The Enterprise Resource planning (ERP) software market is one of the fastest growing markets in the software industry.

The ERP market is predicted to grow from a current $15 billion to a gigantic $50 billion in the next five years. The estimated long-term growth rates for ERP solutions are a stratospheric 36 percent to 40 percent. Some estimates put the eventual size of this market at $1 trillion. Recently major ERP vendors such as SAP AG, Baan, and Oracle have reported significant financial results.

Contributing to this phenomenal growth is the estimation that 70 percent of the Fortune 1000 firms have or will soon install ERP systems and the initiatives by ERP vendors to move into medium to small tier industries with gross revenues less than $250 million. ERP vendors are aggressively cutting deals with these industries to make their products more affordable. For example, SAP, one of the leading ERP vendors, recently started selling its products to customers in the $150 million to $400 million revenue range. Companies could spend hundreds of millions of dollars and many years implementing ERP solutions in their organizations. Once an ERP system is implemented, going back is extremely difficult; it is too expensive to undo the changes ERP brings into a company.

An ERP system can be thought of as a companywide information system that integrates all aspects of a business. It promises one database, one application, and a unified interface across the entire enterprise. An entire company under one application roof means everything from human resources, accounting, sales, manufacturing, distribution, and supply-chain management are tightly integrated. This integration benefits companies in many ways: quick reaction to competitive pressures and market opportunities, more flexible product configurations, reduced inventory, and tightened supply chain links.

The current ERP systems have open client/server architecture and are real-time in nature, i.e., clients can process information remotely and the results of a new "input" will "ripple" through the whole "supply-chain" process. The appeal of such systems for businesses is that all employees of a company will have access to the same information almost instantaneously through one unified user interface. Implementing such a system results in benefits from the "integrated" nature of the system as well as from the "reengineering" of the business practices and the entire "culture" of the business, all at the same time.

Data provided: Adequate and correct data should be provided it had to be collected from the distributed Tally 7.0 Servers, had to be reconciled, mapped into the ERP System in its standard format and finally the data had to be uploaded into the system. A strong management direction is needed for the managers at each of the branches so that adequate and appropriate data is duly provided. Parallel systems: When issues began to crop up after implementation of ERP in Finance module, sales and distribution module was completely ignored, they shifted work with these modules back to the old system. This hampered the proper integration of organization data and led to data mismatch in other modules as well. As a result, support system provided by the vendor became obsolete and difficult to implement. Hence, use of parallel systems should be avoided outright.

Training and testing: Training and testing of the system should be done properly by the ERP Consultants, that is, the vendor is provided as part of the implementation procedure to only a 30% group of people from the clients side known as the Core Team. This core team in turn trains a rest of people who are actually responsible for day-today transactions called the End Users. It was observed that the 50% second leg of training which is provided to the end users was not carried out mainly due to lack of computer literacy, not will to accept the responsibility this triggered a strong resistance to change for the new system being installed and caused reduction in employee motivation. Expectations from the ERP System: Clarity in management objectives and expectations from the ERP System are clearly stated to the vendors. This led to a belief of the systems power to integrate the company actual functions. According to the vendor, management expected a quick return on investment which was not practical since it takes around three to four months to notice any significant returns. Hence, top management should be patient with the new system and any fear of failure should be done with for a successful running system.

Employee Retention: It was observed that after the completion of ERP training provided to the staff and within some days of the system going live, many of the trainees from the organization quit the company causing great losses to organization in the form of shortage of key resources i.e. trained staff. This was a big percentage of employee attrition rate and it is not possible for a company to hold back any of its employees even with the most stringent contract. Design & Testing: is a very important part of software testing and should not be neglected the computer work stations are set up in a room to represent each of the major tasks of customer service /order entry, planning, goods-in, stores and finance. A simplified data set is loaded and the company operations run through. The data is gradually increased as first the project team, then managers and finally users get more familiar with the software. This is conducted just before the ERP becomes fully functional in the organization.

