NIBCO is mid-sized organization dealing in pipe and fitting material as company is involved into manufacturing activity with total revenue of $460 million. After analysis of the current IT system of the organization a strong need of ERP implementation aroused in the company so as to centralize all systems prevailing in the organization. ERP implementation in the organization remained successful. NIBCO selected Big Bang approach for ERP implementation instead of Go Slow strategy. There were several risks to the ERP implementation at NIBCO such as high consulting cost, vendor selection and change management and these risks were managed by NIBCO management efficiently. Though there were few gaps in the real implementation of the ERP system and one which was proposed but despite of that overall ERP system implementation remained successful for the organization.
Table of Contents
NIBCO is a mid size pipe and fitting manufacturer having more than 3000 employees working in the organization with total revenue of $460 million. NIBCO has implemented SAP R/3 recently in organization with help of Boston Consulting group. NIBCO has implemented ERP with one day implementation i.e. Big Bang which creates quiet risky proposition for the organization in case anything happens wrong while at the time of implementation.
The aim of present report is to analyze various implementation elements for the ERP system which has taken through Big Bang approach. Present report would analyze the implementation strategy adopted by NIBCO, management of risk while implementing ERP, carrying out Gap analysis, exploring change management strategy adopted (Daryl, 2002). Further present report would look into the overall effectiveness of the implementation adopted by the company for their ERP implementation and lesson which has been learnt through present ERP implementation. Lesson learnt section would help the management consultants in case of future purchase for the ERP software so that better measures can be adopted for the purchase of ERP software.
2.0 Implementation strategy adopted
There are several elements of ERP implementation process which needs to be discussed while assessing the implementation strategy adopted by an organization for ERP and the two important elements of implementation strategy includes ERP implementation approach (vanilla or big bang) andteam formation strategy used. For implementation of ERP system cross functional team were selected and these cross functional teams were responsible for entire ERP implementation process starting for the need assessment to final go live phase. An executive leadership team was formulated in order to develop change management in the organization. A triad team was formed where in technology team was lead by Wilson, business coordination was led by Beutler and change management was lead by Davis.
At the time of adopting implementation strategy i.e. whether Big Bang and Vanilla several case studies for the implementation of ERP system were referred along with success. BCG recommended 3 to 5 years of phased implementation which was not found suitable as per the top management analysis for the final implementation. Further case studies used by the team formed for the ERP implementation found that several companies which used go slow, phased approach for the implementation were not among the successful organization for the implementation of ERP system. Another reason which was pointing towards adoption of Big Bang approach was the quick implementation demanded by the business team in NIBCO. Further current implementation also included moving from mainframe system to the client/server systems which would give due importance to R/3 licenses required for the system (Hammer and Champy, 2013). Executive leadership team formed for the ERP implementation recommended usage of Big Bang approach looking into the consulting cost and increase in information system cost against the perceived benefits which would be obtained through current ERP system.
After formation of decision at ground level and middle management level entire proposal for the purchase of R/3 system and Big Bang implementation was finally presented to the Board of Directors for NIBCO from where proposal got signed off along with the remarks that Big Bang implementation for ERP is high risk and high reward scenario hence NIBCO need to put its best resource at work in order to make system implementation successful. NIBCO selected two partners for the consultation and these two were Cap Gemini and IBM. IBM was selected as NIBCO was already a hardware shop for IBM hence supporting hardware was the prime motive behind selection of IBM for the ERP implementation while major objective behind selection of Cap Gemini was the strong change management program which company has with them.
In order to implement ERP system in the organization NIBCO used Big Bang approach which was high risk and high reward strategy for the implementation of SAP. The issue with Big Bang approach adopted by the organization was requirement of high degree of change in the organizational technology and processes which has high threat for the change fatigue to occur in the organization. Further with Big Bang approach it was important that business initiatives in the organization have new ideas for the implementation of ERP. Further implementation through Big Bang approach would allow high consulting cost for the organization but this consulting cost would sustain for over 3 to 5 years of time period (Eason, 2008).
