Chapter 7

Recapitulation

This concluding chapter discusses three issues related to current events in enterprise systems. We want to emphasize the importance of training in obtaining effective use of enterprise resource planning (ERP) systems, supply chain management (SCM), advance planning systems (APSs), or electronic information systems (EISs). ERP systems have been around long enough and have had sufficient research leading to improved systems that upgrades have become important. This creates great pressure on organizations that perhaps spent billions on massive systems in the 1990s, now finding that vendors are suggesting they go through another round of massive installation and retraining with significant capital requirements. Upgrades are encouraged by vendors through dropping service on their older systems. (SAP announced around 2004 that they were discontinuing service on their flagship R3 system as of 2007. This was followed by client outcries, resulting in postponement of discontinued service until 2011.) A final topic is the evolution of added functionality. In the past, systems such as APS or customer relationship management (CRM) were added to ERP systems, with software provided by external vendors. This was changed when Oracle purchased Siebel Systems, the leading CRM vendor around 2005. Oracle thus made CRM a module within their ERP. SAP responded by purchasing their own CRM to make into a module. The same was done with SCM systems, to include APSs.

Training

In any supply chain software implementation, it is generally understood that training is a key component of organizational change management and of the overall success of the implementation. Many important issues remain in making SCM systems work. User training has shown up as a critical success factor in the implementation of an ERP in many studies.¹ Managers often underestimate the magnitude required in such a training program. Training is typically underestimated and is often the first target for budget cutting. A period of about 1 year is usually required until the trauma of new system implementation passes.This difficult period is easier to cope with if a good, thorough training program is adopted. Furthermore, those organizations that do a poor job of training have been found to have poorer performing enterprise systems.²

Good training programs can pay off in many ways. Gartner has claimed that each hour of effective training is worth 5 hours to the organization because well-trained users take less than a quarter of the time to reach productive performance levels, they require less assistance from help sources, and they spend less time correcting errors.

Thus SCM training programs focus on transactional training (how the system works). SCM software companies and implementation teams are normally very good at delivering training that teaches employees how to accomplish transactions in the system. On the other hand, running a business entails much more than simply implementation transactions within a software program. SCM training programs should spotlight on new business processes.

Training Problems

EIS software itself is rarely the source of implementation problems. Poor training of users is usually the source of most implementation problems. Organizations with higher proportions of new employees may find implementation of EIS easier. Firms with many employees with many years of experience within the firm prior to EIS implementation require greater levels of change. Conversely, managerial and professional employees are often easier to convince of the positive impact of EIS on organizational effectiveness. Further, the degree of change required within the organization can have an impact on EIS installation timing. If the system is implemented too quickly, this may not provide sufficient time for the organizational climate to change.

Rarely do EIS implementations run smoothly. The following are some of the pitfalls organizations typically face:

Training Media

A number of tools are available to deliver user training. One-way channels included newsletters, road shows, town meetings, a website, and personal appearances by key leaders to inform employees of what was developing in their IT. Interactive communication included workshops, meetings to deal with specific issues, conference calls, and collaboration websites. Hands-on interaction was also developed, to include sandboxes enabling users to play with the system using simulated data prior to using the real system.

Some of the reasons training in new EIS systems is difficult include user diversity, the complexity of the new system, and the variety of training methods available. By their nature, EIS systems are going to radically change how many people do their jobs. The theory of EIS is to integrate computer support to all aspects of the business, naturally leading to user diversity. These people also are busy, especially in coping with the requirements of the new system. Training users in new EIS systems can be extremely expensive, usually over 10% of total EIS system cost.

The need for flexibility in timing and place as well as the need for training in specific functions rather than the comprehensive EIS system have made it important to have flexible training delivery means. This has led to an entire industry providing EIS training. Many delivery formats are available, including the following:

Enterprise system training should be conducted during business hours to indicate its importance.³ V. Vathanophas saw three levels of training, where consultants and vendors can first train IT staff, who in turn train individual departmental representatives (sometimes called superusers), who finally deliver training to their compatriots within their departments.

The scope of training is demonstrated by the experiences of Pratt and Whitney, Canada (P&WC) in 1998.⁴ They trained 110 employees from their six most affected departments as internal trainers (superusers). The year 1998 saw P&WC convert their facilities into a massive classroom, training over 3,000 employees in both technical aspects (system navigation and task training) delivered by consultants as well as providing business-oriented training (processes and tasks). P&WC created over 150 manuals to cover diverse user needs.

