This week I had the pleasure of executing a Twitter #ITChat on ERP change management with IT Toolbox, aka @ToolboxforIT. IT Toolbox has graciously allowed me to provide the transcript of this discussion with the readers of our blog.
The #ITChat Discussion on ERP Change Management
@ToolboxforIT: You work with companies to select ERP solutions and implementation strategies. In your opinion, what are the top ERP Vendors?
@EricKimberling: There are hundreds in the market, so a lot of that depends on unique business requirements, what type of software, etc. SAP and Oracle lead in terms of market share, followed closely by MS Dynamics. Small to medium businesses (SMBs) also have lots of Tier II options as well. Leading Tier IIs include Epicor, Syspro, IFS and a host of others, all with distinct strengths and weaknesses. Companies looking for SaaS or cloud solutions may want to consider options like NetSuite, Workday, Plex or Salesforce.
@Toolboxfor IT: How do you think cloud will affect ERP?
@EricKimberling: Cloud affects ERP in lots of ways, primarily that it gives companies more deployment options and potentially lower up‐front costs. Cloud also shifts the ERP focus to SMBs and emerging markets, who are more likely buyers for SaaS and cloud solutions. You also see cloud affecting traditional ERP vendors in that they are providing more hosted and best of breed options to compete.
@Toolboxfor IT: You mentioned SaaS for cloud solutions. What are the major differences and benefits of SaaS versus on‐premise ERP?
@EricKimberling: Pros of SaaS: potentially lower up front cost, easier installation and great options for SMBs with fairly “vanilla” biz needs. Pros of on‐premise ERP: more flexible configuration to meet business needs, control, ease of integration, and more software options. SaaS is often hyped as having the lowest cost up front, but that’s not necessarily true over the long‐term when you consider higher annual fees. Also, SaaS vendors are closing some of benefits of on‐premise ERP over time with more robust configuration tools to add flexibility. We find that larger and more complex clients don’t generally choose SaaS for ERP because of limitations. But we’re seeing larger companies make use of point SaaS solutions, like CRM, HRM or payroll.
@Toolboxfor IT: What are some of the most common ERP implementation challenges?
@EricKimberling: There are too many to list in Tweets, but the first big one is unrealistic expectations at the start. Companies often start on wrong foot by not planning for adequate time, money, and/or expertise to support implementation. Another big problem is organizational change management (OCM). There’s much more to it than end‐user training. Another challenge is too little focus on business processes. Not enough to simply turn on software and expect people to figure it out. Also, project management is key – the need to manage people, scope, customization, budget, etc. otherwise it can quickly get out of control. Finally (for now), choosing the right ERP software is key. Wrong software for your business = 100% chance of failure.
@Toolboxfor IT: There is lots of change in an implementation approach. What organizational change facets should be included in ERP implementation?
@EricKimberling: Organizational change includes end‐user training prior to go‐live, but it also needs to include much more throughout implementation. For example, it needs organizational design training so that people understand new roles and responsibilities in the new ERP system. Employee communication is key ‐ ERP changes are difficult for employees, so implementation team needs communication plans to address. ERP vendors provide basic system training, but needs to be tailored for company and department‐specific business processes and roles. Finally, there is benefits realization. If you don’t measure results, won’t achieve them, and if don’t achieve, won’t get ROI from ERP.
@Toolboxfor IT: Research says 72% of ERP projects fail – what are ways to avoid failure, and what are some lessons learned?
@EricKimberling: Key ways to avoid ERP failure we already touched on: project management, choose right software and avoid customizations where possible. Organizational change management is another key way to avoid failure, as well as executive support and the right resources committed to the project. Probably the biggest ERP lesson learned is to not cut corners, especially in this tough economy. Cutting scope and money too much increases costs later. Even SaaS or “easy” implementations will be harder than you think ‐ plan and budget accordingly with the expertise you need.
@Toolboxfor IT: Because a solid IT strategy is a best practice prior to ERP vendor selection, what’s the best way to develop this strategy?
@EricKimberling: First, know what you have now and what you need in the future. What are you trying to accomplish with IT? Consolidation, standardization, biz process improvements, positioning for mergers and acquisitions? Then, ask how will you best accomplish those goals. A single system? Best of breed or point solutions? On‐premise? SaaS? Once you have key answers to these IT strategy questions, you’ll be better able to move into ERP selection.
@Toolboxfor IT: How do you adjust, or do you need to adjust, your strategy when replacing multiple legacy systems?
@EricKimberling: The strategy is mostly the same, but defining and standardizing processes is harder. Current systems likely do things differently at different places, so more time needs to be spent defining standardized business operations. Also, cutover and integration is generally more complex in companies with multiple legacy systems.
@Toolboxfor IT: How do considerations differ when implementing globally?
@EricKimberling: Global ERP has similar challenges, but magnified. Organizational change management is so critical during global projects. Besides different systems, global ERP deals with cultures, languages, businesses processes and regulatory needs. OCM is hard work. Global ERP also deals with phasing. Which locations do we roll first? How to standardize while dealing with regulatory issues?
@Toolboxfor IT: What are the key steps to finding the right ERP software?
@EricKimberling: First, define the goals of ERP. Where is your business headed and how could ERP help? Next, what are the business requirements, not only for now, but also for where you’re headed in future? Don’t rely too much on canned sales presentations ‐ vendors should show product in the context of your unique business processes. Understand the strengths and weaknesses of all your options as they all have tradeoffs. Finally, have realistic expectations. Cost, time and resources will be higher than you think. Have a business case and an ROI to justify it.
My thanks again to IT Toolbox for hosting this discussion on ERP change management. It was a very unique and fun event for me.
For more information on IT Toolbox, visit their website at http://erp.ittoolbox.com or follow their IT discussions on Twitter at http://Twitter.com/ToolboxforIT. You can also follow Panorama on Twitter at http:/Twitter.com/PanoramaERP or http://Twitter.com/EricKimberling.