We all are aware of the fact that Enterprise Resource Planning (ERP) selection & implementation is an expensive & time consuming affair for any organization irrespective of its size & industry which will result in sleepless nights to many CxO’s in the organization.
With all the hype created by large to small ERP vendors claiming to increase your profits, improve business efficiency & make your business run smoothly, you might not be surprised to know that alone in EMEA, 65% of these ERP projects either completely or partially fail to deliver ROI, business objectives & goals. (Source: Gartner & Forrester)
Let us go through this blog and understand, some of these challenges you will face as a CxO & IT Leader involved in this critical project and what steps you can take to overcome them.
- Involve the Top Management: Sounds common sense, but very uncommon among many organizations. Involvement of the top management doesn’t only mean having their approvals for budgets and resources but also understanding the demand side from the business WHY? Because it is ever changing based on the market & internal dynamics in your organization.
- CIO’s & IT Leaders should organize calendarize meetings in outlook based on the management’s availability once a month atleast to share the current overall status (not details) & have managements dedication in tangible terms of time for this project, because when the hell breaks lose, everyone knows what needs to be done quickly.
- Another way to overcome this critical aspect is to create a steering committee with a governance model stating every individual’s responsibility, role & authority which will make the process more efficient & formal. This approach works well with government or large enterprises, however avoid the trap of delayed decision making because of steering committees.
When the hell breaks lose, everyone knows what needs to be done quickly.
- Detailed list of business & technical requirements BEFORE you engage: We cannot emphasize more on this point, on how important it is to keep your requirement document lists ready BEFORE you engage with vendors & system integrators. Because many organizations fall in the DEMO TRAP which basically means that you will be swept off your feet when you see a product demo & all the jazzy product features (you probably don’t even need them).
You will be surprised to know that many features & functionalities, which you perceive and believe as basic and should be ‘out of the box’ in even large ERP products from vendors like SAP, Microsoft, Infor & Oracle etc. can only be addressed either through configuration or customization and requires some work.
You can overcome this situation by having a detailed list of requirements from each department on functionalities, features, standard reports & standard workflows documented in an excel sheet which encompasses ‘Must Have’s & Good to Have’ and cross referenced with ‘Out of the Box, Configurations Required, Customization Required’ This will give you a very good idea (not accurate) on which products are fitting your requirements without more customization.
Organizations fall in the DEMO TRAP which basically means that you will be swept off your feet when you see a product demo & all the jazzy product features (you probably don’t even need them).
Example: Source Gartner Research, 2015
Gartner Magic Quadrant & Forrester Wave for ERP’s provide you the product’s quadrant on a global level (This does not mean a Leader on Magic Quadrant is always the right fit for your organization, because it is not a one shoe fit all approach)
Even Gartner & Forrester or any other Analyst firm which has published the research will confirm this for you
As a CIO & IT Leader, involve the department heads and ask them to fill in this detailed sheet which is signed off before you involve Vendors & System Integrators.
- Think Mobile, Social & Cloud: Long gone are the days when the ERP system could only be used by business and technology users in the office premises just as a back end system. With the advent of great internet bandwidth, almost all the vendors have come up with solutions which offer mobility, cloud based application & social media either with partial or rarely complete functionality suite.
‘ERP’s solutions & vendors have moved beyond back end applications & office functions’
It is a very important aspect to choose between products and vendors who have a roadmap which is aligned to your organizations vision over the next 5-10 years as ERP implementation happens once between 5-10 years or else the desired ROI is very difficult to achieve.
As a CxO, You need to have a bird eyes view about where your industry is moving in terms of technology progression & how this selected ERP will help you align with the industry & differentiate you as an organization.
- Don’t Evaluate for the sake of Evaluation: Many times we see clients specially in the developing markets where clients have a set defined process of evaluating vendors, technological or ERP evaluations are different when it comes to following certain steps of evaluation since the entire organization is impacted with this decision not only IT.
ERP is a business application and everyone in the organization owns it including IT.
For example: many companies choose vendors & products based on what their competition has chosen in the particular industry, this is a decision which you need to make it with careful assessment with your vision of the organization and what you really are trying to achieve by implementing a solution.
- Take the effort & time to make those reference visits NOT just phone calls: In our strong recommendation, it should be a mandatory process to ask for references. Many organizations keep this as check box in the procurement process which is a good practice, however the CIO & other business unit heads should ask the vendor & implementation partner to arrange their reference clients visits, so you can go and check in person how the ERP system is working and what are the challenges they have faced during execution, strengths and weaknesses of the product and implementation partner’s resources, licensing & support related details.
