By. B K Khaitan
The greater the care taken during evaluation and selection of the ERP
product, lesser the time for implementation, and greater the chances of
success, says B K Khaitan. Here’s an overview of how RPG Cables went
about its ERP implementation.
Investment required in ERP is very high and an inappropriate selection
of ERP could prove to be a nightmare for the company. Meticulous
planning is therefore required in the selection process. If we take
adequate care in the evaluation and selection of an ERP product, lesser
will be the time taken in implementation and greater the chances of
success. My experience is that selecting an enterprise-wide ERP should
typically take anywhere between five to six months from the word go, to
finally signing the order.
ERP selection is very different from purchasing off-the-shelf software
like accounting or payroll packages. We don’t need much skill to
evaluate an accounting software since it does not impact the business as
a whole, and moreover, accounting practices are fairly standardised
everywhere. Therefore, if an accounting package works for company A,
there is a good chance that it will work for company B too. But the same
logic does not work with ERP. There are a number of cases where the same
ERP product has been successfully implemented in company A but failed
miserably in company B. We need to analyse carefully as to why ERP fails
and take appropriate preventive measures.
In the evaluation process, to start with, at RPG we performed the health
check diagnostics in the organisation to gauge how prepared it was for
an ERP implementation. On a scale of one to ten, our score was six. We
had fixed the minimum score as five, below which we would have postponed
the decision to implement ERP and concentrated on improving the business
process, systems and procedures. Many ERP implementations fail not
because of any technical defect in the software but because the
organisation is not ready for it yet.
ERP vis-à-vis business objectives
No IT initiative can be effective if it is not aligned with the
company’s business objectives. It is therefore necessary to formulate a
business strategy to achieve business objectives and then align IT
initiatives to achieve them. ERP implementation may be one among such
initiatives. We conducted a workshop in the company to identify
objectives and critical success factors of each SBU. The objectives were
defined keeping in mind the organisation’s strengths and weaknesses,
opportunities and threats prevailing in the market. We then studied
existing business processes of each SBU and identified pain areas. The
entire exercise was documented. A detailed RFP was prepared based on
this exercise. The RFP contained functionalities required by us under
each module—it was used as a Bible to test the functionality of ERP
products.
Our next step was to call ERP product vendors and submit a complete
business document along with RFP with a request to fill in the blank
columns so as to understand the product’s suitability. We asked vendors
to sign a non-disclosure agreement before handing over sensitive
business documents.
After two weeks of submitting business documents and RFP to vendors, we
arranged to meet with vendors, where they came prepared with their
presentations. We met with our SBU heads to give briefings of their
business and to sort out any clarifications from the vendor’s side.
Having understood our business, vendors were asked to submit the RFP
duly filled in. On the basis of their response, we gave ratings against
each functionality, depending on suitability. Some weightages were given
to core functionalities that were specific to our business. The total
score was arrived at for each product and ranking was done accordingly.
Product demo
Product demo is a very important step in the evaluation process. Our
experience has been that the look-and-feel of the product, the level of
flexibility, user friendliness, etc, can be seen only in a product demo.
Besides, product demo helps determine end-user comfort level. It is at
this stage that the key users must be involved and their opinion taken.
For the demo to be effective, we prepared business data covering the
entire business cycle, right from enquiry to shipment stage and passed
on this data to the vendors. During the demo, we concentrated on looking
at the core functionality in the product. For example, we are in the
manufacturing sector and our products are mostly made-to-order, we were
looking for an ERP solution with a strong product configurator. We
wanted our customer to be able to configure the product on the Web
before sending an enquiry to us. We wanted to reduce our time in
responding to a customer enquiry. Similarly, we were looking for
functionalities like drum selection and cut length management in ERP,
which are specific to the cable industry. We did not waste time looking
into standard functionalities of sales, purchase, stores, accounting,
etc, since these functionalities could be found in all top-of-the-line
ERP products we were evaluating, such as SAP, BaaN, Oracle, Intentia,
JDE.
