ERP Implementation Process | How To Prevent Failure | Datix
ERP implementation process failure rates are on the rise — again. Key findings in a 2015 report from Panorama Consulting shows 21 percent of companies varying in size, industry and geography define their projects as failures compared to 16 percent in 2014. The survey also delves less companies say they would have chosen the same ERP vendor if they could do it all over again. Additionally, Panorama uncovered the average total cost of ownership of ERP systems increased from $2.8 million last year to $4.5 million this year.
Those numbers are astronomical and convey no room for error in an ERP implementation process. So why are so many failing to address this critical component properly? According to the survey, the primary cause of this implementation cost inflation is an increased need for customizations. We attribute this need to a growing number of supply chain verticals whom look to parallel their processes with the succeeding link in the chain (external partners, suppliers, distributors, etc.) to increase compliance and speed up processes.
As a leading ERP consulting firm, we’ve come to experience a volume of implementation successes and have coached businesses on the ways to prevent ERP implementation process failure. Here are the top 5 ways to execute an ERP project using best practices while maintaining cost-effectiveness.
Have An ERP Selection Process
Develop a clear and comprehensive plan for the ERP implementation process, needs, and software. This permits the project committee to zero in on owned business processes and not vendor offerings. It significantly helps when drafting the short list. Many ERP vendors provide solutions, but those solutions are mock ups of what “could be”. Don’t fall into the trap. Draft a flow chart of your business processes and look to match those with vendor, or implementation consultant, capabilities. If the process seems convoluted, it is, and this is why many source a third party for ERP selection. Internally, look to vendor reviews, user groups and publications to determine if a particular vendor is one worthy of your capital dollars. Remember, there is no one size fits all solution out there so limit your buying criteria to three or four key stipulations. This allows the acceptance of some opinions whilst eliminating others.
Be Clear on Expectations
This involves an understanding of what to expect from the both the ERP system and the project itself. We often emphasize this at nauseam because it cannot be stressed enough. Projects fail because people aren’t clear on what to expect. This is where find we find the majority of discrepancies in projects — non-technical users express what they want, but are truly unknowing of what they actually need. Based on the solution you’ve chosen, find an implementation expert whom knows the extent of the system. Also, that resource’s methodology should include a deliverable that will communicate each step of a work flow. Only then should it be communicated before its creation to clarify exactly how the final product or function will perform. This way both business leaders and end users are clear on what to expect from their new system — and the ERP implementation project — from the onset.
Get Input from All Your Departments
Bring both senior executives and business leaders to the table for a conversation around an ERP implementation project. There is often a display of opposition from both sides of the party. This is because it’s largely an emotional decision; given it involves a lofty price tag and an organizational overhaul. However this can hold each of these high level stakeholders accountable for the company’s final decision. This forces both executives and mid-level managers to influence the rest of the population to adopt the change as well. When leaders ready their team for the new system and foster goals of the project, those departments are less likely to astray from using the system as it was intended. This can go along ways toward influencing ownership in an ERP implementation process.
Determine TCO and ROI
Perform a break-even analysis to determine what it will take to reach the ROI you expect after the ERP implementation process. This will produce a hard number for what it will take to fully realize in an ERP project. Additionally, it will steer the walk or buy conversation; inferring what can be done in-house and what cannot. All too often businesses purchase licenses assuming the sooner the system is live the sooner it will produce a return on investment. This is wrong. Only when business processes are mapped effectively does a company produce a smoother operational flow that is both consistent and fast. Then ROI is a near certainty because the level of contingencies across the business are significantly lessened.
Which Processes Should Be Automated?
How much more efficient could a process be if it were automated? We are seeing more companies leverage the power of automation as the jumping off point for their ERP projects. Automation can be mapped both inside the ERP and from the ERP to other areas of the ecosystem through integration. However, automation is not a “plug and play” process. Each business process renders a number of transactions unique to the company. To streamline a process, an implementation expert or BPM specialist will need to survey each transaction from end to end to determine if each proceeding transaction sets up the right conditions for the next transaction to occur. Many times this involves drilling down to finite transactions to ensure that these do not create any risk to the process as well. (This is the stage where customizations are more likely).
This is a draining process for most internal IT teams because this stage of project requires a laser focus. Many projects derail at this juncture because investors focus on time to completion, rather than ensure transactions are fully utilized and functional — the reason the project was brought forth in the first place. Remember, automation is a remarkable asset to a company, but without the proper configuration, the ERP is useless.
Carefully consider all angles of your business. Be certain everyone is on board with what’s expected and there are enough resources to fully induce an ERP project. If there is not, be the wiser and look to a 3rd party implementation source. After all, many financial institutions are more open to fund projects when second opinions are taken into consideration. Not all projects are created equal. What may have worked before, is likely to not work a second time as technology is ever-changing and best of breed systems largely vary as a result.
If your business is currently weighing these options you should contact our enterprise software experts to further discuss the merits of a move like this for your organization. We’ve successfully helped dozens of businesses make the transition, and have talked a few out of it as well. Visit our services page for more info.
Originally published at www.datixinc.com on July 8, 2015.