Information System today have been the inevitable part of every business. In most organizations, huge volumes of data accumulate: data of products, data of customers, data of employees, data of the delivery of products, and data of other sources. These data therefore play an important role in contemporary organizations and must be stored, managed, and processed, which is where information systems come into play. The information system manages the data’s such that it could play a vital role in the day to day business decision. So, it’s one of the crucial part to the management for getting the validity of the reports being generated from their system.
Amongst Various MIS, Enterprise Resource planning (ERP) are globally used system which is aimed to supports the main business processes of an organization— for example, human resource management, sales, marketing, management, financial accounting, controlling, and logistics. In the past, each business process was encapsulated in a separate information system. As most of these business processes use related data, much redundant data had to be stored within the respective information systems.
The increasing number and complexity of information systems forced organizations to spend much effort in synchronizing the data of all information systems. ERP helps the organizations to gain a competitive advantage by integrating all business processes, managing and optimizing the resources available. ERP systems provide multi-instance database management, configuration management, and version (or customization) management for the underlying database schema, for the user interface, and for the many application programs associated with them. Enterprise resource planning (ERP) system has been one of the most popular business management systems, providing benefits of real-time capabilities and seamless communication for business in large organizations.
Globally the importance of the ERP application has been growing day by day due to its strong integration capabilities. The Importance of the integrated System has also been realized in Nepal as well, as the result of which the ERP system has now been gradually adopted by many corporate houses. However, the utilization percentages of the system in such company’ is not that encouraging.
Why ERP Project Fails?
Not all ERP implementations have been successful. Since ERP implementation affects entire organizations such as process, people, and culture, there are a number of challenges that companies may encounter in implementing ERP systems. In spite of ERP’s significant growth from the late 1990s to the present day, there are a number of challenges that companies may encounter when implementing ERP. Most multinational firms are using ERP and that more small and midsize companies have begun to adopt few modules of ERP. Despite ERP’s promises to benefit companies and a substantial capital investment, not all ERP implementations have successful outcomes. Research shows that almost Forty Five Percentage of the Implementation has failed. Further, ERP implementations commonly have delayed an estimated schedule and overrun an initial budget. Furthermore, the literature indicates that ERP implementations have sometimes failed to achieve the organization’s targets and desired outcomes. Much of the research reported that the failure of ERP implementations was not caused by the ERP software itself, but rather by a high degree of complexity from the massive changes ERP causes in organizations. Having said that, not all the ERP system are well tested and full proof as various customization takes place as per the requirement of the company. There are multiple reasons for the failure of the ERP Projects major of which has been highlighted below:
a. Lack of Proper Co-ordination within the ERP Project Team
b. Higher Expectation from Management
c. Vendor defining the functions without Identifying the Required Changes
d. Resistance for change
e. Lack of Motivation and Training
f. Failure in Business Process Re-engineering and system’s customization
How ERP Implementation can be successful?
a. Assemble Proper Team
Before making any key decisions regarding your ERP project, you must ensure that you have the right people on board. Successful ERP Implementation should have at least following compositions
• Ensure someone at senior level is involved from the very beginning.
• Selecting a good project leader (from Both Vendor & Client Side) who would drive the entire project till the completion.
• Representation from the user level who have an understanding of how each part of the business works, also called Business Process Owners.
• Ensure an Independent Reviewer on Board so that he would play the role of the watch dog from the Planning to the project handover stage.
b. Proper planning
Planning is the most Crucial Stage of the ERP Implementation where every blueprint documents of every workflows needs to be defined and documented. About 50% of the ERP failures is due to lack of planning of the system. Both the Vendors and Clients are in hurry to make the system “Go-Live” without agreeing with the blueprint/Process flows of the system.
Further the planning of the communication also plays and vital role in the implementation process. Strong communication within the entire organization during the implementation process increases success for ERP implementation. It allows the organization’s stakeholders to understand the goal and the expected benefits of the project as well as to share the progress of the project.
c. Running Parallel System
Since the ERP Process is not one day process; it requires validity of every process and transaction on each steps. So, it’s very important to continue with existing system for some time so that the confidence can be built amongst the user/managers for new system and process.
End user training has been recognized a critical factor for ERP implementation. Due to the complexity of the integrated ERP system, end user training is essential for a robust understanding of how the system works and how to use it. Consequently, appropriate end user education and training will maximize ERP benefits and increase user satisfaction.
It’s really tough for the management to manage the changes aroused due ERP Environment, the frustration is obvious amongst the staff due the massive transformation of the legacy. Here management would have to play a very positive role for the overall motivation of the employees and users. The fear of mistake amongst employee has to be overcome
f. Proper Documents
Disputes arises between client and Vendors due to lack of proper documentation. So, it’s very important to make every documentation of every modules, process, and controls and agreed by both the parties so that the chances of disputes are minimized.
g. Ownership transfer
ERP Project can only be successful when the end users take that project as their own project. The ownership can be established by handing over the project after proper assurance of the product quality and reliability. The over dependency on minor issues should be avoided; internal team leaders has to take the ownership to drive the entire process.
h. Support from Management
Successful ERP implementation depends on management to prepare for challenges that might be faced as well as senior management who are involved in overall strategy of the company and are not familiar with technical aspects. Management has to clear on the matter that ERP System is not an overnight process; sometimes it may take more than a year to stabilize the system.
In a Nutshell, ERP project has huge investment both in terms of Human Capital and financial resources. The success and the failure of the project entirely depends on the commitment of the team members of the ERP Project who drives the entire process.
(Author is a Chartered Accountant Cum SAP Functional Consultant with Extensive Experience in ERP Implementation and also representing SAP Partner for Nepal )