People: Your Key to Successful ERP, Smart Investor, January, 2003

By Chee Chong Hwa, CA(M), CPA, Chief Executive Officer of KarenSoft Technology Berhad, a homegrown solutions company.

The numerous benefits, the outcome of a successful ERP2 system implementation, make ERP2 projects involved yet worthwhile undertakings. It is the norm for project managers to focus on the technical and financial aspects of a project but many forget that often, it is the human factor that plays an equally consequential role in ensuring the success of an ERP2 implementation.

It would not be wrong to say that it is one of the key factors that drive a successful ERP2 implementation. Hence, this article looks at the critical factors needed for a successful ERP2 implementation with a special emphasis on the human factor behind successful ERP projects.

Distilling from KarenSoft's experience of more than 10 years of implementing large-scale enterprise applications for customers, the discussion of critical success factors will be divided into two categories-strategic and tactical factors.

Strategic factors are those that must be present throughout the entire life cycle of an ERP2 project while tactical factors, on the other hand, applies to specific phases within a project's life cycle.

What is ERP2?

Let's take a quick look at ERP2 and what it consists of before moving onto a discussion of critical factors. ERP2 is defined as Extended Enterprise Resources Planning (ERP2) where it comprises Enterprise Resources Management (ERM), Supply Chain Management (SCM) and Customer Relationship Management (CRM).

Seen as an equation, ERP2 = ERM + SCM + CRM where: ERM = Financial Management System + Fixed Assets Register + Human Resources Information System; SCM = Sales Distribution System + Materials Requirement Planning + Logistics Management System + Planning & Production System.

Alternatively, ERP2=ERP+CRM, where ERP=ERM+SCM

A good ERP2 system should consist of individual modules which can be adapted to suit the specific needs of each customer, eliminating the need to shoehorn the customer's business processes into the ERP2 system's reference model.

Critical Success Factors

There are 8 strategic factors to look out for in carrying out a successful ERP:

a) Sustained management support

Sustained management commitment, both at top and middle levels during the implementation, refers to management's own involvement and its willingness to allocate valuable organisational resources.Management support is important for accomplishing project goals and objectives and aligning these with strategic business goals.

b) Effective organisational change management

Organisational change refers to the body of knowledge that is used to ensure that a complex change,like that associated with a new ERP2 system, gets the right results, in the right timeframe, at the right costs. A proper change management ensures the acceptance and readiness of the new system, allowing the organisation to derive benefits from its use. A successful organisational change approach relies on a proper integration of people, process and technology.

c) Good project scope management

Project scope management involves the clarification of project goals and their synergy with the organisation's strategic goals. This includes both scope definition and control. Some components of this factor are: scope of the supply chain, business processes, and business units involved, ERP2 functionality to be implemented, and technology to be replaced/upgraded/integrated.

d) Competent project team

ERP2 projects typically require some combination of business, internal IT, vendor, and strategic consulting support. The structure of the project team has a strong impact in the implementation process. Note that two important factors are the integration of the vendor's consultants into the team and the retention within the organisation of the relevant ERP2 knowledge, A reliable solutions provider should supply both technology and business consultants to a customer's project team. It should also include a training programme that's designed to maximise the retention of score ERP knowledge needed by users to perform their tasks effectively.

e) Business process improvement

Business process improvement concerns the alignment of the client's business processes with the ERP2 system's business model and related best practices. This process is especially critical for small businesses that do not have well-defined or rigorous business processes. For example, KarenSoft customers under this category will typically purchase our standard ERP2 package with the goal of rapidly aligning their ad hoc workflows with more efficient ones found in our ERP system. This is done primarily through quality, training programmes provided by our own KarenSoft Institute of Technology.

f) A project champion

The main reason why a project champion is considered to be central to successful implementation is that he/she has both the position and the skills that are critical for handling organisational change. In the context of Malaysian SMEs, the ideal project champion is usually the Chief Executive Officer or Managing Director.

g) User involvement and participation User participation refers to the behaviours and activities that users perform in the ERP implementation process. User involvement is evidenced by full and active participation in the training programmes organised by the vendor.

h) Trust between stakeholders

During the implementation phase there are different stakeholders involved such as managers, users, consultants and vendors. A high level of trust between them will go a long way towards the achievement of project goals and the resolution of conflicts.

Tactical Factors

a) Dedicated staff and consultantsUsually, in many cases the time dedicated to the implementation project is shared with other activities. It is also important to ensure that the staff believes in the project success and makes the necessary sacrifices of time and energy. Consultants should be involved in a way that helps the implementation process while also sharing their expertise with the internal staff involved.

b) Strong internal and external communication Communication should be of two kinds: internal within the project team and external to the whole organisation. This means not only sharing information between the project team but also communicating to the whole organisation the results and the goals in each implementation stage.

c) Formalised project plan/schedule This means having a well-defined plan/schedule for all the activities involved in the ERP implementation, with appropriate allocation of resources for these activities. To ensure project completion according to the plan/schedule, close monitoring and controlling of time and costs should be done by the project manager.

d) High-quality training programme The training plan should take into consideration both technical staff and end-users, and its scope will depend on the type of implementation approach selected. KarenSoft's approach to training is two-fold: one, we seek to impart the core ERP2 knowledge needed by our users to perform their tasks and second, we seek to impart enough system maintenance and support knowledge to our customer's IT personnel so that they can offer effective first-line support to the users.

e) Preventive troubleshooting This factor is related to the problem and risk areas that exist in every implementation. Troubleshooting mechanisms should be included in the implementation plan. Two important aspects are the adaptation and transfer of old data, and the 'go live' moment. The time and effort involved in the transfer of data from previous systems should be properly planned and budgeted.