Customization should be less than 30%- Customization Services involves any modifications or extensions that change how the out-of-the-box ERP system works. Customizing an ERP package can be very expensive and complicated. Some ERP packages have very generic features, such that customization occurs in most implementations. Customization work is usually undertaken as "changes requested beforehand" software development on a time and materials basis. But ideally, experts in the ERP implementation field have suggested that customization should be less than 30%. The level of customization in the case of Multiplex exceeded beyond this and posed a great deal of problems when key applications were run and found to be not working as they were intended to. Stakeholders shall be identified in the initial phase including customers and vendors: Stakeholders are all those who are directly or indirectly affected by a company implementing any new ERP system be it organizations like those of the supplier as well as the vendors. A failure to identify the stakeholders gives the implementing company a major setback when the concerned people or organizations work against the new system. So identification of all stakeholders has to done in advance.

Top Management Commitment: The IT literature has clearly demonstrated that for IT projects to succeed top management support is critical. This also applies to ERP implementations. Implementing an ERP system is not a matter of changing software systems, rather it is a matter of repositioning the company and transforming the business practices. Due to enormous impact on the competitive advantage of the company, top management must consider the strategic implications of implementing an ERP solution. It is often said that ERP implementation is about people, not processes or technology. An organization goes through a major transformation, and the management of this change must be carefully planned (from a strategic viewpoint) and meticulously implemented.

Reengineering:

Implementing an ERP system involves reengineering the existing business processes to the best business process standard. ERP systems are built on best practices that are followed in the industry. One major benefit of ERP comes from reengineering the company's existing way of doing business. All the processes in a company must conform to the ERP model. The cost and benefits of aligning with an ERP model could be very high. This is especially true if the company plans to roll out the system worldwide. It is not very easy to get everyone to agree to the same process. Sometimes business processes are so unique that they need to be preserved, and appropriate steps need to be taken to customize those business processes. The companies also face a question as to whether to implement the ERP software "as is" and adopt the ERP system's built-in procedure or customize the product to the specific needs of the company. Research shows that even a best application package can meet only 70 percent of the organizational needs. An organization has to change its processes to conform to the ERP package, customize the software to suit its needs, or not be concerned about meeting the balance 30 percent. If the package cannot adapt to the organization, then organization has to adapt to the package and change its procedures. When an organization customizes the software to suit its needs, the total cost of implementation rises. The more the customization, the greater the implementation costs. Companies should keep their systems "as is" as much as possible to reduce the costs of customization and future maintenance and upgrade expenses.

Integration One of the major benefits of ERP solutions is the integration they bring into an organization. Organizations need to understand the nature of integration and how it affects the entire business. Before integration, the functional departments used work in silos and were slow to experience the consequences of the mistakes other departments committed. The information flow was rather slow, and the departments that made the mistakes had ample time to correct them before the errors started affecting the other departments. However, with tight integration the ripple effect of mistakes made in one part of the business unit passes onto the other departments in real time. Also, the original mistakes get magnified as they flow through the value chain of the company. Companies must be aware of the potential risks of the errors and take proper steps, such as monitoring the transactions and taking immediate steps to rectify the problems should they occur. They must also have a formal plan of action describing the steps to be taken if an error is detected. A proper means to communicate to all the parties who are victims of the errors as soon as the errors are detected is extremely important.

ERP Consultants: Because the ERP market has grown so big so fast, there has been a shortage of competent consultants. The skill shortage is so deep that it cannot be filled immediately. Finding the right people and keeping them through the implementation is a major challenge. ERP implementation demands multiple skills - functional, technical, and interpersonal skills. Again, consultants with specific industry knowledge are fewer in number. There are not many consultants with all the required skills.

Implementation Time: ERP systems come in modular fashion and do not have to be implemented entirely at once. Several companies follow a phase-in approach in which one module is implemented at a time. The length of implementation is affected to a great extent by the number of modules being implemented, the scope of the implementation (different functional units or across multiple units spread out globally), the extent of customization, and the number of interfaces with other applications. The more the number of units, the longer implementation. Also, as the scope of implementation grows from a single business unit to multiple units spread out globally, the duration of implementation increases. A global implementation team has to be formed to prepare common requirements that do not violate the individual unit's specific requirements. This involves extensive travel and increases the length of implementation.

Implementation Costs: Even though the price of prewritten software is cheap compared with in-house development, the total cost of implementation could be three to five times the purchase price of the software. The implementation costs would increase as the degree of customization increases. The cost of hiring consultants and all that goes with it can consume up to 30 percent of the overall budget for the implementation . Employees could double or triple their salaries by accepting other positions. Retention strategies such as bonus programs, company perks, salary increases, continual training and education, and appeals to company loyalty could work. Other intangible strategies such as flexible work hours, telecommuting options, and opportunities to work with leading-edge technologies are also being used.

