Implementation of ERP System – Reengineering vs Customization, Big Bang or Phased Implementation

Implementation of ERP System, is a complex exercise, involving many process alterations and several legacy issues. Organizations need a implementation strategy encompassing both pre implementation and implementation stages. The fallout of a poor strategy is unpreparedness of employees, implementation not in conformity with wider business strategy, poor business process redesign and time and cost overrun.

Following issues must be carefully thought out and formulated, as a part of implementation strategy, before embarking on actual implementation:

Business Process: Hypothetically, company insiders should know best about the processes of their organization. But employees often constrained to work in departmental silos and overlook wood for the tree. Under most circumstances, prevailing business practices are not properly defined and no”as is” flow charts, documenting existing processes, are available.

An ERP implementation could be a great occasion to assess and optimize existing business processes, control points, breaking points between departments, and interfaces with trading partners. But, often, due to resistance to changes and departmental clouts, ERP implementation is comprehended as an exercise to automate legacy processes. This may lead to little improvement in underlying business processes, resulting no appreciable return on investment.

Automating existing manual processes peculiar to a company necessitates, significant source code customization, as even a best fit ERP product match to a maximum of 85% to 90% of legacy processes. Source code customization will not only require changing of software objects but also need changing data models. The efforts needed to make such changes are significant in terms of development, testing and documentation. The future cost of maintenance and upgrades will be substantial, affecting entire life cycle of the system.

Unless a considered view favoring process changes is taken as a part of implementation strategy, pressure will mount subsequently for more and more customization, when the exercise of Business Process Mapping and Gap Analysis is taken up during implementation.

ERP systems are highly configurable and contain series of design trade off to meet various nuances of the same business cycles/processes. This should, normally, be sufficed to cover needed processes, probably with a little bit of swapping whenever needed. At occasions, it may be imperative to change source code to account for some unique core processes of the organizations. Procedure for authorization of such changes, normally requiring attention from sponsor, should also form part of the strategy document.

Implementation Methodology: Selection of implementation methodology constitutes an important component of implementation strategy. Most popular implementation methodology is “big bang” approach where on a scheduled cut-off date; entire system is installed throughout the organization. All users move to the new system and manual/legacy systems are discontinued. The implementation is swift and price tag is lesser than a phased implementation. On the flip side, risk element is much higher and resources for training, testing and hand holding are needed at a much higher level, albeit for a shorter period of time.

Another major implementation strategy is “phased implementation”, where roll out is done over a period. This method is less focused, prolonged and necessitates maintenance of legacy system over a period of time. But, phased implementation is less risky, provides time for user’s acquaintance and fall back scenarios are less complicated. There are various choice of phasing such as i) phased roll out by locations for a multi location company ii) phased roll out by business unit e.g. human resources iii) Phased roll out by module e.g. general ledger.

Methodology of implementation should form an important constituent of implementation strategy, which should be formulated after considering availability of resources, state of preparedness, risk perception, timeframe of implementation and budgetary provisions.

Other important strategy issues:

• Legacy data: Gathering, cleaning and removing of duplicate data.
• Hardware and software: Addition and updating of existing resources. Compatibility with existing Operating system and Database.
• Project structure: Project champions and competency centre.

Conclusion: A proper implementation strategy, drawn in advance and containing important strategic directions, should favorably impact project execution. An outside consultant, at this stage, also helps to formulate a proper strategy as well as making a Request for Proposal (RFP) document for selection of vendor, which constitutes the next phase.