ERP Technology Implementation
Monday, March 18, 2013
I was recently engaged in a conversation with an ERP vendor’s implementation project team leader who challenged my assertion that the approach companies took towards implementing ERP was wrong. His contention was that they had an excellent methodology for implementing ERP and although they had problems it wasn’t with the methodology but with the client.
On looking at his implementation methodology it was clear that we were not thinking along the same lines. He was referring to the implementation of the software technology component of ERP whilst I take a greater picture of implementing a business change program that uses the software component but that the project was far bigger than just software. In fact software accounts for around 25% of the success factor of an ERP project.
This discussion highlights the difficulties in getting the message across about successfully implementing an ERP project. Most people, including senior executives think ERP is about technology, about a computer system and not business change. ERP vendors and their teams focus on the implementation of the software and do not have a mandate, even if the understood the broader issues, to get involved across the entire company to make the changes necessary to ensure a successful outcome.
The software component of an ERP system is where most of the activity will be centred but it is relatively easy to understand the process. This is where configuration to a company’s specific requirements are made to the software which may have multiple configuration possibilities depending on the type of organisation, data is to be loaded or migrated, training undertaken, system tested, procedures written, security assigned and system turned on. Simple in concept but the many traps along the way include inadequate budget to carry out data clean-up, wrong software selection leading to scope creep, inadequate resources leading to shortcuts and so on and so on.
The response from the vendors project manager was that they were not engaged to look at the other issues and that was a company responsibility not his. His responsibility was the implementation of the software.
This highlights the fundamental cause of an ERP project failure. To be successful an ERP project must look across a broad range of issues that affect the ultimate outcome of the project and this starts with the acquisition strategy in the first place. The issues of what do we want to do and what are the expectations of outcomes in the first place are fundamental to on-going decision making about budgets, resources, executive involvement, software and timing.
Ignoring or not understanding the bigger picture leads to the industry statistics of 55-70% failures, budget blow-outs, wrong software, internal disputes, chaos, potential financial damage or bankruptcy and increases in litigation.
I have argued for a long time that an ERP project can have a successful outcome every time, if the full implications are understood and approached in the right way. The 26 steps listed below cover the non-software and software implementation issues that need to be addressed for a successful outcome.
1. ERP Acquisition Rationale
2. In House Expertise in ERP
3. ERP Risk Assessment
4. ERP Cost Justification & Budget
5. Request For Proposal (RFP)
6. Software Selection Criteria
7. The ERP Contract
8. Project Plan
9. Go Live Date/s
10. ERP Education
11. ERP Training
12. Implementation Responsibility
13. Project Management
14. Executive Involvement
15. Software House Expertise
16. Software Imp Team Expertise
17. Process Change
18. Data Clean-up
19. Data Conversion
20. Issues Identification
21. Scope Change
22. Software Changes
23. Management Action to Issues
24. Go-Live Readiness Reviews
25. Live Running Cut-over
26. Post ERP Cut-over
These steps have been identified after multiple analysis of failed ERP projects and identification of key points contributing to failures. Application of these 26 points identifies issues before they become problems and results in a good ERP outcome. They can even be applied mid project to identify any shortcomings that can be addressed before they become a crisis.
As a footnote the ERP vendor’s implementation project manager conceded that these issues needed to be covered but that was not his brief. His brief was to implement the software and that was the basis for his implementation plan.
Our in-house program goes through these 26 steps and the response is always “How come we weren’t told about the other things we had to do to get it right”. The time and money that can be saved, if organisations sat back and spent more time in planning and understanding the big picture business change opportunities, and issues, is enormous. The business opportunities of getting it right are equally enormous but in order to achieve this, a different approach must be taken by senior executives.
The use of the name ERP Technology has evolved to create the impression that it is all about a computer system and until this changes we will continue to see expensive ERP projects with poor outcomes.