NICMAR

IMPLEMENTATION OF ENTERPRISE RESOURCE PLANNING SYSTEM

IN CONSTRUCTION PROJECTS.

A thesis submitted in partial fulfillment of the academic requirements

of Post Graduate Programme in Project Management.

By
R V KARTHICK
(212-02-31-10431-2132)

UNDER THE GUIDANCE OF:

Prof. DEEPAK SUNDRANI

SCHOOL OF DISTANCE EDUCATION

NATIONAL INSTITUTE OF CONSTRUCTION
MANAGEMENT AND RESEARCH
PUNE

Acknowledgement.
I have taken efforts in this project. However, it would not have been possible without the kind
Support and help of many individuals and organizations. I would like to extend my sincere
thanks to all of them.
I am highly indebted to Prof. Deepak Sundrani for their guidance and constant supervision
as well as for providing necessary information regarding the project & also for their support in
completing the project.
I would like to express my gratitude towards my parents & member of NICMAR-SODE for
their kind co-operation and encouragement which help me in completion of this project.
I would like to express my special gratitude and thanks to industry persons for giving me such
attention and time.
My thanks and appreciations also go to my colleague in developing the project and people who
have willingly helped me out with their abilities.

DECLARATION
I declare that the research thesis entitled Implementation of Enterprise Resource Planning
in Construction industry is the bonafide research works carried out by me, under the
guidance of Pro. Deepak Sundrani. Further I declare that this has not been previously formed
the basis of award of any degree, diploma, associate-ship or other similar degrees or diplomas,
and has not been submitted anywhere else.
Place: Chennai

Name of Student

Date:

R V KARTHICK

CERTIFICATE
This is to certify that the research thesis entitled Implementation of Enterprise Resource
Planning is the bonafide work of Mr. R V KARTHICK, in partial fulfillment of the academic
requirements for the award of Post Graduate Programme in Project Management. This work is
carried out by him under my guidance and supervision.
Counter Signed

Guide

Prof.

Name of the Guide: Prof. Deepak Sundrani

Dean
Place: Chennai
Date:

CONTENTS

Title
CHAPTER No.
CHAPTER-1 INTRODUCTION
1.1 Introduction to ERP
1.2 Need for study
1.3 Objective
1.4 Methodology
1.4.1 Literature Review
1.4.2 Data collection
1.4.3 Data analysis
1.4.4 Conclusion
1.4.5 Scope of work
CHAPTER-2 LITERATURE REVIEW
2.1 Critical factors for successful ERP implementation
2.2 ERP system selection
2.3 ERP implementation strategies
2.3.1 Pre-Implementation (planning) strategies
2.3.2 Implementation strategies
2.3.3 Post-implementation strategies
2.4 Cost & Payback Period of ERP implementation
2.5 Benefits of ERP implementation
2.6 Research Gap
CHAPTER-3 DATA COLLECTION
3.1 SAP AT JAI HIND PROJECTS, INDIA
3.1.1 What Was The Problem?
3.1.2 Solution & Implementation
3.1.3 Pre-requisites study for ERP Implementation
3.1.3.1 Risk Identification
3.1.3.2 Selection of Implementation Consultant
3.1.3.3 Vendor selection Criteria
3.1.3.4 Total Cost of Ownership
3.1.4 Current Information System
3.1.5 Benefits
3.2 JMC Projects India Ltd
3.2.1 Company History
3.2.2 Problem & Solution
3.2.3 Current Information System
CHAPTER-4 DATA ANALYSIS
4.1 ERP Pre Implementation Parameters

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4.2
4.3
4.3.1
4.3.2
4.3.3
4.3.4
4.3.5
4.3.6
4.3.7
4.4
4.4.1
4.4.2
4.4.3
4.5
4.6
4.6.1
4.6.2
4.6.3
4.7
4.7.1
4.7.2
4.7.3
4.8
4.8.1
4.8.2
4.8.3
4.8.4
4.8.5
4.8.6
4.8.7
CHAPTER-5
Refer
Resea

ERP Pre Implementation Process Charts

Various Types of Functional Modules of ERP Software
ERP Production Planning Module
ERP Purchasing Module
ERP Market in Module
ERP Inventory Control Module
ERP Sales Module
ERP Financial Module
ERP HR Module
ERP implementation Methodologies
The Big Bang
Modular Implementation
Process-Oriented Implementation
ERP Software Selection Criteria
Total Cost of Ownership
Costs of Software
Costs of Hardware
Costs of Professional Services
Causes of ERP Failure
Failure of ERP Software Implementation
Failure of Accommodating Evolution of Business Processes
Failure of User Acceptance
Most Common Ways of Successfully implementation of ERP
Critical stakeholders to accept or get involved with the
implementation
Adequate user input
Specifications and change control procedures to be properly defined
Expectations to be realistic and defined
The presence of an outside consultant
Good Communication
The implementation methodology should be clear and tested
CONCLUSION
References
Research Papers

APPEN APPENDICES

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LIST OF TABLES

Table
No.

Page
No.

Title

1 Evolution of ERP
2 Tangible Benefits Realized
3 Intangible Benefits Realized
4 ERP Pre Implementation Parameters

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LIST OF FIGURES

Figures
No.

Page
No.

Title

1 SAP AT JAI HIND PROJECTS, INDIA

2 JMC Projects India Ltd.
3 JMC Projects India Ltd.
4 ERP Pre Implementation Process Charts

18
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26
30
31

ABSTRACT
1.1 BACKGROUND
ERP is the contraction of Enterprise Resource Planning. ERP utilizes ERP software
applications to improve the performance of organizations' resource planning, management
control and operational control. ERP software is multi-module application software that
integrates activities across functional departments, from product planning, parts purchasing,
inventory control, and product distribution, to order tracking. ERP software may include
application modules for the finance, accounting and human resources aspects of a business.
ERP (Enterprise Resource Planning) is the evolution of Manufacturing Requirements Planning
(MRP) II. From business perspective, ERP has expanded from coordination of manufacturing
processes to the integration of enterprise-wide backend processes. From technological aspect,
ERP has evolved from legacy implementation to more flexible tiered client-server architecture.
1.2 Need for ERP.
As explained earlier ERP is tool for integrating whole information system through ERP
software. Various ERP software vendors are available in market. This softwares consist of
various modules. Each of this module cost around 40 lacs per module. Also company spends
lots of money over hardware as well as over consultant for operation & maintenance of this
module. In some company they use their in house IT experts as well as their employee for
operating this modules. For training of employees also company have to spend lots of money
as well as time. According to survey done by META group in US in year 2002, It states that
average cost for implementing ERP in top fortune listed company was around 15 million
dollars and average time for implementing this system company take on and average 24
months.
So from above facts its clear that company have to invest huge amount of money as well as
time for implementation of ERP and after all if it fails to meet companies requirements and
goal than company can sunk in huge losses. So before implementing ERP in any company its
better to check whether is it feasible for their company or not?

