IMPLEMENTATION OF ERP

SYSTEM:
A DETAILED UNDERSTADNING OF THE RISK FACTORS:

INTRODUCTION:

A multinational company has acquired a new asset which has an existing ERP solution. To
bring the new assets in line with the existing company assets, the system needs to be swapped
for SAP. Being a project manager of SYSPRO, I am supposed to bring the new assets in line
with the existing one so that the company doesn’t face any kind of problems. SYSPRO
specializes in ERP and similar integrated software to the distributors and manufacturers.
They are the vendors and their software include all type of business including manufacturing,
accounting, distribution, and operations.

OBJECTIVE:

The objective of this project is to replace existing ERP with the new ERP to bring it in line
with the company standard.

BACKGROUND:

The headquarter of SYSPRO is in Johannesburg. The foundation of company was laid in

1978 by two brothers named Chris and Phil Duff. Our company is considered to be one of the
finest vendors to develop ERP. Our services are now spread over more than 15000 channel
partners and our services are being used by more than 14000 companies (licensed) which are
spread in 6 continents.
We help our users to integrate and automate crucial business processes like sales, finances,
inventory, CRM, supply chain and operations which include:

 ERP

 CRM and Sales management

 Business activity monitoring

 Warehouse management

 E-commerce

 Business intelligence

INHERENT RISKS:

There are some inherent risks associated with the implementation of ERP which are
discussed below:

1. Redesigning Business Processes (Failure):

When the ERP is implemented, the ideal part is to redesign the processes so that the purchase
fits an ERP system. Changing the existing and old process becomes very difficult in most
businesses. Moreover, customizing ERP system so that it fits in the processes is time
consuming and costly.

2. Lack of Management Support from Seniors:

Project objectives and its implementation is dependent on the support from top management.
So, when the support of senior management is present, the implementation becomes easy.

3. Insufficient Training:

Investment in skilling and training is vital when it comes to meeting the deadlines and project
objectives. When ERP implementations are considered, meeting deadlines become more
important. this is where the lack of skill and insufficient training jump in and may hinder in
targeting desired performance.
 4. Inability to recruit and Retain Systems:

Retaining and recruiting ERP specialists is a task as these people usually have very high rates
and are not economic for companies.

5. Full-Time Commitment of Employee:

Commitment of employees and managers for projects like this is uncertain as they are not
sure of what doors will be opened for them once they are back to their positions.

6. Poor Technology Planning:

Inadequate infrastructure and technical expertise for new project requirements also add up to
the risk factors associated with ERP implementation.

7. Lack of Change Management:

Accepting new reforms and changes in the systems that are being used over the years
becomes a task. For an employee who was been using a particular software for quite a long
time, accepting new ones is both difficult and tough.

STAKEHOLDERS & STAKEHOLDER ANALYSIS:

Stakeholders are the list of people who work within your organization and for it. From owner
to newly recruited executive, everyone comes under the domain of stakeholders. From the
perspective of an organization, projects associated with ERP are comprehensive as well as
integral of company-wide processes and systems. Therefore, the involvement of almost all
stakeholders and departments affect the working of organization.

The actions of stakeholders determine the failure or success of project. The interactions they
have and interdependence of roles within the organization influence each other’s role.
Therefore, they tend to have effects on final project outcome. The list of most important
stakeholders is as follows:

 Business Owner:

The owner of business is an integral part of the stakeholders list. An owner is responsible for
guiding the software company inside the organization. Owners help in understanding about
the processes and practices while mentioning the style and way they want it to be.

 Top Manager:

Top manager is another important part of stakeholders list. The role of top manager is quite
extensive. He is responsible for controlling and steering the project. Allocating the needed
resources and providing financial and ethical support to the people of organization are some
other responsibilities of top manager.
  System Manager:

Another important stakeholder in an organization is System Manager. The system manager is

knowledgeable and responsible for the needs of firm. He makes decisions and necessary steps
to ensure smooth working. He is also responsible for the network infrastructure the company
possesses. Therefore, it is very important that the manager is aware of the ERP software
needs and the infrastructure of the system in order to eliminate the deficiencies in existing
working conditions.

 Project Manager:

Project manager is responsible for managing the progress of project. He is also responsible
for solving and finding solutions to the problems being faced by organization. One other role
of manager is to manage the allocated responses.

 Business Consultant:

He is responsible for guiding the software company top choose the best option of all.

 IT Manager:

IT manager is responsible for the key for all the servers.

 Executive (Key User):

Responsible for executing the work assigned.

 Administrative Staff:

Administration works for supervising the people and helping them in sorting out the
problems. Administrative staff is the authority which is established to keep a record of the
working of team.

 Vendors:

Vendors are the people from whom a company buys stuff. They are added to the stakeholders
list because they affect the performance of company. Vendors are the external stakeholders
who are responsible for designing systems. They are also responsible for providing regular
updates and upgrades about the system. They ensure the compatibility of a system with the
present infrastructure.

 Sales Team:

Sales Team is responsible for all the sales and generation of desired revenue. This team
involves the marketing and sales team.
COMPARISON OF OBJECTIVES:

The objective of the company is to simplify the business complexities for the distributors and
manufacturers. Our strengths and priority lie in adopting a simplified approach towards
technology. We believe in commitment to both the partners and our customers while this
project this project revolves around to replace existing ERP with the new ERP to bring it in
line with the company standard.

IDENTIFICATION OF RISKS:

 POOR PROJECT PLANNING:

Project planning is an integral step in identifying and planning for the coming endeavor. For a
lot of companies, it becomes a task to plan a project according to its needs and basis. The
complexity of the planning is often neglected or underestimated by many organizations. The
resources that are required to implement an ERP system are not usually present because of no
planning. This results in failure of establishing an accurate plan. Moreover, the unpredictable
events are also overlooked because of it which affect the deliverables and quality of project.

