SAP Implementation Assignment: Introduction
Enterprise resource planning is emerging out as tools which enhances the performance, help building capability and provides data to take quick decision for day to day business needs (Anita, 1996). An ERP package integrates all the business activities by improving relationship and help in achieving competitive advantage for the company. SAP is the German based company which provide software for the enterprise wide client/server systems. SAP is the dominant leader all around the world in providing the enterprise solution to the companies (Sprengel, 1998).
The Client/server computing is the root cause for the need of ERP systems, the client/server computing along with Business process re-engineering created the demand for the ERP systems in organisation. The Main aim of the SAP implementation is to bring together various business functions such as accounting, inventory, sales and distribution in one data models so that data which is collected once can be used for every business function without duplication of data (Caldwell, 1998). This methodology saves both time to collect duplicate data as well as money which is used for collecting the data again and again.
The introduction of SAP system in the big companies or corporate is due to its importance of enabling the applications of various SAP packaged applications, such as; enterprise resource planning (ERP), customer relationship management (CRM), supply chain management (SCM) and other applications of the modern business. SAP software application was founded by IBM Germany engineers back to 1972. SAP is regarded as the world’s top business software applications provider, i.e.; providing means of improving the business activities and various other fields in this issue. This may include and not limited (Chain Store Age 1998);
- Enabling the business and its partners/customers as well as employees to work together.
- Enabling the integration of SAP applications with the business requirements.
Accordingly, this study will address the enterprise planning and implementation which is part of the SAP family applications in the business. SAP/ERP is an important software system which helps in integrating the business activities for the purpose of improving its efficiency, quality of services and at the same time minimizing the costs of its operations.
The SAP systems were designed for the organisation as a whole as has several features into them which can be listed as follows:
- Online system without any interface required
- No duplication of data
- Data models defined clearly
- Customization according to need
- Client server model
- Standardized process
SAP R/3 software which is implemented in organisation for the integration of data for the various departments of any organisation consists of several software into it. These different kinds of software are arranged in form of layers which have their definite functions (Davenport, T. 1993). The software contained by SAP according to their layer structure can be represented as follows:
- Graphical user interface (Presentation layer)
- Application layer
- Database layer
(Source: Adapted from Taufel, 1998)
The current study will try to highlight the barriers and challenges faced by the industrial companies to implement SAP successfully for integrating their data. Further research will assess the role of the various factors in an organisation which contributes to the successful SAP implementation process (Peterson, 1998).
2. Problem statement
What causes failure in SAP implementation process in industrial companies and what role does management and information technology plays in SAP implementation?
The Objectives for carrying out the research are as follows:
- To identify challenges faced in SAP implementation in the industrial companies
- To identify the role of the top management, information technology department and other departments as well as vendors in managing the SAP implementation
- To analyse the findings of the study and compare it with the literature review which will lead to identify the success factors and produce a conceptual framework for implementing SAP in industrial companies
4. Research Questions
- How technology infrastructure poses challenge in SAP implementation?
- How communication issues pose challenge in SAP implementation?
- What role does top management have in successful SAP implementation?
- How IT department is involved in SAP implementation?
5. Research justification
The Failure of SAP implementation in small organisation is a big issue since if the SAP implementation got failed then the all functions of the business which are dependent on the SAP will get haywire. For example if the SAP implementation has been implemented in the company as the full package, then the various processes of the company starting from the order taking to the cash realization would be dependent upon the SAP systems.
The Processes such as the taking order from customer based on the database management and customer relationship management would be working as the main system. If the SAP system implementation will get failed then the company would not be able to take the order of the customer and the orders which were taken initially would not be executed in absence of the SAP system.
Also company would have made big investment in the SAP system as the system is very costly and if the implementation is not successful then the whole investment of the company will get wasted. Before implementing the SAP system training has to be provided to the users of the SAP and the new staff has to be hired by the company in order to properly handle the system and if the implementation get failed then the human resource issues also get arises in the company.
Hence if the research is carried out in order to find out the reasons which lead to the failure of SAP systems in the company then while implementing the system proper care can be done so that no such incidence happens and SAP implementation process can take place successfully. The current research will guide all the industrial companies which are going to implement the SAP system in future.
