Strengths, Weakness, Opportunities and Challenges for Organizational Change in relation to implementing an ERP in Sri Lankan Organizations.

B.L.R.S. Fernando PGE-12-0004

Abstract Ever since the introduction of ERP systems, most of the large scale organizations around the world have been started adopting ERPs. Organizations implement ERP systems in order to supplement their long term strategic business objectives by integrating and streamlining their existing business processes to gain competitive advantages and creating opportunities to expand to the future. Despite the fact that the ERP implementations are claimed to be failures, highly expensive, require extensive effort to maintain (including new hardware and new versions upgrades) and reap the intended benefits. Lots of medium and small scale organizations have shown interest for adopting an ERP system for their organization. In recent past many Sri Lankan organizations have been shown interests of adopting an ERP system to their organization while contributing to the growing numbers of ERP implementations in Asia region. Implementing an ERP system in an organization is not merely an off the shelf IT system which automate their business process. But an incremental process of changing the current organizational structure, business processes, human resource. Those are the areas which the organizations face many challenges. This report is devoted for analyzing and discussing organizations strength, weakness, opportunities and challenges with related to pre and post ERP implementation environments. Introduction In Sri Lanka big conglomerates, manufactures, telecom, automotive, apparels, hospitals, banks and many multinational organizations have implemented at least one or few of ERP modules [1]. Also there are many organizations currently being in their inception level or in the face of evaluation of implementing an ERP system. The reason behind almost all the organizations which have adopted an ERP system is to enabled streamline integration of data and process across the organization and best practices inherent in ERP systems[2] Further, obtaining a competitive advantage by integrating business processes and providing reliable and accurate data for decision making for the upper management of the organization [3].
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Multinational organizations, on the other hand inherently get an ERP due to the influence of their parent organization most probably at the time of setting up their local branches in Sri Lanka (only if the parent company is having and using an ERP system already). Therefore most of the time they will not face any change management issues. Having installed ERP systems, they also are expecting to integrate their entire enterprise to fulfill the aforementioned objectives and visions like other organizations in Sri Lanka. However, implementing an ERP system requires more analysis to be done in different aspects of an organizations point of view. That includes health of the finance, technology, future investments and divestments just to name a few. Most importantly the analyzing the impact of organizational structure change and human changes is vital before implementing the ERP as it will be a crucial factor for the success or failure of the implementation. Citing the fact that most researches in the ERP stream have stressed that ERP implementation is a change management process[4], this report is critically analyzed the strength, weakness, opportunities, and challenges with relates to pre and post ERP implementation environments in Sri Lankan organizations. Analysis Data Table 1, shows the analysis data categorized under strength, weakness, opportunities and challenges with related to ERP implementation in Sri Lankan organizations. Each point of every section will be discussed in comprehensive manner in the report.

Table 1 Strengths Weaknesses

Senior/Top management with the thorough Communication barriers. knowledge in their business domain. Extensive experience in business processes Organization culture. within the organization.

Financial strength of the organization. Organization culture. Top management support.

IT maturity. Ad-hoc standards in business processes. Lack of knowledge in ERP implementations.

Streamlining the business processes which No proper analyzing methods employed/been were isolated previously. used when analyzing objectives. ( with relates to ERP implementation)

Opportunities

Challenges

Improve the efficiency and effectiveness of the Convince the organizations employees about business processes. goals and objectives behind the implementation of an ERP. Opportunity to becoming service providers and Recruiting qualified knowledge workers and service consumers to/with external parties training the existing employees for the ERP while creating competitive advantages. Possibility of applying to obtain implementation and retain them. well Finding adequate, experienced and reliable vendors in local market with relates to the selected ERP system. Providing a safe passage for alliances or Fulfilling expectations of external entities. mergers with other partners though well standard business process and protocols.

reorganized standards. Such as ISO standards.

