Good, Bad, Dirty, Ugly SAP Implementation

 

Many SAP Implementation were stated as "successfully" implemented, indeed these are 'Unsuccessful' because of these six factors which were listed. The following paragraphs elaborate on the six factor groups which could be useful to those implanting or just implemented.

 

Factor 1: Worked with SAP functionality/maintained scope

A crucial part of working with the SAP functionality is the ability to streamline operations. When implementing a system, many organizations fail to specify their organizational objectives. Job skills are raised by the requirements of the new, post-implementation company. Idiosyncratic ways of doing business, which were manageable, although most likely inefficient, under the "old system", are no longer tolerated. Companies that do not understand these issues early on will face serious problems. Successful companies have recognized the importance of "cleaning up" their operations, which will allow them to implement "vanilla" SAP – with minimal customization.

Even though the so-called "vanilla" approach is adopted by two-thirds of implementing companies, some customization will always be required in order to meet individual needs . The key, it appears, is to know just how much to customize. For example - Colgate-Palmolive, a $9 billion consumer products manufacturer, implemented SAP in 41 countries in 1998. Installing an integrated computer system at this level of magnitude would be a daunting project for anyone. A direct quote from Ed Toben, CIO of Colgate-Palmolive, puts the plan into clear terms: "This is complicated stuff, you have to do anything you can to simplify it" (Stedman, 1999). The ability to implement SAP with minimal customization requires assistance from several other factors, primarily streamlining operations and re-engineering the business – both of which will help the organization to run in a more straightforward manner. Thorough planning is also a close partner, as it is threaded through the plans from scope to budgets. Scope is the initial "blueprint" of an implementation plan. Within this original plan, budgetary and resource needs are established. During the course of the project, it can be easy, often transparently so, to become so involved in details that additional responsibilities or requirements are added or affected. Suddenly, but often too late, the realization comes that the project is a victim of "scope creep". The ability to maintain scope is closely related to planning, and it is possible to achieve for companies both large and small. Colgate-Palmolive Company also listed scope maintenance as a factor to their success.

Factor	% Contributed for Success	% Contributed for Unsuccessful l/ Failure
Worked with SAP functionality/maintained scope	High ( 55% )	Low
Project team/management support/consultants	High ( 49% )	Medium 33%
Internal readiness/training	Medium (41%)	High 53%
Deal with organizational diversity	Low 31%	High 40%
Planning/development/budgeting	Low 20%	45% ( High )
Adequate testing	Low 10%	33% ( Medium )

 

 

Maintaining scope is just as important for small companies as it is for large organizations. The approach for "rolling out" their implementation is another very important consideration under the SAP functionality/scope umbrella. Much has been said about "big bang" approaches and gradual rollout of modules within a company. There is no evidence that any one way is better than another as a whole; however, one approach will be better for companies on an individual basis. There have been many widely publicized "big bang" successes, and many failures. The same is true for gradual (phased) rollouts, although these generally are not headline-grabbers. I know , Chevron, a $43 billion oil giant, attributes a phased rollout to their success. They successfully implemented SAP and replaced over 250 legacy systems on a global basis using the phased approach. By implementing gradually, they were able to catch any "bugs" before moving forward, thereby avoiding any catastrophic, system-wide problems. Amoco, Merisel and Owens Corning are examples of other companies who chose to take a gradual rollout approach, and who consider the decision a contributor to their success. Home Depot has successfully implemented several modules around the world, and utilized the phased rollout approach. The phased rollouts take longer to complete, and are more expensive due to the additional time commitment; however, the approach does offer a reduced business risk . Only one of the companies analyzed cited SAP core functionality as a problem. Sobey's, an $89 million Canadian grocery chain, did not feel SAP could handle its requirements, and prematurely abandoned the implementation process. For the most part, companies, even the ones who experienced miserable, expensive failure, agree that SAP will perform as advertised.

 

Factor 2: project team/management support/consultants

The successful project team is cross-functional, consisting of the most knowledgeable

people in the organization. The team, at all times, must be dedicated solely to the project, and have no other responsibilities within the company. Lockheed Martin, a leading aeronautical group, stated one of its keys to success was "assembling a team capable of making and executing" the changes required .

