Critical Success Factors of ERP Implementations

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Critical Success Factors of ERP Implementations

  1. 1. Critical Success Factors of ERP Implementations in Belgian SME’s: A Multiple Case Study Claude Doom and Koen Milis HOGESCHOOL-UNIVERSITEIT BRUSSEL
  2. 2. ERP success <ul><li>Critical Success Factors (CSF) </li></ul><ul><li>Most research: large implementations </li></ul><ul><li>Focus on smaller ERP implementations in SMEs </li></ul><ul><li>Focus on Belgian market </li></ul><ul><ul><li>Many SMEs </li></ul></ul><ul><ul><li>Case study of 4 successful implementations </li></ul></ul><ul><li>Preliminary results </li></ul>
  3. 3. Critical Success Factors for ERP <ul><li>CSF: improves chances of successful project implementation </li></ul><ul><li>Five groups: </li></ul><ul><ul><li>Vision, scope, and goals </li></ul></ul><ul><ul><li>Culture, communication, and support </li></ul></ul><ul><ul><li>Infrastructure </li></ul></ul><ul><ul><li>Approach </li></ul></ul><ul><ul><li>Project management </li></ul></ul>
  4. 4. Vision, Scope, and Goals <ul><li>Enterprise vision, ERP project scope, Implementation goals </li></ul><ul><li>Vision, Strategy and Business plan </li></ul><ul><ul><li>Clear and motivating business vision </li></ul></ul><ul><ul><li>Clear project mission (related to business) </li></ul></ul><ul><ul><li>Clear definition of strategic goals </li></ul></ul><ul><ul><li>Clear business plan, describing benefits </li></ul></ul><ul><ul><li>Model of target business </li></ul></ul><ul><li>Scope </li></ul><ul><ul><li>Clear definition of ERP project scope </li></ul></ul><ul><ul><li>Limitation of scope to essential business functions </li></ul></ul>
  5. 5. Culture, Communication, and Support <ul><li>Senior management support </li></ul><ul><ul><li>Project approval </li></ul></ul><ul><ul><li>Identifying project as top priority </li></ul></ul><ul><ul><li>Senior management participation </li></ul></ul><ul><ul><li>Defending and supporting project </li></ul></ul><ul><ul><li>Mediation in conflicts </li></ul></ul><ul><ul><li>Understanding of technology and issues </li></ul></ul><ul><ul><li>Proper resource assignment </li></ul></ul><ul><ul><li>Communication of shared vision </li></ul></ul><ul><ul><li>Communication of role of new system to staff </li></ul></ul><ul><ul><li>Identify and approve new organizational structures, roles and responsibilities </li></ul></ul><ul><ul><li>Approve codes of conduct </li></ul></ul>
  6. 6. Culture, Communication, and Support <ul><li>User involvement </li></ul><ul><li>Effective change management </li></ul><ul><ul><li>Strong corporate identity </li></ul></ul><ul><ul><li>Open to change </li></ul></ul><ul><ul><li>Encouraging open communication </li></ul></ul><ul><ul><li>Determination to accept new technologies </li></ul></ul><ul><ul><li>Determination to overcome implementation problems </li></ul></ul><ul><ul><li>Project champion </li></ul></ul><ul><li>Internal communication </li></ul><ul><ul><li>Announcement of project scope, objectives before onset </li></ul></ul><ul><ul><li>Formal presentations / user participation (requirements, results) </li></ul></ul><ul><li>Supplier management </li></ul>
  7. 7. Infrastructure <ul><li>Standardized IT infrastructure </li></ul><ul><li>Suitable business and IT legacy systems </li></ul>
