Transcript Choosing an ERP system

Implement an ERP System
Enterprise
Resource
Planning
Systems
MSc. Nguyen Thanh Tuan
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Contents
Importance of implement an ERP System
Processes of Implement
Types of Risk
Control and Auditing
ERP Products
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Why implement an ERP
System?
 To support business goals
 Integrated, on-line, secure, self-service
processes for business
 Eliminate costly mainframe/fragmented
technologies
 Improved Integration of Systems and
Processes
 Lower Costs
 Empower Employees
 Enable Partners, Customers and Suppliers3
How should we implement
ERP systems
Obtain the right mix of people,
processes and technology!!
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How should we implement
ERP Systems?
People
Project Structure
Should be aligned to processes
Process
Implementation Process (outlined in
detail)
Adapt your processes to those of the ERP.
Technology
Hardware
Software
Integrated Systems
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Process
1. Definition and Analysis
Hold discussions with various functional
personnel to establish the actual number
of systems operating at client site, what
they are used for, why and how often
Produce the Project Scoping Document
outlining current situation, proposed
solution and budgeted time
Challenge : REQUISITE EXPERTISE 6
No two clients are the same
Process
2. Design
Prepare various functional reports specifies current scenario and wish list
Prepare Design document which specifies
how the system is going to work
Prepare test scripts to be followed on
system testing
Map out the interface paths to various
modules
Challenge : INFORMATION SHARING
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- Availability of staff
Process
3. Build
Configure system as per set up
document specifications i.e. transfer
conceptual model into reality
Test system to verify accuracy
(preliminary tests)
Challenge : TECHNICAL
ENVIRONMENT - System functionality
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Process
4. Transition
Train users on their specific areas
Assist in test data compilation and
system testing by users
Finalise the Live system and captured
opening balances
Challenge : USER RESISTANCE
Understanding and acceptance
data preparation
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Process
5. Production
Official hand holding
Effectiveness assessment
Business and Technical Direction
recommendations
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Technology
Technology is an enabler, not the driver
(it is there to assist the organisation to
achieve business goals)
It is a means to an end, not the end
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Types of Risk
Risk occurs throughout the ERP life cycle
Types of risk and extent of their impact vary
as we move through the ERP life cycle
Three basic types of risk
Technical
Business
Organizational
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Risk Matrix
Technical
BusinessOrganizational
Deciding to
go ERP
Choosing an
ERP System
Designing
Implementing
After Going
Live
Training
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Risk Definitions
Technical risk - risks arising due to
information processing technology, sensor
technology, and telecommunication
technology
Business risk - risks deriving from
models, artifacts and processes adopted as
part of ERP
Do they match? Are they consistent? Do
partners processes match up?
Organizational risk - risks deriving from
the environment in which the system is
placed - including personnel and
organization structure
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What is the perceived risk
of ERP projects? (%’s)
Risk
Technical
Organizational
Very Low
Low
Moderate
High
Very High
10.5
22.5
39.5
15.0
11.5
Business
4.5
23.0
32.5
26.0
14.5
1.5
8.5
18.5
37.5
35.0
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Summary of Survey
Findings
Organization risk is the “biggest” risk -the most likely to be seen as “high” or
“very high”
Business risk is the next biggest risk
Technical risk is the smallest of the
bunch, with 72.5% rated very low to
moderate.
Technical risk is also the easiest to fix,
e.g., just choose more power.
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Technical Risks
As the firm adopts new technologies,
there are a number of risks that are
common to each phase of the life cycle
Operating Systems
Client Server Computing
Network Capabilities
Database
Links to other systems
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Operating Systems
Operating systems include Unix, Linux,
Windows 7, 8.
Different systems require different
knowledge
Need to employ people who understand that
operating system
Microsoft’s SAP implementation was the
first to use Windows 7, 8 as an operating
system
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Client Server
Dominant form of computing used in ERP
However, firm’s expertise may be with
mainframe computing
As a result, there may be a limited set of
personnel for the new computing environment
Mainframes are typically bullet-proof,
whereas client servers are frequently at the
opposite end of the spectrum in terms of
controls.
