Implementation Challenges and Methodology for ERP Implementation - Essay Example

Implementation challenges and methodology for ERP implementation 1.0 Introduction The enterprise resource planning (ERP) has gained wider application in the global industry and business information systems. ERP comprises of a wide range of technological systems that enhances the effectiveness and efficiency of all business activities and process, at all organizational levels (Finney & Corbett, 2007:329). The major benefit associated with the implementation of ERP within organizations is its ability to increase the productivity of the organizations, through increasing the timely, continuous and widely applicable real-time business information (Bradford & Florin, 2003:207). This enables organizations to plan well for their different operations. Nevertheless, the implementation of the ERP can be marred by varied challenges, which combine to reduce the chances of the implementation success. This therefore requires that the implementation of ERP should apply a methodology that minimizes such challenges, and thus delivers the expected benefit of the ERP system to the organization with minimal associated costs. The methodology applied to implement an ERP should therefore be loaded with the essential critical success factors, to ensure that the organization is able to start enjoying the benefits of an ERP system from the very beginning, and that such benefits are sustainable (Ifinedo, 2008:557). Thus, this discussion analyses the possible challenge that Rolls-Royce can experience in its quest to replace its legacy systems with an ERP system. The focus of this discussion is to assess all the possible challenges that can face the ERP system implementation. The discussion analyses ERP implementation as a global technology transfer project, which can enable Roll-Royce transform from its initial legacy system into enjoying the full benefits of the ERP thought its multinational operations. 1.1 Challenges for ERP implementation Technology Transfer refers to a process by which the knowledge and information that is embedded within a technology by the technology creator is put into practical use by the user of the technology (Hawking, 2010:27). Therefore, the implementation of the ERP system in Roll Royce does not only entail the application of the ERP equipment, but also the know-how. Therefore, the challenge facing the global implementation does not only entail the challenges of the conveyance process from the vendor/creator of the ERP system to the organization, but also the subsequent challenges involving the adoption, possession and promotion of the ERP by the organization (Huang & Palvia, 2001:14). Such challenges of global ERP implementation projects include: 1.1.1 National Culture National culture is one of the major challenges that face the global implementation of the ERP system, and which is set to affect the Rolls-Royce Engines global ERP implementation project, owing to the fact that this organization is a multinational corporation. National culture encompasses the heterogeneity or homogeneity of the cultures found within a country, based on whether the country is comprised of diverse ethnic, religious, race and other socio-cultural demographic characteristics. The challenges caused by national culture in the implementation of the ERP system are further exacerbated when comparison is done between the Western and the Eastern countries national cultures (Hawking, 2010:24). This problem was noted in a case study evaluating the implementation of western-based ERP systems in China, where it was found that the western-based ERP systems are ‘rule-based’ and appropriate for mature economies, as opposed to the ‘relation-based’ governance system of the China economy (Hawking, 2010:24). Cultural differences do not only affect the attitude or response towards the introduction of change within an organization, but also the model of application of the innovation according to the different cultural contexts. The formulation of ERP system is based on the needs of a particular business context, such that certain ERP systems are developed to suit the business operations and processes of certain countries or regions, where the business operations and processes portrays some similarity. Other components of the national culture include the cultural attitudes such as the cultures of masculinity, uncertainty avoidance and power distance (Hawking, 2010:24). The implementation of ERP is negatively affected by the national cultures that are orientated towards uncertainty avoidance and power distance, owing to the fact that such national cultures are technological and organizational change averse, while the interaction between the superiors and subordinates within such cultures is limited (Haines & Goodhue, 2000:35). This in turn affects management-employee cooperation through the process of the ERP implementation, which is very essential if ERP adoption and application within an organization has to be successful. Further, a major ERP implementation challenge occurs when an organization is a multinational corporation or even a regional company that operates outside of a single country or region. Such a company is required to meet the business operations and business process needs of different countries or regions from which it operates. For example, a case study investigating the effectiveness of implementation n of the western-based ERPs in China found that national culture was a major challenge facing the implementation. This is because, the national culture of China, which is largely the Asian culture, has a preference for hardcopy generated reports, while most of the western-based ERP were found to be generating online reports (Hawking, 2010:25). The major challenge here is the fact that there may lack an ERP system that is tailor-made to meet the different needs of different countries or regions, which are specific to their business model, culture and processes. The problem of national culture has been found to have negative effects on ERP implementation, mostly in countries that comprises of wide cultural differences, where the cultural heterogeneity hinders