  8. 8. Approach <ul><li>Overall approach to project </li></ul><ul><li>Formalized project approach and methodology </li></ul><ul><ul><li>“ Skeleton approach”: limited start  expansion </li></ul></ul><ul><ul><li>“ Single module”: module per module </li></ul></ul><ul><ul><li>“ Big Bang”: complete system </li></ul></ul><ul><li>Focus on user requirements </li></ul><ul><li>Use of external consultants </li></ul><ul><li>User training </li></ul><ul><li>Data accuracy (at conversion, at input) </li></ul><ul><li>Alignment with business processes </li></ul>
  9. 9. Project Management <ul><li>Proper project planning, phasing and follow-up </li></ul><ul><ul><li>Project goals description (realistic quality, time and cost goals) </li></ul></ul><ul><ul><li>Project scope </li></ul></ul><ul><ul><ul><li>Identification business processes </li></ul></ul></ul><ul><ul><ul><li>Choice of modules </li></ul></ul></ul><ul><ul><ul><li>Identification of changes </li></ul></ul></ul><ul><ul><li>Project phasing and critical path analysis </li></ul></ul><ul><ul><li>Milestones and deadlines </li></ul></ul><ul><ul><li>Resources plan </li></ul></ul><ul><ul><li>Project follow-up organization </li></ul></ul><ul><ul><li>Contingency measures </li></ul></ul>
  10. 10. Project Management <ul><li>Properly organized project management </li></ul><ul><li>Appropriate project teams </li></ul><ul><ul><li>A single physical location </li></ul></ul><ul><ul><li>Incentives for delivery within time and budget </li></ul></ul><ul><ul><li>Incentives and risk-sharing agreements with partners </li></ul></ul>
  11. 11. Critical Success Factors in Belgian SMEs <ul><li>Do these CSFs apply to Belgian SMEs? </li></ul><ul><li>76 SMEs with known successful ERP implementations </li></ul><ul><ul><li>#employees: 10  250 </li></ul></ul><ul><ul><li>Revenue < 50 mio euro </li></ul></ul><ul><ul><li>Balance total < 43 mio euro </li></ul></ul><ul><li>Limited survey </li></ul><ul><li>4 Representative cases </li></ul><ul><ul><li>Different sectors </li></ul></ul><ul><ul><li>Structured interview of key players (IT, Management) </li></ul></ul>
  12. 12. Company Activity Employees Revenue in 2006 (mio euro) F-Co Latex-foam 113 34.1 M-Co Process engineering 57 14.5 O-Co Vegetable oils 87 84.0 W-Co Tires and Wheels 51 40.5
  13. 13. F-Co <ul><li>Leading European manufacturer of latex foam </li></ul><ul><li>Sites in Belgium, Czech republic </li></ul><ul><li>Sales offices in 10 more countries </li></ul><ul><li>SAP implementation </li></ul><ul><ul><li>Purchasing, order entry, materials management, production planning, financial accounting, distribution and logistics, asset management, data warehouse </li></ul></ul><ul><ul><li>Single site </li></ul></ul><ul><ul><li>Project divided into subprojects </li></ul></ul><ul><ul><li>10% modified </li></ul></ul><ul><ul><li>“ Big Bang” roll-out </li></ul></ul>
  14. 14. F-Co: Project <ul><li>Duration: 6 months planned, 7-12 months effective </li></ul><ul><li>Cost: 1 – 1.5 mio euro as planned </li></ul><ul><li>Useful lifetime: 10 years </li></ul>Component Fraction of cost Hardware 10% Software 60% Consulting 5% Implementation team 5% Training 20%
  15. 15. F-Co: CSFs <ul><li>Users heavily involved </li></ul><ul><ul><li>Information and participation </li></ul></ul><ul><ul><li>Requirements identification </li></ul></ul><ul><ul><li>Training </li></ul></ul><ul><ul><li>No formal acceptance </li></ul></ul><ul><li>Pivotal role of senior management </li></ul><ul><ul><li>Project approval </li></ul></ul><ul><ul><li>Financial responsibility </li></ul></ul><ul><ul><li>Top priority </li></ul></ul><ul><li>Change management </li></ul><ul><ul><li>Organization open to change </li></ul></ul><ul><ul><li>Commitment to new technology </li></ul></ul><ul><ul><li>Determination to overcome operational problems </li></ul></ul>