 POOR PROJECT TEAM:

For the deliverables to be delivered on time and meeting the desired goal, it is very important
to have a strong team and people who are dedicated towards their goal. These individuals are
aware of the necessary experience, commitment, willingness, and knowledge and are ready to
work more than their limits.

 SECURITY:

Security is one of the important factors of risks associated with the implementation of ERP
system. As these systems are dealing with almost every other process of organization it is
installed in, the factor of security massively affects the risk factor. Massive amount of data is
involved, and the project team must be more than careful about its implementation.

 PROJECT COMPLEXITY:

It is often assumed that ERP has its implications in IT department only and it is assumed to
be solely an IT project. This is a very wrong assumption as the project is quite complex and
has much greater domain.

 VAGUE METHODOLOGY:

The methodology organizations adopt to carry out the process are vague and often not
rewarding. This has a direct impact on the success and effectiveness on the objective of
project.
  EMPLOYEE COMMITMENT:

Employees are the most valuable assets of any organizations. They are the people who make
money and do all the work. Their importance and performance in organization dominates the
way it works. When there is change in system or working of a system, it might cause
nonawareness and massive handling issue among employees. They might face difficulty in
accepting new changes and to develop a familiarity for such software often becomes a task.

 MANAGEMENT HETEROGENIETY:

One of the most appreciable and unique features of organization is the establishment of
harmony and respect among the people working for it. BPR calls for the coordination among
the processes, technology, and people. The management often fails to establish that sort of
relation among the employees.

 PROBLEMS IN CROSS FUNCTIONAL TEAMS:

The making of teams for a particular task is a task itself. An ideal team consists of people with
multidimensional capabilities and understanding of each other’s expertise. Moreover, the needs of
cross functional teams are not fulfilled which results in creation of problems.

 LACK OF PROPER TRAINING:

It is essential for an employee to develop the strategies and skills according to the
requirement of implementation. A lot of companies don’t focus on providing training to the
employees which results in complexity and confusion.

 FOCUS ON SHORT TERM OBJECTIVES:

Focusing on short term objectives and non-consideration of long-term impacts is a risk factor
too. ERP is a long-term case which requires different set of skills and expertise.

 COMMUNICATION RISKS:

Communication is very important for an organization to work properly. The lack of

communication between the administration and employees results in poor performance and
inability to understand the project objectives and deliverables.

 LACK OF BUSINESS ANALYSTS:

There are lesser number of business analysts with knowledge about business and technology.
This affects the implementation as there is no proper understanding of the project.

 INABILITY TO RECRUIT AND RETAIN:

Recruiting and retaining staff that are technical and have proper knowledge about the project
is difficult as they are highly paid workers.
  LACK OF SENSITIVITY:

Lack of sensitivity to user resistance also affects the ERP implementation.

PROBABILITY IMPACT MATRIX:

Probability impact matrix is a method to measure and view risk factors based on likelihood
and severity. It is one of the most essential and used method to assess any factor qualitatively.
This qualitative analysis is done in the form of matrix and table which sorts out the variables.
Likelihood is on the column side with ascending order from downwards to upwards while
severity is along rows with ascending order from left to right. This matrix is extremely
helpful in understanding the risks of a particular project.

In our case, a lot of different factors that were associated with risk were identified and looked
at. Although these factors have affected the working as a combination, but they could be
viewed as less severe and more severe factors. A 5*5 probability impact matrix is used to rate
them. Following is the numbering associated with each factor so that the matrix is not
confusing and stuffed. This made it easy for us to look at the likelihood and severity of these
factors.

1-- POOR PROJECT PLANNING.

2-- POOR PROJECT TEAM:
3-- SECURITY.
4-- PROJECT COMPLEXITY.
5-- VAGUE METHODOLOGY
6-- EMPLOYEE COMMITMENT.
7-- MANAGEMENT HETEROGENIETY.
8-- PROBLEMS IN CROSS FUNCTIONAL TEAMS:
9-- LACK OF PROPER TRAINING:
10-- FOCUS ON SHORT TERM OBJECTIVES:
11-- COMMUNICATION RISKS:
12-- LACK OF BUSINESS ANALYSTS:
13-- INABILITY TO RECRUIT AND RETAIN:
14- LACK OF SENSITIVITY:
 DISCUSSION:

The qualitative analysis of the risk factors with the help of establishment of probability
impact matrix made it easy to assess and understand the risk factors mentioned above.
Although, all the factors have their due impact on the working and deliverables of project,
there are some that have the highest impact. These shortlisted factors are those that greatly
affect the project outcome and might stop in reaching for the targeted goal. Therefore, if we
target and cater the factor affecting the most, we would be able to rectify the whole business
properly. This would eventually result in more profit and easy implementation in our case.

As per the qualitative analysis of the risk factors, poor project planning is the most crucial
part of factors and has the most undesirable effect on our implementation. As discussed
above Project Planning is an integral step in identifying and planning for the coming
endeavor. The resources that are required to implement an ERP system are not usually
present because of no planning. The complexity of the planning is often neglected or
underestimated by many organizations. For a lot of companies, it becomes a task to plan a
project according to its needs and basis.

Project planning in my opinion governs the whole basis of project. It covers all the essentials
of a project, its deliverables, objectives, problems, implementation, and output. If we focus
on planning the project accordingly while catering the targeted outcomes, we would be able
to obtain good results and satisfactory performances. Therefore, it needs a lot of attention,
and this part should be conducted well to make sure that the implementation of ERP is done
properly.
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