6. Dissertation outline
For carrying out the research following outline would be followed:
The introductory chapter of the research will give the reader a brief understanding about the research contents, objectives and goals; i.e., what the researcher is trying to investigate and present to the reader.
- Literature review
This chapter of the research will investigate the environment surrounding the SAP ERP implementation in the industrial projects and will focus on the critical success factors that may encounter in fulfilling the implementation process. Previous studies and writings of many academics who wrote about this issue will be reviewed to understand better about both the positive and negative impacts of this software implementation in the organization facilities.
This chapter will provide a description on how the research data is collected and analysed; i.e., where the primary data came from? And what are the steps taken by the researcher to base his research on this data.
- Data collection (Primary and secondary)
In this chapter data collection process would be done. Both kinds of data i.e. primary and secondary would be collected for the research. Secondary data required for the research would be collected through the case study method while for collecting the primary data questionnaire would be designed and the in depth interview with the SAP implementation teams of the companies would be carried out.
- Analysis and Discussion
In this chapter data collected in the previous chapter would be analysed through different techniques. For analysing the secondary data collected through case studies content analysis would be done while for the collection of the primary data statistical tolls would be used. The discussion part of the research will focus on the talking about the critical success factors identified in the literature review.
The discussion will lead to know causes beyond the SAP ERP implementation failures. Then recommendation based on the research would be given.
This portion will conclude the research by providing the factors identified as critical success factors that may affect the work progress if not considered at the beginning of the work implementation. It will highlight and provide the limitations, recommendations and suggestions in overcoming the software package implementation failures.
In understanding more about the SAP systems, it is worth mentioning to know that it is originally a German word (Systeme, Anwendungen, Produkte) which means system applications and products. It was introduced by former IBM employees in Germany in early 1970s for the purpose of providing interaction capabilities and multiple usages of the organization/s database. Today, many organizations are using this type of software in order to operate their businesses efficiently. SAP is considered as the world’s biggest inter-enterprise software organization and had more than 34,400 employees as of January 2007 scattered on fifty countries around the world (searchsap, 2010).
SAP which is an acronym for the System Application and Products enables the creation of centralized database for corporate business applications. Even though, SAP provides various applications in managing the business entities, such as; warehousing, customer relationship, supply chain, product life cycle, human resource and various other systems, but, it is generally focused on Enterprise Resource Planning or what is known as “ERP”. SAP applications are based on R/3 system which functions in handling the product operations, manpower, materials, assets and cost accounting.
2. SAP implementation models
The Model given for the SAP implementation up to greater extent depends upon the fact that the successful SAP implementation process depends upon how certain elements are integrated and comprehend (Shanks et al. 1999). There are many core elements in the model and the successful implementation process depends how these core elements are integrated into the whole implementation process. The Core implementation element of the SAP model has been shown in the figure below:
Elements of successful SAP R/3 implementation process:
- Business case development: Developing a business case is the first step in the SAP implementation. From the literature review it has been revealed that out of 120 SAP implementation processes studied more than 70% of the SAP implementation plans were initiated with the help of business case development (Rockhart, 1979). A business case development process is helpful for the SAP implementation plan as it controls the scope of the SAP implementation. Also business case development tie-up the business specific result with the SAP implementation plan. A business case which is defined clearly into the organisation helps in understanding the need for change and defines the commitment level from the employee which is very crucial for the successful implementation plan.
The Business case should be such that it defines the role and responsibility of the each person so that at the time of implementation everyone must be aware of his role and successfully do his task. The Business case of the company should fit into the broader vision of the company and should be such that it allows comparison with all other investments done in the company.
- Benchmarking: Benchmarking is the process of gap identification into the SAP implementation plan. The Gaps present into the implementation plans are identified and the recommendations are provided in order to fulfil the gaps in order to bring the overall performance of the organisation in equivalent to the best in class (Kuang, 2001). It identified the areas which requires the change and sets the priority fir these changes and make proper decision about the degree of change required to fulfil the gaps.