ERP Vendors: As there are about 500 ERP applications available and there is some company consolidation going on, it is all the more important that the software partner be financially well off. Selecting a suitable product is extremely important. Top management input is very important when selecting a suitable vendor. Management needs to ask questions about the vendor, such as its market focus (for example, midsize or large organization), track record with customers, vision of the future, and with whom the vendor is strategically aligned. For a global ERP rollout, companies need to be concerned about if the ERP software is designed to work in different countries. Also, the management must make sure the ERP vendor has the same version of the software available in all the countries the company is implementing the system. It is important to evaluate if the vendor staffers in these countries are knowledgeable and available. If there is a shortage of skilled staff, bringing people from outside could solve the problem, but it would increase the costs of implementation.

Selecting the Right Employees: Companies intending to implement an ERP system must be willing to dedicate some of their best employees to the project for a successful implementation. Often companies do not realize the impact of choosing the internal employees with the right skill set. The importance of this aspect cannot be overemphasized. Internal resources of a company should not only be experts in the company's processes but also be aware of the best business practices in the industry. Internal resources on the project should exhibit the ability to understand the overall needs of the company and should play an important role in guiding the project efforts in the right direction. Most of the consulting organizations do provide comprehensive guidelines for selecting internal resources for the project. Companies should take this exercise seriously and make the right choices. Lack of proper understanding of the project needs and the inability to provide leadership and guidance to the project by the company's internal resources is a major reason for the failure of ERP projects. Because of the complexities involved in the day-to-day running of an organization, it is not uncommon to find functional departments unwilling to sacrifice their best resources toward ERP project needs. However, considering that ERP system implementation can be a critical step in forging an organization's future, companies are better off dedicating their best internal resources to the project.

Training Employees: Training and updating employees on ERP is a major challenge. People are one of the hidden costs of ERP implementation. Without proper training, about 30 percent to 40 percent of frontline workers will not be able to handle the demands of the new system. The people at the keyboard are now making important decisions about buying and selling -- important commitments of the company. They need to understand how their data affects the rest of company. Some of the decisions front-line people make with an ERP system were the responsibility of a manager earlier. It is important for managers to understand this change in their job and encourage the front-line people to be able to make those decisions themselves. ERP systems are extremely complex and demand rigorous training. It is difficult for trainers or consultants to pass on the knowledge to the employees in a short period of time. This "knowledge transfer" gets hard if the employees lack computer literacy or have computer phobia. In addition to being taught ERP technology, the employees now have to be taught their new responsibilities. Companies should provide opportunities to enhance the skills of the employees by providing training opportunities on a continuous basis to meet the changing needs of the business and employees.

Employee Morale: Employees working on an ERP implementation project put in long hours (as much as 20 hours per day) including seven-day weeks and even holidays. Even though the experience is valuable for their career growth, the stress of implementation coupled with regular job duties (many times employees still spend 25 to 50 percent of their time on regular job duties) could decrease their morale rapidly. Leadership from upper management and support and caring acts of project leaders would certainly boost the morale of the team members. Other strategies, such as taking the employees on field trips, could help reduce the stress and improve the morale.

The main obstacles are aligning the existing systems with the new ERP system, and the processes affected. Usually a company is looking for a gain, i.e. going from something unsophisticated to a much better system, but frequently that jump is quite big. It is often better to do two jumps (or more) improving the existing systems, to enable them to align more naturally. Also the assumption is that people will easily adjust to a new computer system, but that may not be the case in a big jump, as the ways of accessing data may change fundamentally, leaving people confused. Training is critical, not only on the new system, but also in getting staff to understand the old system its deficiencies, and what the new information will bring to the party.

