Risks & Factors That Affect Global Rollouts of Template ERP Solutions
At this juncture of world economy; all the leading companies across industry groups financial, health care, consumer/industry goods, service, technology and utilities are opting for a template enterprise solution that can support their global operations. However global rollouts of a template ERP solution involves a vast array of “moving parts”—before, during and after go-live – and as a result it presents unique risks in each phase.
It is essential to carefully plan and prepare to handle these risks, to ensure smooth & successful rollout of a template ERP solution.
Based on rollouts carried out in various countries, this whitepaper presents the key risk areas in global rollouts that can jeopardize the effective rollout of a template. This paper analyses in detail the impact of these risks and provides strategies based on real-life lessons learnt to proactively manage and control these risks.
It also evaluates various factors which influence the probability of each of these risks and hence the overall risk level of a rollout. Recognizing and acknowledging the factors while planning for a rollout, will support improvements in assessing the severity of the various rollout risks and help development of a comprehensive risk mitigation plan before beginning the rollout journey.
Companies around the globe; aspiring to capitalize on the promise of global markets, have identified that they need something that goes beyond the possibilities provided by silo/fragmented ERP Systems. In their pursuit, companies have recognized that a “Template ERP Solution” is the key to propel their aspirations.
But though the advantages experienced due to “Template ERP Solution” are clearly many and are visible in reduction in operational cost, improvement in operational performance and global visibility into operations; the path to achieve it is massive and complex in nature.
Implementing a “Template ERP Solution” can be broken into two major phases, one is the definition of a “Global Solution” which is the “Template” and the second is to roll out the “Template” to various geographies/markets.
This paper talks about the key risks in template rollouts.
1.1 What is Risk?
The ISO 31000 (2009) / ISO Guide 73:2002 defines risks as the ‘effect of uncertainty on objectives’. In this definition, uncertainties include events (which may or may not happen) and uncertainties caused by ambiguity or a lack of information.
According to Factor Analysis of Information Risk (FAIR), risk is the probable frequency and probable magnitude of future loss.
To put this in simple perspective, risk is everything which will make a project costly or cause delays and failure.
2 Risk Areas in Global Rollouts
On the basis of our experience of global ERP rollouts done across various industry groups, we have identified following major risk areas that if not addressed in proactive timely manner can jeopardize the successful rollout of template
- Scope Control
- Template Readiness
- Skills, Roles and Responsibility
- Knowledge Management
Approximate percentage contribution of these risks areas, to the total rollout risk is represented in below figure
Some of the risks identified result in reduction in the quality of a rollout, where as some others affect the project budget or the project schedule. For the risk areas identified, it is essential to do the risk assessment considering the following areas of impact:
- Timeline: Schedule delays that impact the critical path of the project and the associated go-live date
- Cost: Overshooting of project budget or project resource requirement.
- Quality: Final product is not meeting the originally envisioned solution
The risks areas mentioned above have been explained below along suggested strategies which can be used to either reduce the impactor avoid them completely during the course of the project life cycle.
2.1 Scope Control
Given the diversity of business processes across markets and the size and complexity of the initiative, a clear scope is critical to create a strong rollout plan that keeps the effort on track.
Absence of well-defined tightly controlled scope definition measures can lead to delays, incorrect effort estimates and frequent change requests during and after the rollout. A changing scope not only hampers the projects timelines, cost and quality but also makes the template weak as many local requirements are added to the template.
To alleviate the above risks, an expansive and robust template governance model is required that safeguards the content of the globally defined template and oversees the scope definition during rollouts.
Suggested strategies for template management and scope control:
- Defining a fitting template governance model: Determine the extent of standardization that can be realistic and the kind of template governance model that would be best-fit for a company, by considering the diversity of business units or geographies, level of centralized control in the company’s operating model, and the overall application landscape approach that is planned to be used.
- Alignment of rollout requirements with the template design
- Core Template Ownership: This should include stakeholders from Business and IT that ensures template sanctity
- Demand Management: Stakeholders liaising with business entities that are already live with the rollout team
- Change Control Board: This should include stakeholders chiefly from the Business
The core team of process experts should have a rich experience in the particular industry vertical and need to provide their expertise in process validation and “fit/gap” analysis. They are accountable to align the rollout requirements with the template design and oversee the design and sign-off on of any deviations during rollouts.
