Managing data can be overwhelming. Right from handling input resources to finances to output, synchronization with other associated industries, managing forward and backward linkages, a systematized and organized set of data is the key to seamless management. ERP’s offer to do just that. These softwares are based on a limited number of platforms such as Microsoft, SAP, etc. but they provide a great deal of flexibility in terms of customization to your industry’s specific needs and allow real time organization of data. However, here is the catch. 50-75% of ERP implementations have failed in US itself. The numbers are pretty higher in developing countries. Chances are high that it might actually hurt your business rather than benefiting it. This presents a conundrum that we hope we might be able to solve through this blog. Based on a rigorous research and field inputs from our own company, we would like to help you resolve your dilemma. This blog outlines certain criteria that we like to call critical success factors that will enable you to make wiser decisions. We have also tried to present a comparison between the experiences of developing and developed countries in ERP implementation as well as between private and public sectors so that you may focus on what is relevant for you.
Critical success factors:
Most of the researches that have taken place in this context have figured out a list of critical success factors whose presence and strength seem to determine the success rate of implementing solutions. The researches we refer to specifically come from a user centric perspective thus making the inputs more relevant to your search.
Among the umpteen CSF’s, strategic decision making, business alignment, communication, education and training, project team, software testing emerge as the most important ones (Reitsma and Helitofth, 2018). According to their research, industries that are located in developed countries tend to view project team and a project champion as the most important success factor. They expect the team to consist of the best employees of the organization. Simultaneously, they put a lot of emphasis on technical possibilities of the solution. They expect the solution to be up to date with the rapidly changing environment and industry needs. Concise and precise communication with the implementing organization has emerged as another critical factor of successful implementation. Companies prefer to be updated with the progresses made, targets achieved and expected outcomes. A well-defined business plan and vision should define how the organization operates behind the implementation effort and has to outline proposed strategic and tangible benefits, resources, costs, risks and timeline is critical. Researches that have taken place in Pakistan, Indonesia and India present similar results. Information quality, system quality and service quality become the primary factors enabling successful ERP implementations.
Why do implementations fail?
A research conducted by Ala’a Hawari and Richard Heeks (2018) in a Jordanian manufacturing firm brought out some critical insights. The authors argue that in some cases, there appears to be a Design-reality gap between the two partners (implementing agency and manufacturing company). Lack of communication between the two resulted in a software design that did not match the needs of the firm. The employees could not get on board with the hassle; it took them more time to perform their tasks because minute details were not taken into consideration. Lack of education and training of employees also emerged as a critical factor. They were simply unable to understand the system or why it was supposed to be successful. Moreover, they lacked necessary equipment in terms of high storage servers/internet services leading to a persistent issue of overloading. Since the central leadership had not engaged in engaging its employees in the perceived usefulness of the system, there was a general sense of apathy towards this new technological development.
Our company has an experience of more than 30 years in ERP implementation. Our customers primarily belong to developing countries, albeit we have customers in the Gulf as well. While we agree with the above research outputs, we believe that we can add a lot of value to this discussion. For example, a couple of organizations labelled presence of central leadership as not critical to the overall success of ERP implementation. We STRONGLY disagree. We argue that a top down approach that seeks to enforce the implementation upon its employees is critical. This is primarily because ERP implementations tend to be a complicated and often drawn out affair. It might take 3-4 years for it to complete. A number of add-ons and customizations are brought into focus at a later stage of software development; oversights are common. It is a completely new software, new technology that needs to be learned over and over again by the employees. If only we knew the human psyche a little better, we could have explained this persistent resistance to change among the lower level employees of an organization. The presence of top most leadership is therefore essential in improving the perceived usefulness of an ERP implementation within its employees.
Secondly, we believe that an ERP implementation organization needs to be well enmeshed in its field for a significant amount of time to be able to offer customized solutions for different industries. It is not Sisyphus (thank heavens for that), but it does take years of research, persistent grilling and hard work to understand the nuances of any industry and achieve domain expertise. So if their prices seem to be a little higher than your budget, do not be disheartened. The true value of a solution lies in the nuances and details; you may very well be surprised by their keen insights into your business! (FYI, we have stumped our customers time and again. We know it is possible).
Once you decide upon an ERP implementing partner, we would suggest that you keep your list of to-do items limited to bare essentials in the beginning. As our CEO often likes to point out, “you shouldn’t have too much to bite in one go”. It is perfectly fine to be ambitious about including all aspects of your production process. However, it is better to include the add-ons at a later stage, after the basic system is up and running (hence the idea of ERP implementations running for 3-4 years). We have learnt from our mistakes, having seen implementations fail because of over the top ambitious targets; we hope you do not make them as well.
Lastly, ad-hoc practices, lack of transparency, avenues of corruption do not sit well with an ERP system. ERP provides transparency and fluidity of data; it does not allow manipulation of data. Any ERP implementing agency will be unable to help you in this case.