9
1.3 Objective of study

To study the effectiveness of ERP in the feasibility phase for contracting organization.

To identify basic parameters for implementation of ERP in feasibility stage.

To propose a model for implementation of ERP in feasibility stage for contracting

organization who are still to implement ERP.

1.4 Importance of the study

ERP system is an important ingredient of any construction project now-a-days. Implementing
an ERP system is not an inexpensive or risk-free venture. In fact, 65% of executives believe
that ERP systems have at least a moderate chance of hurting their businesses because of the
potential for implementation problems. It is therefore worthwhile to examine the factors that,
to a great extent, determine whether the implementation will be successful. Numerous authors
have identified a variety of factors that can be considered to be critical to the success of an ERP
implementation. The most prominent of these are described below
a) Clear understanding of strategic goals.
b) Commitment by top management.
c) Excellent project management.
d) Organizational change management.
e) A great implementation team.
f) Data accuracy
g) Extensive education and training
h) Focused performance measures.
i) Multisite issues.

10
1.5 Methodology of the study
Literature Review:
As ERP comes in to existence since 1990 so lots of literature is available for past few years in
the area of ERP implementation, so based on that literature reviewed from published paper of
journals and standard books have been done.
Data collection:
Data collection pertaining to subject has been done through discussion with industry experts
from construction organization like:
JMC India Pvt. Ltd.
Jai Hind Project Ltd.
Data analysis:
Based on the collected data, analysis have been done regarding Pre requisites for
implementation of ERP in construction firm through framework.
Conclusion:
Based on the analysis relevant conclusions have been made and scope for the future work have
been suggested.
1.6 Limitation of the study
Although scope of ERP systems are enormous, the study will have following limitations:

Not all of ERP implementations are entirely successful. In fact, about half of ERP
implementations fail to meet expectations.

Most of them suffered from over-budget, over-time, user dissatisfaction, failed to

introduce all planned modules, or the big and horizontal ERP systems pulling back into
beta testing.

So its essential for any company before going for ERP implementation they should do
feasibility study.

Also company should follow the proposed basic pre implementation parameters as well
as process chart described in data analysis.

11
1.7 Scheme of the study.
The study will consist of five chapters
Chapter I will be an introductory chapter. This chapter highlights the importance of
construction sector. It also deals with the importance of the concept of ERP and introduces the
reader to the concept of management/
Chapter II will be an implementation of ERP techniques. It will also provide the system
selection and critical factors for successful ERP implementation. This chapter will analyze the
benefits, cost and payback period of ERP.
Chapter III will be two case studies. The first case study will be about SAP at JAI hind projects
India located at Mumbai. An effort will be made to implement the SAP to align the projected
cost with the actual cost. The second case study will be JMC India pvt ltd. Real time and data
accuracy will be applied in this case study.
Chapter IV deals with data analysis, pre implementation parameters and process charts. It also
deals with various types of functional modules of ERP software and methodologies. This
chapter includes the total cost of ownership and causes of ERP failures.
Chapter V will be summary findings, conclusions and recommendations.

12

CHAPTER-1 INTRODUCTION
1.1 Introduction to ERP
ERP is the contraction of Enterprise Resource Planning. ERP utilizes ERP software
applications to improve the performance of organizations' resource planning,
management control and operational control. ERP software is multi-module application
software that integrates activities across functional departments, from product planning,
parts purchasing, inventory control, and product distribution, to order tracking. ERP
software may include application modules for the finance, accounting and human
resources aspects of a business.
ERP (Enterprise Resource Planning) is the evolution of Manufacturing Requirements Planning
(MRP) II. From business perspective, ERP has expanded from coordination of manufacturing
processes to the integration of enterprise-wide backend processes. From technological aspect,
ERP has evolved from legacy implementation to more flexible tiered client-server architecture.
The following table-1 summarizes the evolution of ERP from 1960s to 1990s

13

Table-1 Evolution of ERP

Timeline

System

Description

1960s

Inventory
Inventory Management and control is the combination of
Management & information technology and business processes of
Control
maintaining the appropriate level of stock in a warehouse.
The activities of inventory management include identifying
inventory requirements, setting targets, providing
replenishment techniques and options, monitoring item
usages, reconciling the inventory balances, and reporting
inventory status.

1970s

Material
Requirement
Planning
(MRP)

Materials Requirement Planning (MRP) utilizes software

applications for scheduling production processes. MRP
generates schedules for the operations and raw material
purchases based on the production requirements of finished
goods, the structure of the production system, the current
inventories levels and the lot sizing procedure for each
operation.

1980s

Manufacturing
Requirements
Planning (MRP
II)

Manufacturing Requirements Planning or MRP utilizes

software applications for coordinating manufacturing
processes, from product planning, parts purchasing,
inventory control to product distribution.

1990s

Enterprise
Enterprise Resource Planning or ERP uses multi-module
Resource
application software for improving the performance of the
Planning (ERP) internal business processes.ERP systems often integrates
business activities across functional departments, from
product planning, parts purchasing, inventory control to
product distribution.

14

1.2 Need for study

As explained earlier ERP is tool for integrating whole information system through ERP
software. Various ERP software vendors are available in market. This softwares consist of
various modules. Each of this module cost around 40 lacs per module. Also company spends
lots of money over hardware as well as over consultant for operation & maintenance of this
modules. In some company they use their in house IT experts as well as their employee for
operating this modules. For training of employees also company have to spend lots of money
as well as time. According to survey done by META group in US in year 2002, It states that
average cost for implementing ERP in top fortune listed company was around 15 million
dollars and average time for implementing this system company take on and average 24
months.
So from above facts its clear that company have to invest huge amount of money as well as
time for implementation of ERP and after all if it fails to meet companies requirements and
goal than company can sunk in huge losses. So before implementing ERP in any company its
better to check whether is it feasible for their company or not?