the effective application of ERP to the business processes and activities of the organization. Thus, to address the problem of national culture as a problem, standardized global ERP system templates have been developed, which offers standardized definitions of the organizational master data, business processes and organizational structures (Huang & Palvia, 2001:44). However, even with such advancements towards overcoming the challenge of global ERP system implementation, the core challenge of national culture still remains a fundamental challenge to the implementation of global ERP systems with standardized templates. This is because, ones the standardized global template ERP systems have been implemented within organizations, they are likely to affect the local business context negatively. This is because; the implementation of the standardized global ERP templates in turn is associated with the lack of flexibility for taking advantage of the local level opportunities, while also limiting the standardized ERP templates from accounting for cultural differences (Hawking, 2010:26). Therefore, the challenge of national culture as a major obstacle hindering the effective implementation of global ERP system has little mitigating measures, other than the implementation of a vendor-specific ERP system that is created and targeted to a given culture. 1.1.2 Language Language is another major challenge that is associated with the global implementation of ERP. Language is a challenge facing the implementation of the ERP both from a technical and a cultural perspective, owing to the fact that a study that was undertaken to evaluate the implementation of western-based ERP in China found that there was a confusion between the western and the eastern name formats (Hawking, 2010:25). The major language problem that was noticeable in the implementation of the ERP was that there was the technical problem of the ERP coping with the name format itself, in addition to the cultural problem of lack of understanding of the format of the names. The implication is that the local vendor created ERP systems are preferable to the global standardized ERP, owing to the fact that the local vendor ERP system are found to match with the user preferences well, compared to either the global standardized ERP or the ERP that have been created in different regions (Mishra, 2011:72). The language problem between the western-based ERP and the eastern-based ERP was found to be deeper, even entailing language applications that would cause the western ERP systems to be completely rejected in the eastern cultures. A good example emanating from the case study assessing the implementation of western-based ERP system in China found that some simplistic ERP functions of certain ERPs, such as the automatic allocation of numbers, generated some offensive homonyms in the Eastern culture (Hawking, 2010:26). This means that since Rolls-Royce is a multinational organization, its implementation of the ERP based on the western culture, which is where the company is based, may eventually be faced by language challenges when the company requires rolling out its ERP system into the Asian and the Eastern regions. 1.1.3 Data coding, conversion and consolidation The data related challenges associated with the global ERP implementation project for Rolls-Royce takes the technical perspective of the ERP data. The data formats in which different ERP systems are coded and created is different, with certain ERPs being coded using the Unicode format while others apply the multi-code formats (Hawking, 2010:27). The major problem associated with such ERP data coding and formatting system is that the ERP systems that are not coded using the Unicode format may not be able to generate standard results. This is because, an ERP that is not coded using the Unicode system does not allow each character to be generated in a standardized format (Hawking, 2010:27). The effect is that the reporting system of such an ERP does not produce standard reports, which can effectively be used by universally. Such challenges therefore means that rolling out an ERP system that is used by the Rolls-Royce to other regions can be a problem, on the event that such data coding systems differ. Additionally, the manner in which the coding of the ERP data is done also determines the nature of the reports it generates in different languages. The data coded in a Unicode system facilitates the ERP to handle different languages (Ifinedo, 2008:556). Unless the data coding system is Unicode so that it can allow for universal applicability in different languages, the attempt to translate the ERP reports from one language to the other definitely means a major problem, owing to the fact that there is a lot of important information that is lost in the process of translation. Therefore, the effectiveness of the global implementation of an ERP system for Rolls-Royce Engines is highly dependent on the data coding system applied. Additionally, the data coding system of the ERP affects the implementation of ERP system, owing o the fact that it defines the applicability of such ERP in different regions, not based on the language but also on the culture of such regions. For example, the case study investigating the implementation of western-based ERP in china found that a surname and the first name of the individual processing the ERP report would be sufficient in the western countries, while in China, title is very important, that requiring the appearance of all names in the ERP reports (Krumbholz, Galliers & Coulianos, 2000:56). Thus, an ERP system coded in a two-name format cannot be effectively implemented in the eastern culture. 