- Definition of stringent template change control
- Gap qualification process is well established
- Localization is strictly allowed for legal & statutory requirements. Local business “must haves” are implemented only after due diligence of business case and quantified cost benefits
2.2 Template Readiness
To execute a project in a minimum time frame, in budget and with no compromise to quality requires a champion template along with necessary tools and accelerators which will speed up the internal phase of the project. Not having a well-defined template along with right set of accelerators will lead to higher rollout turn-around time which invariably leads to higher efforts and eventually higher cost of each subsequent rollout of the same template.
To mitigate the above risks, a well-defined methodology needs to be in place for template definition, which ensures that the template is comprehensive, solid and verified to guarantee globally harmonized processes.
Suggested strategies for making a template ready for global rollouts:
- Bottom up input in defining the template, top-down decision making: Involvement of local process experts from different sites to provide input to the core project team of business experts and IT experts. The core team then presents a template solution, considering the local processes and the standard best practices.
- Baptize the template
- Template enrichment:
2.3 Skills, Roles and Responsibility
Lack / limited availability of skilled process owners and frequent change of participating personnel from local rollout site can also jeopardize the project in many ways. This can lead to delays in the process due to discontinuity at process knowledge or worse can even lead to incorrect understanding of the business process by the rollout team or by rollout site. The effect is cascading and leads to scope creep at later stage of project or definition of a sub-optimal solution, which could endanger the business efficiency for the local market and might also result in resistance/ not-acceptance of the rollout by the local rollout site users.
Ambiguous definition of roles and responsibilities for any stakeholder or between different vendors working on same rollout; is also a major setback to a project of this magnitude, as it can lead to lack of ownership and confusion towards project deliverable.
To circumvent the above risks, it is recommended for a company to have clear roles & responsibility defined for the project team, business stakeholders and the IT organization, clear identification of tasks per phase or role & clear accountability for each task. Along with demarcation of roles and responsibilities, the domain areas of various key stakeholders also should be defined initially, as this prevents conflict and speeds up the requirement gathering, reviews and sign-off of the rollout.
Also to support requirement gathering, reviews and sign-off throughout the rollout and to ensure a successful implementation, the local rollout location should commit to availability & continuous involvement of adequate number of dedicated, knowledgeable SPOCs.
Suggested strategies for doing the same:
- Project organization set up and governance model should be clearly defined. Project charter defining clearly the team structure with each participant responsibility
- Local rollout location team should be aligned along with the project structure of the rollout team with clear communication flow. At every level the contact points and escalation level should be clearly defined
- A dedicated local team from rollout site must be identified with clear expectations set. If required, back-fill for the SPOCs involved from local rollout locations, so that they are able to work didactically for the rollout and are not hindered with other tasks.
2.4 Knowledge Management
Lack of knowledge management could lead to slow acceptance of the solution and can cause following issues:
2.4.1 Change Resistance
Resistance to change is one of the major reasons for failure of global rollouts. Hence it is recommended that timely & regular organization change management communications are provided to business users and end users. It is essential to make all the stakeholders aware of the change, and engage them in a way to ensure their commitment.
Suggested strategies for ensuring change acceptance:
- Companies must define a persuasive business case, an overall change strategy and an integrated communications plan to support the rollout initiative
- Change support should be provided across all roles and levels of the organization affected by the change. Regular interaction with the users and constant communication during entire rollout and immediately after Go-live to thwart any misconceptions
- Continuous involvement of core users from requirement gathering phase to the testing and training phase, to set the right expectations and create an environment for acceptance before Go-live
2.4.2 User training issues
In the realization phase lack of training to the users for carrying out testing and verification activities can result in undetected escape of defects and can compromise software quality. Untrained or poorly trained end users lead to significant process related understanding issues post Go-live thereby impacting business productivity of the market. All the users should be exposed to the new system look and feel right from the starting of the project which gives them the exposure to the new system and time to absorb the changes.
Training should be given as high the rating in the project planning as is requirement gathering or testing.
Suggested strategies for ensuring user enablement:
- Preparing comprehensive test plans, manuals, video, system demos that can act as training guides to users for quick and easy access during and after training.
- Quick reference Cards: Preparation of list of common occurring issues and there reasons for process which have multiple system involvements, so that users could refer the same to identify the source system for the issue
- Ensure full time availability of the users as per the training plan and a in-built mechanism to take the regular feedback on existing knowledge gaps.
2.4.3 Knowledge Transition
During the post Go-live phase improper enablement of second level support can delay issue response and impact SLA performance. A well-tuned second level and a successful transition are as critical as the Go-live. The confidence of the end users is maintained if the quality and knowledge standards are at least maintained in the post Go-live phase.
