Chapter 5

Question 1

Organizational readiness for ERP

Answer 1

-organizational readiness assessment is the formal evaluation of a company‘s preparedness for ERP.

Question 2

Project governance

Answer 2

-helps keep projects running smoothly, on budget, and on time.
-Before the project begins project roles and responsibilities should be set up as well as governance documents compiled.
-rules and documents to govern the ERP project: steering committee, project manager, project team, project charter, scope statement.

Question 3

Steering committee

Answer 3

-highest decision making authority for the project; determines the projects ultimate success or failure. The executive sponsor leads the committee.

Question 4

Steering committee responsibilities

Answer 4

• needs to be aware of project portfolio management: prioritize projects within the organization and staff them realistically with qualified individuals. Should meet regularly to make important decisions.

Question 5

ERP project manager

Answer 5

-has the lead role in planning, executing, monitoring, controlling, and closing the project.
-responsibilities of the project manager: make timely decisions at the project level, communicate decisions both up and down stream, review members qualifications and submit to steering committee for approval, deliver the project on time and within budget, and present project status to steering committee.

Question 6

Project team

Answer 6

-plays a critical role in the success of the ERP project as they implement daily
- Core team includes: subject matter experts – employees that are highly respected and have extensive domain knowledge. Technical people, site champions, and the best and brightest.

Question 7

Project charter

Answer 7

- governance document for the deployment and completion of the ERP project
-Details mission, objectives, business case and budget information, and a description of how the project will be organized and conducted.
- differentiates the roles and responsibilities of internal resources versus external resources
-Signed by the executive sponsor.

Question 8

Scope statement

Answer 8

• details what is and is not included in the ERP project so the project boundaries are crystal clear.
  -Scope creep: The expansion of the projects original boundaries, reason why ERP exceeds budget
• change control: process of controlling changes to project scope.

Question 9

ERP business case

Answer 9

-outlines the justification for ERP, including the costs, expected benefits and anticipated ROI.
-steps to create a business case: determined business case rationales, estimate potential benefits, estimate potential costs, estimate potential ROI

Question 10

Business case rationales

Answer 10

-High level reasons why an organization needs to implement an ERP system
-Three types of business case rationales: technology rationale, strategic rationale, business process rationale.

Question 11

ERP costs

Answer 11

• total cost of ownership - components include: software licenses, database licenses, third-party software licenses, hardware and IT infrastructure, implementation costs, maintenance and support costs. Some of these cost will be one time cost, while others will be recurring.

Question 12

Software license cost

Answer 12

Depends on number of employees that will be using the system, vendor tier being deployed, number of modules purchased

Question 13

Software license cost methods

Answer 13

-perpetual licensing model: the vendor allows access to the software for an indefinite time upon payment of an on upfront licensing fee.
-named user licensing: company identifies the total number of individual users who will access the ERP system and pay the license for each one a.k.a. per seat licensing.
-Concurrent user licensing: allows for an unlimited number of named users and accounts, but it limits the number of people that can actively access the software at a given time.

Question 14

Third-party software license cost

Answer 14

-offers additional features or logic that becomes part of the overall solution to solve certain business needs
-ERP vendors will partner with third-party is for these “bolt Ons”
-third-party software needs to seamlessly integrate with ERP system

Question 15

Hardware in IT infrastructure costs

Answer 15

• if running the ERP system on premise, a company will need to invest in IT infrastructure components including hardware, fail over solutions, network connectivity, power, and security
  -hardware may include servers, routers, back up and storage, desktops, laptops, tablets, and printers.
• if ERP is hosted by third-party, IT infrastructure is included in monthly subscription.

Question 16

Implementation cost

Answer 16

-highest cost component of the TCO
-Cost of internal resources also needs to be estimated. Full-time equivalent is a measure of how many employees a project requires, assuming all employees work a full work week.

Question 17

Maintenance and support cost

Answer 17

• Application management services: post-go live maintenance and support, Includes functional and technical support, installing updates and patches, application monitoring, and back up recovery. The cost for maintenance ranges from 18% to 25% of the software license cost.

Question 18

Return on investment

Answer 18

-when the costs and benefits have been estimated, a project ROI can be calculated, typically a five year window.
ROI= net profit /total investment

Question 19

ERP selection committee

Answer 19

• charged with selecting the ERP system, but final decision made by steering committee. Selection committee should be led by ERP project manager and executive sponsor.

Question 20

Requirements gathering

Answer 20

• process where selection team will determine all the functional criteria the company needs and wants out of the ERP system. Many companies use a series of workshops to gather requirements.
  - requirements document: the results of the gathering, details all business requirements for a new system

Question 21

Market survey

Answer 21

Determines which vendor systems might be contenders

Question 22

Request for information

Answer 22

Send to potential vendors to pre-qualify and shorten the list to a manageable number of vendors usually 3 to 4.

Question 23

Request for proposal

Answer 23

Sent to short listed vendors so they can indicate what specific requirements they are solutions meet. RFP outlines due dates for vendor responses, the selection and award process, and the estimated award date. The selection committee will examine vendor responses.

Question 24

Best in class versus best of breed

Answer 24

• Best in class/family suite: combining core functions of the enterprise into a single, integrated ERP software suite.
  -Best of breed: implementing some modules from niche vendor and integrating these modules with modules from the ERP vendor.
  -Middleware: software that facilitates sharing data and business logic across systems but requires IT expertise to set up in maintain.
  

Question 25

Demo days

Answer 25

• allows committee to check out vendors self reported information
  -Selection committee should provide a script ahead of time to each vendor. Vendor is to focus on must haves, but nice to have and bells and whistles will also be of interest to the committee. Company should make sure the vendors have not added any customization to their software.

Question 26

Fit/gap analysis

Answer 26

-The methodology that companies use when comparing their business process requirements with what an ERP system offers
-Fits our where the ERP system matches the companies required functionality and process design needs
- Gaps or where there is a mismatch between the companies required functionality and process design needs.
- major gaps need to be uncovered during package selection

Question 27

Reference checks

Answer 27

• Organization should always obtain references from customers of the ERP vendors, should be a company comparable in size and in the same industry.
  -Should also seek out additional references to obtain a more objective viewpoint

Question 28

Request for quote

Answer 28

-solicitation for the financial conditions of the proposed solution, including initial licensing costs for the number of users, annual maintenance costs, and payment terms. There are multiple ways to negotiate down the software price.