Strengths Points listed under the strength category are the factors internal to the organization which helpful to achieving its objectives with related the ERP implementation. Senior/Top management with the thorough knowledge in their business domain. This is one of the pre-ERP environment factor which helps organization to evaluate the ERP implementation change. Knowing the business domain in depth is vital for making decision with relates to ERP selection and implementation. This knowledge will truly helpful for the management to evaluate ERP systems. Though the criterion such as does an ERP system will really supportive for their business domain or not? To evaluate, sitting outside, other competitors or partners who have installed ERP systems within the same business domain. To explain the business domain in depth to a person who really involved in analyzing the requirements. One of the interview conducted with a chairmen of one of the leading hospitals in Sri Lanka [5] clearly demonstrate how the thorough knowledge of business domain knowledge helps ERP system selection and implementations. This is of course a implicit version of Change Equation model which introduced by the Beckhard & Haris in 1987 Extensive experience in business processes within the organization. Understanding the business processes and data within the organization will help understanding the benefits of integration which promise by the ERP. This is again a preERP environment factor which helps organization can be used as an evaluation criteria for an ERP implementation evaluation. Also it will help explaining the existing processes to an out sider of the company who really involved in understanding and analyzing the existing processes. Knowledge in business process and data format and structures are considered as one of the four factors to gain benefits from ERP systems [6]. Financial strength of the organization. As the organization grows with expansion of its units and diversifying its businesses obviously there will be a need for an integration of its business units and its process in
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order to make quality decision making which effects the company growth and its future. ERP will be the ideal solution for that need. But due to high cost of such systems [2] financial health of an organization will become a core factor to evaluate its financial capability before electing an ERP. Organizations that have strong financial capabilities have already gone for implementing ERP systems their core business areas.[1], [7], [8], [9]. Organization culture. This could be considered either as Strength or a Weakness in organizations ability to change in relation to ERP implementation. Most of the literature authors [2], [10] put more emphasize on organization culture as a critical factor for an ERP implementation to be succeeded or failed. However from the strength point of view organizations having a value-based management culture would be the most ideal for a change like ERP implementation because it considers integrity as one of its core values. Top management support. Top management involvement in the process of evaluating the ERP system, their involvement in the change management process which resulted due to implementing an ERP system is vital. Their involvement has seen as strength in the organization point of view with related to ERP adoption. The report [4] justified how the top management got involved in boosting up their already failing ERP adoption in their organization. Also other reports [1], [11] stressed the support of the top management as strength as well as a success factor for ERP adoption. Actually the people from top management can be play a champions role to convince and drive the people within a resistive environment towards achieving objectives and goals of the organization in a collective manner. Streamlining the business processes which were isolated previously. This is a strength point identified in a post-ERP environment. After a successful role out of an ERP implementation this is one of the strength factors that an organization can be leverage though the ERP adoption. This makes organizations top management to have
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up to date and most accurate data for their decision making. This gives them a better over view of the organizations current status and let them make further decisions towards growth of the company.

Weaknesses The weaknesses are defined as internal factors which harmful/blocking achieving desired objectives. The list of weaknesses identified in Table 1 with relates to ERP adoption is further discussed under this section. Communication barriers. The most viable communication medium in Sri Lankan organization is their mother tongue. That is Sinhala language. This creates huge barrier when require doing knowledge transfer with outside ERP consultants and local users. Because of all the outside consultants are most of the time foreigners, they use English as their communication medium. Further, local users are failing to understand the technical words and terms use by most consultants. This weakness factor leads the ERP implementation run over budget and delay in implementing the system as it require more time to analyzed and understand the business requirements using various time consuming alternatives ( such as observation, using interpreters etc.) due to communication barrier within organizations. In order for cost saving and respect the deadlines initialized at the beginning of the project only a handful of users have been trained by the consultants in some organization as an alternative [10] . Organization culture. Evan though the organization culture has been categories under the above strength section. Of course this could become a weakness factor due to the nature of it. ERPs are tending to form modern management concepts. Further it introduces online services, highly structured processes, data and new organization roles. In its extreme end it will force organizations to introduce new regulations and conditions which in turns creating
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conflicts and confusion with organization existing culture [2] . Failing to cope up with ERP cultures and convince the people of the benefits inherent in ERP cultures leading the unsuccessful implementation of an ERP in an organization. IT maturity. Until recent past major Sri Lankan organizations have used paper based, manual process in organizations. Having a computer considered as a prestige privilege in such organizations. Of course they believe in manual processes rather automate processes. People who are involved with such processes are now the top managers in those organizations. They still believe in the manual process and reluctant to adopt IT enabled environment to their organizations. This situation is lagging many organizations still to leverage the benefits of IT. So do not think of adopting an ERP system to streamline their business processes and reap the opportunities inherent in ERP systems. However, organizations which have adopted ERP systems still facing late adopters and laggards due to IT maturity. Organizations find difficulties providing adequate user training for such users about ERP systems due to IT maturity. Ad-hoc standards in business processes. Except organizations which are branches of multinational companies, all other organizations were started from the sketch and grow little by little until the current situation where they stand now. During their life span, all these organizations and their processes were built upon the very ad-hoc manner. What they see fit to their organization or the process they adopt it. There was no quality analysis was done nor processes to educate the employee with proper standards. These kind of ad-hoc processes and standard make ERP implementations difficult an involved lot of customization. Too much customization may require more time and more investments, project plans may span years and increase the budget respectively. At the extreme end it results ERP systems to fail or leave it as an abandon projects. From the organization point of view having employing ad-hoc processes and standards considered as a weakness point in relation to ERP adoption.
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Lack of knowledge in ERP implementations. In Sri Lankan organizations, most of its internal departments have their own isolated systems built for their requirements. Department head must prepare reports to be sent to top management periodically. Employees of each department do not know what other departments processes and their systems. They are truly isolated. They do modification to their internal systems which suites to their need and to satisfy only issues specific to their departments. In order to adopt an ERP system it requires skills such as overall business knowledge, knowledge of ERP itself. Adopting en ERP system to such organization described above will require extensive effort formulating business processes and educate employees to meet ERP standards and expectations.

