The biggest problem with ERP implementations is that they often lack a strategic framework. According to our 2015 ERP Report, ERP implementations often take longer than expected, cost more than expected and fail to deliver expected business benefits. So what are you really paying for?
During our 10 years in business, we have found that most of these organizations lacked a strategy when they began their project. Although it can be difficult to define an IT strategy, there are several steps you can take to make sure you are not throwing your money at a failure.
An audit of your organization’s infrastructure, staff and budget can give you a benchmark to compare your organization against others. You have to set a strategic direction for the years to come. Once you have made that decision there are a few more considerations. These can include the following:
- Are we more interested in a single system or a best-of-breed system?
- Would a Tier I or Tier II ERP system work better for us?
- What organizational change management strategy should we develop?
- Would we prefer the software to fit our business, the business to fit our software or a combination of both?
- How much will we standardize business operations across our locations and business units?
These are just a few of the questions that must be considered before beginning an ERP implementation. It’s all too easy to jump into an ERP project and start making decisions that you will later discover do not fit with your IT strategy.
Here are a few things to consider as you and your team begin making key strategic decisions and defining your IT strategy:
Assess your current IT landscape. The first step in any effective IT strategy is to assess the strengths, weaknesses and opportunities related to your current environment. Benchmark your current IT situation to other organizations and best practices to prioritize the various opportunities for improvement. You have to know what you’re starting with to know where you want to be in the future.
Look at all potential strategic scenarios. Once you have analyzed all of your organization’s longer-term objectives you must identify potential strategic scenarios to support the overall vision for the company. You must cover all bases. Make sure to evaluate several potential (and diverse) options. This can include anything from outsourcing your IT department, upgrading and better integrating current systems, replacing current systems, and standardizing operations across global locations. Include strengths, weaknesses and tradeoffs for each. In order to define feasible scenarios, it helps to look at what is happening in the industry and what tactics other organizations like yours are deploying.
Business case and ROI analysis. Ultimately, the strategic scenario your team chooses will be heavily influenced by the potential costs, benefits and return on investment of each. It can be easy to make an emotionally-charged decision – such as, “Our current systems don’t work correctly, so let’s go get a new ERP system” – but these potential scenarios should be evaluated in a rational, quantitatively-focused way to ensure that emotions don’t dictate the chosen approach. These quantitative comparisons of various scenarios should also consider long-term hidden costs, such as the technical and organizational costs of maintaining the particular solution. At the end of the day, your executive team and board will want to see how the costs, benefits and ROI stack up for each potential scenario you are considering.
The three- to five-year strategic roadmap. As much as we would all like to transform and improve our businesses overnight, successful initiatives are typically more of a multi-year process. Your final output from the strategic process should be a three- to five-year roadmap outlining the implementation strategy and key milestones critical to the success of the overall transformation. It is important to remember to include the following key components in your roadmap: what types of solutions will be deployed, how the organization will need to change, expected business benefits, business process reengineering strategy and the organizational change management plan.
That’s what brings us to our question: Are you paying for a potential ERP failure? These and other key strategic topics are covered as part of our proprietary PERFECT Plan™ IT Strategy Methodology, which we recommend and deliver for our clients.
When you invest in an ERP implementation, you expect success. Learn how to ensure success by downloading our white paper, Ten Tips for a Successful ERP Implementation.