, a
REQUIREMENT network infrastructure requirement or a requirement to the
network server. (Anderson, 2003)
DISASTER RECOVERY Requirement that focuses on downtime that lasts many
(DR) REQUIREMENT hours to days or even weeks (Anderson, 2003)
A set of conditions or variables under which a tester will
FUNCTIONAL TEST
determine if a certain business process works
CASE
(www.wikipedia.org)
Requirements that describes the amount of time that the
HIGH AVAILABILITY
system needs to be available to satisfy the needs of the
(HA) REQUIREMENT
users. (Anderson, 2003)
INSTALLATION All documentation related to the installation of an end-to-
DOCUMENTATION end SAP solution (Anderson, 2003)
The collection of current state system documentation, day-
OPERATIONS to-day and other regularly scheduled operations tasks,
MANUAL various installation and operations checklists and how-to
process documents. (Anderson, 2003)
SAP AG is the name of the biggest European software
company. The head office is in Walldorf, Germany. SAP
was founded in 1972 as Systemanalyse and
SAP
Programmentwicklung ("Systems Analysis and Product")
by five former IBM employees in Mannheim, Germany.
(www.wikipedia.org)
SAP A comprehensive project plan that contains all products that
IMPLEMENTATION are delivered whilst performing an SAP implementation
PROJECT PLAN project (Anderson, 2003)
Set of software subsystems or components needed to
SOLUTION STACK deliver a fully functional solution, e.g. a product or service.
(www.wikipedia.org)
SOLUTION STACK A list of all vendors that deliver the products that make up
PARTNERS LIST the SAP solution stack (Anderson, 2003)
A vision of the future-state of the SAP solution (Anderson,
SOLUTION VISION
2003)
A test plan that is focused at determining the stability of a
given system or entity. It involves testing beyond normal
STRESS TEST PLAN
operational capacity, often to a breaking point, in order to
observe the results. (www.wikipedia.org)
A detail of how the test will proceed, who will do the
testing, what will be tested, in how much time the test will
TEST PLAN
take place, and to what quality level the test will be
performed. (IEEE 829)
The acquisition of knowledge, skills, and attitudes as a
result of the teaching of vocational or practical skills and
TRAINING
knowledge that relates to specific useful skills
(www.wikipedia.org)
Consisting of training units, a training plan is the result of
hierarchical decompositions of a training goal, tailored
TRAINING PLAN according to the learning preferences and prior knowledge
of the trainee. A plan is the means by which the trainee
satisfies the goal. (www.ece.eps.hw.ac.uk/)
Technical Support Organization. The people that are
TSO committed to implementation and management of SAP.
(Anderson, 2003)
A chart that depicts the structure of the TSO. (Anderson,
TSO CHART
2003)

[edit] Activity table

The following table provides a summary of all of the activities that form the SAP
implementation process. These activities will be described with more detail and
elaborated with examples in the rest of this entry.

