ERP Implementation Effor Estimation

Estimating

Enterprise Resource Planning

SEPG 2006

David SeaverPRICE Systems LLC

Technical DirectorInformation Technology Estimation Solutions

2© PRICE Systems LLC, 2005-2006, All Rights Reserved

Overview

1. Background Information and Definitions

2. The real Cost of ERP Deployment

3. Using True Planning to estimate ERP Costs


Process Overview

Step 1: Document purpose of the estimate

Step 2: Develop size estimate

Step 3: Document pertinent project parameters

Step 4: Develop estimate effort and schedule

Step 5: Review estimate with Stakeholders


Review of a Software Estimate - 1

What is the estimated size of the software? What metric was used and what analogies exist to support this number?

Is there reuse in this project and How were the reuse percentages derived ? Is the percent of design adapted >= percent of code and test adapted?

If not, is there a rationale for this?

Where will the software be operating Manned SpaceSpace AirborneGround What domain Commercial, Civilian Agency, DoD?



What is the functional complexity of the software? How was this value derived? What analogies exist to support this number?

What activities and resources are included in this estimate?

If any were eliminated what was the rationale?Do any need to be added, if so what is the rationale?

Were activity or resource requirement multipliers used for this estimate?

If yes, what was the rationale?

What labor rates were used for the estimate?


Review of a Software Estimate - 3What value for Organizational Productivity was used?

How was it derived? How does it compare to the organizations historical data?How was historical data collected, normalized and used for this estimate?

Is it within the ranges expected from prior efforts? If not is there a reasonable explanation?

Are there truly project constraints and will these constraints push the state of the art beyond typical capability of hardware and software?

Are there schedule constraints?If so, what is the impact to cost?



How the integration activity was assessed for COTS/GOTS items.

Is there an analog to support these assumptions?

What assumptions have been made regarding:Development teams experienceToolsProduct familiarity Other complicating factors?

How was the integration complexity quantified? What assumptions were made about the integration teams experience and the difficulty of the task?


Enterprise Resource Planning Defined

Enterprise Resource Planning (ERP) is a business management system that integrates the operational components of an organization.

ERP provides wider access to more accurate information while enabling organizations to standardize and improve its business processes.

It is important to note that ERP is more than a software package. ERP enables business process re-engineering, focuses on industry common best practices, and facilitates process improvements.


What is ERP

ERP is a Commercially available business software solution that ...

Provides consistent & timely information for decision making & performance measurementAutomates & integrates business processesProduces & accesses data in a near real-time environmentShares common data & processes across the enterprise

Examples of ERP SAP the market leaderOracle

Peoplesoft (Just purchased by Oracle)JDEdwards (Part of Oracle)Sieble CRM (Purchase recently initiated)

SSA BAAN (Manufacturing)


Benefits of ERP

Improved data accuracy

Automation & integration of an organization’s business processes

Sharing of common data and practices across the enterprise

Increased visibility of information in a real-time environment

Improved insight into total costs of operations, leading to improved decision making

Quicker adjustment of personnel to changes of duty through use of common processes and tools


ERP Issues and Risks(US Navy Example)

An important aspect of implementing an ERP solution for an organization as large and diverse as the Department of Navy is determining how legacy systems and new commercial off-the-shelf (COTS) systems will pass data.

It is safe to assume that no single COTS package can handle all of the functionality required by the DON, and there is the additional challenge of interfacing with mandated Department of Defense (DOD) systems.

Therefore, any solution must be designed to interface with custom software as well as the many COTS solutions required to build an enterprise solution for the Department of the Navy.


Programs/Sites

Proc

esse

s

MaterialMaterial

Financial ManagementFinancial Management

BudgetBudget

Asset ManagementAsset Management

PlanningPlanning

ProcurementProcurement

PropertyProperty

Human ResourcesHuman Resources

Results:• Software that is set up to

meet your specific business needs

• Standard Processes and tools across the enterprise for all programs/products

• Common data, real time integrated across the processes

• Software that is supported commercially and constantly improving

• Hundreds of Best Commercial Practices

• Thousands of Software Engineers support

Benefits:

• Improved decision making

• Efficient processes

• Enables management of the enterprise 6

The Promise of ERP


Definition Bolt On

Bolt On: Another application designed to work seamlessly with the ERP Systems.

