ERP - Implementation Challenges in Defence

Enterprise Resource Planning (ERP) systems are commercial off the shelf (COTS) solutions with modular design that provides comprehensive yet integrated solutions for all aspects of a business enterprise. As the name suggests the ERPs are meant for large organisations. As early as 2001, more than 60% of the Fortune 1000 companies had ERPs installed or were in the process of implementing ERP packages to support their back-end business activities[i]. The trend has only improved over the years. Closer home companies like Dabur India, Bajaj Auto, Lanco Industries, Larsen and Toubro, Bharat Earth Movers Limited (BEML) exploit ERP solutions. Recent successful implementation of System Application Product (SAP) based ERP in Malabar Cements prompted the Industries department to call for Expression of Interest (EOI) in June this year, to extend its implementation to 39 public sector enterprises (PSEs) in Kerala.[ii]  

The fact that the US Department of Defence has invested $6.65 billion[iii] on ERP implementations as of December 2011 and that the net quantum of investment would become fourfold in the coming four years , is to a great degree,  reflection of the value that can be derived from these systems. On the other hand the fact that the Expeditionary Combat Support System (ECSS), a major ERP program of the United States Air Force, had to be shelved, post an expenditure of close to $1 billion[iv] on its development over a period of seven years from 2007 to 2012, highlights the necessity of planning and executing ERP implementation with utmost care.

Organisations choose to implement ERP to attain numerous benefits. Multiple conflicting representations of the same data become a single version of truth. Many standalone packages become a single integrated system, ensuring seamless integration across and between processes. The implementation not only brings in transactional traceability and referential integrity but also provides the senior management with absolute visibility with regard to business operations. ERPs contain a bouquet of best practices which have been tested in large number of organisations and proven across thousands of implementations. The business processes of the ERPs are configurable such that these can be suitably altered by addition/deletion/modification of steps to suit peculiar requirements. Configuring requires good knowledge of the organisation’s processes and those being offered by the ERP, and an understanding of the difference between the two. Where the differences between user expectations and what is being offered by the ERP becomes intolerable, customisation is restored to by writing of additional programming code, through RICE (Reports, Interface, Conversion and Enhancement) objects.

Implementations in the industry have made it apparent, that in order to successfully use COTS solutions, organizations have to accept minimal customization of the software. However, at the same time, customisation is not easy to avoid. In the first place, the ERPs were designed for the corporate. A business company and a defence enterprise are not much similar in terms of goals, organisational structure and business functions. A commercial enterprise strives to make profit, remain solvent, limits risk/liability, and evolves implicit tax strategies (valuation and depreciation), all of which is not relevant to a defence enterprise. Further, the Ministry of Defence and the Service Headquarters are not designed for business efficiency. They are organized and optimized for execution of their respective military missions. Secondly, the defence enterprise has a structurally fragmented architecture, which brings in insurmountable difficulty in ERP implementation. ERP software typically organises transactions into end to end processes across multiple business units and supporting organizations within an enterprise. Some of the typical ERP processes are:

• Acquire to Retire.
• Budget to Report.
• Procure to Pay.
• Order to Cash.

Configuring and mapping these processes is a big challenge in the corporate world, and in a defence enterprise it entails that these processes spread across to organisations outside the control of Service Headquarters, to include the likes of Defence Accounts Department, Defence Finance and the Directorate General of Quality Assurance. Further, for most of the processes, particularly when seen end to end, there is no single authority/process owner that can be held accountable for overall process efficiency and effectiveness. Complex cross-organizational interdependencies, and the varied organisational culture, service ethos of these organisations at the macro level and their distinctly diverse work flows at the functional level pose a big challenge to cross-organisation ERP implementation.

Even if we assume that the crossing of organisational boundaries is minimised, the degree of difficulty of an ERP implementation is a factor of the number of ERP users, number of geographical locations, volume of data to be migrated, number of legacy systems, interfaces with other systems, level of resistance to change, complexity of processes, fit of the ERP and numbers of stakeholders of the processes being automated. Unfortunately, in case of defence enterprises across the globe, most of these factors work to enhance the complexity of the implementation. This makes the task of predicting the cost of acquisition, time for implementation and benchmarking performance extremely difficult, if not impossible. It is no wonder that the Government Accountability Office of the US, in its report titled, ‘Improved Management Oversight of Business System Modernization Efforts Needed’, states that six of the nine major ERPs programs of the Department of Defence have experienced schedule delays ranging from 2 to 12 years and five have incurred cost increases ranging from $530 million to $2.4 billion[v].

ERP systems are enabling technologies which are designed with the intent to transform business operations. Their effectiveness ultimately depends on the ability and willingness of an organization to change its behaviour and its processes. Successful implementation of an ERP, implying that benefits and operational improvements are realized to the planned extent, is contingent upon such fundamental foundations as[vi]:

• Sustained involvement of senior leadership with authority over and accountability for execution of all end-to-end processes impacted by the ERP.
• Willingness and ability of the leadership to make hard decisions related to proceeding or not proceeding with an implementation based on program performance.
• Strong integrated governance that includes representation of and participation by all impacted stakeholders. The representatives must have the authority to make decisions that are binding on the organisations they represent. Decisions must be made rapidly and the effectiveness of the governance must be actively measured and reported.
• An organizational operating model (structure and process) aligned to the design of the ERP with minimal requirements to cross organizational boundaries and which execute components of a process outside of the ERP, thus breaking the inherent integration of the ERP.
• A strategy and approach that address the root cause (not just the symptoms) of the problems being solved and the measurable operational improvement to be gained by solving them.
• Personnel with the requisite skill set and experience necessary to define and execute an ERP implementation (eg. source selection, contracting, vendor management, change management, technical oversight).
• Defined metrics for operational improvement to be gained, supported by a baseline describing existing business performance.
• Accurate, consistent, and authoritative data.

To summarise, when an organization decides to implement an ERP solution, it has no option but to minimise customisation, which implies that the organisation must be willing to change its business operations and align it with those being offered by the ERP chosen for implementation. Changes to processes, roles, responsibilities and organisational structures are inevitable. Therefore, the need to train, prepare and plan transition, inspired and guided by a completely involved and authoritative leadership is the key to a successful implementation.

The author is a Senior Fellow

Views expressed are personal