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MODERN ERP. SELECT, IMPLEMENT & USE TODAY’S ADVANCED BUSINESS SYSTEMS. Second Edition . Chapter 5: ERP Life Cycle: Planning and Package Selection. Why Change Information Systems . Obsolescence High operational costs Lack of vendor support Lack of compliance Changing business model

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select implement use today s advanced business systems

MODERN ERP

SELECT, IMPLEMENT & USE TODAY’S ADVANCED BUSINESS SYSTEMS

Second Edition

Chapter 5: ERP Life Cycle: Planning and Package Selection

why change information systems
Why Change Information Systems
  • Obsolescence
  • High operational costs
  • Lack of vendor support
  • Lack of compliance
  • Changing business model
  • Different or enhanced functionality
  • Lack of scalability
  • Too many business problems and unanswered questions
  • More
the erp life cycle
The ERP Life Cycle
  • Planning (Chapter 5)
  • Package Selection (Chapter 5)
  • Implementation (Chapter 6)
  • Maintenance (Chapter 6)
erp life cycle planning
ERP Life Cycle: Planning
  • Need a rationale grounded in a business case (high level reason why a company undertakes an ERP implementation)
  • Types of rationales:
    • Technology rationale – IS are failing, desperately need new technology.
      • Too expensive to patch and maintain old, outdated systems, need better visibility of data.
    • Competitive rationale – adopting a system because the competition has it, need to keep up
    • Strategic rationale – reasons why ERP is needed to support the organization’s strategic direction
      • Drive growth, support mergers and acquisitions, market diversification, globalization
    • Business process rationale – benefits in key processes (KPIs)
      • Attain targeted, specific, and measureable performance improvements
erp life cycle planning1
ERP Life Cycle: Planning
  • Executive Leadership – rally support, distribute resources, and delegate management of implementation to team
    • CEO, CFO, or other high level sponsor should take ownership of the project and be actively involved in its activities .
    • This is not a technical project, so CIO not the top sponsor.
  • Project Scope – project team should determine the scope and the procedures to enforce against the “never ending project” syndrome
    • Project scope includes: business processes that will be included in the implementation, the ERP functionality that will support these business processes, the divisions or business units that will be included in the roll-out, and the technical infrastructures that will be replaced
    • Scope management – define and control what is and what is not included in the project; guard against scope creep – changes to the scope of the project.
erp life cycle planning2
ERP Life Cycle: Planning
  • Project Team
    • Given the discretion to make all important decisions regarding the implementation
    • Consists of key process owners, end users, managers, IT people, and executives who span functional boundaries, business units, and organizational levels
  • Project Manager
    • Understand both technology and business processes
    • Knowledge of the effect of ERP on the business
    • Work with professionals to organize a smooth transition from the “as is” state to the “to be” state
    • Envision the end results and make tough decisions
erp costs
ERP Costs
  • Total cost of ownership (TCO) – total costs that will likely be incurred throughout the system’s life cycle that are influenced by:
    • Transaction volume
    • Number of users
    • Functionality
  • Application license – govern the software’s use
    • Named users – company identifies the total number of users who will access the system
    • Site license – blanket contract covering the use of the ERP system at a particular location
    • Concurrent users – maximum number of users who would potentially access the system at a given time
    • Heavy users – those who use more of the systems functionality and may be charged a higher license fee than casual users who may only view reports or run occasional queries
erp costs1
ERP Costs
  • Database License – based on the number of simultaneous users that will log into the system or the number/type of database servers required
  • Hardware – varies depending on the scope of implementation and platforms
    • Will need database and application servers, storage systems, network components, wiring, power, user workstations, and redundancy
  • Implementation Services – often a multiplier of software license costs
    • Ratio of services to software costs provides an indication of a system’s ease of implementation or support for more advanced or custom functionality
  • Internal HR Costs – varies among companies and projects
    • Full time equivalents
  • Ongoing Maintenance – typically 20 – 30% of the software license costs per year
  • Hidden Costs – scope creep, training, customization, data conversion, and developing interfaces between the ERP system and other systems
erp benefits
ERP Benefits
  • Integrate financial information – creates one version of the truth, which can not be questioned because everyone uses the same system
  • Integrate customer order information – customer order travels from the salesperson through credit, picking, packing, shipping, invoicing and cash receipt
  • Standardize and speed up manufacturing processes
  • Reduce inventory – help manufacturing process flow more smoothly, improving visibility of the order fulfillment process
  • Standardize human resource information – consolidates employee information into a single system and provides self-service accessibility to manages and employees
erp life cycle package selection
ERP Life Cycle: Package Selection
  • Key steps in selecting an ERP system:
    • Market Survey
    • Request for Information
    • Narrowing Down the Choices
    • Site Survey
    • Requirements Analysis
    • Request for Proposal
    • Demo Days
    • Reference Visits
    • Fit-Gap Analysis
    • Implementation Methodology Discussion
    • Proposal
    • Decision and Negotiations
  • Package selection presumes that a high-level organizational group has approved funding based on the business case outlined by the project team
  • Choosing the “best” application for a company is based on: functionality, affordability, user-friendliness, customizability, and vendor support
erp life cycle package selection1
ERP Life Cycle: Package Selection
  • Market Survey – to determine which vendors’ systems might be potential alternatives
    • Websites, industry magazines, trade exhibits, suppliers, competitors, etc.
  • Request for Information – issue a request for information to the vendors indentified in the market survey
    • Request for information (RFI) – vendors supply written information about the capabilities of their solutions and the skills they offer
  • Narrowing Down the Choices – project team should narrow down the ERP vendor candidates based on criteria important to them
erp life cycle package selection2
ERP Life Cycle: Package Selection
  • Site Survey – invitation for each of the prospective vendors to meet with the project team on-site so that the vendor’s sales team can better understand the buyer’s functional requirements and the peculiarities of their business
  • Requirements Analysis – detailed analysis to determine all the functionalities they need and desire
  • Request for Proposal – formal document developed by the potential buyer that details requirements in order to seek vendor offerings
    • Enables the requestor to evaluate and compare various proposal fairly
erp life cycle package selection3
ERP Life Cycle: Package Selection
  • Demo Days – vendor must “walk the walk” and “talk the talk”
    • Must be detailed, showing how key business process work using the prospective customer’s own data
erp life cycle package selection4
ERP Life Cycle: Package Selection
  • Reference Visits – visit to a “like” customer site of the final short-lived vendors
    • Before making a decision the project team should visit one or more of the vendor’s customer sites to observe how the ERP system works in real life
    • Issues to discuss with “like” customers include:
      • Satisfaction with functionality and performance
      • Satisfaction with look and feel of the system
      • Implementation time and cost
      • Impression of the vendor as an implementation partner
      • Local vendor support
      • Lessons learned from issues that were not anticipated but arose after the implementation began
  • Fit-Gap Analysis – used to compare the company’s requirements with what the ERP systems under consideration offer
    • The more functionality “gaps” the less attractive a system is to the customer; however process gaps are opportunities to reengineer to best practices
erp life cycle package selection5
ERP Life Cycle: Package Selection
  • Implementation Methodology Discussion – discussion of the understanding of implementation needs
    • Project and implementation teams should agree on project scope, roles and responsibilities of customer and implementation team, implementation methodology and defined deliverables that will be used to guide the project and gauge its success
  • Proposal – includes the recommended modules for the defined scope, annual fees for support and software assurance, a high level project plan, and the defined hardware, network, and software requirements necessary to support the new ERP systems
  • Decision and Negotiations – the team should discuss all critical information obtained from demos and reference visits, then rate each vendor, a selection is made, and a contract is signed by both parties