Final implementation for ERP system kicked off on 30th September and total 14 months time was taken in order to plan for ERP system implementation while total ERP system implementation took 15 months of hard work from the organization. First week of implementation was spent in order to build project team while second week of the project implementation was spent by IBM in order to discuss about changes which would be required for the implementation of ERP system. Further introductory level training along with R/3 module training was imparted through 2 to 5 days of compulsory courses.
3.0 Risk management
Risk management is a critical aspect for the NIBCO ERP implementation and well taken care by the management of NIBCO. Below are some of the points showing risk and the mitigate strategy used by NIBCO in order to successfully execute ERP implementation in the organization:
- High consulting cost: NIBCO is a mid-sized organization having revenue of $460 million while the consulting cost was one of the most critical costs incurred by NIBCO in entire ERP implementation plan. More than 50% of the budget was spent on consulting cost to the two vendor hired by the company i.e. IBM and Cap Gemini. There was an inherent risk that in case of failure of ERP implementation the entire cost would go in vain unlike hardware cost which would still remain with the organization despite of unsuccessful implementation (Scott &Vessey, 2010). This could have been a severe financial loss for the organization and in order to mitigate the risk of high consulting cost NIBCO developed an integrated strategy where in vendors were involved in the project to high extent and time to time management was reviewing the project implementation strategy developed by vendor which lead the overall project to success.
- Great degree of change needed and possibility of change fatigue: Implementation of ERP system in NIBCO was challenging from the perspective of high degree of change which would be brought in the organization and there was risk that change fatigue might occur in the organizations due to which there are high chances of failure of the ERP implementation project. In order to mitigate the risk of high degree of change and change fatigue from the initial ERP system proposal top management lead to the development of mindset for change so that processes and systems are so flexible that high degree of change can be implemented without change fatigue to take place in the organization (Koop et al,2009). Consultants hired by NIBCO were assigned the responsibility to design business process re-engineering in such a way that system and processes are so well coordinated to lay down smooth path for the implementation of ERP system in the organization.
- IBM was not able to manage a successful ERP till date: Another major risk for the organization was with vendor hired by the organization. IBM was the major consulting organization helping NIBCO in their ERP implementation. But the major issue was with IBM as till the time of ERP implementation in NIBCO, IBM has never implemented ERP successfully which was a point of risk for the organization. In order to mitigate risk of lack of experience Cap Gemini was included and even help of external consultants were obtained so that ERP implementation plan can be supported for NIBCO.
v Change management: Change management was one of the key challenges for any organization implementing ERP system as entire organization has to make changes in their working style and need to align them as per the implemented ERP system. In NIBCO there was resistance from the employees for implementing ERP system as they need to learn ERP and work according to new system requirement (Kraemmerand, 2008). This would force them to work into an environment which is not suitable to them. NIBCO managed risk for change management quiet effectively. Top management was committed towards change management risk in the organization and internal team along with external consultants were employed so as to manage change in the organization effectively.
4.0 Gap Analysis
Present section would provide comparison for the actual performance of ERP system implementation in NIBCO against the potential implementation plan developed for the organization. The first factor which shows a major difference in actual and potential implementation plan was the hampering day to day operations at the time of final system implementation in the organization (O’Brien, 2011). At the start of the project, project management team has planned that day to day operations of the company would be hampered for a very short duration and this would not create problem in managing the work operations. While in reality due to medium size organization entire workforce of the organization was busy with the ERP system implementation and related work activities due to which the day to day operations of the company were hampered badly and manufacturing operations could not be started for a long time. This not only affected the financial performance of company but also made high influence on the image of company in front of their customer as company lost several customers due to this. Another gap was due to lack of top management support in ERP implementation, for any ERP implementation top management support is always a critical success factor but NIBCO top management could not take much involvement into ERP system implementation due to lack of knowledge towards the information system.