  16. 16. F-Co: CSFs <ul><li>Change management </li></ul><ul><ul><li>Project champion </li></ul></ul><ul><ul><ul><li>Middle management </li></ul></ul></ul><ul><ul><ul><li>Defending project </li></ul></ul></ul><ul><li>Project approach and management </li></ul><ul><ul><li>Mixed team with external consultants </li></ul></ul><ul><ul><li>Project manager selection criteria: competences and experience </li></ul></ul><ul><ul><li>Team members </li></ul></ul><ul><ul><ul><li>Top performing staff </li></ul></ul></ul><ul><ul><ul><li>Mostly part-time involvement </li></ul></ul></ul><ul><ul><li>Critical decisions: company management (close collaboration) </li></ul></ul><ul><ul><li>Incentive for delivery within time and budget </li></ul></ul>Project participants Fraction of staff Users 50% Business analysts 15% Technical experts 10% External consultants 25%
  17. 17. M-Co <ul><li>Branch of world-wide provider of products and technologies for separation, heat transfer, fluid handling </li></ul><ul><li>Intentia ERP suite </li></ul><ul><ul><li>Purchasing, order entry, materials management, financial accounting, distribution and logistics, financial management </li></ul></ul><ul><ul><li>Interface to data warehouse and reporting tools </li></ul></ul><ul><ul><li>Division into subprojects </li></ul></ul><ul><ul><li>20% modifications </li></ul></ul>
  18. 18. M-Co: Project <ul><li>Duration: 7-12 months, slightly longer than planned </li></ul><ul><li>Cost: 1 – 1.5 mio euro as planned </li></ul><ul><li>Useful lifetime: 10 years </li></ul>Component Fraction of cost Hardware 30% Software 35% Consulting 10% Implementation team 10% Training 15%
  19. 19. M-Co: CSFs <ul><li>User involvement (outside project team!) </li></ul><ul><ul><li>Informed </li></ul></ul><ul><ul><li>Not actively involved </li></ul></ul><ul><ul><li>Only management participated actively </li></ul></ul><ul><ul><ul><li>Requirements, advice and feedback </li></ul></ul></ul><ul><ul><li>Positive acceptance of final result </li></ul></ul><ul><ul><li>Extensive training </li></ul></ul><ul><li>Crucial role of Management participation </li></ul><ul><ul><li>Approval </li></ul></ul><ul><ul><li>Responsibility </li></ul></ul><ul><ul><li>Identification as top priority </li></ul></ul>
  20. 20. M-Co: CSFs <ul><li>Change management </li></ul><ul><ul><li>Corporate culture: flexibility, shared values, common goals </li></ul></ul><ul><ul><li>Open communication </li></ul></ul><ul><ul><li>Project champion </li></ul></ul><ul><ul><ul><li>Middle management </li></ul></ul></ul><ul><ul><ul><li>Effective contribution unclear </li></ul></ul></ul><ul><li>Project approach and management </li></ul><ul><ul><li>Project manager selection criteria: capabilities, flexibility, reputation </li></ul></ul><ul><ul><li>Team members </li></ul></ul><ul><ul><ul><li>Mostly part-time </li></ul></ul></ul><ul><ul><li>Consultation with management for critical decisions </li></ul></ul><ul><ul><li>No incentives </li></ul></ul>Project participants Fraction of staff Users 40% Business analysts 20% Technical experts 20% External consultants 20%
  21. 21. O-Co <ul><li>European division of global player in development and production of vegetable oils </li></ul><ul><li>SAP implementation </li></ul><ul><ul><li>Purchasing, order entry, materials management, production planning, financial accounting, distribution and logistics, financial management, data warehouse, advanced planning </li></ul></ul><ul><ul><li>30% modifications </li></ul></ul>