Upgrades

Upgrades are mainly intended to take advantage of new technologies and business strategies to ensure that the organization keeps up with the latest business development trends. Therefore, the decision to upgrade SCM and related systems is usually not driven by code deterioration or anticipated reduction in maintenance costs alone but by different purposes. According to an AMR study, 55% of ERP upgrades were voluntary business improvements triggered by the need for new functionality, expansion, or consolidation of systems; 24% of upgrades were triggered by technology stack changes; 15% of upgrades were forced by discontinued support of the running version of software to avoid vendor support termination; and 6% of upgrades were triggered by bug fixes or statutory changes.

The cost of upgrades is high. Upgrade costs may involve 50% of the original software license fee and 20% of the original implementation cost per user, which means over $6 million for a 5,000-user system. Typically, each ERP upgrade requires 8 to 9 months of effort with a team the equivalent of one full-time employee per 35 business users. The adopting organization does not have to develop and rewrite the system itself, but rather it replaces (or upgrades) the old version with a readily available new version from the vendor. However, a lack of experience may cause the costs and length of the upgrade project to approach or even exceed those of the original EIS/ERP implementation effort. General benefits for organizations from EIS/ERP upgrades include the following:

Add-ons

Add-on (or bolt-on) is ERP jargon for third-party applications. More specifically, an add-on is an execution system providing very specific functionality or technology to complement ERP software. Many useful applications of this type are available. The types of software and related features of add-on software listed by Microsoft for their ERP software are shown in Table 7.1.

Table 7.1 shows a variety of functions that can still be supported by add-ons. In the 1990s, major functions were supported, such as SCM and CRM. The evolution in ERP systems has seen these major functions pulled into more integrated ERP systems. However, there will always be

ideas to supplement ERP systems, some of which will prove commercially viable. A snapshot of some of those systems is demonstrated by Table 7.1.

Support of customer relationship management is the form of data mining most commonly associated with ERP. CRM allows businesses to identify the profitability of specific customers, and to increase chances of retaining them. This is accomplished by having all relevant information readily available that is needed for planning, product, and service throughout the customer life cycle. SAP has been a leader in enhancing their product’s abilities to support CRM.⁶ Many of these systems failed, as they introduced the need for middleware, or software that translates data from one vendor system to another, creating an added layer of complexity and expense.

Naturally, ERP vendors added functionality such as SCM and CRM to more efficiently utilize their systems. As we have mentioned, that is what Oracle did when they purchased Siebel Systems’ CRM product in September 2005 and integrated it within their ERP (thus creating an EIS in industry jargon). Thus add-ons became modules through acquisition. Clients benefited by elimination of the need for middleware for that application. However, realistically, there will always be add-on products of some type generated by the active software development industry.

Conclusion

Training is a key component of a successful enterprise system installation. Training needs to be considered in the initial project budget. Typically, it is underestimated by significant amounts. There are two major elements of enterprise system training. The first is focused on how to use the system, and this type of training is well-developed by vendors and consultants. The second is on organization specific business processes. This second form of training has proven to be far more important than the first. Vendors and consultants can’t be expected to deliver training programs covering organization-specific processes unless the installed system has no customization. Usually, effective systems that match organizational needs do have customization, and the organization itself will have to develop this form of training. (They will want to if it covers core competencies that yield competitive advantage to the organization.)

An effective means to organize training is to have experts (vendors or consultants) train IT staff. IT staff in turn train a set of superusers from departments within the organization, who then relay the knowledge they obtain to general organizational users.

There are many different media available to deliver enterprise system training. One-way media can be used to inform users of the system’s value to the organization. Two-way media are usually more effective in teaching users how to use the system. Hands-on interaction with sandbox systems can be highly effective in training users of their specific job requirements.

Through care in the planning and delivery of training, the success rate of enterprise systems installations can be vastly improved.

EIS/ERP upgrade projects have grown in importance, as vendors are seeking to generate revenue through improved systems. The reticence of vendors to support old systems was noted by multiple organizations in this study. (The value of improved functionality was also noted.)

Upgrade projects seem to be much more controllable than initial supply chain management software installation projects. This should be expected due to the experience organizations gain with their original systems. All the organizations seemed to do something that fit the theoretical model of an upgrade project that we used. Assessment, planning, and action phases were present to at least some degree. The renewal phase noted by the fifteen organizations involved very smooth turnover. A limitation of the study is that future implications were not yet available in all cases (problems may crop up later), although all organizations credited strong planning and project management as ways to assure smooth transitions.

The software industry continues to generate new applications, and improvements on existing applications. That is progress. Large vendors of software will add such systems (or develop their own), leading to the need for upgrades and renewing their revenue stream. Smaller vendors such as Sage and Lawson may not add as many of these functionalities, so that there will be an increasing variety of supply chain software varieties available, calling for more complicated software selection decisions, to include open-source options. The price of progress is often more complexity.