Planning an ERP Implementation Project @ Small and Medium Enterprises 27 th Regional WIRC Conference 31 August 2012
Table of Contents What is an SME and ERP Why an ERP for the SME segment Assessing the readiness for ERP (think before you jump) A typical ERP project lifecycle and roadmap ERP Deployment challenges Continuous improvement and post go-live Role of CAs during ERP implementation Page 2
What is an SME (in ERP Parlance) Companies whose turnover is less than INR 800-1000 Cr. is classified under SME segment (definitions could change from country to country and for the OEM) Total number of users requiring IT systems for recording transactions (purchase, sales, inventory, accounting etc) would be around 100-200 Less than 200 PC organization Page 3
What is ERP. Integrated across the primary and support processes System tools Master data Treasury/ CM Asset Management Procurement Planning and Execution Production Planning and budgeting Marketing Finance Sales Inventory/ Stores BI/ MIS R&D HRMS Supply Chain Quality Mgmt Page 4
what are the key drivers? IT enablement of leading processes to support business growth, learning from others and global templates (growth, cost reduction, response time) When decision-making and business reviews become time-consuming for want of quality and adequate data Integration of business processes (purchase, inventory, sales, accounting etc) single source of truth People and role optimization, infusing efficiency through automated workflows (get more and better quality of work done) working capital and labor efficiencies Key Drivers Building a foundation for extended enterprise, backend for web-based systems and upcoming new age products Public listing, international footprint, regulatory environment, need for centralized controls, business policies and compliance Page 5
Improved performance and maturity through ERP Days to close a month (can be reduced up to less than 3 days) Days to close the year (less than 21 days) No of people required for payment processing Complete and on time delivery Inventory truns improvement On-time plant maintenance (almost 100%) Debtors turnover (days outstanding < 30 days) No. of people for a given transaction volume (gets reduced due to better integration and automation) Improved performance management capabilities Page 6
Key concerns think before you jump Cultural and mindset change required (ERP becomes a new way of life and changes culture, process and competencies) Is the promoter and top management executive sponsorship fully secured for the project? Do you have the right core team to drive the project? Can you manage the project of this size internally? Key Issues Less flexibility for process deviations as well as less agility for making system changes People based functions v/s system and process driven workflows Ability to driver the change. There is a danger that ERP will become and remain like an expensive typewriter Page 7
When Organization is ready for ERP Timing and Pilot ERP implementation need to be executed when the business is stable In case the organization is spread across the geographic locations, it is prudent to identify a single location for the pilot project and roll-out to other locations Investment ERP implementation would involve one time investment in the range of INR 70 Lacs 200 Lacs and will have about 25% annual recurring expenditure Process ERP implementation need to be executed for processes which are stable and have evolved to a higher maturity level. People ERP implementation need to be considered based on the maturity level of the people in terms of business process understanding along with the fluency of IT usage Business Unit In case the organization operates in varied businesses, it is imperative to identify the business unit which is stable and evolved in terms of processes for the pilot project and subsequent roll-outs Page 8
How make Organization ready for ERP Starting at a right time in the year (busy seasons, core team availability etc) Orientation program regarding ERP for core team, top management Plan ahead for targeted go-live and cut-over date Identify change management requirements and plan for communication strategy Understanding what is unique in my company (sales, production, customer delivery process) Plan for the program and project management Build a core team that has acceptability in the Company and not the easy option of people who can be easily spared for the project Involve the core team on the full-time basis Incentivize the core team, plan for their retention Choose an implementation partner who understands the sector and organization cullture Build the right expectations with the business heads and process owners Page 9
Typical ERP Roadmap/ project lifecycle Need assessment Vendor Selection Implementation Planning ERP Implementation ERP Post Implementation ERP need assessment Vendor selection Implementation Planning ERP Implementation ERP Post Implementation Business case approval Project planning RFP Preparation Selection of ERP product vendor Form project team. Prepare project plan Prepare change management plan. Prepare business blueprint System Config. Complete data migration Conduct end user training SAT and UAT Design and manage access controls Set up service desk Implement additional functionalities and manage roadmap Post implementation audit Go live Page 10
Leading ERP Products Standard Packages Complex Monolithic Application # SAP ECC Oracle EBS Ramco Enterprise Microsoft Dynamix, Axapta Infor Peoplesoft/ JD Edwards Relatively Simpler Distributed On Demand Applications # Ramco On Demand Tally Enterprise SAP Business One (SBO) Sage ESS Sun # names are trademarks of owned by respective individual ERP software manufacturer ERP delivery options SaaS, Traditional on-premise Hosted & managed by vendor/ 3 rd party Page 11
ERP Costs and selection criteria One Time Software licenses Hardware Network equipment/ WAN/ LAN Implementation partner fees PMO fees Project office set up In-house resources External consultants Training costs New hiring (DBA) Recurring Telecom links Software AMC Hardware AMC Change requests costs Additional licenses Top selection criteria Functional fitment Ease of use Integrated suite rather than multiple point solutions bundled together Total cost of ownership Ability to tailor functionality without programming Ease and speed of implementation Integration technologies, middleware platform Future scalability and architecture for expansion and delivery platforms (mobile, web, smart-phone etc) Page 12
ERP Deployment: Common Challenges A move to leading practices requires the integration and coordination supported by a PMO Common Issues Treat ERP project as an IT only project Key objectives, drivers and benefits are not defined Project is totally or mostly depended on Service provider The system is too much customized to meet business requirements ERP just automated the current process Reporting is not considered while designing the system Separate and potentially conflicting measures Benefits realization is not reviewed as a discrete area Requirements are not documented correctly Leading Practices ERP projects are transformational and should be managed by Business and IT A business case is prepared including clear goals for the project Dedicated, full time business resources are included in the project teams Try to leverage ERP standard functionality as much as possible Reengineer process as needed and that are in line with leading practices Design includes reporting requirements Balances management of delivery, dayto-day financial performance and stakeholder sentiment Direct leadership oversight supported by transparent savings progress metrics Define the future state and requirements before starting system build Page 13
Sustain: Post Implementation Strategy Maintenance of ERP application post implementation is as critical as implementation. The support strategy need to be planned in advanced and not during the final stages of the implementation It is better if the first year is supported by the implementation partner company to maintain the continuity and easier trouble-shooting SLAs (level 1, 2, 3) should be established Strict control on maintaining integrity of the ERP production environment is critical: System changed are allowed only after consulting the vendor/ core team Access to the system is given on need to know basis Third party access is controlled and monitored License management process should be in place, budgeting for additional users and business growth should be performed on time Hardware, IT infrastructure and support services AMC contract should be renewed every year DR mechanism should be established to ensure service continuity Continuous improvement and optimization initiatives to be undertaken Page 14
Role of CAs in ERP deployment Within the Implementation Team (CAs in the industry) Finance core team leader Work as a Project manager Role in selection of ERP Build on the overall process and commercial and business knowledge gained in CA course and on the job Power user and SME for Finance, costing, BI, MIS and tax modules Chart of accounts design Data migration and reconciliation sign-off Finance process improvement As a consultant/ CAs in Practice On-going QA review Post implementation review Role in selection of ERP COA sign-off or consolidation to be signed off and approved by the statutory auditors Work with top management in the project steering committee Project Risk, quality and governance Pre-go-live checks Data migration reviews Training the client team on performing ERP audits Page 15
Thank You Avinash Bendke