IT infrastructure
Since ERP cannot be implemented without strong IT infrastructure at the
back-end, we looked in to our IT infrastructure needs along with the ERP
evaluation. We wanted to connect our factories and branches through
leased lines, VSATs or VPN. Each of these options had advantages and
disadvantages. The advantage of VSATs, for example, is that it can be
installed anywhere with a very high uptime and consistent performance.
Opting for a leased line would mean spending three months to first avail
approval from MTNL for a leased circuit. VPN is a cheaper option than
VSATs and leased lines; but for VPN to work, Internet service providers
would have to have a point of presence (POP) in locations where we have
business units. In case of locations in remote places, we would have to
go in for VSATs. We realised that the initial investment in VSATs is not
as high as leased lines but the operating expenses of VSATs are higher
than leased lines or VPN. We opted for a hybrid solution using a mix of
VPN, leased lines and VSATs depending on the physical location of the
unit and the type of application we wanted to run in each unit.
Bandwidth requirement is an issue that must be addressed to be able to
provide necessary bandwidth for enterprise-wide ERP to work.
Computing total cost of ownership (TCO) for each of the ERP products was
a tricky issue. TCO comprises licensing cost, implementation cost,
hardware cost, AMC, networking cost, etc. Licensing cost may be
determined on the basis of named users or concurrent users or may be a
combination of both. There are hidden costs, which if not understood
will come out in the implementation stage, which will raise the TCO
substantially. We defined our own standard template and submitted it to
the vendors for their feedback. In this way we standardised on the
bundling of various software modules in ERP.
Implementation partner
Implementation of ERP in most cases is not done by the vendor but a
third party. Therefore, evaluating the implementation partner along with
the vendor is extremely important. We left it to the vendor to submit
the cost of implementation on behalf of implementation partners. We did
not deal with implementation partners directly in the beginning. All
communication with implementation partners was channelised through the
vendor to avoid any confusion or misunderstanding. We observed that
implementation cost varied from one implementation partner to another
for the same product. The difference in cost was as much as double and
in some cases even trebled. We ensured that the implementation cost
given by the vendor was agreeable to all implementation partners
nominated by him.
We shortlisted vendors on the basis of technical and commercial
evaluation. Evaluation of implementation partners was done on the basis
of skill sets of implementation teams, domain knowledge of the industry
and their track record in implementation. We asked each of the
implementation partners to submit a document containing details of
scope, project plan, implementation methodology used by them, etc.
Hardware cost also has several components that need to be understood
thoroughly. We asked our vendor to do a sizing of the hardware on the
basis of number of user licenses and volume of transactions. In order to
arrive at the user licenses requirement, we did not go by the number of
PCs we had. We knew ERP was not going to replicate our existing business
processes. Roles and responsibilities of end-users were going to undergo
drastic changes. Keeping this in mind, we prepared a table in matrix
form in which we listed down names of employees with key
responsibilities according to their department. We then determined
whether each employee had to play any role as an ERP user and then
defined his new role. Correct estimate of user licenses had a direct
bearing on the TCO.
Verification
A site visit is very important to understand the implementation issues,
if any, during implementation. We were very selective in site visits. We
asked our vendor to give us the list of sites where they fully
implemented ERP, preferably in industries similar to ours. We visited at
least one site of each vendor and talked to project managers to know how
they went about implementing ERP and what according to them were the
pain areas. We had closed-door meetings with them, avoiding the presence
of a vendor representative. We were able to get balanced feedback on
products. In case of reference sites in other countries, we got feedback
through e-mail.
Whether to implement ERP in a big bang approach or in a phased manner is
something left to the individual organisation. Decisions should be taken
keeping in mind level of preparedness, physical location of various
units, availability of resources, etc. There is a cost implication in
each of these approaches.
Finally, we did overall assessment of ERP products based on
functionality suitability and standard features, product demos, TCO,
site visits and feedback from reference sites.