Opportunities Opportunities for an organization which are resulted in pro-ERP environment are discussed in this section. Improve the efficiency and effectiveness of the business processes. Efficiency and effectiveness are inherent opportunities after a successful implementation of an ERP. Organization would be able to streamline their business processes more smother than their previous status. There are evidences that organizations stated that after a successful adaptation of an ERP noticeably their profit has increased [5], [8], [9]. Opportunity to becoming service providers and service consumers to/with external parties while creating competitive advantages. Running business processes in an integrated manner it will facilitate organization to partner with other external entities for further improve their value chain requirement in an effective and efficient manner. ERP systems enabled organization to become B2B (Business to Business) services while providing B2C (Business to Consumer) services to its suppliers and customers respectively. Exchanging data in a well formatted manner
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while respecting industrial standard would become a benefited for the organization to expand its services. This opportunity allows organizations to become more competitive in the market while gaining competitive advantages through this opportunity. Possibility of applying to obtain well reorganized standards. Such as ISO standards. Organization bodies who awarding Standards reorganizations to organizations such as ISO are evaluating organization based on the standards and processes they utilized with in their organization they have numbers of quality recognition factors/standards organization who willing be used in their evaluation process. Most of these evaluation processes are by default included in most of the ERPs available in todays ERP market. So the criteria required for an organization to obtain an industry accepted standards will be filled by default adopting an ERP. Providing a safe passage for alliances or mergers with other partners though well standard business process and protocols. Most of the organizations are now showing interests for mergers or alliances to become more competitive among others while providing better services to end customer. This has become more revenue generation strategy among organizations. However there have been many instances which reported issues faced when mergers happened in most of IT enabled organization. This is due to their systems integrations issues. Having employed different standards and protocols are made their system integration more costly. Merge between organization which use standard protocols (protocol in this context referring to organization standards and business processes) will make system integration easier. And make the initiative or merge or alliance reality. Challenges In relations to ERP adoptions there are number of challenges faced by many organizations. Most of the organizations face/win those challenges having employed better strategies and best managerial practices.

Convince the organizations employees about goals and objectives behind the implementation of an ERP. Communicating the objectives over adopting an ERP is vital for all stakeholders in the organization as they are very much sensitive for What is there for me norm with relates to any change within the organization. Without convincing the employees it is a difficult task move forward any desired change. There could be huge resistance against the change if not clearly communicate the objectives behind the change and try convincing them. There have been so many theories and models presented by lot of researches how to handle such change which will take place within the organization while satisfying stakeholders. All most all the organization in Sri Lanka employee oriented organizations. Means all the success or the failures of organizations most of the time depend on employees. How to convince employees with the change is a quite huge challenge that organizations are facing.