1.3 Objective

To study the effectiveness of ERP in the feasibility phase for contracting organization.

To identify basic parameters for implementation of ERP in feasibility stage.

To propose a model for implementation of ERP in feasibility stage for contracting

organization who are still to implement ERP.

15

1.4 Methodology
1.4.1 Literature Review:
As ERP comes in to existence since 1990 so lots of literature is available for past few years
in the area of ERP implementation, so based on that literature reviewed from published
paper of journals and standard books have been done.

1.4.2 Data collection:

Data collection pertaining to subject has been done through discussion with industry
experts from construction organization like:
JMC India Pvt. Ltd.
Jai Hind Project Ltd.

1.4.3 Data analysis:

Based on the collected data, analysis have been done regarding Pre requisites for
implementation of ERP in construction firm through framework.

1.4.4 Conclusion:
Based on the analysis relevant conclusions have been made and scope for the future work
have been suggested.

1.4.5 Scope of work:

In this seminar scope of work will be limited up to obtaining basic knowledge regarding
ERP and to identify prerequisites for implementing ERP in any construction organization.

16

CHAPTER-2 LITERATURE REVIEW

2.1 Critical factors for successful ERP implementation
Implementing an ERP system is not an inexpensive or risk-free venture. In fact, 65% of
executives believe that ERP systems have at least a moderate chance of hurting their businesses
because of the potential for implementation problems. It is therefore worthwhile to examine
the factors that, to a great extent, determine whether the implementation will be successful.
Numerous authors have identified a variety of factors that can be considered to be critical to
the success of an ERP implementation. The most prominent of these are described below
[1][4][5][9].
j) Clear understanding of strategic goals.
k) Commitment by top management.
l) Excellent project management.
m) Organizational change management.
n) A great implementation team.
o) Data accuracy
p) Extensive education and training
q) Focused performance measures.
r) Multisite issues.

17

2.2 ERP system selection:

An estimated 5075% of US firms experience some degree of failure in implementing
advanced manufacturing technology. Since an ERP system, by its very nature, will impose its
own logic on a companys strategy, organization, and culture, it is imperative that the ERP
selection decision be conducted with great care. Based on the available sources and our own
experiences, the authors recommend the following thirteen-step selection process [1].
1)

Create the vision.

2)

Create a feature/function list.

3)

Create a software candidate list.

4)

Narrow the eld to four to six serious candidates.

5)

Create the request for proposal (RFP).

6)

Review the proposals.

7)

Select two or three nalists.

8)

Have the nalists demonstrate their packages.

9)

Select the winner.

10) Justify the investment.

11) Negotiate the contract.
12) Run a pre-implementation pilot.
13) Validate the justication.

18

2.3 ERP implementation strategies:

Based on success of implementing SAP at the Water Corporation, Australia, Purnendu Mandal,
A. Gunasekaran has suggested following strategies to be considered while implementing
similar type of projects. [2][8]

2.3.1 Pre-Implementation (planning) strategies:

Incorporate the risk and quality management plans in the change management plan.

Breakdown the project into natural phases or subsystems for modular planning and for
development of cross-functional communications.

Consider a phase-based approach for gradual implementation rather than radical approach.

Use appropriate planning styles for different tasks, detailed task plans for tangible tasks,
iterative plans for evolving tasks, and personal communications plans for change
management.

Prepare plans for the recruitment, selection, and training of the necessary personnel for the
project team.

2.3.2 Implementation strategies:

Formulate a network for collecting user requirements and user feedback..
Prepare to handle expected or unexpected crises and deviations from plans.
Provide a strong leadership with concerns for the welfare of people and resource commitment.
Provide a professionally stimulating work environment.
Promote client consultation and user participation and obtain approval from parties for what
is being undertaken throughout the project.
Use pro-active communications to establish more realistic expectations about the technology
Capabilities while communicating in tailored way to each division or unit.
Promote collaborative system development between users and developers.
Use multi-functional project teams to bring complementary capabilities together during the
total life of the project.
Use intra-project teams and intra- and inter industry networking for technology transfer.
Provide stakeholders with a detailed plan of the implementation process, explain how it
achieves business objectives, and keep them informed about the system and progress of its
implementation.

19
Propose possible ways for restructuring personnel and systems to accommodate the new
technology including maximizing of system integration and interfacing.

2.3.3 Post-implementation strategies:

Post project evaluation strategy could be followed in measuring the effectiveness of an ERP
system, where questions such as listed below could be used for further improvement:
Whether the objectives of the ERP system were realized fully;
Whether the scheme options were considered adequately;
Whether the estimates and project information were accurate;
Whether or not the agreed practices and techniques were complied with any other factors
which are considered appropriate.

2.4 Cost & Payback Period of ERP implementation:

Meta Group recently did a study looking at the Total Cost of Ownership (TCO) of ERP,
including hardware, software, professional services, and internal staff costs. The TCO numbers
include getting the software installed and the two years afterward, which is when the real costs
of maintaining, upgrading and optimizing the system for your business are felt. Among the 63
companies surveyedincluding small, medium and large companies in a range of industries
the average TCO was $15 million (the highest was $300 million and lowest was $400,000).
While its hard to draw a solid number from that kind of a range of companies and ERP efforts,
Meta came up with one statistic that proves that ERP is expensive no matter what kind of
company is using it. The TCO for a heads-down user over that period was a staggering
$53,320.
Dont expect to revolutionize your business with ERP. It is a navel gazing exercise that focuses
on optimizing the way things are done internally rather than with customers, suppliers or
partners. Yet the navel gazing has a pretty good payback if youre willing to wait for ita
Meta group study of 63 companies found that it took eight months after the new system was in
(31 months total) to see any benefits. But the median annual savings from the new ERP system
was $1.6 million per year.
Source: Darwin Publications.

