Discuss about the ERP Software and Vendor Selection for Finance.
ERP systems are integrated business management solutions that cover all functional avenues of an enterprise or organisations. They cover all areas of business such as finance, logistics, management and human resource among many others. Through their organisation and logical flow, they allow enterprises to streamline their operations and in the end achieve maximum output from their services. In a nutshell, ERP systems promise to be a single resource that holds the database (information), applications and a single user interface to interact with the users (Vayyavur 2015). However, like any other solution, a lot of work is needed prior to implementing them, this includes research, analysis and evaluations of the said system as well as the organisation itself. These procedures enable an organisation to determine their requirements and to tailor a solution that best suits their requirements (Mendelson 2000).
When selecting an ERP system, it’s advisable for an enterprise to highlight the critical success factors (CSF), these items are used to gauge the success of the selection process and mitigate the losses involved (Burns 2013). From these elements, the selection process can commerce having a clear structured strategy. Nevertheless, regardless of the plans and selection procedures highlighted there are always issues or challenges that affect the process, for instance, some organisation lack patience and speed up the entire selection process. Later on, these cost money because the system chosen lack the necessary capabilities to meet the needs of the business. In this report, we highlight some of these challenges and provide possible solutions to mitigating them.
Choosing an appropriate ERP system and the correct partner in the implementation process is the foundation of the success of an ERP solution. However, selecting a suitable vendor and an appropriate system is a complex process that involves critical decisions based on planning, analysis and evaluation (Munkelt & Volker 2013). Fundamentally, several models have been proposed to guide an organization in this process that heavily affects its overall structure. Nevertheless, a familiar outline is noticeable in all the models used as shown below.
Fig: ERP Selection Process
Project Planning and Setup – At this stage, the initial plans are made regarding the overall project from the proposed budget to the initial assessment of user specifications/requirements. User requirements (needs of the enterprise) are then used to guide the team selected to execute the entire selection process.
System Analysis and design – Implementing and ERP system is a long term project that affects the order of business and may require the enterprise to re-engineer its operations. Through the analysis process, the system specifications are understood and their implication on the organisation infrastructure.
Business and system design – ERP systems improve business activities not take over them, therefore, the selection process at this stage identifies the link between the proposed system and the existing business procedures. Those that do not fit are re-evaluated and redesigned to fit the requirements. (NB: Both the business values and system can be redesigned to fit each other).
Evaluation – Having highlighted the requirements and developed a suitable skeleton of the ERP system, the selection process incorporates vendors who fit the outlined requirements. Furthermore, multiple bids or vendors are requested in order to improve the chances of obtaining an appropriate system.
Selection – The final solution is chosen having satisfied the requirements, from system design to the cost implications. Moreover, assessments are made on the contract agreements especially the licence agreement which decides the capabilities available to the user as set by the developer.
(ERP Selection process modified from Epicor 2012).
ERP systems have had profound benefits in business since their early inceptions in the 1900s where they were used to streamline business operations. However, to date, people are still faced with many issues and challenges when selecting these systems. Moreover, some ERP solutions end up being liabilities rather than being the intended improvements to business operations. Some of these challenges contribute to these failures that may occur despite an organisation’s capital investment (Vayyavur 2015). Furthermore, research by reputable audit organisation has shown that majority of the ERP solutions implemented in enterprises fail to meet their objectives. These failures are rarely caused by the ERP Softwares instead, they are caused by the complexity of the changes caused by an ERP system in an organisation.
According to Seo (2013), most of the issues faced in ERP implementation and selection are not caused by technical capabilities but by the organisation and the personnel involved. Lack of commitment from the top management is one of the major issues faced by enterprises during the selection process. From the overall requirements, it’s clear to see the complexity of the demands made by this process, from structural changes to hefty cost requirements. It’s the responsibility of the top management to designate the roles using clear cut communication channels that seek to integrate the entire organisation as a whole. Lack of this commitment reduces the credibility of the ERP system setting it up for failures (Bywater 2015).
ERP system has a wider impact on the roles of the employees and the roles they conduct. In addition to this, ERP systems influence different departments and the functionality of the different processes within an organisation. Therefore, proper training is needed to sensitise the users from the different departments in order to facilitate a smooth transition. Inadequate training presents another common challenge in the selection of an ERP system, this because most training will focus on the system itself and not the integration of the system on the business operations. As a result of this misconception, employees perceive the system as a monitory tool far from the enterprise operations (Ranjan, Jha & Pal 2016).
The conflict between departments and their operations is another common challenge faced by ERP systems. ERP system will integrate different operations irrespective of their roles or specifications. This integration incorporates many different variables which creates conflicts among users and the operations of the system (Soltanzadeh & Khoshsirat 2012). Furthermore, this problem can be catalysed by business processes adopted to meet the needs of the ERP solution. Moreover, poor redesign mechanisms present another considerable challenge because they conflict the knowledge base and the objectives of the ERP system. Furthermore, the shift in business operations is a continuous process which may affect the logistics of systems and in the end, affect the adaptability of the organisation.
Finally, consider the requirements made by an ERP system and the problems that may arise if they are misunderstood and are wrongly implemented. Forgetting the user conflicts, ERP and business mismatch can generate immense consequences on the productivity of the business because of increased expenditures caused by inefficient systems. Furthermore, it can affect the organisation’s culture where employees adopt wrong assumptions about the internal structure of the organisation. Since these assumptions govern the values, practices and processes within an enterprise, the end result is an inefficient workforce propagated by wrong objectives (Vayyavur 2015).
