19 Aug What is it with ERP implementations?
What is it with ERP implementations?
I was recently reminded of an ERP Risk Assessment I conducted 15 years ago for the Supervisory Board of a listed company. The chairman of the board had experienced an implementation at another company that almost led to bankruptcy and he wanted to prevent ending up in a similar situation. Below is a screenshot of the lessons learned from the then implementation partner:
Indeed, these were the lessons learned 15 years ago. So how come these are still the main factors for failure in the majority of implementations that I encounter? Why are so many ERP implementations still underestimated?
Forgive me for any cynicism in the answer to this, I do realize that reality is more nuanced than how I outline it here:
- Senior management is still insufficiently aware of the challenges an ERP project entails, how big the impact will be on the daily way of working and how important it is to put the best people to work on the project. Instead, the IT manager is mainly looked at (and not necessarily listened to) for a solution.
- Implementation partners like to point out the benefits of their applications during the sales process, but do not want to discourage the customer up front by naming all risks and costs associated with an implementation to avoid being priced out of the market by a more opportunistic competitor.
- The shareholder is not exempt from this either, as he mainly focuses on a positive business case. Intangible strategic benefits are sometimes difficult to translate into euros, but the costs of implementation are highly visible. As a result the budget gets slashed and a solid project plan becomes less solid.
Despite this pattern of unrealized expectations and project duration and budget overruns, I am optimistic about the chances of success if a few simple preconditions are met:
A realistic goal:
What do you want to achieve with the ERP implementation? Increasing efficiency is sometimes at the top of the list and in that case it is also reflected in the business case. However, it is an illusion to assume that in the short term more efficiency will be achieved by purchasing an ERP application. That is a next step that will have to be made at a later stage, through better management information and potentially some strategic extensions to the system, such as the introduction of Product Information Management, Advanced Planning & Scheduling, a CRM solution or integrated project management. Preconditions for these improvements are a solid IT architecture that can be built on, good reporting options (both in the daily process and at management level) and last but not least continued attention at management level for the further development of the application landscape.
A careful selection process:
- Organize a careful selection process, with sufficient attention to the critical functionalities. Get external support for this exercise. Don’t try to reinvent the wheel, find an application that proves to work well in the industry. Be prepared to adapt processes to the system in order to do as little customization as possible, but make sure that the basics are well covered. When selecting, pay sufficient attention to the choice between a generic ERP application (such as SAP or Microsoft Business Central) with possibly some add-ons OR an industry-specific solution (such as Inventive for yacht building / installation services) if available. With the first variant you are a bit more flexible towards the future due to the broader possibilities of integration, with the latter you have a greater chance of a good match with your own processes.
- First select the package and only then look for the right implementation partner. It will not be the first time that an external party guides the package selection and “accidentally” ends up with the package it implements itself. Preferably select an implementation partner who has demonstrable experience in the industry and incorporate the knowledge and experience of their proposed project manager into the decision-making process.
- Check references for relevance to your situation.
A detailed blueprint:
In the first phase of the implementation, ensure a good and detailed blueprint, based on the business process. That may sound old-fashioned in the Agile and Scrum era and not all implementation partners will like it, but this investment up front pays off in a clearly defined product (including the necessary integrations), more project control and a more predictable end result.
The right project team:
- An ERP implementation costs money. It is therefore good to seriously assess beforehand whether the investment is worth it. However, if that’s the case, do it right and be prepared to staff the project appropriately. With an independent and experienced project manager, senior product and process owners from the business and a leading implementation partner with industry knowledge.
- An ERP implementation is usually so drastic for the organization that it is difficult to obtain sufficient involvement from the business during the entire duration of the project. Therefore make the ERP project so important that people from the business are not forced / tempted to skimp on their commitment to it. Dare to make the choice to postpone other internal projects until after implementation.
- Ensure senior involvement and ownership from the line to avoid being perceived as an IT project.
- Bring in people who can make the translation between Business and IT. Internal people with a lot of knowledge of the processes often have insufficient insight into the possible solution directions within the application. However, the right choice between them can be essential for the success of ERP. The IT consultant, on the other hand, usually does not oversee the end-to-end business process and thus sometimes ignores essential requirements with regard to the process. A good business consultant with experience in the industry and knowledge of the application is therefore not a luxury.
I am convinced that with the above points of attention, the average implementation will already go much better. An ERP implementation does not have to be difficult, but it does require a long-term commitment and focus from an important part of the organization.
What’s your take on this?