Activity Sub-Activity Description

Project Craft solution Refine and communicate a SOLUTION VISION of
preparation vision the future-state of the SAP solution, to sketch a
design that meets both business and financial
requirements. The focus should be on the company’s
core business and how the SAP solution will better
enable that core business to be successful. Some of
the guidance and key requirements for how to put
together an ERP and SAP business case for ROI,
business benefit, and success includes focusing on
 competitive pressures, value propositions, and how
the solution enables success.
Design and staff the key positions of the SAP
Design and Technical Support Organization (TSO), the
initially staff the organization that is charged with addressing,
SAP TSO designing, implementing and supporting the SAP
solution.
Perform a COST OF OWNERSHIP ANALYSIS to
Perform cost of determine how to get the best business solution for
ownership the least money i.e. to determine where and when the
analysis costs are incurred within the context of the SAP
solution stack.
Identify high
Determine all HIGH AVAILABILITY and
availability and
DISASTER RECOVERY REQUIREMENTS, to plan
disaster recovery
what to do with later downtime of the SAP system
requirements
Select the best SAP hardware and software
Engage SAP
technology partners for all layers and components of
solution stack
the SAP SOLUTION STACK, based on a side-by-
vendors
side sizing comparison
Staff the bulk of the TSO, i.e. fill the positions that
Sizing and directly support the near-term objectives of the
Staff TSO
blueprinting implementation, which are to develop and begin
installation/implementation of the SAP data center.
Train the various members of the SAP TSO, like data
center specialists, high availability specialist and
Execute training
network specialists and train the end-users to give all
the required SAP knowledge and skills
Build a new SAP DATA CENTER facility or
Setup SAP
transform the current data center into a foundation
DATA CENTER
capable of supporting the SAP SOLUTION STACK
Install the (My)SAP components and technological
Perform
foundations like a web application server or
installations
enterprise portal.
Identify and staff the remaining TSO roles, e.g. roles
Round out
that relate to help desk work and other such support
support for SAP
providing work.
SAP Develop a planned approach to the changes in the
functional organization. The objective is to maximize the
Address Change
development collective efforts of all people involved in the change
Management
and minimize the risk of failure of implementing the
changes related to the SAP implementation.
Address SAP Create a foundation for the SAP systems management
systems and and SAP computer operations, by creating a SAP
operations OPERATIONS MANUAL and by evaluating SAP
management management applications.
Perform Test the SAP business processes, by executing
functional, functional tests to ensure that business processes
integration and work, integration tests to ensure that the
 organization’s business processes work together with
other business processes and regression tests to prove
regression tests
that a specific set of data and processes yield
consistent and repeatable results.
Plan, script, execute and monitor SAP STRESS
Perform systems
TESTS, to see if the expectations of the end users,
and stress tests
defined in service level agreements, will be met.
Final
Plan, prepare and execute the CUTOVER, by
Preparation
Prepare for creating a CUTOVER PLAN that describes all
cutover cutover tasks that have to be performed before the
actual go-live
Go Live Turn on the SAP system for the end-users

[edit] Implementation processes

[edit] Project preparation

The project preparation phase, depicted below, focuses at two main activities, i.e. to
make a setup for the TSO and to define a solution vision. These activities allow an
organization to put in on the right track towards implementation.

Design and initially staff the SAP TSO

The first major step of the project preparation phase is to design and initially staff an
SAP technical support organization (TSO), which is the organization that is charged
with addressing, designing, implementing and supporting the SAP solution. This can
be programmers, project management, database administrators, test teams, etc. At this
point, the focus should be at staffing the key positions of the TSO, e.g. the high-level
project team and SAP professionals like the senior database administrator and the
solution architect. Next to that, this is the time to make decisions about choosing for
internal staff members or external consultants.

The image at the right shows a typical TSO chart.

Craft solution vision

The second project preparation job is to define a so-called solution vision, i.e. a vision
of the future-state of the SAP solution, where it is important to address both business
and financial requirements (budgets). The main focus within the vision should be on
the company’s core business and how the SAP solution will better enable that core
business to be successful. Next to that, the shortcomings of the current systems should
be described and short but clear requirements should be provided regarding
availability (uptime), security, manageability and scalability of the SAP system.

[edit] Sizing and blueprinting

The next phase is often referred to as the sizing and blueprinting phase and forms the
main chunk of the implementation process. The phase is illustrated below.
Perform cost of ownership analysis

This phase starts with performing a total cost of ownership analysis (TCO analysis) to
determine how to get the best business solution at the lowest costs. This means to
compare SAP solution stack options and alternatives and then determine what costs
each part of the stack will bring and when these costs will be incurred. Parts of the
stack are for example the hardware, operating system and database, which form the
acquisition costs. Next to that, there should be taken a look at recurring costs like
maintenance costs and downtime costs. Instead of performing a complete TCO
analysis for various solution stack alternatives that would like to compare, it can be
wise just to do a so-called delta analysis, where only the differences between solutions
(stacks) are identified and analyzed. The image at the right depicts the essence of a
delta analysis.

Identify high availability and disaster recovery requirements

The next step is identifying the high availability requirements and the more serious
disaster recovery requirements. This is to plan what to do with later downtime of the
SAP system, caused by e.g. hardware failures, application failures or power outages.
It should be noted that it is very important to calculate the cost of downtime, so that
an organization has a good idea of its actual availability requirements.