Two types-ready made bolt-ons (ready to go)

To be developed using ERP API


Definition RICEF

RICEFReportsInterfacesConversionsExtensions/EnhancementsFormsWorkflowData Warehouse (Reports & Objects)

Enhancements to existing ERP functionality1. Configuring ERP for organizations language2. Augmenting functionality3. Can include custom development (not recommended)


The Real Costs of ERP Deployment

The Problem

Solution Methodology

Implementation and Customization Activities for ERP Systems

Deployment and Maintenance Activities for ERP Systems

Conclusions


The Problem

ERP Systems are plug and play – just another instance of Commercial Off the Shelf Software (COTS) – Must be low cost to deploy and maintain right?

ERP Systems provide infrastructure and lots of possibilities but for a successful implementation you need

DecisionsCustomizationInterfaces

All of these things take time and money – what are the things we need to consider when planning for an ERP implementation?


Solution Methodology

Our standard cost research approach1. Understand and bound the problem

2. Understand the process of deploying ERP Systems and identify the activities associated with this process

3. Identify the factors that drive costs for these activities

4. Construct a mathematical model to determine cost from these cost drivers

5. Test the mathematical model against actual data and refine the model


1. Understand and Bound the Problem

Cost and Management Challenges when Fielding and ERP System

1. Expensive

2. Deciding between changing business processes to conform to new software or modification of software to match present business processes (don’t go over 20%)

3. Getting buy in to new business processes (Change Management)

4. Training employees


2. Activities associated with deploying ERP

For a successful ERP Deployment

1. System Requirements and Design

2. Identify, evaluate and select ERP Components

3. Purchase / Lease / License the ERP components

4. Tailor ERP Components - RICEF

6. Identify and Interface with Bolt-ons

7. Customization

8. Integration and Test

9. Deployment

10.Maintenance

3. Identify the factors that drive costs for these activities


System Requirements and Design

Determine the scope of ERP Implementation –what functions will the system performExamine needs to end-users and stakeholders to determine what types and extent of capability required to meet needDetermine what requirements can be met with ERP components and RICEFs can accommodate How much functionality is required?

What kind of functionality is required?Target environmentOther project constraints

Called Blue Printing by ERP Community


RICEF Reports

Simple: Less than 5 standard SAP tables. As many as 1 external file. Straightforward data retrieval.

Medium: Between 5-9 standard SAP tables. As many as 3 external files. Some cross-checking. Logic: Multiple-level drill down capability. Moderate calculation, sorting. Some customization (i.e., company-wide). Field translations required.

Complex 10 or more standard SAP tables. 3 to 4 external files. Data from multiple functional areas.


RICEF Interface

Simple:1 external file. Fewer than 3 different record types. Logic: No translations of codes. Batch. Data read from less than 5 tables

Medium:2 to 4 external files. 3 to 5 more difficult record types. Logic: Batch. Moderate translations of codes. Data read from 5 to 9 tables.

Complex:5 or more external files. 6 or more different record types. Logic: heavy translations. Near real-time or real-time. Triggering via user exits. Data read from 10 or more tables.


RICEF Conversions

Simple: Data is pre-extracted and formatted. Up to 2 input files/record types. Logic: Use of standard SAP load programs (BDC, LSMW). Loading basic master data. Single load program. Assume zero, until identified.Medium: Data is pre-extracted and formatted. Up to 2 input files/record types. Logic: Use of standard SAP load programs (BDC, LSMW). Loading basic master data. Single load program. Assume zero, until identified.Significant reformatting is required. 5 or more input files/record types. Logic: Moderate ABAP (moderate validation). Loading lowest level master data. Single load program.


RICEF Extensions

Simple: Manipulation of 1 standard SAP table. Logic: Does not require user exits. Initial and detail screen. Menu extensions. No database updates. One version suits all requirements. Non-SAP

Medium: Manipulation of 2 standard SAP tables. Logic: User exits to capture data only. Initial and detail screen. Function exit. Update database. Some customization (i.e., company-wide).

Complex: Manipulation of 3 or more standard SAP tables. Logic: User exits with substitution logic. Step-loop to maintain header and detail. Initial screen with sub-screens. Dynapro extension. Some customization (i.e., plant-wide).