Benchmarking process works well at internal as well as the external level and helps in knowledge transfer process for the organisation. Many a companies do the benchmarking process in order to set their strategic directions and capture the world class organisation experience while implementing the SAP.
- Implementation strategy: Implementation strategy is the guiding force behind the SAP implementation process as it alters the task and workflow into an integrated process. An implementation strategy defines how the implementation would be done and how organisation will absorb the changes required for the successful implementation (Coffin, 2001). The Implementation process for the SAP R/3 process depends upon the first two steps of the process which are business case development and the benchmarking process done by the organisation. Some of the principles of implementation strategy can be stated as follows:
- Business process re-engineering needs to be done before implementation
- One single business model has to be followed by organisation for its various business groups
- Global design needs to be created in order to standardised the process
- Information system of the organisation needs to be managed in a proper way
- Project management infrastructure: A successful project implementation plans requires internal and external participation from the stakeholders. As internal stakeholders different levels of managers are required to implement the SAP while as the external stakeholders customers and consultants are required to participate into the implementation process. The Project management infrastructure for the organisation consists of the following aspects:
- Defining team formation criteria
- Defining roles and responsibility of each members
- Defining forms and channels of co-operation among the various teams
- Preventing the intra-group and inter-group conflicts
- Ensuring structured project leadership
- Change management: A successful SAP implementation can’t be completed without the effective change management process in the organisation. A change management system ensures the minimum resistance from the stakeholders for the newly implemented system and processes (Carpendale, 2008). Change management system in the SAP implementation process involves various aspects such as proper communication process, people involvement, empowerment and training for the new system and processes. The Change management process in any organisation can’t be implemented without the commitment and sound managerial capability from the top management.
- Business process re-engineering (BPR): BPR is defined as the fundamental rethinking and radical redesigning of business process to achieve the instant improvement in the workings of the company. The Business process re-engineering in any organisation is dependent on the integrated It system of the company which is supported by the SAP R/3 systems (Bond 1988). A survey of 200 German companies showed that the simultaneous implementation of BPR and SAP R/3 software yields very effective results for the organisation.
- SAP R/3 installation: The Installation process for the SAP R/3 is very costly for the organisation as it requires dedicated cost and other resources for the implementation process. The Installation requires an integrated approach which is driven by the business strategy and vision. The Major steps taken in SAP R/3 implementation process can be shown as below:
Some of the competencies required for the SAP R/3 implementation process are as follows:
3. Contribution of organisation wide factors for successful SAP implementation
Nah, et al., (2001) identified factors are as follows: suitable business and legacy of IT systems, evaluation and monitoring the performance, re-engineering of the business processes, introducing management and cultural change programs, ERP composition and teamwork, system troubleshooting and testing, the need of management support, communication and championing the project. Other scholars (Shanks, et al. 2000) and
(Murray and Coffin, 2001) also added two more articles to the above literature where non-Empirical based studies as well as synthesis of previous studies were not included in this review. The table shown here down summarizes the results of the above mentioned scholars writings. As shown on this table, there is a high grade of agreement between the researchers of almost six of the articles stated on the table. The generation of this table is based on various accumulated ERP implementation work knowledge and opinions of not only the academics, but, also on practitioners’ fields. The subject results might be used a benchmark of evaluating the performance of ERP implementation through the use of critical success factor. The Eleven success factors explained in the above model for critical success factors are explained as follow:
3.1 Role of information technology infrastructure
Holland, et al. (1999) indicated that Information Technology Systems Legacy and Business itself play an essential role in determining the level of corporate changes Information Technology needed for the ERP Implementation success. This means, the higher the level of legacy of these systems, the higher the level of corporate change and amount of technology needed. Similarly, in his diffusion of innovations theory, he provided a general concept of complexity of innovation. The scholar emphasized that in order to achieve a success of ERP implementation, overcoming the difficulties that arise from the business itself and the legacy of Information Technology systems is badly needed. Roberts and Barrar (1992) also expressed the need of stable business setting to achieve the goals of ERP implementation success. The stable business might have a strong corporate identity which can accept the changes needed for the purpose of ERP implementation. This occurs by off-setting the difficulties and complexities that can be faced by the corporate. Scholars (Slooten and Yap, 1999) supported as well this concept and stated that, “ one of the critical success factors that may enable the quick implementation of ERP system is the availability of capable, mature and stable organization”. Learn about XML, AJAX & Web API Terminologies.