Engage SAP solution stack vendors

A true sizing process is to engage the SAP solution stack vendors, which is the next
step. This means selecting the best SAP hardware and software technology partners
for all layers and components of the solution stack, based on a side-by-side sizing
comparison. The most important factors that are of influence here are the estimated
numbers of (concurrent) users and batch sizes. A wise thing to do is to involve SAP
AG itself to let them create a sizing proposal stating the advised solution stack, before
moving to SAP’s technology partners/SAP vendors, like Accenture, HP and IBM. A
simplified solution stack is depicted at the right, showing the many layers for which
software and hardware has to be acquired. Note the overlap with the OSI model.

Staff TSO

The TSO is the most important resource for an organization that is implementing
SAP, so staffing the TSO is a vital job which can consume a lot of time. In a previous
phase, the organization should already have staffed the most vital positions. At this
point the organization should staff the bulk of the TSO, i.e. fill the positions that
directly support the near-term objectives of the implementation, which are to develop
and begin the installation/implementation of the SAP data center. Examples are: data
center experts, network infrastructure experts, security specialists and database
administration experts.

There are many ways to find the right people within or outside the organization for all
of the TSO positions and it depends on the organization how much time it wants to
spend on staffing.

Training
One of the most vital stages of the implementation process is training. Very few
people within an organization are SAP experts or even have worked with SAP
software. It is therefore very important to train the end users but especially the SAP
TSO: the people who design and implement the solution. Many people within the
TSO need all kinds of training. Some examples of these positions:

• SAP Network Specialists

• SAP Database Administrators
• SAP Security specialists
• Documentation specialists
• Et cetera

All of these people need to acquire the required SAP knowledge and skills or even
SAP certifications through training. Moreover, people need to learn to do business in
a totally new way. To define how much SAP training every person needs, a company
can make use of a skillset matrix. With this matrix, a manager can identify who
possesses what knowledge, to manage and plan training, by defining the height of
expertise with a number between e.g. 1 and 4 for each skill for each employee.

Setup SAP data center

The next step is to set up the SAP data center. This means either building a new data
center facility or transforming the current data center into a foundation capable of
supporting the SAP solution stack, i.e. all of the technology layers and components
(SAP software products) in a productive SAP installation. The most important factor
when designing the data center is availability. The high availability and disaster
recovery requirements which should have been defined earlier, give a good idea of the
required data center requirements to host the SAP software. Data center requirements
can be a:

• Physical requirement like power requirements

• Rack requirement
• Network infrastructure requirement or
• Requirement to the network server.

Perform installations

The following step is to install the required SAP software parts which are called
components and technological foundations like a web application server or enterprise
portals, to a state ready for business process configuration. The most vital sub steps
are to prepare your OS, prepare the database server and then start installing SAP
software. Here it is very important to use installation guides, which are published for
each SAP component or technology solution by SAP AG. Examples of SAP
components are:

• R/3 Enterprise — Transaction Processing

• mySAP BI — Business Information Warehouse
• mySAP CRM — Customer Relationship Management
• mySAP KW — Knowledge Warehouse
• mySAP PLM — Product Lifecycle Management
 • mySAP SCM — Supply Chain Management
• mySAP SEM — Strategic Enterprise Management
• mySAP SRM — Supplier Relationship Management
• mySAP HCM — Human Capital Management

Round out support for SAP

Before moving into the functional development phase, the organization should
identify and staff the remaining TSO roles, e.g. roles that relate to helpdesk work and
other such support providing work.

[edit] Functional development

The next phase is the functional development phase, where it is all about change
management and testing. This phase is depicted below.

Address change management

The next challenge for an organization is all about change management / change
control, which means to develop a planned approach to the changes the organization
faces. The objective here is to maximize the collective efforts of all people involved
in the change and to minimize the risk of failure of implementing the changes related
to the SAP implementation.