20

2.5 Benefits of ERP implementation:

Deloitte Consulting (1998), and discussed in OLeary (2000), that investigated the rationales
and benefits for why firms choose to implement ERP. That study broke benefits into two broad
categories: Tangible Benefits (Table 1) and Intangible Benefits (Table 2). Deloitte Consultants
(1998) study was based on interviews with 62 client firms of the Fortune 500. As part of a
large-scale project, client firms were asked which tangible and intangible benefits had been
realized. The results in Tables 1 and 2 present the percentage of the firms that indicated which
benefits would be realized, allowing for multiple responses for each firm. [3] [6]
On-Time Delivery

Table_2: Tangible Benefits Realized

Inventory Reduction

32

Table_3:

Personnel Reduction

27

Realized

Productivity Improvements

26

Order Management Improvements

20

Information/Visibility

55

Financial Close Cycle Reduction

19

New Improved Processes

24

IT Cost Reduction

14

Customer Responsiveness

22

Procurement Cost Reduction

12

Cost Reduction

14

Cash Management Improvement

11

Integration

13

Revenue/Profit Increases

11

Standardization

12

Intangible

Benefits

Transportation/Logistics Cost Reductions 9

Flexibility

Maintenance Reductions

Globalization

2.6 Research Gap

As per the literature survey done for past 10 years, the research done by eminent researchers
have been limited to identification of various factors responsible for success and failure of ERP
system for manufacturing industries. But very nominal work has been done to study
prerequisites for implementation of ERP in construction industry.

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CHAPTER-3 DATA COLLECTION

Data collection regarding Prerequisites for implementing EPR in any organization has been
collected through questionnaire survey with experts of two organizations like JMC India Pvt.
Ltd. and Jai Hind Projects Limited. In case of JMC questionnaire was conducted with Mr.
Mahendra Patel, Head of IT Dept. While in case of Jay Hind Projects questionnaire was
conducted with Mr. Keyur Shah, Sr Manager, SAP.

3.1 SAP AT JAI HIND PROJECTS, INDIA

Jaihind Projects Ltd. is an engineering, procurement & construction (EPC) company focused
on the hydrocarbons, water & infrastructure sectors. It provides EPC services ranging from:

Oil & Gas

Marshy Pipelines
Tankage & Terminal
Horizontal Drilling
Boring
Onshore Fabrication

Process
Reifneries

Civil Infrastructure
Water Supply & Sewagwe
Turnkey
Rail
Thermal Power Plants

Jaihind owns one of the largest task force of Pipeline equipment in south Asia. Jaihind is
continuously investing in equipment to expand it project capabilities and increase the number
of spreads & projects it can simultaneously work on. Jaihind Projects Limited is a Public Listed
Company with its shares listed on the Bombay (Mumbai) Stock Exchange (BSE). As of March
31, 2008, it employs just under a 1,000 full time and contractual employees and its annual
turnover is around 225 crores. Its head office is located in Ahmedabad (Gujarat), India.

22

3.1.1 What Was The Problem?

Jai Hind group has several projects running at various locations throughout the country also
they are planning for international market. Each project had its own database and information
system, which was not connected to head office.
One of the biggest challenges for a construction company like the Jai Hind is in estimating cost
of construction. Since the projects are usually spread over many years, aligning the projected
cost with the actual cost becomes difficult. At any given time there would be at least 20-25
construction projects running concurrently. The departments were maintaining different files
in different excel charts. The accounts department was maintaining a separate software package
but materials and purchase was not linked to those. Moreover much of this data was lying in
site offices, which was not connected to the head office in Ahmedabad.
The entire process of collecting information from various departments was being done
manually. Whenever there was a quarry, each department would have to pull out information
and consolidate it for report. This not only slowed down the decision making process but also
created power centers within the company. This made it very difficult to do real time cost
estimation of different projects.

3.1.2 Solution & Implementation

To solve the above problem company decided to go for ERP implementation based on success
of various organization successes. For that company first of all go for ERP need analysis review
and found that Real time data and Data Transparency, this are the two main benefits for
implementing ERP. Real time data means accurate & present data regarding any item can be
obtained at any time about any of their construction site. The main value ERP systems provide
is the opportunity to integrate an entire organization through common data base and the
information flow is much more efficient & clear.

3.1.3 Pre-requisites study for ERP Implementation:

3.1.3.1 Risk Identification
Before implementing ERP company first of all focused on three main parameters which are
people, Process changes and Technology.

23
3.1.3.1.1 People:
As employee are the ultimate users of new system and if they do not agreed upon the new
system then whole investment can ruin the business,
So company first gave them training in three various stages of implementation.
During first Stage Company make aware their employee what is ERP and basics of
ERP.
During second stage employee were given On Hand Training, in this employees
were given demonstration about various modules according their departments and
then assignments were given to solve.
During third stage employee were given On job Training, In this stage now
employee were asked to phase real time situation and they use software on site and if
they want help then consultant are there to help them.
3.1.3.1.2 Process & Technology Change:
Due to implementation of new technology there is always resistance to new system as
employee required to learn new things also it makes employee uncomfortable. Also there
is myth about ERP that it will reduce man power requirement and employee will lose their
jobs. Due to implementation of ERP role of the many employee may be changed and
organization structure will change. So for that company ensures their employee that there
wont be any lay off due to new system.

3.1.3.2 Selection of Implementation Consultant:

When asked about selection criteria about consultant they say, there are no special selection
criteria for consultant but based on their experience and their market value organization
should select consultant. Also organization should contact the companies who have dealt
with those consultants and based on their experience, consultant should be selected. Jai
Hind had approached many consultant like IBM, ORACLE, WIPRO etc. for vendor
selection as well as operation & maintenance of various modules and all were asked for
their presentation, in the end management decided to go with WIPRO.
Because WIPRO was the most economical while other two were charging ten times higher
due to their market position, so company hired WIPRO as consultant on contract basis.
Company can hire consultant as per requirement. Generally consultants are available on
call basis as well as contract basis. Per call consultant generally charges around

24

10000- 15000 per call while on contract basis they charge around 1-1.5 lacs per month per
module.