In line with the other factors, business processes re-engineering is needed for the purpose of configuring the ERP system. Wee (2000) expressed that as long as the ERP system is used, the need of re-engineering process is must where new knowledge ands thoughts might be included within its database to achieve a full advantage of its capabilities.
Corporate should act on doing the necessary updates of their software in order to reduce the level of customization and arranging the software to fit the business operations requirements (Bingi and Godla, 1999; Holland et al., 1999; Murray and Coffin, 2001; Shanks et al., 2000; Sumner, 1999; Rosario 2000).
3.3 Change management
According to (Falkowski, et al., 1998), change of management culture is badly needed and is the responsibility of the corporate stakeholders and the top management decision makers to provide the necessary help in supporting the ERP implementation. The corporate change management might include the change of its existing culture and the people working for the corporate.
This means, the existing corporate culture might be involved and added to new corporate goals of recommending new training programs to its professionals to update their knowledge and understand the ERP systems proper applications and its advantages towards the corporate business (Bingie et al., 1999; Holland et al., 1999; Roberts and Barrar, 1992; Shanks et al., 2000).
3.4 Teamwork and co-operation
Since the ERP system involves all the corporate functions, teamwork cooperation efforts of technical expertise and systems end-users are needed; i.e., cooperative team of consultants, vendors and implementers are needed for the ERP program. The corporate should hire the best employee for ERP implementation (Bingi et al., 1999; Buckhout et al., 1999; Falkowski et al., 1998; Rosario, 2000; Shanks et al., 2000; Wee, 2000). For the purpose of developing the skills of the corporate employees, the team involved ERP should be balanced and mixed of different departments of the corporate and external consultants as well as empowering the ERP implementation team to take rapid decisions is another important factor (Holland et al., 1999; Shanks et al., 2000; Sumner, 1999). Jiang, et al. (1996) also supported the need of qualified experts that have enough knowledge in implementing this project. Ross (1999) indicated in her study that corporate are badly in need of assigning their best employees in implementing this type of system; i.e., the interaction between experts and employees involved in this type of project provides a better result of ERP implementation success.
3.5 Project Management
In managing projects, such as; ERP implementation, the evaluation of the project success is mainly base on how far it will meet the time frame set for its completion as well as the allocated costs. As mentioned previously on project champion article, there should be a responsible person/ people to lead the project implementation and ensure its success (Rosario, 2000). Through various studies, it was found that availability of competent leader is one of the project’s success factors. That means, the business units that will involve the system and its scope should be clearly defined, controlled and guided accordingly (Holland et al., 1999; Shanks et al. 2000; Rosario, 2000; Shankis et al. 2000; Ross, 1999). Therefore, any changes suggested for the business must be evaluated and coordinated with all concerned parties (Falkowski et al. 1998; Sumner, 1999). As mentioned on the previous pages, unrealistic budget allocated and time schedules of the project implementation are major issues of the project failures (Boehm, 1991). This leads to lack of effort of measuring the system performance and the project implementation (Block, 1983).
3.6 Role of top management
Unlike the factors mentioned above, top management support is considered as one of the success factors needed for the implementation of ERP project. The project should achieve a top management support and acceptance to succeed (Bingi et al, 1999; Buckhout et al. 1999; Murray and Coffin, 2001; Shanks et al. 2000; Sumner, 1999). The involvement of senior staff and their willingness of putting resourceful values to the system implementation is needed (Holland et al. 1999; Shanks et al. 2000). This requires not only allocating enough time and resources, but, also assigning qualified staff in implementing the system (Roberts and Barrar, 1992).