Suggested strategies for ensuring effective knowledge transition:
- Core support team involvement before the GO-Live would give them the feel of the local requirements which are new to the template.
- Good documentation of the process created in the release.
3 Factors that affect rollout risks
Though all the above stated risks have a major impact on the success of a rollout implementation; there are various factors which influence the probability of each of these risks and hence the overall risk level of the rollout.
Companies should recognize and acknowledge these factors as they plan their rollouts, because only then they can assess the severity of the various rollout risks and will be equipped to develop a comprehensive risk mitigation plan before beginning the rollout journey.
Factor 1: Business process diversity across markets
Companies that are rolling out the template tohomogenous markets, will find it easier to define and roll out the standard solution to various geographies, and will realize quick rollout turn-around time.
However more the geographic areas, business units and legal entities involved in the global deployment, then more would be the diversity of business processes and such companies will face significant challenges in standardizing even when using a robust enabler such as a global ERP solution. Defining scope of the project can be a major challenge, which can affect timelines, effort & cost of the project.
In case of vast differences in culture and languages in countries the template is being rolled out, activities such as training and support are also affected.
Factor 2: Business unit autonomy
Companies that have a highly centralized structure – will have the existing framework and organization mindset necessary to quickly gain agreement on critical aspects of the initiative.
However, companies that are with an autonomous management structure will experience a greater challenge in implementing the standardized processes and governance a global ERP solution requires—which causes a higher risk for the rollout.
Factor 3: Presence of multiple vendors
Companies that have a single vendor deploying the solution across the globe – will get benefits of scale, easy governance and will profit from application of consistent rollout methodology across different rollout projects. But they may possibly suffer from being highly dependent on a single supplier, as they would be putting all their eggs in one basket.
However, when companies have multiple vendors deploying same template across different geographies, different rollout methodology may be used in each rollout, thus increasing the complexity of a rollout. Having different vendor teams spread across the globe, working in different time zones and also on different rollout projects at a given time, can also cause issues with knowledge transition and alignment to the template.
Factor 4: IT Landscape diversity
Companies that have a highly homogeneous IT Landscape – will substantially be able to reduce the rollout turnaround time, as the effort of identifying, harmonizing and cleansing the enterprise data in the existing system and converting it to the new solution will be standardized and quick.
However, companies that have a diverse IT landscape, the data will exist in various locations and databases, in different formats and languages, and converting it to the new solution would be a bigger challenge.
Factor 5: Availability of Resources (Time & money)
Companies need to understand the complexity of a rollout, and accordingly allocate the necessary people, time & money for the rollout. Right balance between cost and time of deployment, ultimately affects the success of a rollout.
3.1 Impact of rollout factors on various risks
In the below graph we have tried to capture the essence of the factors with respect to their influence on the risk areas. Higher the risk lines cut the axis of the factors, more the impact of that factor on the various risk areas.
For example: The factor “Business Process Diversity” has maximum impact on risk areas like Skills and Knowledge management. However risk area scope control is mostly influenced by factor “Business unit autonomy”.
Table 2: Impact of rollout factors on various risks
As companies pursue a ‘Global template ERP Solution’, they should be mindful of the risk areas we described, and right at the outset of a rollout, should carefully prioritize these risks considering the various factors defined in this paper.
By carefully planning for these risks, companies can dodge many of the problems associated with global rollouts, keep their rollouts within budget and on time, and implement a best-fit solution that can serve as a catalyst to business efficiency and growth.
About the authors
Navdeep Singh Sandhu
Navdeep is a Senior Consultant in the Manufacturing SAP practice of Infosys. He has over 6 years of global consulting experience.
He has been part of 4 global SAP rollouts, and has worked with established companies in the Automotive and FMCG industries.
Navdeep holds an MBA in Marketing & Operations from LBSIM Delhi, India and Electronics and Instrumentation engineering degree from MDU University, India.
Anuradha is a Consultant in the Manufacturing SAP practice of Infosys. She has over 3 years of global consulting experience and overall 6 years of IT experience.
She has been part of 3 global SAP rollouts, and has worked with established companies in the Finance, Automotive & FMCG industries.
Anuradha holds an MBA in Finance & Marketing from SDMIMD Mysore, India and Information Technology engineering degree from Cht. Shivaji University Kolhapur, India
You have highlighted the key risk areas well