Effect of SAP ERP Software in the Workplace (Term Paper Sample)

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Developing an Effective SAP ERP Software Offering
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Introduction
For a business to run effectively in today’s global environment it must be able to organize and control its various organizational activities from a single unified control hub. Enterprise resource planning (ERP) software gives management this capability. Having ERP software at hand allows the organization to control and monitor materials, orders, finished inventory goods, schedules and other key information about the company (Mehrejrdi 2010). System Analysis and Product Development (SAP) is the world’s largest inter-enterprise software company (Mehrejrdi 2010). It is also the world’s 4th largest independent software supplier. SAP has made significant headway in the ERP software market becoming one of its top competitors. SAP has accomplished this through a seamless integration of data and process dimensions (Mehrejrdi 2010). SAP’s integration with Microsoft’s Microsoft Word program has been an example of such a streamlining activity (Mehrejrdi 2010). While SAP has developed a popular ERP software package, the efficacy of said software, within different organizations varies on a number of factors. The purpose of this report is to identify employee/management practices which can have strong effects on how new ERP software will affect the organization. The report begins with a brief cost-benefit analysis of SAP’s ERP implementation, before it moves on to how the actions of each of the three stakeholder groups (employees, management, and implementation group) can affect the outcome of an ERP offering.
Costs and benefits of ERP implementation
Every manager implementing ERP is both excited by the possibilities of ERP and dreads its consequences. Successful implementation means success on five levels: operational, managerial, strategic, information technological, and organizational (Al-Mashari, Al-Mudimigh, & Zairi 2003). Operational success means that the organization reduces its costs, improves its product quality, as well as its customer service (Al-Mashari et al 2003). Managerial success means that resource management has been improved, as has performance, decision making, and planning (Al-Mashari et al., 2003). Strategic success means that business growth and innovation has been enhanced through the adoption of the ERP (Al-Mashari et al 2003). Information technology success means that the business has improved the flexibility and infrastructure of its existing IT system (Al-Mashari et al 2003). Finally, organizational success means that the organization is left with a higher level of knowledge regarding ERP systems and it has become more streamlined in its day to day activities (Al-Mashari et al 2003).
While the implementation of ERP has become a cornerstone of new business, it comes with a set of pitfalls and challenges which, if not handled effectively can adversely impact an organization’s ability to function on a day to day basis. A meta-group survey conducted in the early 2000’s showed that on average the cost of implementation for an ERP software product across an organization was $10.6 million (Umble, Haft, & Umble 2003). With this cost in mind, the new system took, on average 23 months to pay for itself (Umble et al 2003). Additionally, on average, $2.1 million was spent by each company on software maintenance fees alone (Umble et al 2003). Other research has shown similar results. One study of 63 companies showed that it took eight months for the new system to show any benefit (Al-Mashari et al 2003). While the benefits and popularity of new software offerings by SAP are alluring to many firms, it is necessary to approach them in a way that will benefit rather than harm the firm in the future.
A poorly implemented ERP can disrupt the company’s culture; create extensive training requirements, lead to productivity dips, and mishandled customer orders, all of which can damage the bottom line in the short term (Umble et al 2003). One of main setback in implementation of the system is antagonism with implementing partners. The process of involving consultants in the implementation of ERP is expensive and time consuming (Wong and Scarbrough 1999). Consultants, while bringing technical know-how, may overlook reengineering of the ERP system to suit the particular requirements of a business, resulting to software misfit. Software misfits lead to underutilization of the ERP system and unrealistic expectations by the users (Wong and Scarbrough 1999).
What is clear from the above is that it’s necessary to understand which practices create effective an ERP rollout that will be beneficial to the firm, and which practices are detrimental. Key to any ERP introduction is the way in which staffs are affected by it, and how they deal with its consequences. This paper is concerned with discerning between adaptive and maladaptive staff responses to ERP rollouts.
The End User
End Users are those individuals who will be trained in the use of the company’s ERP software. As soon as the ERP becomes operational these are the individuals within the firm which are integral to its new operations. ERP has revolutionized the functioning of the firm’s day to day operations making the end-user important. Making them more important is the fact that as soon as the implementation team has left the premises, the trained end-user becomes the individual that keeps the redesigned company afloat. Without them, the company may sink. Not surprisingly then, it has been reported that the retention of the end-user is a significant concern for firms just coming out with ERP (Adam & O’Doherty 2000). To improve end-user retention, some of the sampled firms had released successful incentive programs for those individuals trained to use ERP (Adam & O’Doherty 2000).
Another issue which affects how well ERP is implemented amongst end-users is the level of education. As early as 1998, SAP’s representatives stated that roughly 12% of any organizational implementation budget which the client allocates for its ERP, should be spend on end-user training (Torode, 1998). One research study showed that reserving 10-15% of total ERP implementation budget to end-user training related to a success level of 80% for companies (Umble et al., 2003). Training and education should be a constant development and begin early lest the full benefits of the ERP remain under-utilized (Umble et al 2003). It has been suggested that periodic meetings where end-users can exchange information about their experiences with the system, are beneficial for the company (Umble et al., 2003). End-users that are highly educated and capable of troubleshooting problems with the ERP, and use the system to evolve the business, cuts dramatically into the company’s costs related to consulting and third party maintenance (Umble et al 2003).
Part of the training for end-users should relate to data accuracy. ERP systems strive for integration of all of the company’s day to day information. An error in one part of the system resonates amongst all of the others. So simple data accuracy standards are emphasized as being of high importance (Umble et al 2003).
The Implementation Team
The implementation team is the group of individuals that come to install ERP within the company. From the start of the process, this implementation team, or IT group will work with top management and end-users while they install and customize the ERP within the company’s system. The implementation team should be chosen carefully by top management and entrusted with critical decision making responsibility (Umble et al 2003). While oversight and communication with management is important, it is emphasized that this group must be allowed decision making flexibility to assure that the project runs smoothly and quickly (Umble et al 2003).
After the implementation has been completed, the IT group must remove itself from the site to allow the client to continue operations by themselves. The group stays on as a consultant but loses a lot of its previous contact with the client. The way that this detachment process occurs can have important consequences for the company. For example, Adam and O’Doherty (2000) interviewed organizational management and found a “sigh effect” occurring in organizations where ERP had been implemented. The effect referred to the falling morale that clients felt after IT groups had left. As client staff returned to their day to day tasks, they found problems with ERP software which they could themselves not ameliorate (Adam & O’Dohert, 2000). As IT group representatives were no longer on site, and could only provide telephone or online support, the level of confidence that end-users had with the product deteriorated. As time went on, problems with the new system crystallized, creating a negative perception of the ERP software as well as the aforementioned “sigh effect” (Adam & O’Doherty 2000).
The length of the presence of the IT group determines (in the eyes of top implementation leadership anyways) how well client firms deal with the “sigh effect.” Team leaders from the implementation group stated that the longer the group had an active and involved relationship with the client, the smaller the effect would become, and the easier it would be for the organization to maintain a positive attitude towards its new ERP system (Adam & O’Doherty 2000). The continued presence in the client’s organization sometimes meant setting up the ERP implementation leader as an administrator for the client’s ERP software (Adam & O’Doherty 2000). By maintaining this involvement it was believed that the implementation group could p...