 

A successful implementation is only achievable when high-level executives have a strong commitment to the project . The attitude of senior managers will affect not only the flow of funds and information to the project, but also the subordinates view the project, its future impact upon the company as a whole, and its impact upon the employees as valued and capable individuals. Fujitsu Microelectronics, an international manufacturer of semiconductors, successfully completed its ERP implementation within ten months. They attribute success in part to top management support. During the entire project, company management provided substantial incentives to team members, and ensured that internal communication channels were open at all times. GTE completed 11-month integration not only on time and within budget, but also without the aid of an outside consulting firm. Again, top management was a primary factor cited for their success. Senior management at Farmland Industries showed its support of the process by providing bonuses to employees and consultants. The project members were charged with ensuring that not only technical goals were met, but also that the "people" element and business changes were taken care of at the same time . Farm Land had the foresight to understand that an ERP system was not only a significant technical change, but also a massive cultural change. As stated earlier, and reinforced with these examples, the ERP software can be designed to work perfectly well, but lacking top management support, the project is destined to fail. Senior management has the authority and responsibility to support the project internally through incentives and bonuses, and externally through maintaining open and effective communication channels and a reassuring, positive attitude. By constantly exposing the positive benefits and results of such an endeavor throughout the implementation process, success is much more likely to occur.

 

Factor 3: internal readiness/training

 

The "people element" and training aspect of an ERP implementation have historically received the least amount of attention. The paradox of this is that when this factor is ignored or downplayed, primarily because it does not have the largest quantifiable benefit, expenses are greatly increased in the long run. By treating resource training with little regard and financial support, it is not hard to realize the reality of delay, confusion and financial ruin that may result. Some companies insist on assigning a fixed cost or percentage to the training effort, regardless of need or variable conditions.

This mistake has certainly been the root cause of many failed implementation attempts. Fortunately, it has also been a source for others to learn from such experiences and avoid repeating the mistake.

 

The people element must be handled on two levels. At one level, employees must be trained on the new system in order to use it to continue day-to-day operations. The second level is educational exposure. Managers must know and understand the implications of the system, and must come to a consensus about the changes that will take place. If they agree that change is necessary and possible, they can be charged with disseminating this information to their subordinates. If managers are not in agreement or collaboration, then there will be no "enthusiasm", or buy-in, and there

may even be active resistance (Davenport, 2000). The reinforcement of a "team environment" is critical to the overall success of an ERP implementation. Members of the project team should be encouraged to support each other and work toward common goals. This also leads to a "cross-pollination" effect, resulting in a more collaborative and self-sufficient mix of talent and responsibilities.

 

Not unexpectedly, the most common failure factor reported was that of "readiness

for change".

 

Implementing an ERP system completely changes the culture within an organization, and many companies have found themselves hard pressed to accomplish this successfully. Unisource, a $7 billion corporation, scuttled its implementation plans due to "internal problems". The company was unable to deal with the levels of cultural change that would have to take place in order to be successful under an ERP system.

 

Many companies have been guilty of making simplistic assumptions of how an implementation will affect the culture within their organization. Culture changes do not occur magically, and must be handled with the utmost care and precision . These changes directly relate to the human cost element, or human psyche. If people are not ready or willing to change, change simply will not occur. All managers must be charged with the responsibility of controlling worker anxiety and resistance to the ERP system .

Factor 4: deal with organizational diversity

 

Organizations have many cultures. Individual branches of the same organization have their own ways of doing things, and each function/department operates with different procedures and business requirements. Not unexpectedly, the larger, more global companies cite their diversity as an obstacle to success. Individual units and groups are often companies of their own right, and do not wish to be assimilated into one corporate culture. "Re-engineering" of the business is required here, both on the "people" level, and on the operational level. This organizational diversity differs from factor #1 (worked with SAP functionality/maintained scope) in that the company changes its culture, not just its processes.

 

Farmland Industries, a $10.7 billion farmer-owned cooperative wanted to ensure that their endeavor would be successful. Before launching their implementation, they interviewed over thirty other SAP users, in an attempt to "learn from the mistakes of others". The knowledge gained allowed them to re-engineer their business before beginning the process, and resulted in a successful implementation. It appears to be more critical for large, diverse organizations to re-engineer their processes and remove idiosyncrasies – both cultural and procedural – before taking on a project.

Amoco ($33 billion, oil/petroleum) and Chevron ($43 billion, oil/petroleum) painstakingly

Re-engineered their companies. The concept of re-engineering the business is not simply to

fit the software. Before any company can be linked effectively to world-class supply

chains, their internal processes must be world-class . Chemical giant E I DuPont, scuttled its SAP implementation after determining that its organizational units were too diverse, feeling that it would be too difficult for them to attempt to re-engineer their processes (Koch, 1996). On the other hand, it is possible to overcome this problem. Many large companies, Amoco and Chevron, for example, successfully re-engineered their business and overcame the problem of organizational diversity.