Another obstacle is the changing goal posts from the Business users. On an average the ERP project implementation cycle is around a year. During this period, the business processes get modified, priorities change and most importantly people responsible also change. This being the case, what was deemed as the objective a year back when the project started might not be entirely valid. Though most modern ERP solutions market their product as a completely flexible tool with the ability to adapt to the changing business processes, there still remains a gap that mandates the involvement of the vendor resulting in cost and time impact. Shorter implementation cycle by adopting a modular implementation methodology might help is mitigating this kind of obstacle

Lack of top management involvement in the project no project management lack of training unwilling to adopt change selecting the wrong vendor or software

Failure to redesign business processes to fit the software Based upon their experiences, all of the project managers learned to avoid customization. Many companies go to war with the package and try to make it meet their business process requirements, only to lead the way to cost overruns and project failure in some cases. Rather than attempting to modify the software, the chemical manufacturer re-engineered its business processes in order to be consistent with the software and this proved to be critical to the projects success. Lack of senior management support Without question, top management support is critical. It is important to achieve the support of senior management in accomplishing project objectives and aligning these goals with strategic business goals.

Insufficient training and reskilling A number of firms learned that investment in training and reskilling the IT workforce was higher than expected. Growing internal IT staff members with needed technical skills, particularly in application specific modules, was a strategy followed by four of the organizations. Lack of ability to recruit and retain qualified ERP systems developers Many of the organizations found it difficult to recruit and retain good ERP specialists because the market rates for these people are high. Management must understand and appreciate the criticality of hightech worker turnover, recruitment and retention issues. Four organizations developed recruitment and retention programmes specifically designed for addressing the need for ERP systems professionals. In their experience, the loss of trained ERP analysts to consulting firms was particularly frustrating.

Insufficient training of end-users Most firms emphasized making a major commitment to training end-users in system uses. Inability to obtain full-time commitment of customers to project management and project activities It may be difficult to get managers to commit to project management roles because they may be uncertain about what responsibilities will still be open to them once they are transferred back to their functional areas. Getting the business areas to dedicate people to the management of the project is a key priority and some of the project managers found this difficult.

Lack of integration In terms of factors conducive to project failure, one of the main factors associated with failure is lack of integration. The project needs to be based on an enterprise-wide design. One project manager argued that you cannot start with pieces and then try to integrate the software components later on. Another stated that, it is important to use a federal approach; define what is needed at the enterprise-level and then apply it to the business unit level. Lack of a proper management structure Without central project leadership there is excessive duplication of effort. The pharmaceutical manufacture put someone in charge and centralized the management structure of the project in order to avoid duplication of effort. In implementing a centralized system, a centralized management structure should exist. At the military aircraft manufacturing company, several senior executives had equal authority over the project and this contributed to conflicts and lack of problem resolution.

Insufficient internal expertise When they did not have needed expertise internally, most firms brought in the consultants they needed in order to overcome technical and procedural challenges in design and implementation. It is important to obtain consultants who are specialists in specific Failure to emphasize reporting, including custom report development The use of report generators and user training in reporting applications is critical to project implementation success. One of the lessons learned by the military manufacturer was that insufficient enduser training can generate resistance to using the system, largely because people are ill-prepared for using it effectively. Ineffective communications It is critical to communicate what is happening, including the scope, objectives and activities of the ERP project.

ERP systems are very large and complex and warrant a careful planning and execution of their implementation. How a company implements an ERP system determines whether it creates a competitive advantage or becomes a corporate headache. The top contributor for a successful ERP implementation is strong commitment from upper management, as an implementation involves significant alterations to existing business practices as well as an outlay of huge capital investments. The other important factors are the issues related to reengineering the business processes and integrating the other business applications to the ERP backbone. Upper management plays a key role in managing the change an ERP brings into an organization. Organizational commitment is paramount due to possible lengthy implementation and huge costs involved. Once implemented, an ERP system is difficult and expensive to undo. Since no single ERP solution can satisfy all the business needs, organizations may have to implement custom applications in addition to the ERP software. Integrating different software packages poses a serious challenge, and the integration patchwork is expensive and difficult to maintain. Selecting and managing consultants pose a continuous challenge due to the shortage of skilled consultants in the market. ERP vendors are bringing out industry-specific solutions and newer methodologies to cut the length and costs of implementation. Organizations could reduce the total cost of implementation if they reduce customization by adapting to the ERP's built in best practices as much as possible. Selecting the right employees to participate in the implementation process and motivating them is critical for the implementation's success. Finally, it is important to train the employees to use the system to ensure the proper working of the system.

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