Most of the issues highlighted above are caused by poor integration mechanisms, where the chosen solutions fail to fulfil the needs of an organisation because of conflicting requirements. Adopting the business process re-engineering (BPE) model can help align the business requirements with those of the ERP system. BPR provides an enterprise with the basic rethinking model to redesign the business structure to attain the necessary improvements needed to succeed while using an ERP system. BPR will involve changes in organisation structure, employee’s job description, and the management itself. Moreover, these changes must follow a strict format outlined by an appropriate training method (Seo 2013). Through BPR, an enterprise is able to meet its training requirement and also resolve its in-house conflicts.
Secondly, an organisation can have a holistic approach to the selection process by incorporating a specific team to run the selection process. This team can comprise of different members of the organisation having members from all departments and all levels of operation. This ‘think team’ should thereafter have regular assessments based on specific milestones set by the senior management through the guidance of ERP experts (Thai 2011). This solution would solve the commitments issue from the top management and also help to increase the viability of the projects because of the accurate measurement procedures used.
Finally, an organisation should consider the entire process (selection and implementation) as an ongoing project with minimal time restrictions. This perception would allow the designers of the system to develop a solution that meets the needs of the organisations. Moreover, this outlook would have the necessary allowance to alter the system architecture for it to fit the needs of an organisation. In addition to this, it would help the entire organisation to adapt to the new order of events and even help it meet the needs of the new system. However, a realistic time plan should be used to gauge the progress of the project (Kimberling 2010).
Conclusion
Information technology has revolutionised business, more so the environment used to conduct it. Today, business enterprises have heavy competition because of the added capabilities introduced by digital media which provides an extra trading environment i.e. a virtual marketplace. ERP provides organisations with the necessary advantage to beat the competition. Furthermore, ERP solutions help streamline operational activities by engaging the right resources through accurate information delivery. It is through these systems that senior executives can relay their strategies to the lower management. Moreover, it is through ERP systems that consumers are able to receive efficient services, delivered on time and on demand. However. Proper procedures must be used to implement these solutions for them to turn into positive reinforcements of business.
An enterprise must carry out thorough research into the ERP system they intend to implement. Moreover, similar scrutiny must be used to identify qualified vendors to provide this crucial solution. In addition to the system and vendors, the organisation must re-evaluate itself to satisfy the needs of an ERP system and also to allow a smooth transition into the new system. Through these strategic procedures, an organisation can be assured of improvements after implementing a chosen ERP system.
References
Burns. M, 2013, How to Select and Implement an ERP System, Available from: https://www.180systems.com/resources/ERPWhitePaper.pdf [26 January 2017]
Bywater. P, 2015, 5 Challenges of ERP Implementation, Business 2 Community, Availble from: https://www.business2community.com/strategy/5-challenges-erp-implementation-01380341#5FWpxxdqPgw4Wobs.97 [26 January 2017]
Epicor, 2012, How to Successfully Select an ERP System in Eight Simple Steps, Available from: https://www.macroscoop.nl/macroscoop/images/stories/macroscoop/pdf/8stepstoselectanerpsystem.pdf [26 January 2017]
Kimberling. E, 2010, five challenges to software implementation and how to avoid them, Software implementation white paper, Available from: https://teamsoftware.com/wp-content/uploads/2015/11/Implementation_White_Paper.pdf [26 January 2017]
Mendelson. H, 2000, ‘ERP Overview’, Graduate School of Business, Stanford University, Available from: https://faculty.ist.psu.edu/yen/421/erp.pdf [26 January 2017]
Munkelt. T & Völker. S, 2013, ‘ERP systems: aspects of selection, implementation and
Sustainable operations’, International Journal of Information Systems and Project Management, 1(2), Available from: https://www.sciencesphere.org/ijispm/archive/ijispm-010202.pdf [26 January 2017]
Ranjan. S, Jha. V. K & Pal. P, 2016, ‘Literature review on ERP implementation challenges’, International Journal of Business Information Systems 21(3), Available from: https://www.researchgate.net/publication/295087899_Literature_review_on_ERP_implementation_challenges [26 January 2017]
Seo. G, 2013, ‘Challenges in Implementing Enterprise Resource Planning (ERP) system in Large Organizations: Similarities and Differences between Corporate and University Environment’, Composite Information Systems Laboratory (CISL), Available from: https://ic3.mit.edu/ResearchSamples/2013-07.pdf [26 January 2017]
Soltanzadeh. J & Khoshsirat. M, 2012, ‘Challenges of ERP implementation: ERP as a Technology Transfer Project’, international Conference on Economics, Business Innovation, 38, Available from: https://www.ipedr.com/vol38/004-ICEBI2012-A00007.pdf [26 January 2017]
Thai. P. H, 2011, Study of Problems and Solutions for Implementing ERP System at Enterprises in Nam Dinh Province, Vietnam, Graduate School of Information Management, Available from: https://ir.lib.stu.edu.tw/ir/retrieve/535/stu-100-s97731421-1.pdf [26 January 2017]
Vayyavur. R, 2015, ‘ERP Implementation Challenges & Critical Organizational Success Factors’, international Journal of Current Engineering and Technology, 5(4), Available from: https://inpressco.com/wp-content/uploads/2015/08/Paper822759-2766.pdf [26 January 2017]
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