 

Factor 5: planning/development/budgeting

 

Planning a sophisticated ERP project should not be taken lightly or with little forethought. As mentioned before, there are enormous potential costs associated with such an undertaking. In addition to the high costs paid out before the go-live date, there can and have been major expenses incurred by companies that were unable to fully develop a comprehensive plan. Planning should be closely identified with maintaining scope during an implementation. Cost overruns and developmental delays are costly, sometimes fatal results of ineffective planning. Home Depot, Lockheed Martin, and Mead Corporation are some examples of companies that attributed their success to planning. Lockheed planned a well-equipped team to do the implementation, allowing

them to make a solid plan for achieving their stated goals. Mead Corporation, a large pulp and paper manufacturer researched the notorious Hershey Foods implementation in an effort to learn what they would need to do differently in order to succeed, or more specifically, to avoid failing. Consequently, Mead successfully implemented nine separate modules simultaneously within their operations.

 

Developmental delays with ERP implementations were more of an issue during the Y2K readiness period, and some companies in the midst of an implementation were forced to scuttle the operations and make quick fixes to their legacy systems. For example, this was a primary issue with Nash Finch, a national food wholesaler. Delays, however, can cause any operation to be scratched if the senior managers feel they should no longer, financially or otherwise, support a project that may never get off the ground within a reasonable period of time. Developmental delays can also lead to resource attrition, which in turns affects the learning curve and completes the vicious cycle by creating additional obstacles to obtaining cut-over.

 

Knowing this, Fujitsu Microelectronics successfully completed their well-planned implementation in ten months. Projects are demanding, not only on the company, but also on the employees on the team.

 

Implementations can become very costly, despite all efforts at developing a solid plan. Unisource and Snap-On-Tools attribute this to part of their failure. Waste Management, Inc. found the unexpected costs too much to handle, and subsequently retired their ERP implementation project. Many projects, especially failed ones, find themselves over budget, some by as much as 189 percent. Only one-sixth of projects are completed on time and within budget.

Factor 6: adequate testing

 

System testing has proven to be the key element of success for some companies, and a

Direct cause of failure for others. The Gillette Company endured five months of rigorous testing procedures before their successful go-live date. Eastman Kodak completed what at the time was the largest implementation on record, attributed testing as a primary factor for their success. After

Months or years of development, it may be feasible to assume that both team members as well as executive management are tired of dealing with the project and just want it to be completed. The result of this myopic thinking, however, is that testing is reduced or ignored, and "red flags" are disregarded. Whirlpool Corporation, for example, attributes inadequate testing as its single reason for an unsuccessful- and costly-implementation. In an attempt to meet their deadlines, red flags were ignored.

 

Whirlpool gambled on its testing program by reducing the amount of time needed in an effort to avoid the "wrath" of senior executives. Furthermore, Whirlpool executives admitted that to complete adequate testing and fix any problems would have delayed go-live by only one week. Consequently, these "red flags" reappeared at go-live creating inventory and delivery problems, and costing the company more financially in the long run . This also proves the importance of another success factor – top management support. Unrealistic fears of delaying the "go-live" dead line indicated that senior executives were not completely "in tune" to the importance of completely testing the implementation; even that resulted in a slight delay. Hershey Foods stated that their rush to complete the implementation in order to be "ready" for their busiest time of year, in addition to other issues that essentially doomed the project early on, caused their massive, highly publicized Failure .

 

Conclusions

 

Six factors were identified for success and failure of SAP implementations in this . It has been noted that the primary factors (working with SAP functionality and maintained scope, and project T eam/management support/consultants) for successful implementation of SAP are different from the primary factors (inadequate internal readiness and training, and inappropriate planning and budgeting) that contribute to failure of SAP implementation. Hence, it can be noted that the factors that contribute to the success of SAP implementation are not necessarily the same as the factors that contribute to failure. This points out that management should be focusing on one set of factors of avoid failure and another set of factors to ensure success. The main regret in ERP implementations seems to be that there was not enough time and attention devoted to the internal readiness factor and their changes during the implementation process. This is true for all companies that have had implemented an ERP system, whether it is SAP or any other vendor.