The author is the CIO, RPG Cables. He can be contacted at
bkay@rpgcables.com
Source: http://www.expresscomputeronline.com/20030505/tech2.shtml
The greater the care taken during evaluation and selection of the ERP
product, lesser the time for implementation, and greater the chances of
success, says B K Khaitan. Here’s an overview of how RPG Cables went
about its ERP implementation.
Investment required in ERP is very high and an inappropriate selection
of ERP could prove to be a nightmare for the company. Meticulous
planning is therefore required in the selection process. If we take
adequate care in the evaluation and selection of an ERP product, lesser
will be the time taken in implementation and greater the chances of
success. My experience is that selecting an enterprise-wide ERP should
typically take anywhere between five to six months from the word go, to
finally signing the order.
ERP selection is very different from purchasing off-the-shelf software
like accounting or payroll packages. We don’t need much skill to
evaluate an accounting software since it does not impact the business as
a whole, and moreover, accounting practices are fairly standardised
everywhere. Therefore, if an accounting package works for company A,
there is a good chance that it will work for company B too. But the same
logic does not work with ERP. There are a number of cases where the same
ERP product has been successfully implemented in company A but failed
miserably in company B. We need to analyse carefully as to why ERP fails
and take appropriate preventive measures.
In the evaluation process, to start with, at RPG we performed the health
check diagnostics in the organisation to gauge how prepared it was for
an ERP implementation. On a scale of one to ten, our score was six. We
had fixed the minimum score as five, below which we would have postponed
the decision to implement ERP and concentrated on improving the business
process, systems and procedures. Many ERP implementations fail not
because of any technical defect in the software but because the
organisation is not ready for it yet.
ERP vis-à-vis business objectives
No IT initiative can be effective if it is not aligned with the
company’s business objectives. It is therefore necessary to formulate a
business strategy to achieve business objectives and then align IT
initiatives to achieve them. ERP implementation may be one among such
initiatives. We conducted a workshop in the company to identify
objectives and critical success factors of each SBU. The objectives were
defined keeping in mind the organisation’s strengths and weaknesses,
opportunities and threats prevailing in the market. We then studied
existing business processes of each SBU and identified pain areas. The
entire exercise was documented. A detailed RFP was prepared based on
this exercise. The RFP contained functionalities required by us under
each module—it was used as a Bible to test the functionality of ERP
products.
Our next step was to call ERP product vendors and submit a complete
business document along with RFP with a request to fill in the blank
columns so as to understand the product’s suitability. We asked vendors
to sign a non-disclosure agreement before handing over sensitive
business documents.
After two weeks of submitting business documents and RFP to vendors, we
arranged to meet with vendors, where they came prepared with their
presentations. We met with our SBU heads to give briefings of their
business and to sort out any clarifications from the vendor’s side.
Having understood our business, vendors were asked to submit the RFP
duly filled in. On the basis of their response, we gave ratings against
each functionality, depending on suitability. Some weightages were given
to core functionalities that were specific to our business. The total
score was arrived at for each product and ranking was done accordingly.
Product demo
Product demo is a very important step in the evaluation process. Our
experience has been that the look-and-feel of the product, the level of
flexibility, user friendliness, etc, can be seen only in a product demo.
Besides, product demo helps determine end-user comfort level. It is at
this stage that the key users must be involved and their opinion taken.
For the demo to be effective, we prepared business data covering the
entire business cycle, right from enquiry to shipment stage and passed
on this data to the vendors. During the demo, we concentrated on looking
at the core functionality in the product. For example, we are in the
manufacturing sector and our products are mostly made-to-order, we were
looking for an ERP solution with a strong product configurator. We
wanted our customer to be able to configure the product on the Web
before sending an enquiry to us. We wanted to reduce our time in
responding to a customer enquiry. Similarly, we were looking for
functionalities like drum selection and cut length management in ERP,
which are specific to the cable industry. We did not waste time looking
into standard functionalities of sales, purchase, stores, accounting,
etc, since these functionalities could be found in all top-of-the-line
ERP products we were evaluating, such as SAP, BaaN, Oracle, Intentia,
JDE.
