A company uses Enterprise Resource Planning (ERP) to integrate its activities and have a simplified and standardized system. With a more integrated system, a company is able to “manage [its] resources more effectively” (Nah & Delgado, 2006). At the beginning of the 21st century, with the talk of Y2K, most companies used ERP to synchronize their activities. The two common approached used for this implementation are the big-bang approach and the phased approach.
With the big-bang approach, “a business switches from their old ERP system to their new system at a single point in time” (Donagher, 2013). It is done quick and fast and everyone in the company switches to the new system together at a launch date. On the other hand, the phased approach goes about the change gradually, where different sections of the business switch to the new system at different points (Donagher, 2013). Both these approaches have pros and cons, and a company decides on which approach to use depending on which approach best fits its needs. Looking at the advantages of the big-bang approach, to begin with the company does not operate two systems at different times, and everyone uses the new system at the same time (Lee, 2013). This in turn reduces the costs of running two systems at the same time. The other advantage of the big-bang approach is the time saved during implementation. Because it is done so fast, there isn’t much time wasted during the switch to the new system (Lee, 2013).
On the other hand, the big-bang method also has some disadvantages. To begin with, the little time used during implementation allows for lots of things to go wrong (Lee, 2013). This is mainly due to the fact that the switch to the new system is done fast and in a short time, leaving room for mistakes. Additionally, during the fast implementation “failures in one part of the system can cause problems and failures in others” (Lee, 2013). Companies therefore have to be very careful not to have any failures in any part of the system as fixing such problems would be very costly, negating the advantage of low costs. Another disadvantage of the big-bang method is that the employees have immense pressure to learn the new system in a short time and this may be detrimental to their productivity (Lee, 2013). With these cons in mind, it is essential for a company to decide if the big-bang method is the best method for the company to use.
The phased approach is a much less stressful approach as it allows for time to implements the new system. However, it too has pros and cons, Looking at the pros side, because the phased method happens over a period of time, there is less risk of problems arising (Lee, 2013). Also, users have more time to learn and use the system and are therefore not under pressure like employees are under the big-bang method (Lee, 2013). Additionally, unlike the big-bang method, failure in one part of the system does not necessarily lead to failure of the whole system (Lee, 2013). Under this method, users have a chance to fix problems as they come and as they learn the new system. This method therefore presents a safer approach to implementing ERP. On the other hand, the phased approach is seen as a costly and time consuming method as it takes a while to implement (Lee, 2013). Also, working in two different systems could lead to information loss which could hurt the company (Lee, 2013).
Given the pros and cons for the different methods used to implement ERP, the implementation process could go very wrong, and thus cost the company a lot of money. One area that could lead to failure in ERP implementation is in the planning stages. When there is poor planning for the ERP implementation, the failure risk is much higher (Schiff, 2012). It is therefore essential that the company take time to plan all the aspects of the implementation, taking into account any aspects that could go wrong and how to handle a situation that could go wrong. Another area that could be problematic is lack of understanding of the key resources and time that is needed for ERP implementation (Schiff, 2012). It is essential that the company devote time and resources to understand the complexity and intensity of the ERP implementation and what will be needed. It is tempting and very common for a company to underestimate the time and resources needed while implementing (Schiff, 2012). As a result, the new system does not work as planned and the company ends up using more money to solve a problem that could be avoided had adequate time and resources been allocated to the project. The third area that could be problematic during ERP implementation is not having enough training and change management for the employees (Schiff, 2012). It is essential that employees buy into the change for it to work and for them to apply the change. However, when the employees do not support the change and are not well trained on the new system, the system ends up not working as well and the productivity of the employees is greatly reduced.
Implementing ERP has advantages and disadvantaged. To begin with, ERP offers a unified system for the organization which helps to bring standardization in the organization (Rajesh, 2011). ERP implementation also offers “visibility into all the important processes, across various departments of an organization” (Rajesh, 2011), thus helping the company know all the various activities that go on in the organization. ERP also enables “coherent workflow from one department/function to another, to ensure a smooth transition and quicker completion of processes” (Rajesh, 2011). A fourth advantage of ERP is that a unified system helps the company minimize costs by focusing resources on just one system (Rajesh, 2011). This saves the company funds that are now available to invest in other productive ways.
One of the disadvantages of ERP is that while it leads to costs savings later on, the intial cost outlay is huge (Rajesh, 2011). Some companies may not have enough funds to carry out an ERP implantation and may give up some activities in order to have funds for ERP implementation. The second disadvantage is that employees may take a lot of time to learn the new system, during which the day to day activities of the company are at a standstill (Rajesh, 2011). In some cases, employees may never quite learn the system and may end up leaving the organization after being frustrated. The third disadvantage of ERP implementation is that the old and new system may not be alike, and therefore migration to the new system may lead to loss of some company information or lack of continuity of information between the new systems (Rajesh, 2011). A final disadvantage of ERP implementation is that unifying activities in ERP locks a company to a single vendor, which reduces freedom of price control and flexibility for the company (Rajesh, 2011).
Given the discussed disadvantages of ERP implementation, a company may choose to implement only certain modules in an ERP system rather than a complete implementation. Some activities such as finance and accounting may work better in a synchronized system while others like customer service may not work well with other activities. Also, the security requirements for different modules of a company may require that only some of them are implemented in an ERP. Additionally, the costs of implementing all the modules may be too high, and therefore the company may decide to implement just some parts. In today’s globalized economy, what works in one country may not work in another country, and this may dictate ERP implementation for all the activities in a multinational company.
References
Donagher, J. (2013). Big Bang Versus Phased ERP Implementations. Lumenia. Retrieved from
http://www.lumeniaconsulting.com/blog/john-donagher/big-bang-versus-phased-erp-implementations
Lee, J. (2013). ERP Implementation Strategies: The Pros and Cons of Big Bang vs. Phased Roll-
Out. ERPVAR.com. Retrieved from
http://www.erpvar.com/blog/bid/98952/ERP-Implementation-Strategies-The-Pro-s-and-Con-s-of-Big-Bang-vs-Phased-Roll-Out
Nah, F. & Delgado, S. (2006). Critical Success Factors for Enterprise Recourse Planning
Implementation and Upgrade. Journal of Computer Information Systems. Retrieved from
http://cba.unl.edu/research/articles/549/download.pdf
Rajesh, K. (2011). Advantages & Disadvantages of ERP (Enterprise Resource Planning)
Systems. Exctingip.com. Retrieved from
http://www.excitingip.com/2010/advantages-disadvantages-of-erp-enterprise-resource- planning-systems/
Schiff, J. (2012). 13 Common ERP Mistakes and How to Avoid Making Them. CIO.com.
Retrieved from
http://www.cio.com/article/2397802/enterprise-resource-planning/13-common-erp- mistakes-and-how-to-avoid-making-them.html