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Client/Server Configuration
Distributed
Presentation
(Thin Client)
Remote
Presentation
Distributed
Application
Remote
Data Mgmt
Distributed
Presentation
(Fat Client)
Data
Management
Data
Management
Data
Management
Data
Management
Data
Management
Application
Function
Application
Function
Application
Function
Presentation
Presentation
Presentation
Data
Management
Application
Function
Application
Function
Application
Function
Presentation
Presentation
Presentation
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Network Capabilities
Issues include security and capacity of
the network to facilitate use of the ERP
system
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Computing and Network Environment
Highest Risk
(Highest Potential Gain)
Integrated
Stand Alone
Lowest Risk
(Lowest Potential Gain)
Not Linked
Linked
Linked to Other Applications
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Technical Risks and
ERP Life Cycle
Technical
Business
Organizational
Deciding
Choosing
Designing
Implementing
Going Live
Training
Deciding to go ERP
Firms that have kept up with technology are likely
to better understand the risks associated with ERP
systems.
Try to see what has worked in the past
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Technical Risks and
ERP Life Cycle
Technical
Business
Organizational
Deciding
Choosing
Designing
Implementing
Going Live
Training
Choosing an ERP system
Virtually all software choice can be manipulated,
since it is a political process
Requirements change as new technology becomes
available.
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Technical Risks
and ERP Life Cycle
Technical
Business
Organizational
Deciding
Choosing
Designing
Implementing
Going Live
Training
Designing
One company designed an ERP contract
based on computing capacity, so the
vendor had to fix any problems with
insufficient capacity
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Technical Risks
and ERP Life Cycle
Technical
Business
Organizational
Deciding
Choosing
Designing
Implementing
Going Live
Training
Implementing and Going-Live
Upon implementation and going-live,
capacity … six transactions a minute … 360
per hour … or 3600 for a ten hour day …
was not enough
Needed more network capacity
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Technical Risks
and ERP Life Cycle
Technical
Business
Organizational
Deciding
Choosing
Designing
Implementing
Going Live
Training
Training
Risk that mainframe IS personnel might
have to be re-tooled to client-server
technology
ERP system may require different technical
people with different skills
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Technical
Business Risks
Business
Organizational
Deciding
Choosing
Designing
Implementing
Going Live
Training
Deciding whether or not to do ERP
Must have the resources to do the project
Firms get going on ERP and then find that they
don’t have the resources.
This typically means that either the organization
fails or the project fails.
Must meet needs of the business
What is needed by the firm’s partners?
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Technical
Business Risks
Business
Organizational
Deciding
Choosing
Designing
Implementing
Going Live
Training
Choosing an ERP System
Determine specific requirements, e.g.,
transaction handling capabilities
Fox Meyer - system could do 10,000 invoice
lines, but they needed 420,000
The business risk is that the ERP Vendor
can not meet the company’s needs
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Technical
Business Risks
Business
Organizational
Deciding
Choosing
Designing
Implementing
Going Live
Training
ERP Design
Design is a political process. As a result, there is a
risk that the design is sub-optimal.
There is also the risk that processes designed by one
group in the organization will not interface well with
processes designed by other groups.
There is the risk of project stopping
This project would have changed how people work and
reduced staffing by half. It was the easiest thing to cut
because people did not have the stomach for it
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Technical
Business Risks
Business
Organizational
Deciding
Choosing
Designing
Implementing
Going Live
Training
Implementing
The project will take longer than expected
The project will cost more than expected
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Technical
Business Risks
Business
Organizational
Deciding
Choosing
Designing
Implementing
Going Live
Training
Going Live
If the ERP is not working properly, there
could be problems with customers and
suppliers.
Hershey Foods Inc. lost most of their
Halloween, Thanksgiving and Christmas
sales due to a poorly functioning ERP
system.
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Technical
Business Risks
Business
Organizational
Deciding
Choosing
Designing
Implementing
Going Live
Training
Training
Training should provide users with process
and system information
The main business risk is that timing is too
short and too late.
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Organizational
Risks
Technical
Business
Organizational
Deciding
Choosing
Designing
Implementing
Going Live
Training
Deciding whether or not to do ERP
Reportedly, one of the biggest risks is that
top management is not involved.