Vendor support for the ERP implementation can’t be neglected as vendors would be helping the organization from the start of ERP system proposal to the final stage. Hence selection of vendor for ERP system implementation is a critical step which should be adequately emphasized by the organization. NIBCO always proposed to have best quality vendors as their consultants but finally they selected IBM and Cap Gemini as their vendors (Lequeux, 2008). Reason behind selection of IBM as vendor was purchase of almost all hardware infrastructures from IMB due to which it was compulsory for NIBCO to involve IBM as their knowledge partner in ERP implementation. Problem with IBM was their lack of experience towards implementation of ERP system successfully as IBM had never been involved into any of successful ERP implementations. Steering committee which is generally supposed to have a large team with the cross functional team members but NIBCO due to its small size only had CEO and their assistant as the members of steering committee which was a point of major concern for the organization as several time decision making was delayed and even optimal decisions were not made due to absence of cross functional team members.
5.0 Change management
Change management was a major issue for NIBCO as management thought that their legacy system which lacks even in computerization would not support the implementation of ERP system in the organization. The responsibility for business coordination and change management was assigned to the managers in NIBCO who have spent a long time with the organization. Current ERP implementations at NIBCO successfully lead to change management in terms of technology, processes and people as well. Some of the key examples for the change management developed in processes by NIBCO include providing NIBCO associates for the customer accounts which was initially not the process, development of a controlled environment for setting up customer master data which was made initially by the customer service personnel and formation of new service marketing group under SAP (Head, 2008).
Looking from the process view several processes such as the network management, recovery procedures, system change control, backup and management of business-client relationship were the major point of change in the organization. All these processes were successfully changes by the organization with the help of TIGER project umbrella and IBM consultancy by designing of information technology system and processes in alignment with each other.
6.0 Overall effectiveness of implementation process
Assessing the overall ERP system implementation process for NIBCO it can be said that despite of resource constraint environment in NIBCO, ERP implementation in the organization can be known as the case of change management, effective IT implementation, good team formation and comparison of Big Bang against Go Slow project for the ERP implementation. From the success of ERP implementation project it is evident that NIBCO did the implementation quiet effectively by implementing the system within allotted budget and timeline for the implementation. Effectiveness of the ERP system implementation can be determined from the implementation schedule as organization kept time for 15 months along with 30 days grace period and during this time only final implementation took place successfully (Waldner, 2011). Another parameter for determining effectiveness of the ERP system implementation in NIBCO was imparting 1200 hours of training to the users so that they can operate successfully which was imparted to them in 3 centres of NIBCO and 4 months prior to go live phase so that at last moment there are no issues arising due to lack of training among users of the system.
7.0 Lesson learned for future ERP purchase process
Some of the key lesson learned from the success story of ERP implementation at NIBCO can be given as mentioned below:
- Communication for a project implementation is an important task, NIBCO showed the importance of active communication strategy in order to coordinate efforts of the entire project team. NIBCO formed TIGER team and held several “TIGER TALK” sessions so as to develop active communication.
- Selection of ERP implementation strategy was an important decision which went in favour of NIBCO as company chooses Big Bang instead of Vanilla strategy keeping in mind the success rate for the implementation strategy (Montgomery, 2010).
- Team formation is an important exercise and success in ERP implementation is decided by the way teams have been formed
- Change management: Change management is essential for ERP implementation and NIBCO case can be ideally taken so as to understand how active change management strategy can make ERP implementation a big success for the organisation.
- High focus: NIBCO case can be referred for understanding the fact that ERP implementation is crucial activity for the lifetime of an organization and an organization should understand this. Further high attention should be paid to the project at the time of implementation like NIBCO did by assigning entire workforce of the organization for ERP implementation.
NIBCO case for ERP implementation can be referred for understanding several success factors which needs to be adopted in order to make sure that ERP system can be properly implemented. NIBCO case highlights importance of Big Bang approach, BPR (business process re-engineering) and role of change management.