  22. 22. O-Co: Project <ul><li>Duration: 7-12 months as planned </li></ul><ul><li>Cost: 1 – 1.5 mio euro as planned </li></ul><ul><li>Useful lifetime: 5 years </li></ul>? Component Fraction of cost Hardware 10% Software 10% Consulting 50% Implementation team 20% Training 10%
  23. 23. O-Co: CSFs <ul><li>Particular attention to user involvement </li></ul><ul><ul><li>Timely information </li></ul></ul><ul><ul><li>Requirements, remarks, feedback </li></ul></ul><ul><ul><li>Actively seek user approval </li></ul></ul><ul><li>Active involvement top management </li></ul><ul><ul><li>Approval </li></ul></ul><ul><ul><li>Identification as top priority </li></ul></ul><ul><ul><li>Conflict resolution </li></ul></ul><ul><ul><li>Active participation </li></ul></ul><ul><ul><li>Not final responsibility (final responsibility carried by member of operational management) </li></ul></ul>
  24. 24. O-Co: CSFs <ul><li>Change management </li></ul><ul><ul><li>Corporate culture of open communication </li></ul></ul><ul><ul><li>Openness to change </li></ul></ul><ul><ul><li>Commitment to new technology </li></ul></ul><ul><ul><li>Strong will to overcome operational problems </li></ul></ul><ul><ul><li>Change agents and Project champion (middle management) </li></ul></ul><ul><ul><ul><li>Emphasizing advantages </li></ul></ul></ul><ul><ul><ul><li>Defense against critics </li></ul></ul></ul><ul><ul><ul><li>Conflict resolution </li></ul></ul></ul><ul><ul><ul><li>Contacts with users </li></ul></ul></ul><ul><ul><ul><li>Detecting problems with system </li></ul></ul></ul>
  25. 25. O-Co: CSFs <ul><li>Project management </li></ul><ul><ul><li>Project team </li></ul></ul><ul><ul><ul><li>Best staff members </li></ul></ul></ul><ul><ul><ul><li>50% end users </li></ul></ul></ul><ul><ul><li>Project manager selection criteria: capabilities, experience, reputation, flexibility </li></ul></ul><ul><ul><li>All critical decisions taken by corporate management </li></ul></ul><ul><ul><li>No incentives </li></ul></ul>Project participants Fraction of staff Users 50% Business analysts 10% Technical experts 0% External consultants 40%
  26. 26. W-Co <ul><li>Provider of industrial and agricultural tires and complete wheels </li></ul><ul><li>Belgium: 3 sites </li></ul><ul><li>Intentia ERP </li></ul><ul><ul><li>Purchasing, order entry, materials management, production planning, financial accounting, distribution and logistics, financial management </li></ul></ul><ul><ul><li>Interface with data warehouse </li></ul></ul><ul><ul><li>5% modifications </li></ul></ul><ul><ul><li>Loose planning </li></ul></ul><ul><ul><li>Split into subprojects </li></ul></ul>
  27. 27. W-Co: Project <ul><li>Duration: 7-12 months as planned </li></ul><ul><li>Cost: 1 – 1.5 mio euro as planned </li></ul>Component Fraction of cost Hardware 5% Software 15% Consulting 50% Implementation team 10% Training 20%
  28. 28. W-Co: CSFs <ul><li>Major user participation </li></ul><ul><ul><li>Information whole community </li></ul></ul><ul><ul><ul><li>Representation by a few users </li></ul></ul></ul><ul><ul><li>Soliciting user input </li></ul></ul><ul><ul><li>Requirements, feedback </li></ul></ul><ul><ul><li>No formal approval </li></ul></ul><ul><ul><li>Training: “job helpers” </li></ul></ul><ul><li>Top management instrumental </li></ul><ul><ul><li>Approval </li></ul></ul><ul><ul><li>Alignment with corporate strategy </li></ul></ul><ul><ul><li>Identification as top priority </li></ul></ul><ul><ul><li>Conflict mediation </li></ul></ul><ul><ul><li>Necessary changes in corporate culture </li></ul></ul><ul><ul><li>Assumed final responsibility </li></ul></ul>