3.7 The Vision and Business Plan of the Corporate
For the purpose of achieving a successful ERP implementation, business entity might require enough time and clear vision that lead in achieving its business goals. Scholars (Rosario, 2000) and (Wee, 2000) emphasized the need of having a business plan that could provide an outline strategic plan indicating the risks that will be encountered, costs needed to incur, time frame needed as well as the other resources that must be utilized for this purpose. Other scholars who expressed the same feelings are (Buckhout and Nemec, 1999; Roberts and Barrar, 1992; Holland et al, 1999; Shansks, et al., 2000). Similarly, (Falkowski, et al., 1998; Ross, 1999) who stated as well the need of a long term vision of improving the ERP implementation as well as the justifications for changing the work progress which must be aligned with the corporate future directions.
3.8 Troubleshooting, testing and software development
In the process of developing ERP program, a special method of testing must be used and managed and overall architectural of ERP Program should be constructed. This can be done by taking into consideration major implementation needs. Wee (2000) indicated that this may prevent the implementation reconfiguration. Scholars (Murray and Coffin, 2001; Scheer and Habermann, 2000) all expressed that in achieving ERP success, the important tools that may help include using a suitable architectural and modelling methods.
System documentation and creation of definition requirements are essentially needed. Due to the importance of guaranteeing a smooth operation of ERP implementation process, corporate should work together closely with their consultants and vendors in solving all difficulties that might be faced and carry out all troubleshooting errors that are critical (Holland et al., 1999; Rosario, 2000). To achieve the benefits and successfully implement the system, a home-grown integration systems and software products are needed.
In terms of communication, scholars (Falkowskie et al., 1998; Wee, 2000) described that communication is needed always for the purpose of implementing the ERP program. Communication is needed for conveying the message to the end users of the system to understand the progress and how the problems are handled; i.e., creating an open communication between the concerned parties will upgrade the success and at the same time facilitate the corporate-wide learning process. This includes and not limited to; promotional programs and corporate work progresses (Holland et al., 1999).
3.10. Championing the project
The concept of project championing is essential for the purpose of ERP implementation, it will enhance corporate to fulfil its overall commitments; i.e., over-looking all of the ERP implementation life cycle (Rosario, 2000). A person should be assigned to lead the operation of ERP implementation (Shanks et al., 2000; Stefanou, 1999; Sumner, 1999). The subject program leader should be a highly knowledgeable person who is capable to set the aims of the intended changes (Falkowski et al., 1998). For the purpose of ERP project innovation success, Rogers (1995) highlighted that these types of changes will be costly and visible. It should be involved by high level people in the corporate.
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Shanks, et al. (2000) also expressed that project champion will do the necessary updates and promotions of the system. This will also play an essential role of the leadership’s transformational skills for achieving the ERP implementation success and limiting any differences of opinions that may occur. The change is needed (Stefanou, 1999; Murray and Coffin, 2001) due to the complexity of the system, ERP implementation may require the employees to work long hours which will probably cause the employees moral decrease.
Therefore, project champion is needed to upgrade the project staff morale and guarantee their competence, skills and work progress. (Please see the following figures illustrating various stages of project management support, project team competence and inter-department operations).
3.11 Performance auditing
In monitoring the progress of the ERP implementation, it is essential to look the target and milestones (Murray and Coffin, 2001; Roberts and Barrar, 1992; Rosario, 2000; Sumner, 1999). The criteria that might be used in implementing this system progress are; (i) a management based method of measuring the finished dates, quality and costs; (ii) the operational method which is used for measuring the production.
The Factors explained above shows the important parameters which need to be taken care in order to implement the SAP process in any organisation. Since most of the SAP implementation projects get failure due to one or more of the above factors. Hence the companies implementing the SAP process in their organisation should take care for the above factors.
SAP was invented by a group of IBM employees in year 1970 for the purpose of general interaction. SAP is a German word which means product and system. SAP implementation process is very complex and takes lot of efforts and capital investment for the companies. But the dark side of the story is revealed by more than 60% failed SAP implementation projects in the world. SAP implementation process follows several steps which are: Business case development, Benchmarking, project infrastructure management, change management, business process re-engineering and SAP R/3 Implementation.
Some of the critical success factors for the SAP implementation process are: top management support, change management system, proper communication system, employee support and information technology infrastructure etc. Trouble shooting, project management, project championing are some of the essential aspects of the SAP implementation process which an organisation have to implement in order to have the successful SAP implementation process.