RICEF Form

Simple: SAP standard forms (i.e., invoice, quotation, etc.). No custom database access is required. Logic: Minor modification to the SAP standard forms. Printing of forms is configured into SAP, no custom ABAP programming required.Medium: Non-SAP standard forms (i.e., new invoice form). Accesses one logical database. Logic: Creating a form from scratch, and printing it on pre-printed paper. No need to create cosmetics such as grids or boxes. Printing of forms may require custom work.Complex: Non-SAP standard forms (i.e., new invoice form). Accesses two or more logical databases. Logic: Creating a form from scratch, but printing it on plain paper. Will need to create cosmetics such as grids or boxes. Printing of forms may require custom work.


Definitions Workflow

The defined series of tasks within an organization to produce a final outcome.

Sophisticated workgroup computing applications allow you to define different workflows for different types of jobs.

For example, in a publishing setting, a document might be automatically routed from writer to editor to proofreader to production. At each stage in the workflow, one individual or group is responsible for a specific task. Once the task is complete, the workflow software ensures that the individuals responsible for the next task are notified and receive the data they need to execute their stage of the process.


Definitions Data Warehouse

A collection of data designed to support management decision making. Data warehouses contain a wide variety of data that present a coherent picture of business conditions at a single point in time.

Development of a data warehouse includes development of systems to extract data from operating systems plus installation of a warehouse database system that provides managers flexible access to the data.The term data warehousing generally refers to the combination of many different databases across an entire enterprise.


Identify, Evaluate, and Select

Identify solutions that satisfy requirements

Techniques for evaluation include:Progressive filteringPuzzle approachKeystone components

Cost drivers are:Amount of functionality being implemented?How many different ERP vendors are being evaluatedHow much bolt-on capability requires evaluation?Type(s) of evaluation taking placeNumber and criticality of evaluation criteria


Purchase / Lease / License

Negotiation

Contract Resolutions

Cost DriversSize of organizationNumber of licenses requiredProcurement processesTerms of contractNegotiated purchase price


Tailoring ERP Components

Tailor ERP functions to your needsReportsInterfacesConversionsEnhancementsForms

Cost drivers are:Amount of functionalityTypes of functionalityComplexity to learn and use ERP SystemQuality of user documentation, vendor support and trainingExperience of personnel with ERP System Implementations and this particular ERP System


Identify and Interface with Bolt-Ons

Bolt-Ons are external software packages that supplement capability not delivered as part of the ERP system

Links to Project management systems (Artemis)Links to ADP payrollLinks to Business Objects reporting application

Bolt-Ons must be identified and interfaces must be developed to integrate them into the system


Identify and Interface with Bolt-Ons

Cost DriversNumber of Bolt-Ons being integratedAmount of functionality delivered by Bolt-OnsTypes of functionality delivered by Bolt-OnsExperience of team with ERP implementations and integrationsQuality of user documentation, vendor support and training.


Customization

Custom code needs to be developed whenRequired functionality not available in ERP System or through Plug InsLegacy code required adaptation to interface with ERP System

Cost drivers for customization are the same as for any software development with adjustments for

Quality of documentation, training and supportExperience of integration team with ERP SystemMaturity and stability of the ERP SystemVendor cooperation


Integration & Test

Before deployment, need to ensure that ERP System satisfies requirements and operates with out failures

Requirements relating to performance, reliability and security could be problematic

Cost drivers are:Total functionality being integrated Quality, performance and reliability requirementsIntegration team productivityIntegration difficultyNumber of components and bolt-ons


Deployment

Deployment includes:Pilot programsInstallation throughout the organizationTrainingSupportChange management

Cost DriversSize of organizationNumber of geographical locationsExperience of deployment teamVendor involvement and cooperationNumber and complexity of new business processes


Maintenance and Support

Deployment of vendor upgrades

Bug fixes for customized code and interfaces

Field support

Cost DriversSize of organizationNumber of sitesSize of total functionality deliveredAmount of functionality that is custom builtNumber of interfacesIntegration Complexity


Summary

ERP Systems are designed to save organizations time and money when fielding complex systems to achieve organizational effectiveness

Care should be taken to:Select ERP Solutions that maximize satisfaction of end user and stakeholder needsUnderstand all of the activities and the respective cost implicationsLook at the long term and short term cost implications


True Program Success™

Our mission

is to ensure that no

Program is

deterred from their

mission due to

failures

in Program

Affordability

Management

David P. SeaverTechnical Director

PRICE Systems [email protected]

www.pricesystems.com

mailto:[email protected]

ERP Implementation Effor Estimation

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