3.1.3.3 Vendor selection Criteria:

When asked how vendor selection process takes place they say,
At the time of ERP vendor & software selection, first of all company should discuss the
functionalities of organization with consultant as well as implementation strategies and
based on consultant view about particular player vendor selection is done.
For example,
For Real estate developer no of modules requirement will be less as compared to
contracting or infrastructure firm. Because in real estate firm organization perform similar
kind of work for their various projects also they give work on contracts so except
supervision and billing most of all activities are performed by contractor. While contracting
firm remains involved in all material purchase to construction activities so they definitely
require more no & types of modules.
Also based on degree of customization provided by any vendor with their software,
selection is done.
For Example:
If all IS of organization are working smoothly and company does good business with that
system than these systems can also integrated with new ERP system.
Various ERP vendors are available in market at domestic as well as international level.
Based on company budget and requirement vendor should be selected.
Domestic ERP vendors: In-house Software etc.
International: SAP, People Soft, JD Edwards, Oracle.
These are the major players in the ERP market.
In this case, main requirement was to integrate various departments like Operations,
Accounting and Finance, Asset Management (equipment), Procurement and HR. So we had
decided to go for phase wise implementation. So after discussion with consultant various
vendors like SAP, People Soft, JD Edwards, and Oracle were contacted and asked for their
presentation of their software.

25

In the end management decided to go with SAP,

i.

Because of its acceptability and popularity in market.

ii.

Due to its functionality & flexibility, SAP allows integration of PRIMAVERA with
new system also its functions provides huge amount data and reduces processing time.

3.1.3.4 Total Cost of Ownership:

When asked about cost & time required for ERP implementation they say,
Most common factors contributing to TCO are
i.

Software licensing fee,

ii.

No of end users,

iii.

Software customization,

iv.

Cost of hardware,

v.

Consultant fees,

vi.

Employee training.

ERP cost can vary from few lacs to crores, it totally depends upon organization need (no
of modules) and end users.
And about time for implementation of ERP, there is no fix time duration that ensures that
within this ERP will be implemented in organization but from experience it has been seen
that approximately time for implementation takes around 2-2.5 years for full ERP
implementation. For implementing SAP at Jay Hind Projects we had started our planning
in 2002 and by the end of year 2004 we were ready for testing for new system and it cost
goes in to crores, approximately 7-8 crores.

3.1.4 Current Information System:

Today Jai-hind has the best of breed Management Information Systems for its Operations,
Accounting and Finance, Asset Management, Procurement and HR. For its core operations and
accounts such as FICO, Materials Management, Sales & Distribution, Tendering, Accounts,
Document Management Systems, Jaihind runs SAP. It uses other segment specific software
and systems for Human Resources, Procurement Portal, Employee Self Service, etc. and doing
wonders!

26

3.1.5 Benefits:
(1)

The first and most important benefit of this solution is that information has now become
transparent and seamless.

(2)

With a smooth information flow, decision making has also become much quicker.

(3)

All departments and site offices are now connected on a single platform.

(4)

The management team gets a complete overview of the projects and instant availability
of data and reports.

(5)

Information flows freely between departments.

(6)

Tremendous improvements have been made in fund management.

(7)

Also process like purchasing materials have been automated and have seen immense
benefit from the solution.

3.2 JMC Projects India Ltd.

3.2.1 Company History:
JMC Projects(India) limited(JMC) was incorporated on 5th June,1986 as Civen Construction
Private Limited, subsequently the name was changed to Joshi & Modi Construction Private
Limited on 10th December ,1989 and to JMC Projects (India)Private Limited on 21st January,
1994, thereafter converted into Public Private Limited on 4th February, 1994 under the name
JMC Projects (India) Ltd.
The company was popularly known as JMCPL among the corporate clients. In order to
capitalize on the same, the company changed its name to JMC Projects (India) Ltd. The
company entered the field of Industrial construction with the prime motive of servicing reputed
clients with very high quality of construction work. The company has achieved substantial
growth during the last 3 years and is one of the leading construction companies in Gujarat. It
has registered as class `A ' Contractors with Government of Gujarat. The list of prestigious
clients includes Tata telecom Ltd, Videocon International Ltd, Videocon Narmada Electronics
Ltd. The
company tends to enter real estate business as part of its diversification programme.

27

3.2.2 Problem & Solution

Main problem for company was also same as Jay Hind Projects Ltd., to integrate information
(database) of all various sites running throughout the India. The departments were maintaining
different files in different excel charts. The accounts department was maintaining a separate
software package but materials and purchase was not linked to those. Moreover much of this
data was lying in site offices, which was not connected to the head office in Ahmedabad. The
entire process of collecting information from various departments was being done manually.
Whenever there was a quarry, each department would have to pull out information and
consolidate it for report. This not only slowed down the decision making process but also
created power centers within the company. This made it very difficult to do real time cost
estimation of different projects. Thus need arises for integration of various functional
departments by one common platform.

28
To solve the above problem company decided to go for ERP implementation based on success
of various organization successes. For that company first of all go for ERP need analysis review
and found that Real time data and Data Transparency, this are the two main benefits for
implementing ERP. Real time data means accurate & present data regarding any item can be
obtained at any time about any of their construction site. The main value ERP systems provide
is the opportunity to integrate an entire organization through common data base and the
information flow is much more efficient & clear.

3.2.3 Current Information System

Based on organization need as well as risk identification & cost of ERP implementation;
management decided to develop their own in-house software for ERP implementation.
Approximately time for implementation for ERP was around two years and cost for
implementing ERP is approximately 70 lakhs.
The cost for implementing in this case was far less then Jay Hind Projects Ltd.
Main reason for this is due to reasons described below.

29

NoNeedfor
Vendor
Selection

NoNeedfor
Vendor
Selection
Consultant

Reasons
for less
cost

NoNeedFor
Implementation
consultatn

NoNeedFor
Customization

JMC has developed the best Management Information Systems modules for its Operations,
Accounting and Finance, Asset Management, Procurement and HR also for its core operations
and accounts such as FICO, Materials Management, Sales & Distribution, Tendering,
Accounts, Document Management Systems, JMC decided to run in-house software. By end of
July 09 Company targeted to implement ERP at their all over sites in India. It uses other
segment specific software and systems for Human Resources, Procurement Portal, Employee
Self Service, etc. and doing wonders!

30

CHAPTER-4 DATA ANALYSIS

4.1 ERP Pre Implementation Parameters
For successful implementation of ERP first do need analysis review, then based on requirement
select appropriate consultant based on their experience, then follow the selection criteria for
vendor selection and based critical success factor try to implement those factor and based on
critical failure factor try eliminate those factors also find out total cost of owner ship so it
becomes clear for organization that how much they will have to spend. Based on this criterion
ERP implementation should be done to reach organization goal through ERP.Bellow is the
model provided to make one understand how various people are associated at various stages
and how they perform their role in to organization and which are the parameters they consider
at pre implementation stage.