The implementation of SAP software will most surely come with many changes and
an organization can expect many natural reactions, i.e. denial, to these changes. To
fight this, it is most important to create a solid project team dedicated to change
management and to communicate the solution vision and goals of this team. This team
should be prepared to handle the many change issues that come from various sources
like:

• End-user requests
• Operations
• Data center team
• DBA group
• Systems management

SAP systems and operations management

Next thing is to create a foundation for the SAP systems management and SAP
computer operations, by creating a SAP operations manual and by evaluating SAP
management applications. The manual is a collection of current state system
documentation, day-to-day and other regularly scheduled operations tasks, various
installation and operations checklists and how-to process documents.

Functional, integration and regression testing

Testing is very important before going live with any system. Before going live with a
SAP system, it is vital to do many different kinds of testing, since there is often a
large, complex infrastructure of hardware and software involved. Both requirements
as well as quality parameters are to be tested. Important types of testing are:

• Functional testing: to test using functional use cases, i.e. a set of conditions or
variables under which a tester will determine if a certain business process
works
• Integration testing
• Regression testing

All tests should be preceded by creating solid test plans.

[edit] Final preparation

agreements, will be met. This can be done with SAP’s standard application
benchmarks, to benchmark the organization’s configurations against configurations
that have been tested by SAP’s hardware technology partners. Again, a test plan
should be created at first.

Prepare for cutover

The final phase before going live with SAP is often referred to as the cutover phase,
which is the process of transitioning from one system to a new one. The organization
needs to plan, prepare and execute the cutover, by creating a cutover plan that
describes all cutover tasks that have to be performed before the actual go-live.
Examples of cutover tasks are:

• Review and update all systems-related operations procedures like backup

policies and system monitoring
• Assign ownership of SAP’s functional processes to individuals
• Let SAP AG do a GoingLive check, to get their blessing to go live with the
system
• Lock down the system, i.e. do not make any more changes to the SAP system

[edit] Go live

All of the previously described phases all lead towards this final moment: the go-live.
Go-live means to turn on the SAP system for the end-users and to obtain feedback on
the solution and to monitor the solution. It is also the moment where product software
adoption comes into play. More information on this topic:

• Product Software Adoption: Big Bang Adoption

• Product Software Adoption: Parallel Adoption
• Product Software Adoption: Phased Adoption

[edit] Critical success factors

In order to successfully implement SAP in an organization, there are several things
that are of great importance:
1) Choose the correct SAP Consultants to have the correct blueprint. An SAP
Consultant is a professional who has the skills to speak to the managers of a company
and help them creating the blueprint. For this the SAP Consultant has the business
skills of the business area he/she is working with, and also masters this area on SAP.
For example, if this is SAP FI (accountancy) Consultant, this person is an expert on
accountancy and payments, gained through experience or by the corresponding
studies at the University. Also this person knows SAP FI because has gained by the
corresponding training, or the course on the SAP Partner Academy or similar.
Benefits: As this person knows about Accountancy he or she will understand the
needs of the business and will bring it into reality.

2) SAP R/3 implementation is not an IT project, in fact is an Organization Project

impacting all levels of a company. So it is very important to get the support from all
the people that are involved in implementing SAP, but more important the
participation and commitment of all levels, specially managers, of the company.

3) The Blueprint is the keystone used as the lighthouse who must guide the whole
project. A blueprint should never be a merely mapping of IT systems. In fact a
blueprint is bringing the strategy of a company into execution through defining its
processes across all business areas. Many projects have failed because the focus was
on having people with SAP knowledge, but with no business skills and so defining
something that works...wrongly. Just remember, processes must change across time,
and a manual error automated could be repeated infinitely.

4) Always consider changing the way things have been done before implementing
SAP. "This has always been done like this and the Consultant should replicate it on
SAP" is the start of a big problem. SAP many times could save you time and money
as it allows your organization to automate many processes.

5) Test the SAP hardware and software rigorously by testing your business
processes, and to ensure that the end-users are ready to use SAP before going live,
because there are many known projects that failed because of a lack of support and
SAP knowledge.

6) Design and execute a Change Management Program by communicating as early

as needed all the information that end users should have to accept the new technology
and designing and executing a training plan in order to reassure a knowledge base
within the organization.