So many times, the perception created by the vendor and system integrator in your organization changes for good after these reference visits, and the importance of this activity cannot be emphasized more…
- Decision of Configuration & Customization of the Product: One of the reasons ERP systems are implemented is to apply industry standards & practices, however an important point to remember is that they are industry practices Not Best Practices as claimed by Vendors of large & small ERP solutions. As a CxO of your organization it is crucially important to understand the underlying benefits related to business process improvement. If you are implementing the solution to change the processes, it is a great way to derive ROI from this large investment. However a very close look at the amount of customizations and configurations you will make into this system needs to be carefully evaluated because it will reaffirms your decision on business process changes and improvement.
Organizations which tailor their business process aligned to the ERP system’s workflows and processes, seek higher ROI on their Investments of $$$ & Resources.
In this implementation & deployment process of having lower configurations & customizations on ERP system’s business logic and processes (industry standards) as an organization you will save $$$ & also de-risk the project from spilling over in terms of budgets & timelines.
- Change Management means change in your processes for good not the ERP System: So many people in your organization right from the top to bottom will be resisting & adding bureaucracy to this project. From our experience we can vouch for the fact that if you are not being resisted, you are not doing a great job as a CIO or CxO responsible for this project. The important point to ponder is how you can create a change management strategy around the project to get everyone on board, so you can run this project smoothly.
A change management strategy should involve key pieces put together such as strong project sponsors, communication & awareness strategy, training right from the time the project is initiated.
- Communication Strategy: So many organizations do not realize how important it is for the IT department & the CxO’s to market this initiative well internally, also make sure that everyone literally everyone is aware that the organization is in planning to implement a new solution which will make everyone’s life & job easy not hard.
You can do this by adopting certain steps like:
- Having a small reward & recognition for any employee who comes up with a ‘Cool’ name for the project.
- Having the PR / Marketing department aligned with the IT to shares emailers across the organization on a regular basis.
- Creating a poster for your project with a theme which suits your culture and putting it across corridors & places where people usually chat.
- Updating every status of the project on your intranet if you have one.
Be Creative in Communicating Positively.
- Awareness & Training: Many projects fail because of carelessly planning the awareness & training programs. Since suddenly the end users & business users in the organization are asked to get into training with the system integrator or vendor for the selected ERP system. This creates a chaotic situation in the organization which impacts on their daily routine and creates a mindset to resist new ways of doing things.
Another challenge is low emphasis on the training days, content & trainer’s credentials, if not evaluated well and organized in a proficient manner might reduce the way people learn the ERP system and their jobs related to the system. Which can be an extra additional cost in tangible terms and lower efficiency in carrying out transactions, processes and reporting which is loss of opportunity in many cases resulting in slow or no business decision making by the management.
- Solution to the above challenge, is to create an awareness & training program which runs with an objective to reduce the end user learning curve, get training on exceptions rather than daily processes, workflows and decision making.
- From a process perspective as a CxO you should be defining every day training agenda along with the system integrator & vendor to achieve daily outcomes for better ROI.
- Users should be given an opportunity to see the product way earlier than the actual training from the start of the project, so they can get a hang of it.
- Include awareness sessions for all the users at every milestone of the project or on a monthly basis.
- Monetary investments on some super & end users for additional training in and outside the organization also provides a good ROI on training and independence from Vendor & System Integrators.
- Support & Maintenance: One of the various parameters for success is to have a detailed SLA separately on product support & services support which will help you be at peace, in case of any support required from the vendor & system integrator. This will also ensure that you have covered the users when they need help, so that they are not left high & dry.
- Licensing: This is one aspect where your IT, Finance & Procurement department can save tangible $$$ on the project. You might not be aware that for every large & small ERP’s they margins which partners & system integrators usually get ranges from 30% to 70%, it is how you negotiate with the vendor & understand their pricing & licensing models. They are multiple ways to get the best deal, based on which solution you have chosen however for the brevity of this blog, it will be impossible for us to share all the details with you.
- Vendor & System Integrator’s Resources: When you sign a contract with a vendor & system integrator it is of crucial importance to check who are the people actually on board from their side, their credentials, experience on similar projects if not the industry.
As a client, you have the right to interview these resources and get a commitment from the partner & vendor that these specific resources will be deployed for your project.
Another way to look at it is by checking which partner focuses on the specific product that you are inclined towards and how many resources or % of their company’s resources are dedicated to the particular technology or product. This will help you understand how important is your project for the vendor & the implementation partner and what kind of focus and attention you will get in terms of customer experience from these partners.
There are multiple approaches to go about the process, please share your thoughts on the above, and thank you for taking the time to go through this blog.
We know it is a long list that can be elaborated even further!
So much for the sake of brevity and busy schedules !