Another risk is that the domain areas are
not involved and committed (Microsoft)
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Organizational
Risks
Technical
Business
Organizational
Deciding
Choosing
Designing
Implementing
Going Live
Training
Choosing an ERP System
Choosing the right consultant is the
biggest challenge (Risk)
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Organizational
Risks
Technical
Business
Organizational
Deciding
Choosing
Designing
Implementing
Going Live
Training
ERP Design and Implementation
Models of organizations are built into the
software, as a result, there are risks that
the models do not match (e.g., Microsoft)
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Organizational
Risks
Technical
Business
Organizational
Deciding
Choosing
Designing
Implementing
Going Live
Training
Going Live
Cultural issues that relate to “big R”
reengineering create organizational risk.
One firm went from compensation based on
number of units sold to salary to accommodate
the ERP system
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Organizational
Risks
Technical
Business
Organizational
Deciding
Choosing
Designing
Implementing
Going Live
Training
Training
Employees not accustomed to data input will
take on the task.
If users don’t know how to use the system, it
will fail.
There may be inadequately trained personnel
after implementation due to poor training or
attrition.
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Risks Associated with ERP
Implementation
Pace of Implementation
Big Bang--switch operations from legacy
systems to ERP in a single event
Phased-In--independent ERP units installed
over time, assimilated and integrated
Opposition to Changes to the Businesses
Culture
User reluctance and inertia
Need of (upper) management support
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Risks Associated with ERP
Implementation
Choosing the Wrong ERP
Goodness of Fit: no ERP system is best for all
industries
Scalability: system’s ability to grow
Choosing the Wrong Consultant
Common to use a third-party (the Big Five)
Be thorough in interviewing potential
consultants
Establish explicit expectations
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Risks Associated with ERP
Implementation
High Cost and Cost Overruns
Common areas with high costs:
Training
Testing and Integration
Database Conversion
Disruptions to Operations
ERP is reengineering--expect major changes
in how business is done
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Implications for Internal
Control and Auditing
Transaction Authorization
Controls are needed to validate transactions
before they are accepted by other modules.
ERPs are more dependent on programmed
controls than on human intervention.
Segregation of Duties
Manual processes that normally require
segregation of duties are often eliminated.
User role: predefined user roles limit a user’s
access to certain functions and data.
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Implications for Internal
Control and Auditing
Supervision
Supervisors need to acquire a technical and
operational understanding of the new system.
Employee-empowered philosophy should not
eliminate supervision.
Accounting Records
Corrupted data may be passed from external
sources and from legacy systems.
Loss of paper audit trail
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Implications for Internal
Control and Auditing
Access Controls
Critical concern with confidentiality of
information
Who should have access to what?
Access to Data Warehouse
Data warehouses often involve sharing
information with suppliers and customers.
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Implications for Internal
Control and Auditing
Contingency Planning
How to keep business going in case of
disaster
Key role of servers requires backup plans:
redundant servers or shared servers
Independent Verification
Traditional verifications are meaningless
Need to shift from transaction level to overall
performance level
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Implications for Internal
Control and Auditing
ERP projects may be concurrent with BPR,
CRM, Data Warehousing, SCM
All of these increase risk of successful
implementation
ERP systems impact organizational
structure and internal controls
New control policies must precede
migration to an ERP system
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Implications for Internal
Control and Auditing
Gartner Group noted following concerns
regarding implementing ERP:
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Audits of ERPs
Audit could provide assurance covering the
areas of …
process integrity
application security
infrastructure integrity
implementation integrity
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ERP Products
SAP is the dominant player, with 35% 40% of the market
Big five (BOPSE) … Baan, Oracle
(Applications) PeopleSoft, SAP and, J.D.
Edwards
Additionally, other firms have generated
interest, e.g., QAD and Lawson, Great
Plains
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ERP Products
SAP: largest ERP vendor
modules can be integrated or used alone
new features include SCM, B2B, e-commerce,
XML
J.D. Edwards
flexibility: users can change features; less of
a pre-set structure than SAP’s
modularity: accept modules (bolt-ons) from
other vendors
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ERP Products
Oracle
tailored to e-business focus
Internet based vs. client-server based
applications
PeopleSoft
open, modular architecture allows rapid
integration with existing systems
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Thank for your
listening