ERP Life Cycle: Implementation and Operation and Maintenance
Chapter 6 - ERP Life Cycle: Implementation and Operation and Maintenance
Objectives of ERP Implementation and Operation
Recognize activities during the implementation stage of the ERP life cycle.
Understand various types of ERP customizations.
Identify steps involved in data migration.
Describe specific testing types conducted during ERP implementation.
Differentiate among various ERP implementation strategies.
Identify the advantages and disadvantages of consultant usage during ERP implementation.
Acknowledge operational and maintenance issues in the ERP life cycle.
Introduction to the ERP Life Cycle
In the previous chapter, the first two stages of the ERP life cycle—planning and package selection—were examined. Following these stages, a company prepares to implement the ERP system. Implementation generally spans a longer duration than the earlier stages combined, influenced by factors such as project scope, customization, resources, and organizational complexity.
Post-implementation, the operation and maintenance phase begins, during which the system stabilizes while receiving patches and upgrades. It is crucial for all participants in an ERP project to grasp the required tasks and address issues at each life cycle stage to avoid disastrous outcomes comparable to financial, legal, operational, and reputational setbacks. Conversely, effective project management can yield significant rewards for a company.
ERP Life Cycle – Implementation
Definition of Software Implementation
Software implementation represents a structured method for integrating software into organizational workflows, fundamentally transforming its operations. Historical ERP implementations, particularly those during the late 1990s and early 2000s, faced numerous failures, prompting the need for better implementation knowledge. Current common issues include widespread ERP failures that can result in significant operational disruptions.
Importance of Structuring the Implementation
Success starts before professional consultants enter, requiring robust project sponsorship and clearly defined objectives for the ERP system. Implementation involves various activities each demanding specific skills from resources, both internal and external, organized under a well-managed project plan.
Key ERP Implementation Activities
Installation
Software Installation: The ERP software is either transferred from disc or downloaded to a computer's hard drive, necessitating installation of the ERP system, related database, and operating system on servers.
Multiple Environments: As discussed in Chapter 2, implementation creates distinct environments including Development (DEV), Quality Assurance (QA), and Production (PRD). Each serves a vital role in ensuring the ERP system meets requirements before going live.
Installation Considerations:
Upgrading the technical infrastructure may be required, especially for hosted solutions where the service provider (often the software vendor) manages system access based on contractual specifications.
Configuration
ERP systems feature numerous configuration options that require careful selection to align the software with a company's needs. This selection process, achieved by making changes to configuration tables, is critical for successful implementation.
Configuration Decisions include:
Number of legal entities in the system.
Default currency/language settings.
Customer credit approval processes.
Fiscal year end definitions.
Units of measure for materials and transaction limits for employees.
Example: Dell Computers took over a year just for configuration decisions during their implementation.
A vanilla implementation utilizes only the basic configuration options, potentially yielding quicker and less costly deployments but may lack the customization some businesses desire.
Customization
Customization refers to modifying or adding code to meet specific company requirements when configuration options are inadequate.
Statistics: A study showed 89% of companies customized their ERP systems due to unique business needs or regulatory compliance requirements.
Customizations encompass various solutions collectively termed RICEF:
Reports: Custom reports to replace inadequate native system functionality.
Interfaces: Connect disparate systems for data exchange, often requiring extensive setup.
Conversions: Assisting in the data migration process by translating data into the appropriate formats for the ERP system.
Enhancements: Adding customer exit programs for additional functionalities without altering core code.
Forms: Development of technical specifications to produce customized output documents.
Disadvantages of Customization
Risks associated with creating custom code lead to quality assurance challenges, potentially resulting in unstable systems.
Customization can inflate costs by necessitating additional programming staff and maintenance.
Heavy customization may detract from change management focus, complicate integrations, and hinder upgrade processes.
Bolt-on Technology
Companies may seek third-party software, or bolt-ons, to add functionalities missing from the primary ERP system, though integration can often require specific interfaces.
Conference Room Pilot
Early in package selection, a system is installed for practice tasks, known as Conference Room Pilots (CRPs), with key objectives:
Document desired end-to-end processes.
Identify functional gaps with the existing legacy systems.
Assess impacts on departments and determine training needs.
Test system functionalities before go-live.
Data Migration
Data migration entails moving master and transaction data from retiring legacy systems to the new ERP. This process, known as ETL (extract, transform, load), requires careful planning to ensure data quality prior to migration.
Procedures for Data Migration include:
Data extraction from legacy systems.
Data collection and cleansing to match ERP requirements.
Data harmonization for standardization.
Data loading requires iterative testing for accuracy pre- and post-transfer.
Testing
Testing is vital to confirm ERP functionality and data integrity. Key types include:
Data Migration Testing: Assessing transferred data utility within the new system.
Unit Testing: Testing individual business processes for compliance with specifications.
Integration Testing: Evaluating end-to-end processes combining all configurations and customizations.
User Acceptance Testing: Ensures user approval before production.
Authorization Testing: Verifies security roles and access permissions.
Performance Load Testing: Assesses ERP response during peak usage.
Change Management
Change Management is critical for guiding employees through ERP implementation changes.
Employees face job alterations; some roles may be eliminated; thus, departments should prepare workers for new skill requirements.
Structural changes in relationships can raise resistance, necessitating favorable communication and involvement in the implementation processes.
Training
Training should commence early to enable users to utilize the ERP efficiently from go-live. Training methods can include:
Train-the-Trainer: A cost-efficient method leveraging super users to educate peers.
Training must persist beyond go-live with refreshers to mitigate productivity drops.
Super Users and Consultants
Super Users: Often serve as the link between end users and technical teams, providing support and insights about system functionality.
Consultants: Provide external expertise in areas like implementation and change management, though their usage must strike a balance to avoid dependency.
Implementation Strategies
Phased Implementation: Gradual rollout to reduce risks and maintain a manageable workload.
Big Bang Implementation: All-in-one system intro, posing higher risks but potential for quicker returns on investment.
Parallel Implementation: Simultaneous operation of old and new systems—often replaced by rigorous pre-go-live testing.
Risk Management
ERP implementation entails various risks; a prevalent study indicates 54% of ERP projects will exceed estimated time and budget.
Risks derive from inadequate resource allocation, poor requirement gathering, inadequate user communication, and governance gaps, necessitating comprehensive planning and management to mitigate.
Operation and Maintenance
Go-Live and Stabilization
Post-implementation, companies enter a stabilization phase, which may reduce performance due to training and fine-tuning. Maintaining support is crucial during this time.
Center of Excellence (COE)
Establishing a COE after go-live helps manage performance improvements and ongoing training effectively.
Maintenance Responsibilities
Regular preventive maintenance and emergency interventions are fundamental to maintaining ERP efficiency. Companies must prioritize software updates to ensure smooth functionality post-go-live.
Upgrades
ERP systems typically see upgrades every five to seven years, requiring diligence to balance the upsides of new functionalities with potential disruptions to operational flows.
Summary
The ERP life cycle consists of four stages—implementation and operation/maintenance are pivotal. Implementation activities must encompass all areas, including installation, customization, data migration, and extensive testing. On the operational side, continuous support and enhancing processes post-go-live are vital to maximizing the ERP investment.