STAGE

31

ISSUE

PARICIPANTS

Implementation
teams.

ERP NEED
ANALYSIS

PARAMETERS
Determine

Organization and

How new system can increase

organization value?

methods specialist.

What are the benefits of ERP?

Head of each

What are the needs for implementing

department.

ERP instead of existing information

IT division.

system?

What are the risks associated with ERP

implementation?

IMPLEMENTATION

What is the total cost of ownership?

Which are the critical success factors?

Top management

Head of each

Major consultant in the market.

department.

Select based on Experience and

CONSULTANT

Determine

Performance.

Also determine the organization where

they have served.

VENDOR
SELECTION

Top management.

Consultants.

Major players in the market.

Method specialist.

What are the specialties in them?

Head of particular

How flexible & user friendly software

Determine

department.

is?

Degree of integration of other IS.

Total cost of license and end users.

Select based on functionality and

Performance.

STAGE

32

ISSUE

VENDOR
SELECTION

PARTICIPANTS

Top management.

Consultants.

Method specialist.

Head of particular

PARAMETERS

Also determine the organization where

they have served.

department.

TRAINING IN

PROCESS

RE-ENGINEERING

Implementation

System overview- whats ERP?

Consultant.

Demonstration of versions and

Implementation
Team.

IT division.

handbooks

Training to implementation team

leaders.

33

4.2 ERP Pre Implementation Process Charts

Based on identified parameters here is the proposed ERP (Pre) Implementation Process Chart
for any organization who wants to implement ERP.
Assemble Project
Teams & End
Assemble
Users

Analysis
Software
Life Cycle Cost

Determine
Organization Needs
& Budget

ERP
Implementation
Risk

NO
Is ERP
Feasibl
?

STOP

YES

ERP Software

Softwa

In-house

Vendor

re

Software

Design
Software

34

Draft Criteria
Criteria For
for
Draft
Software Selection
Consultant

Hire
Software Selection
Consultant

Consultant
Advice
Vendors

Vendors

Performance

Market Value

Organization

Customization

Budget

Need

Vendor
Selected
Implementation

Management

Consultant

Decision
Implementation
Methodology

B
Customization

Testing

End User
Training

Going Live-ERP Implementation

35

4.3 Various Types of Functional Modules of ERP Software:

ERP software is made up of many software modules. Each ERP software module covers a
major functional area of an organization. Common ERP modules include modules for product
planning, parts and material purchasing, inventory control, product distribution, order tracking,
finance, accounting, marketing, and HR. Organizations often selectively implement the ERP
modules that are both economically and technically feasible.

4.3.1 ERP Production Planning Module

In the process of evolution of manufacturing requirements planning (MRP) II into ERP, while
vendors have developed more robust software for production planning, consulting firms have
accumulated vast knowledge of implementing production planning module. Production
planning optimizes the utilization of manufacturing capacity, parts, components and material
resources using historical production data and sales forecasting.

4.3.2 ERP Purchasing Module

Purchase modules streamline procurement of required raw materials. It automates the processes
of identifying potential suppliers, negotiating price, awarding purchase order to the supplier,
and billing processes. Purchase module is tightly integrated with the inventory control and
production planning modules. Purchasing module is often integrated with supply chain
management software.

4.3.3 ERP Market in Module

ERP marketing module supports lead generation, direct mailing campaign and more.

4.3.4 ERP Inventory Control Module

Inventory module facilitates processes of maintaining the appropriate level of stock in a
warehouse. The activities of inventory control involves in identifying inventory requirements,
setting targets, providing replenishment techniques and options, monitoring item usages,
reconciling the inventory balances, and reporting inventory status. Integration of inventory
control module with sales, purchase, finance modules allows ERP systems to generate vigilant
executive level reports.

36

4.3.5 ERP Sales Module

Revenues from sales are live blood for commercial organizations. Sales module implements
functions of order placement, order scheduling, shipping and invoicing. Sales module is closely
integrated with organizations' ecommerce websites. Many ERP vendors offer online storefront
as part of the sales module.

4.3.6 ERP Financial Module

Both for-profit organizations and non-profit organizations benefit from the implementation of
ERP financial module. The financial module is the core of many ERP software systems. It can
gather financial data from various functional departments, and generates valuable financial
reports such balance sheet, general ledger, trail balance, and quarterly financial statements.

4.3.7 ERP HR Module

HR (Human Resources) is another widely implemented ERP module. HR module streamlines
the management of human resources and human capitals. HR modules routinely maintain a
complete employee database including contact information, salary details, attendance,
performance evaluation and promotion of all employees.

37

4.4 ERP implementation Methodologies:

Different companies may install the same ERP software in totally different processes. The
same company may implement different ERP software in the same approach. There are three
commonly used methodologies for implementing ERP systems.

4.4.1 The Big Bang

In this Companies layout a grand plan for their ERP implementation. The installation of ERP
systems of all modules happens across the entire organization at once. The big bang approach
promised to reduce the integration cost in the condition of thorough and careful execution.
This method dominated early ERP implementations, it partially contributed the higher rate
of failure in ERP implementation. Today, not many companies dare to attempt it anymore.
The premise of this implementation method is treating ERP implementation as the
implementation of a large-scale information system, which typically follows SDLC (Systems
Development Life Cycle). But an ERP system is much more than a traditional information
system in the fact that the implementation of ERP continuously calls for the realignment of
business processes. Many parties involved in ERP software systems are not IT professionals.
ERP more than automates existing business processes. ERP transforms the business
processes.

4.4.2 Modular Implementation

The method of modular implementation goes after one ERP module at a time. This limits the
scope of implementation usually to one functional department. This approach suits
companies that do not share many common processes across departments or business units.
Independent modules of ERP systems are installed in each unit, while integration of ERP
modules is taken place at the later stage of the project. This has been the most commonly
used methodology of ERP implementation. Each business unit may have their own
"instances" of ERP and databases. Modular implementation reduces the risk of installation,
customization and operation of ERP systems by reducing the scope of the implementation.
The successful implementation of one module can benefit the overall success of an ERP
project.

38

4.4.3 Process-Oriented Implementation

The process-oriented implementation focuses on the support of one or a few critical business
processes which involves a few business units. The initial customization of the ERP system
is limited to functionality closely related to the intended business processes. The processoriented implementation may eventually grow into a full-blown implementation of the ERP
system. This approach is utilized by many small to mid-sized companies which tend to have
less complex internal business processes.