1.1.4 Currency Currency is another major challenge facing the global ERP implementation. The essence of an ERP system is its processing of financial information and production of financial reports based on specific currencies. Thus, while most of the western-based ERPs use the ISO system that applies the decimal places, the Asian system does not apply the system (Krumbholz, Galliers & Coulianos, 2000:57). This means that the reporting of financial data in the western ERP ISO format contradicts the reporting of financial data in the Eastern format, creating a major challenge for a multinational organization such as Rolls-Royce Engines to be able to roll out its ERP system to the Asian region. The main challenge associated with the currency reporting is that it produces some major financial reporting challenges, including the localization of the financial data, as well as taxation computation problems (Hawking, 2010:29). The effect of this currency challenge is that the master data ERP held by Rolls-Royce cannot be implemented across the board in all the different regions where it operates, requiring that such regions get localized-specific ERPs as created by the local vendors. The implementation of a localized ERP system by the subsidiaries of the multinational organization presents another challenge, since the localized ERPs may not be incompatible with the master data ERP applied by the organization. This creates the problem of data and information communication between the organization and its different subsidiaries. 1.1.5 ERP adoption challenge The adoption of the ERP after its implementation is yet another challenge that faces ERP system implementation. The scope of ERP implementation is the whole organization, considering the fact that an ERP system is a company-wide system that cuts across all the different functions of the organization (Finney & Corbett, 2007:341). This means that it requires that all the organizational employees are involved in the implementation and subsequent adoption of the ERP. ERP implementation is a major investment for an organization, which means that it introduces substantial change into the manner in which an organization is run (Mishra, 2011:66). The main challenge here is that change is always disruptive, and thus any form of change that seems to alter the status quo of a company is bound to be faced with a lot of resistance. Thus, the top management support is a key success factor for ERP implementation, but employee support is even fundamental, owing to the fact that the employees are the main users and adopters of the ERP once it has been implemented within an organization (Dezdar & Ainin, 2010:452). The top management plays the role of availing and implementing the ERP system, through communicating its relevance to the employees. On the other hand, the employees are the adopters and executers of the ERP, since they are the ones who will interact with it on daily operational activities of the organization. Therefore, a study evaluating the challenges facing the implementation of ERP within the UK Oil and Gas Sector, found that the ERP projects that completed in time and within the set budget were the ERP projects that involved the full support of the executives and the employees (Mishra, 2011:67). The management support emerged as the first order critical success factor for ERP implementation, while the employee support was found to be a second order critical success factor (Mishra, 2011:67). This means that; while the management involvement is essential for ensuring that the organizational behavior is tuned towards the adoption of the ERP, it is the employees that determine the success of both performance and satisfaction that are associated with the ERP. Therefore, where the support for the ERP implementation by the employees is lacking, there are very high chances that both the implementation and the performance of the ERP will fail. While the management plays the role of planning the modalities that are required for the implementation of the ERP, it is the employees who execute the transition from the legacy system of the organization into the ERP application (Haines & Goodhue, 2000:33). Thus, the employees can serve as a critical success factor for the implementation of the ERP if they are adequately involved in the process. On the other hand, the employees can become the greatest obstacle to the implementation of the ERP, on the event that they find the implementation of the ERP a disruptive change, and thus they do not support it. Inadequate vendor support Lack of adequate vendor support has been declared one of the major challenges that hinder the ERP implementation success. According to a study that was undertaken to establish the factors affecting ERP implementation in Iran, the quality of the ERP as created, coupled with the vendor support are key success factors for ERP implementation (Dezdar & Ainin, 2010:449). The marketing for ERP systems has been very aggressive from different vendors, but the associated vendor support has been limited. This makes the implementation of ERP very challenging for organizations. ERP systems affect the whole organizational functions, and thus they are a huge investment by the organization, requiring continual investment in new modules and upgrades (Dezdar & Ainin, 2010:451). Therefore, the availability of the vendor support, in form of technical support as well as making the necessary modules and upgrades available, goes a long way in enhancing the success of ERP implementation for organizations. However, to the extent that the technical support from the vendors is not available, it becomes very difficult for organizations to implement ERP systems effectively. Emergency maintenance services, as well as user training are other important vendor support services that make the implementation of ERP systems for organizations a success (Dezdar & Ainin, 2010:451). Nevertheless, most of the vendors have not been committed to offering such support services, which has in turn caused many organizations to fail in their ERP implementation. References Bradford, M. & Florin, J. (2003). Examining the role of innovation diffusion factors on the implementation success of enterprise resource planning systems. International Journal of Accounting Information Systems 4, 205–225. Dezdar, S. & Ainin, S. (2010). ERP Implementation Success in Iran: Examining the Role of System Environment Factors. Engineering and Technology 66, 449-454. Finney, S. & Corbett, M. (2007). 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(2011). ERP Project Implementation: Evidence from the Oil and Gas Sector. Acta Polytechnica Hungarica 8(4), 55-74. Read More