Recruiting qualified knowledge workers and training the existing employees for the ERP implementation and retain them. From setting up hardware level to the application configuration level, ERP systems require very knowledgeable workers in every aspect mentioned above [6]. Since very recently the appearance of ERP systems starts in Sri Lanka, finding qualified people for every aspect of ERPs life cycle is the hardest challenge that an organizations may face. Either they have to recruit externals workers or have to train internal staff for specified sections of ERPs. Due to the shortage of qualified resources existing resources make unacceptable demands and most of the qualified people are leaving the country for better opportunities. This worsens the shortage of ERP qualified resources within the country. Further there are some mutual understanding agreements between ERP adoption companies not to recruit/hiring workers between them.

Finding adequate, experienced and reliable vendors in local market with relates to the selected ERP system.

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As stated in the research paper conducted by other party [2]. There were lacks of vendor presents in Sri Lanka. Though there have been only few local representatives for the most famous ERPs in the market, they didnt have proper experience to understand the business domains and depth knowledge of configuring ERP systems. This made most of the companies to rely on overseas vendors and consultants for their requirement which made their budget so high. However there are few ERP vendors establishing their branches here in Sri Lanka with more qualified people [12] . Also there are new companies starting up developing custom made ERPs to Sri Lankan market almost covering all the business processes in in different domains. All these initiatives motivate Sri Lankan organizations to adopt ERPs into their organizations.

Layered Growth Model Organizations have their own objectives within its life span. They tend to achieve objectives sequentially. Those objectives will require change within the organization. This could be a huge change, effecting the whole organization or part of the organization. Managing such changes smoothly will allow organization to make it a successful achievement. The report is proposing a model call Layered Growth Model which can be adopted by organizations to handle their objectives in a more successful manner. This model can be applied to any objective achievement within the organization with minor changes to its inner processes/steps. The report further goes into explaining how the model can be used for an ERP adoption of an organization and what procedures are there to follow within the model. Figure 1 shows how the Layered Growth model can be used for an organization to manage its objectives. In the Figure 2 shows how the same model have been used for an ERP adoption with in the same organization. Because ERP adoption also having layered tasks to be achieved in its life span. Those tasks/steps are discussed in designated are below of the report.

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Figure 1 Layered Growth Model

Figure 2 Layered growth model adopted to ERP implementation

A Indicate the organization growth during its life span. B Regular analysis of its predefined objectives so far. This analysis helps organizations management to decide whether the organization is ready to achieve the objective. Tools that can be used for this analysis are SWOT

B - Indicate the allocation of time for the ERP adoption objective. C Represent the regular climate survey with relates to ERP implementation. This helps identifying resistance, innovators, early adopters, late adopters and laggards. Based on survey results further steps can be taken to manage the situation. Like if the resistance too high finding champions for the driving forces, conducting awareness programs can be useful to manage the

analysis, Porter's five forces analysis and Feasibility studies. Also this helps to

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identifying

next

objectives

for

the

situations.

organization from the input of section C displayed in the diagram.

B1, B2, B3, and B4 represent the objectives defined for the organization. B3 has considered as ERP adoption (objective) of the organization. Even though the decision made by the top management, the fact finding and running surveys can be conducted by individual Department heads and HR departments of the organization. C This represents the Climate survey done by regular basis with in the organization to analysis stake holder interests, whether the previous objectives are successful. Do the and employees process Steps indicated in each layers are described as below. 1. Once the decision made to initiate the ERP adoption based on the analysis run evaluating the objective of adoption of ERP. Organizations must start running awareness programs of objectives of adopting ERP system. Make the people aware of the change that will take place within the organization and clearly defined the objectives of the change. Mean time management start evaluating whether what ERP to be selected and what vendors to be selected for the implementation. Steering committee will appoint at this stage. Or based on the analysis done whether to go for a ready13

practicing

standards

introduced in the previous changes etc. Most preferably conducted by HR

department.

made ERP implementation. 2. Once finished evaluating and selecting a vendor. The process continues setting up core teams for each module that going to be implemented within the organization with the supervision of vendor

consultants. Awareness programs are still under process to mitigate any resistance. Other actions will be considered at this stage to mitigate unnecessary resistance. 3. Implementation will be commencing soon after setting up core teams and given training of their responsibilities to make the implementation success. ERP specific methodologies will be adopted and followed within team until the golive/roll-out. Recruiting external staff or educate internal staff for positions will be decided and executed at this stage. 4. End user training and defining their responsibilities within the scope will be conducted at this stage. 5. Post-ERP environment monitoring will be conducted after the go-live. Climate surveys will be conducted to analysis the stakeholder satisfaction. Other analysis to check whether the organization achieved its intended objectives though the ERP
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adoption.