IT infrastructure
Since ERP cannot be implemented without strong IT infrastructure at the
back-end, we looked in to our IT infrastructure needs along with the ERP
evaluation. We wanted to connect our factories and branches through
leased lines, VSATs or VPN. Each of these options had advantages and
disadvantages. The advantage of VSATs, for example, is that it can be
installed anywhere with a very high uptime and consistent performance.
Opting for a leased line would mean spending three months to first avail
approval from MTNL for a leased circuit. VPN is a cheaper option than
VSATs and leased lines; but for VPN to work, Internet service providers
would have to have a point of presence (POP) in locations where we have
business units. In case of locations in remote places, we would have to
go in for VSATs. We realised that the initial investment in VSATs is not
as high as leased lines but the operating expenses of VSATs are higher
than leased lines or VPN. We opted for a hybrid solution using a mix of
VPN, leased lines and VSATs depending on the physical location of the
unit and the type of application we wanted to run in each unit.
Bandwidth requirement is an issue that must be addressed to be able to
provide necessary bandwidth for enterprise-wide ERP to work.
Computing total cost of ownership (TCO) for each of the ERP products was
a tricky issue. TCO comprises licensing cost, implementation cost,
hardware cost, AMC, networking cost, etc. Licensing cost may be
determined on the basis of named users or concurrent users or may be a
combination of both. There are hidden costs, which if not understood
will come out in the implementation stage, which will raise the TCO
substantially. We defined our own standard template and submitted it to
the vendors for their feedback. In this way we standardised on the
bundling of various software modules in ERP.
Implementation partner
Implementation of ERP in most cases is not done by the vendor but a
third party. Therefore, evaluating the implementation partner along with
the vendor is extremely important. We left it to the vendor to submit
the cost of implementation on behalf of implementation partners. We did
not deal with implementation partners directly in the beginning. All
communication with implementation partners was channelised through the
vendor to avoid any confusion or misunderstanding. We observed that
implementation cost varied from one implementation partner to another
for the same product. The difference in cost was as much as double and
in some cases even trebled. We ensured that the implementation cost
given by the vendor was agreeable to all implementation partners
nominated by him.
We shortlisted vendors on the basis of technical and commercial
evaluation. Evaluation of implementation partners was done on the basis
of skill sets of implementation teams, domain knowledge of the industry
and their track record in implementation. We asked each of the
implementation partners to submit a document containing details of
scope, project plan, implementation methodology used by them, etc.
Hardware cost also has several components that need to be understood
thoroughly. We asked our vendor to do a sizing of the hardware on the
basis of number of user licenses and volume of transactions. In order to
arrive at the user licenses requirement, we did not go by the number of
PCs we had. We knew ERP was not going to replicate our existing business
processes. Roles and responsibilities of end-users were going to undergo
drastic changes. Keeping this in mind, we prepared a table in matrix
form in which we listed down names of employees with key
responsibilities according to their department. We then determined
whether each employee had to play any role as an ERP user and then
defined his new role. Correct estimate of user licenses had a direct
bearing on the TCO.
Verification
A site visit is very important to understand the implementation issues,
if any, during implementation. We were very selective in site visits. We
asked our vendor to give us the list of sites where they fully
implemented ERP, preferably in industries similar to ours. We visited at
least one site of each vendor and talked to project managers to know how
they went about implementing ERP and what according to them were the
pain areas. We had closed-door meetings with them, avoiding the presence
of a vendor representative. We were able to get balanced feedback on
products. In case of reference sites in other countries, we got feedback
through e-mail.
Whether to implement ERP in a big bang approach or in a phased manner is
something left to the individual organisation. Decisions should be taken
keeping in mind level of preparedness, physical location of various
units, availability of resources, etc. There is a cost implication in
each of these approaches.
Finally, we did overall assessment of ERP products based on
functionality suitability and standard features, product demos, TCO,
site visits and feedback from reference sites.
The author is the CIO, RPG Cables. He can be contacted at
bkay@rpgcables.com
Source: http://www.expresscomputeronline.com/20030505/tech2.shtml
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