Forewarned is Forearmed when Implementing ERP Systems
Deciding to install an ERP system is one of the most important decisions a senior management team can make. However, once the decision has been made to go ahead, all too often the project ends in failure and disappointment.
In a recent survey by Gartner, the IT research and advisory company, more than 70% of customers of ERP systems reported that their projects had failed at the implementation stage to deliver on the objectives of the project.
Respondents to the survey spent on average 4 months researching potential suppliers and conducting detailed assessments of the vendors. The survey concluded that 62% were not confident that they had chosen the right system or supplier.
The reasons for this high percentage can be narrowed down to a few core issues as follows;
Firstly, 48% said that they were confused by the range of products. Engaging with the vendors only made matters worse.
71% said that vendors were not totally transparent regarding the total cost and functionality of the system. Speaking ‘IT’ rather than ‘business’ does not help the buyer/vendors relationship. Many had server misgivings and distrust regarding potential vendors.
Whilst a significant amount of time was spent on selecting their ERP partners, they still had significant concerns about implementing the new system.
Once implementation started, most companies found themselves handling a number of cost, timescale and functionality issues, not to mention the usual run of the mill organizational change activities.
There are useful tools that should be deployed BEFORE settling on an ERP vendor, which will improve a company’s chances of success in the long run should they adopt the following pre-ERP approach. They are:
Make sure that you have a Business Strategy that works!
The business strategy must be linked to departmental and functional objectives within the organisation. Each department has something to offer the company’s overall direction. Each department delivering towards the strategic objective, must be represented by the ERP system. This sounds obvious, but why then do ERP buyers say that the systems they buy do not contribute to the productivity of their company? It’s because the organisation itself isn’t joined up!
Undertake a full Business Review
Before any Business Management System is considered, the processes and systems of the organisation must be optimised. Without this activity, the ERP system will provide little commercial benefit because it will be automating poor process performance.
Base-lining is the first step. Business base-lining allows a management team the opportunity to understand where the company is now in terms of performance, processes and systems.
If the business strategy tells the management team where they need to go, the business review tells them how to get there. These are two important things to know before buying an ERP system.
Design & Build ‘On Paper‘
Before the external vendor gets involved, redesign and improve all of the affected systems and processes on paper and install it. Get it working and see how it performs.
Improve the processes and behaviours, install lean methodology, research best practice. Design your whole system to be best in the class – on paper.
Why? Because it is less expensive than a full-blown ERP system and the company can collect the financial benefits before investing in automation. This could and should offset the cost of the ERP system and installation.
Make sure you get a detailed list of functional requirements you ‘could, should or must’ have. It is really important that the list is initially extensive because the ERP project management team can always make judgments afterwards.
Having a good Functional Requirements Specification enables buyers to see which vendors are unsuitable and why.
Ask the questions once the FRS is completed and have vendors demonstrate their systems capabilities. Indeed, in a recent project, we had the vendor set up a test facility so that our clients’ staff could trial the system ‘hands on.’ We tested each of the vendors FRS answers to understand the functionality for ourselves.
Functional Design Specification
Complete the Functional Design Specification, even if you’re buying an ‘off the shelf’ package. Having done a lot of work on redesigning all of your processes and systems, it will be important to perform a gap analysis between the two processes and spot any large anomalies and then take whatever activities are necessary.
Be prepared to Walk Away!
“If something appears too good to be true, that is because it is.”
Trust your gut instinct, your analysis, and your team decision, whatever it is. If it is not working and smells bad, walk away. It will be one of the best business decisions you ever made.
Buying and modifying a Business Management Systems
The ERP market is highly competitive with most vendors willing to attempt modifications to their systems. From a buyer’s perspective, this may sound good, but modification can lead to project overruns in both budget and time, making the system overly complex. There are then the hidden costs of updating the system. The annual round of modifications and updates are aimed at the standard systems.
Updates to bespoke modifications can add an increasing annual cost to a system already over budget.
My advice in a nutshell would be to do your homework up front and don’t be rushed into a decision. Ask lots and lots of stupid questions. If you’re feeling bamboozled, it’s because the answer given is not clear and you need to do a bit more digging. Ask again until you are clear and then get it incorporated into the FDS.