Conclusion Having carefully analyzed the factors present in this report realized that most of the organizations in Sri Lanka have their own set of objectives to be achieved in their life span. ERP adoption is one such objective at a stage of growing organization in its life span to stay competitive and adopt best practices though the ERP. Further observations revealed that most of the organizations in Sri Lanka making ad-hoc, quick decision to make possible their objectives without proper analyzing the requirements of their objectives without analyzing their strength, weakness, opportunities and threats related to that objective before making decision go for it. It is observed that due to lack of knowledge in standards and analyzing models employed in their decision making processes. Further realized the top and middle management was promoted in to their current designation truly based on their long years of experience in the same organization and due to the loyalty to the organization. Therefore their decision purely based on their experience within their scope of knowledge. These scenarios have led to failures or abandon the projects like ERP and waste huge amount money of organizations. However, there are few organizations doing critical analysis before go achieving their objectives/milestones as they grow with the time. Noticeably they are able to reap the success from achieving their objective and stay competitively among others. The proposed Layered Growth Model presented in the report can be used as a framework to mitigate the implication arising due to any changed occurred in an organization. Further it allows organizations to achieve their objectives during their life span in a manageable, structured and very appropriate way. Adopting such model theoretically helps to handle any change management within the organization successfully.
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Reference
[1] M. S. Mutthusamy, Analysis of the Decision-Making Process for the Adoption of Enterprise Resource Planning Systems iin Sri Lankan Business Environment, Department of Industrial Management, Faculty of Science, University of Kelaniya, Sri Lanka. [2] J. Rajapackse and P. B. Seddon, Why ERP may not be Suitable for Organizations in Developing Countries. . [3] A. K. Dixit and O. Prakash, A Study of issues affecting ERP implementation in SMEs. . [4] I. Kemppainen, CHANGE MANAGEMENT PERSPECTIVES IN AN ERP IMPLEMENTATION, Turku Centre for Computer Sciences (TUCS) / University of Turku, Lemminkisenkatu 14 A, FIN-20520 Turku, Finland. [5] The Sundayleader, ERP to optimise a companysinternal value chain. [Online]. Available: http://www.thesundayleader.lk/archive/20030803/business-5.htm. [6] J. Rajapackse, P. B. Seddon, and R. Scheepers, Why ERP Systems Fail to Generate Intended Benefits in Developing-country Organisations. . [7] M. . L. . Goonetilleke, H. . S. A. Fernando, D. C. Elvitigala, W. A. G. . Gunarathna, and A. . G. T. Dissanayak, Enterprise Resource Planning Requirement At John Keells Holdings, MBA in IT Department of Computer Science & Engineering University of Moratuwa. [8] Microsoft, ACL Cables PLC Sri Lanka., Cabling Manufacturer Gains More than 75 Percent Improvement in Streamlined Processes. [Online]. Available: http://www.microsoft.com/casestudies/Microsoft-Dynamics-NAV/ACL-Cables-PLC/CablingManufacturer-Gains-More-than-75-Percent-Improvement-in-Streamlined-Processes/4000007308. [9] Microsoft, ODEL PLC Sri Lanka, Retail Company Accelerates Growth with Increased Visibility. [Online]. Available: http://www.microsoft.com/casestudies/Case_Study_Detail.aspx?CaseStudyID=4000010996. [10] T. Suraweera, S. Mahagederawatte, C. Kahandawaarachchi, P. Hewamallikage, D. Periyapperuma, and M. Adipola, Knowledge Management Implicationsin ERP Implementations:Evidence from Sri Lankan Cases, Department of Information Management Sri Lanka Institute of Information Technology New Kandy Road, Malabe, Sri Lanka. [11] V. Wickramasinghe and V. Gunawardena, Critical elements thatdiscriminate between successfuland unsuccessful ERPimplementations in Sri Lanka, Department of Management of Technology, Faculty of Engineering, University of Moratuwa, Moratuwa, Sri Lanka. [12] Adaderana, SAP announces strategic plans and new alliances in Sri Lanka. [Online]. Available: http://www.adaderana.lk/biznews.php?nid=78.

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