ERP Implementation in a Medium Scale Enterprise
ERP implementation is a challenging project for any organization irrespective of the size. However, the types of challenges faced by a medium scale enterprise can be starkly different from the one faced by a large MNC. In this column, I wish to enumerate the various factors that contribute to the success or failure of SAP implementation in a Medium Scale Enterprise (MSE). Note that these observations are based on my personal experience and therefore can be highly debatable. The reader is welcome to share his/her views and counterviews for deeper insight. Secondly, nearly all my implementation experience is in India so it is likely that the observations may be reflect a regional bias, although, I believe, most of it should hold true irrespective of the geography.
1. Budget: The underlying problem of nearly all the following problem lies in the budget. The budget for IT department in an MSE is limited and implementation of an ERP system like SAP is an expensive affair. While most reputable MSEs do not like to compromise on their choice of implementation partner, the lack of budget shows up in different places such as number purchased licences, recruitment of specialized resources or restricted timelines.
2. Motivation from top management – As stated above, an SAP implementation requires a large budget dedicated to the IT department, which, for an SME, generally implies that one or more project from other departments is getting sacrificed. This may not down well with the department heads. There may be other reason that individual functional heads are not keen on SAP implementation such as familiarity and flexibility that the legacy system provided. This lack of motivation from the functional heads can severely impact the success of an ERP implementation since motivation trickles down from top.
It is crucial for the top management and the CIO to ensure that the functional heads are aligned and involved throughout the course of the project. Their opinion and advice must be sought regularly and they must be made to realize that an ERP project may be driven by the IT department but it must be owned by all the departments. In certain cases, it may even be useful to assign specific targets for each functions with respect to implementation activities.
I have even seen KRAs of functional heads tweaked just to ensure that the ERP implementation is given the importance it deserves.
3. Lack of competent workforce – Getting used to working on an advanced ERP system such as SAP involves a learning curve. Business users, and not just the key users or core team members, must be adept at learning newer concepts and technologies. It is found that MSEs fail to acquire the kind of talent pool which is tech-savvy or have better than average aptitude. The lack of competency can also result in greater change resistance.
While there is no easy way to address this challenge, greater involvement at several stages of implementation and encouraging peer learning can mitigate the severity to a certain extent.
4. Involvement of the end-users – It is worth remembering that an information system is only as good as the data that is fed to it. While involvement and motivation from higher management is crucial, it is also important to make all end users an active participant in the implementation process. In a typical implementation, end user training is only provided towards the fag end of implementation just before the User Acceptance Testing. By this time, the end users already feel left out. This is extremely demotivating especially for those users who were willing to be an active participant from the early stages.
An implementation is far more likely to be successful if the end user training is provided in at least two parts, if not more. One round of general training or workshop should be given after business blueprint is prepared and basic processes can be demonstrated on a test system. This will have two-fold impact – one, the end users will feel a part of the implementation process and will get a basic understanding of the system’s look and feel; two, the implementation team will get an immediate feedback if something critical has been missed out or miscommunicated.
Although this may increase the implementation timeline by a few days, it will go a long way in ensuring that the processes streamline more quickly, system matures faster and the benefits are reaped sooner than it otherwise would.
5. Standardization of business processes – While it may seem that large organizations would be more reluctant in changing business processes, given their size and complexity, it is often observed that medium scale enterprises are, in fact, more inflexible towards accepting process change. There are multiple possible causes for this – greater resistance to any kind of change (refer point 2), lower bargaining power in the industry as per porter’s five forces model, unwillingness to decentralize and distribute power centres. Nevertheless, this inflexibility to change is detrimental to ERP implementations. Far too many implementations tend to fail because of extensive customization than is normally believed. Most of the pain points that clients complain of after two or three years of implementation is attributable to drastic modifications made in the SAP system. Especially in fast-growing MSE, as the scale and structure of processes expand, it becomes increasingly difficult to adapt the new changes in a piece of customized code. Moreover, most of the process changes are easier to make when the size is smaller, such as changes in customer/vendor payment terms (when number of business partners are few) or method of revenue recognition (when distribution channels are limited).
I must reiterate that these observations are based out of personal experience and cannot be considered indisputable by any means. I would, nevertheless, urge fellow consultants to pay special attention to these pointers, and hope it would be helpful, while going in for a greenfield implementation at a Medium Scale Enterprise.