In addition to the cost of the software, that of the consultants who help in its installation, and the costs of the required IT infrastructure there are other costs to ERP.
For one, the organization implementing ERP must train its employees. The training is not just about developing skills in operating the system and interfacing, but about the new methods of doing things. People in the organizations need to have a process-orientation. They should think about the process that leads to the customer and thus have a larger perspective. They should also be trained in the new methods and procedures. This training takes time to sink into people and them to start giving results.
Data of the old systems have to be moved to the new system. Some of the old data could be useless or obsolete in the new system. Some of it could be spurious. When data starts getting transferred, one discovers the extent of work required to modify the old data and generate the new.
ERP is not a project that comes to an end at one point in time. It becomes a more or less continuous process of improvement. The costs, therefore, will continue.
Steps in ERP Implementation
1. Identify the need for having an ERP system on board. The management of the organization should, in a broad sense, know as to what it wants in terms of the business and where do the lacunae lie.
2. Assess whether the organization is ready for ERP. Much of it has to do with the top management commitment and the attitudes of the people in the organization.
3. Assess the costs of installing ERP on a long term basis and the readiness of the management to bear it.
4. Start organizing for ERP implementation. Select the persons within the organization who will interact with the consultants of the ERP software vendor. Assign specific roles and jobs.
5. Document and evaluate the old process and the new process that is desired. Process mapping and modeling can help in evaluating the probable results. Based upon it, the new process can be further revised.
6. Select the software and the vendor or its associate that would do the desired job. This would involve parameters such as:
(a) The global and local presence of the software and its vendor (i.e. which other organizations have used it. Check these organizations’ experiences).
(b) Type of industry that the software attempts to target, for instance, some software packages are specific to engineering industry while some others could be for a process industry.
(c) Obsolescence of the software package.
(d) Price of the package plus the cost of implementation. This could vary from one package to the other.
(e) The caliber, expertise and attitude of the vendor or its local associates who would interface with the organization during implementation.
(f) Ease of implementation involving the nature of the package, its design its modularity and the people who install it.
(g) After sales service or support offered by the vendor or its associates.
7. Draw up a detailed plan if implementation that should include:
(a) Forming a team for implementation
(b) Training of the team
(c) Mapping of the business processes onto the package
(d) Deciding upon customizing where essential
(e) Schedule or the test runs
(f) User training
Leading ERP Software Vendors:
SAP is German company that operates all over the world having a large share of the ERP software market. Its flagship product SAP R/3 is its high end software. The strength of SAP is in its research and development support, its process-orientations rather than being technology – oriented, partnership with consulting and IT firms and training. It meets the needs of modern day corporations that have global accounting standards and other modern business practices, multiple currencies and multiple languages. It controls SAP certificate very stringently and thus has a name for quality. In India, SAP has had a lion’s share of the market ad large business houses of repute such as Tata, Kirloskar and Mahindra have been their user licenses, P&G, LG, and HP in India have implemented SAP.