4.5 ERP Software Selection Criteria:

Certain packages are regarded as having an exceptional functionality in some of their modules,
for example in the case with PeopleSofts Human Resources module. Other vendors are
regarded as specializing in certain industries, supporting industry-specific best practices, as for
example SAP in Chemicals and Pharmaceuticals, Oracle in Energy and Telecommunications
and Baan in Aerospace and Defense industries (Aberdeen Group, 1997).
Criteria for evaluating ERP software:
1) Should be compatible with the Companys business processes.
2) Should have enough degree of integration with the various components of the organizations
existing system.
Example: It should be able provide integration with software like MSP, Primavera, Tally
etc.
3) It should be flexible.
Means according to organization needs it should be modified.
4) It should not be Complex means it should be user friendly.
5) Quick implementation; shortened ROI period,
6) Ability to support multi-site planning and control,
7) Technology; client/server capabilities, database independence, and security,
8) Availability of regular upgrade, means it should be able to customize as company expand
their operation and business function.
9) Amount of customization required.

39

4.6 Total Cost of Ownership:

The total cost of ERP ownership includes the costs of packaged software, hardware,
professional services (for ongoing maintenance, upgrades and optimization) and internal costs.
Based on the ERP survey conducted by Meta Group in 2002, the average cost of ERP
ownership was $15 million ranging from half millions to $300 million. The average cost per
user per year could be as high as $20,000.

4.6.1 Costs of Software

The cost of packaged ERP software depends on the scope of implementation (the license of
ERP modules and the number of end users), complexity of software and ERP vendors. ERP
software that involves the integration with external business entities generally costs more. ERP
vendors offer discount for organizations who invest in a suite of ERP software systems. Midsized organizations typically commit a few million dollars to packaged ERP software.

4.6.2 Costs of Hardware

Implementation of ERP systems routinely requires purchase of new computer hardware,
systems software, network equipment and security software. The costs of hardware vary in a
wide range dependent on the scope of implementation and platforms. The hardware typically
costs about half million dollars for mid-sized organizations that implements ERP systems.

4.6.3 Costs of Professional Services

Customization The big chunk of costs of Professional Services is customization. The cost of
customization can easily out-run the cost of packaged ERP software, but it is the customization
of ERP software that makes an ERP a success or a failure.
Integration ERP systems won't demonstrate its full potentials unless they are properly
integrated with other enterprise software application:
1. The integration of various functional ERP modules,
2. The integration of ERP with other e-business software applications, and
3. The integration of ERP with legacy systems.

40
Data Conversion The cost of data conversion depends on the format and the media that store
the historical data. Data conversion from legacy systems to RDBMS is a time-consuming
process. Data conversion may lead to further data gathering to fill the missing links in data
requirements.
Testing ERP systems are thoroughly tested before they go into production. ERP testing
includes unit testing, component testing, regression testing, performance testing and user
acceptance testing.
Training ERP training is expensive because workers almost invariably have to learn a new set
of processes of doing their daily tasks besides learning how to use the ERP software. To reduce
the cost of ERP training and to ease the transitions from old processes to new, organizations
often seek the help from training companies which are specialized in coaching workers on
using ERP software from particular vendors.

41

4.7 Causes of ERP Failure:

In ERP Definition - A Systems Perspective, we have identified the four components of an
ERP System:
1. ERP software,
2. Business Processes that ERP software supports,
3. Users of ERP systems, and
4. Hardware and Operating Systems that run ERP applications.
The failures in one or more of those four components could cause the failure of an ERP project.
The failures in hardware are easier to identify and to fix, we'll examine the failures in software
implementation, business process and user acceptance.

4.7.1 Failure of ERP Software Implementation

Module-based ERP software is the core of ERP systems. Most ERP projects involve
significant amount of customizations. Packaged ERP software modules have built-in
functionality that work in a standard and simplified enterprise environment. However, every
organization is unique in data requirements and business processes. It is the customizations
that transform packaged ERP software into ERP software that meets organizations' individual
business processes and operations. Long and expensive customization efforts often result the
pass of release deadline and budget overrun. Customizations make the software more fragile
and harder to maintain when it finally goes to production. Major changes may be required in
the later stage of the implementation as a result of incomplete requirements and power
struggles within organizations

4.7.2 Failure of Accommodating Evolution of Business Processes

Business processes fall into three levels - strategic planning, management control and
operational control. Organizations continuously realign their business processes of all levels
in response to the ever-changing market environment. Many ERP systems aren't flexible
enough to accommodate evolution of business processes.

42

4.7.3 Failure of User Acceptance

The users of ERP systems are employees of the organizations at all levels. ERP projects
usually modify the company's business processes which create extra workload for employees
who use them initially. They may not think that the workflows embedded in the software are
better than the ones they currently use. Ongoing end-user involvement and training may ease
the difficult in organization's adaptation of new systems and new processes.

4.8 Most Common Ways of Successfully implementation of ERP:

The seven most uncommonly common reasons have been identified which would ensure that
the project does not miss its budget, timeline and performance improvement goals.

4.8.1 Critical stakeholders to accept or get involved with the implementation.

ERP implementations are pervasive. They impact most departments and impose changes on
the way people handle their day-to-day functions. If middle managers sense a lack of senior
management support, they may introduce roadblocks that will adversely affect a projects
performance. Many senior executives regard ERP implementations as simple, costly,
technology upgrades. It is imperative they understand the end result will be a significant
change to the way the organization looks and operates. By the very nature of ERP systems,
departments are forced to share information that they considered proprietary in the past.
Stakeholders must insist that silos, constructed over the years for hoarding information, be
dismantled. Senior managers must facilitate negotiations among the various parties when
disputes or disagreements erupt. They must keep their focus on the overall objectives and
contribute sufficient time to the endeavor while avoiding being bogged down with the
projects finer details.

4.8.2. Adequate user input.

Lack of user input will likely contribute to a bad ERP implementation. Introduce the project
to those who will be affected by the outcome. Include not only the users, but also the business
partners and other internal departments whose cooperation will be needed. Even though this
may slow things down, the project management team must identify all the key resources
needed to implement and support the ERP project. As mentioned above, information must not
be hoarded. Convince middle managers to be forthcoming about the way their departments

43
run and alleviate their fears that the new software will reduce their influence. Senior managers
must reinforce the project's benefits and stress the importance of sharing
information. They must make sure three broad groups contribute before the project gathers
steam: those who will be affected by it, those who will implement it, and those who will pay
for it.