  29. 29. W-Co: CSFs <ul><li>Change management </li></ul><ul><ul><li>Project champion </li></ul></ul><ul><li>Project management </li></ul><ul><ul><li>Project team </li></ul></ul><ul><ul><ul><li>Best staff members </li></ul></ul></ul><ul><ul><ul><li>Mostly part-time </li></ul></ul></ul><ul><ul><li>Project manager selection criteria: reputation, flexibility </li></ul></ul><ul><ul><li>Urgent decisions taken by project team </li></ul></ul><ul><ul><ul><li>Proper communication with top management </li></ul></ul></ul>Project participants Fraction of staff Users 10% Business analysts 50% Technical experts 20% External consultants 20%
  30. 30. Critical Success Factors in Belgian SMEs <ul><li>Vision, Scope, and Goals </li></ul><ul><ul><li>Vision, strategic goals, and business plan </li></ul></ul><ul><ul><li>Scope </li></ul></ul><ul><ul><li>Efficient management reporting </li></ul></ul><ul><li>Culture, Communication, and Support </li></ul><ul><ul><li>Senior management support </li></ul></ul><ul><ul><li>User involvement </li></ul></ul><ul><ul><li>Effective change management </li></ul></ul><ul><ul><li>Internal communication </li></ul></ul><ul><ul><li>Supplier management </li></ul></ul>  ?      <ul><li>Explicit scope limitation important </li></ul><ul><li>Suitable corporate culture, open to change </li></ul>
  31. 31. Critical Success Factors in Belgian SMEs <ul><li>Infrastructure </li></ul><ul><ul><li>A standardized IT infrastructure </li></ul></ul><ul><ul><li>Suitable business and legacy systems </li></ul></ul><ul><li>Approach </li></ul><ul><ul><li>A formalized project approach and methodology </li></ul></ul><ul><ul><li>Focus on user requirements </li></ul></ul><ul><ul><li>Use of external consultants </li></ul></ul><ul><ul><li>User training </li></ul></ul><ul><ul><li>Data accuracy </li></ul></ul><ul><ul><li>Alignment with business processes </li></ul></ul>  ?    ? 
  32. 32. Critical Success Factors in Belgian SMEs <ul><li>Project Management </li></ul><ul><ul><li>Proper project planning </li></ul></ul><ul><ul><li>Proper project management </li></ul></ul><ul><ul><li>Good project teams </li></ul></ul>   <ul><li>Variable project management </li></ul><ul><ul><li>No critical path </li></ul></ul><ul><ul><li>No contingency </li></ul></ul><ul><li>Project champion </li></ul><ul><ul><li>Contribution not always clear </li></ul></ul><ul><li>Project manager criteria: capabilities, experience </li></ul><ul><li>Mix of internal and external specialists </li></ul>
  33. 33. Conclusions <ul><li>Important Critical Success Factors of ERP implementations in Belgian SMEs: </li></ul><ul><ul><li>A clear vision on the strategic goals of the implementation </li></ul></ul><ul><ul><li>Senior management support </li></ul></ul><ul><ul><li>Active user involvement </li></ul></ul><ul><ul><li>A suitable corporate culture, open to change </li></ul></ul><ul><ul><li>Internal communication on the project (before, during) </li></ul></ul><ul><ul><li>Proper supplier management </li></ul></ul><ul><ul><li>Formalized project approach and methodology </li></ul></ul><ul><ul><li>Focus on user requirements </li></ul></ul><ul><ul><li>Use of external consultants </li></ul></ul><ul><ul><li>User training: technical, business, practice oriented </li></ul></ul><ul><ul><li>Proper project planning, phasing and follow-up </li></ul></ul><ul><ul><li>A mixed project team: users, internal technical and business experts, external consultants </li></ul></ul>
  34. 34. Thank you

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