ERP Lessons Ignored
Tuesday, February 26, 2013
ERP has now been around for around 40 years in one form or another. In the beginning it was called MRP then MRP II and then ERP. In all of this time companies across the board have struggled to implement the technology into their organisations as a general rule. Failure rates historically have been around the 70% mark. Failure is a difficult terminology to define as the majority of companies manage to implement part of the system but not achieve the outcomes they were looking for.
Companies would buy the software, have some training, convert their data into the system configured by the software house and turn it on. Not terribly successfully! For many it was an accounting system with the other elements handed to the departments as an afterthought.
In the late 1900s ERP software companies realised that there was a lot of money to be made out of add-on services in implementation and the sell job was very simple: It is our software and we are experts in implementing it, and they developed terms such as “Proven Path” and other headlines that led companies to believe all they had to do was pay money to the software vendor to implement the system and they didn’t have to get overly involved.
The evolution of the ERP industry has now morphed into a multi-million dollar industry with success rates around the same of 40 years ago. Some companies have even gone bankrupt trying to implement ERP systems.
If you read the information available from any source available the issues faced today by organisations attempting to implement ERP are the same with one major exception. The cost of failure has gone up exponentially as the software companies and their partners milk the implementing client for everything they can.
So why, after 40 years have we not become smarter in implementing ERP? I can think of no other technology or venture that would even exist with a failure rate of 70%!
Part of the answer to this is in the ERP industry itself. The amount of money that organisations invest in implementation services would simply dry up if companies understood that implementing these systems is more about managing the project from an overall corporate perspective then just focussing on software.
The software companies are not about to reveal the simple logic of implementing these systems, if they even know how, as this would kill of the major part of their revenue streams. They would prefer to produce complex implementation plans that are complex but reflect more their revenue plan than implementation of ERP.
Organisations do not need to spend the money being wasted on paying vendor consultants lining their pockets on projects doomed anyway as they are only concerned with the technology aspect of the project and neither have the mandate nor knowledge to manage the bigger corporate change process essential for successful ERP.
Even at the technology level ERP can be broken down into simple steps:
- Buy the software (preferably tested against a model to ensure fit)
- Configure the software
- Clean-up and formulate data
- Enter or migrate the data
- Undergo rigorous training
- Write procedures and reengineer processes
- Test the system in an integrated pilot
- Turn it on
These steps need to be managed to bring everyone together but you do not need to spend millions in having someone actually managing the project. You can do it yourself with assistance from the software vendor to configure the software, migrate the software from legacy systems and provide training.
One organisation, I have visited, were having significant problems with modelling and terms such as blue-printing, and implementation progress. The progress was minimal with endless delays until I suggested that they dispense with the vendors implementation team and do it themselves using the above simple steps. The outcome was a successful implementation that won a Microsoft award for implementation and operation of their system. The great part of this was that the company did it themselves with minimal help from myself.
The software house when threatened with loss of revenue raised the fear factor of disaster unless it was done their way. The implementing company did step out into the risk zone to do it themselves and it payed off. The CEO who repeats the story whenever asked will tell you. “We were caught up in the ERP industry gravy train and had to bite the bullet to get off”.
With all of this knowledge accumulated over the last 40 years why then do we repeat the ERP disasters like Lemmings going over a cliff? Is it because we are have been conditioned by the ERP industry to stay on the ERP train?
Get off the train. You can’t do any worse than the ERP industry serves up today and the likelihood is you will succeed without breaking the bank.