4.8.3. Specifications and change control procedures to be properly defined.

Poorly defined specifications and a lack of change control procedures are prime causes of ERP
project failure. Requirements must be well defined up front to obtain the required consensus
among the stakeholders. One of the keys is to secure input from the stakeholders through a
series of planning meetings to define in clear terms what the project can, and cannot do. Senior
management must ensure project scope changes are managed in a formal manner. This
includes, but is not limited to, delays in the schedule or requests for additional money.

4.8.4. Expectations to be realistic and defined.

Estimating ERP project schedules and resource requirements has always been a hit-and-miss
affair. Stakeholders, less knowledgeable about what the technology can really do, create their
own expectations even fantasies. If expectations are not set, scope creep is inevitable. An
initially straightforward project can evolve into an unmanageable one, violating schedules and
consuming resources.
A formal project charter must be established to set expectations. Project management must
ensure that formal budgeting and risk assessment happen while senior management makes
sure the culture is in place for a strong project management discipline. Projects fail, not
because the tasks are insurmountable, but because they're engendered by an effort to transform
the company. Information Technology is used as the catalyst for that change and makes a very
convenient scapegoat if things turn ugly. When a project falls short, it may look like IT
failedbut it's almost always because the organizational change was unsuccessful.

44

4.8.5. The presence of an outside consultant.

At times the employees feel that they are the best in house consultants to decide what processes
to follow and what not to follow. This can become a death trap for the organization. The
organization should do introspection and decide whether they have enough resources to
implement the ERP or they need to take an external help. And when working on the
consultants contract, it's important to negotiate toward a reasonable, achievable agreement.
These aren't adversaries; these are partners.

4.8.6. Good Communication.

The everyday communication problem is worse when IT is involved, simply because it's hard
for a lay person to grasp the lingo. Use non-technical terminology whenever possible,
especially when communicating outside the project team. The project manager must be
forthcoming with any news good or bad. Line workers don't want to be the bearers of bad
news, and senior managers contrive to not hear bad news if its ever delivered. As a result,
nobody sounds the alarm on IT projects that have "disaster" written all over them until it's too
late. Ensure that senior executives are available when theyre needed and that they stay in
constant touch with the project management.

4.8.7 The implementation methodology should be clear and tested.

But perhaps the biggest and deadliest mistake organizations make when implementing
ERP is relying on an unrefined, and even untested, methodology. Too often, the key players
in ERP implementations VPs, CIOs, CFOs, controllers, and the like assume that they can
get by on their own. They dive into the project only to discover that implementing ERP is
more complex than any garden variety project-management style or approach can handle. An
alternative scenario, which will become more common as smaller companies begin using
ERP, is that the personnel in charge of the implementation mistakenly believe that because
their organizations are small, their implementations wont be complex and, therefore, dont
require as much fuss as a big business implementation would demand. Both of these beliefs
are false and could lead to the downfall of your project. ERP implementations are complex,
regardless of the company size.

45

CHAPTER-5 CONCLUSION
Not all of ERP implementations are entirely successful. In fact, about half of ERP
implementations fail to meet expectations. Most of them suffered from over-budget, over-time,
user dissatisfaction, failed to introduce all planned modules, or the big and horizontal ERP
systems pulling back into beta testing. So its essential for any company before going for ERP
implementation they should do feasibility study. Also company should follow the proposed
basic pre implementation parameters as well as process chart described in data analysis.

46

References:
Research Papers:
1) Elisabeth J. Umble a, Ronald R. Haft b, M. Michael Umble (2003) Enterprise resource
planning: Implementation procedures and critical success factors
European Journal of Operational Research Vol 146, pp.241257
2) Purnendu Mandal, A. Gunasekaran (2003) Issues in implementing ERP: A case study,
European Journal of Operational Research 146, pp.274283
3) OLeary, Daniel E. (2004), Enterprise Resource Planning (ERP) Systems: An Empirical
Analysis of Benefits, Journal of Emerging Technologies in Accounting, Vol. 1, pp. 6372
4) S.M. Jafari, M.R. Osman, R.M. Yusuff and S.H. Tang (2006), ERP systems implementation
in Malasiya: The importance of Critical success factor.
International Journal of Engineering and Technology, Vol. 3, No.1, 2006, pp. 125-131
5) H Akkermans, and K van Helden (2002), Vicious and virtuous cycles in ERP
implementation: a case study of interrelations between critical success factors
European Journal of Information Systems.
6) Ashim Raj Singla (2002), Impact of ERP systems on small and midsized public sector
enterprises. Journal of Theoretical and Applied Information Technology
7) Young B. Moon (2007), Enterprise Resource Planning (ERP): a review of the literature,
Int. J. Management and Enterprise Development, Vol. 4, No. 3
8) Rebstock, M., Selig, J. (2000). "Development and Implementation Strategies for
International ERP Software Projects", ECIS, Vol. 2, Vienna, pp-932-936.
9) Nah, F. F-H., Lau, J., L-S., Kuang, J, (2001): Critical factors for successful implementation
of enterprise systems, Business Process Management Journal, vol 7, no 3, pp 285-296.

Books:
1) Alexix Leon, ERP DEMYSTIFIED, Second Edition,
Tata McGraw-Hill, New Delhi
2) Jagan Nathan Vaman, ERP in Practice-ERP Strategies for Steering Organizational
Competence and Competitive advantage. Tata McGraw-Hill, New Delhi

47

APPENDICES
1. Whats the reason for implementing ERP?
2. Which are the major tasks that are required to take care before going live?
3. Which are the probable risks associated with ERP implementation?
4. Which are the strategies required/formed before implementation?
5. What are the criteria for ERP vendor and software selection?
6. Who are the major ERP vendors in market?
7. Which are the various ERP modules used in construction industry?
8. Which existing information systems can be integrated with ERP?
9. How the functions of new ERP system can be handled?
10. What are the selection criteria for consultant?
11. What are the responsibilities of consultant?
12. Who is the consultant for your company?
13. Whats the approximately time required for implementing ERP?
14. Which are the main components contributes to Total cost of ownership?