Risk that associated with ERP implementation and measures that can be taken to fix these risks. A. Risk that are identified with the implementation of ERP
1. Lack of alignment between organization strategies. 2. Lack of Control
3. Complexity of the Project
B. Commitment of top level management.
1. IT literature has clearly demonstrated that for IT projects success management support is critical. 2. By ERP any organization goes through a major change this should be planned strategically. 3. The success of ERP is completely dependent on top management. C. Reengineering the whole organization structure
1. Implementation of ERP involves restructuring the organization to business standards. 2. Some businesses are complex therefore ERP need customization. 3. Cost of reengineering and customizing the software according to needs in very high. D. Integration of ERP is same for every company
1. Most companies want a single solution for their problems from ERP. 2. Integration by far now has been estimated as the most expensive process in ERP implementation. 3. Organizations need to understand the efficiency of integration process.
In order to achieve maximum efficiency the risk associated with any task must be minimized. Many engineering, medical firm install different types of tools to overcome the risk factor. This is done through the identification of inherent, control and detection of risk followed by the establishment of an acceptable specified level of overall risk that is function of other risks 1. The same reason can be thought upon for the implementation of an ERP system. In order to have successful implementation of the ERP the firms need identify the risk associated with every task and apply appropriate controls put in place to minimize the risks. The lack of alignment between the organization strategy, structure, and processes and the chosen ERP application is one risk that is repeatedly identified in the literature2. Both the engineering and business literature have made the conclusion that ERP system cannot be successful unless and until organization restructures its operational processes. Moreover the ERP implementation project should be business proposal. This requires the organization to gain strategic clarity and fidelity of purpose. Finally, a conclusion direction is required to achieve these goals. With an ERP project, the loss of control is another major risk. Two ways in which loss of control can take place: the lack of control over the project team and the lack of control over employees once the system is operational. The lack of control results from the devolution of the decision making and following ineffective approval of decisions. When the ERP system is implemented a project team must be given the task to have some knowledge regarding the implementation of ERP system. However where the project team has complete control over the ratification of its own decisions creates potential risks. The second risk is that an operational ERP system must always results in the devolution of responsibility and empowerment of lower level employees. Another major risk is complexity of the project. An ERP system implementation involves relatively large expenditure for the acquirement of the hardware, software, implementation costs, consulting fees and training costs3. Also an ERP system completion project has a wider scope compared to most other information system implementations, and may cause a important number of changes within an organization. The range and the difficulty of the project area source is major risk. ERP system is not only about implementing software or changing the software system, rather it is a matter of changing and repositioning the whole business practices for an organization. Commitment of top level management is very important for the success of projects that involve ERP. The IT literature has clearly demonstrated that for IT projects to be...
References: 1- Arens, A.A.; Loebbecke, J.K. (1997): Auditing: An Integrated Approach. PrenticeHall. Upper Saddle River. NJ
2- Davenport, T.H. (July/August 1998): “Putting the Enterprise into the Enterprise System”, Harvard Business Review, vol.76, n.4: 121-133.
3- Barki, H.; Rivard, S.; Talbot, J. (Fall 1993): “Toward an Assessment of Software Development Risk”, Journal of Management Information Systems, vol.10, n.2:203-225.
a- Davenport, T., "Putting the Enterprise into the Enterprise System," Harvard Business Review, July August 1998, Vol. 76, No. 4, pp. 121-131.
b- Melymuka, K., "ERP is Growing from Being Just an Efficiency Tool to One That Can Also Help a Company Grow," Computerworld, September 1998.
c- Edwards, J., "Expanding the Boundaries of ERP," CIO, July 1, 1998.
d- Schwartz, K., "Putting Consultants on Your Team," Beyondcomputing, Vol. 7, No.6, August 1998
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