Another year is about to draw to a close, which is always a good time to look back on accomplishments from the last year and look forward to the upcoming new year. In 2014, much in the ERP software industry remained the same, but plenty of things changed as well.
One thing that hasn’t changed was the proliferation of high-profile ERP failures and challenges. For example:
Avon pulled the plug on it’s $125 million ERP implementation after a botched roll out in its Canadian operations.
The federal government’s healthcare.gov web-site and back-end functions had a number of flaws and issues on roll out, which were widely publicized by the media.
Congress criticized the US Air Force’s failed $1 billion ERP and logistics management system.
While these are just a few of the more extreme challenges that organizations as a whole experienced, not all was lost in the last year. First of all, plenty of organizations managed successful implementations. In addition, there were a number of other positive trends, such as impressive updates to software among some of the leading ERP vendors and exciting new advancements in mobility, business intelligence and SaaS.
But all of this is old news and water under the bridge. Looking forward, what does 2015 have in store for the ERP software industry? Here are our top 10 predictions for the next year:
Blurred lines between SaaS and on-premise ERP software. For years, organizations (ourselves included) have been obsessed with the SaaS versus on-premise debate. As the dust of the debate begins to settle, it appears that we may have been arguing a moot point. ERP vendors are increasingly more likely to offer both SaaS and on-premise solutions to their customers, and, in many cases, organizations are adopting both. The real gray area is with hybrid solutions that host on-premise solutions in the cloud, which is a solution more of our clients are starting to adapt as a way to get the best of both worlds.
Continued adoption of mobile and business intelligence solutions. As some companies strive to leverage low-hanging fruit in their ERP initiatives, more will invest in mobile solutions and business intelligence software to get more out of their existing ERP systems. Organizations will recognize that newer ERP systems will not necessarily help them make better use or sense of business information without the tools to better support decision-making among employees and key decision-makers. In addition, executive teams will be under growing pressure to increase revenue, which will put more pressure on their employees to provide decision-making tools and dashboards designed to support executives’ need for information.
ERP software will no longer be limited to ERP. Salesforce used to simply be a CRM vendor – albeit a very strong competitor in that space. With its increasing ecosystem of apps and bolt-ons designed to address the things the software can’t do on it’s own, it is becoming clear that Salesforce and other non-ERP vendors are disrupting ERP software as we once knew it. Now, rather than simply considering the traditional ERP vendors, organizations can look to standalone CRM, financial and inventory management systems and still have options to extend those solutions into more traditional ERP territory.
Best-of-breed systems will make a comeback. As outlined above, non-ERP software vendors are providing compelling reasons to adopt their solutions and integrate to others to provide comprehensive enterprise solutions. Now that there are more options on the table, organizations will no longer be hamstrung by a relatively limited subset of complete, standalone ERP systems. This is good news when it comes to having more options, but bad news in that it will make the ERP software selection process even more overwhelming.
Integration and solution architecture will become increasingly important. The increase of best-of-breed ERP systems will put more pressure on CIOs and ERP consultants to provide better integration between systems and address potential silos of processes and data that often come with the territory. As a result, solution architecture and integration will become increasingly important competencies required to support effective ERP implementations.
Watch out for the new Tier I ERP vendor. Last year, we commented on how SAP and Oracle had made up for lost ground in their respective market shares after ceding to the Tier II vendors in the previous year. While we won’t know how the new market share figures will shake out until our 2015 ERP Report is released early next year, it is time to consider a new Tier I vendor in the meantime: Infor. We are seeing more and more instances of Infor going up (and winning) against SAP, Oracle and Microsoft Dynamics, even more so than with what used to be their Tier II counterparts. Throw in the strategic investments and acquisitions, product enhancements, and broad suite of offerings the company provides, and it seems that we may have a new Tier I alternative that can scale to various industries and company sizes along with the best of them.
Convergence of ERP and consumer user interfaces. For the last decade or so, we’ve seen the proliferation of mainstream consumer social media platforms, such as Facebook, Twitter and Instagram. However, ERP systems have always maintained a different, more complex and less consumer-friendly look and feel – until now. It was bound to happen eventually as more millennials entered the workforce and demanded more consistency in their work versus social technologies, and it appears that it is finally happening. A new look at the user interfaces from ERP vendors such as JD Edwards, Epicor and Infor all reveal that this may be the year that enterprise software starts to close the usability gap with the social media giants. This is good news for those of us concerned with organizational change management and user adoption of new ERP systems.
ERP failures are still very real risks. Unfortunately, and as mentioned above, ERP failures aren’t going away anytime soon. Since each year brings new high-profile failures and our expert witness practice continues to thrive, we are finding that we may need to make this a standing prediction for each year we create this predictions list. ERP implementations are simply too complex and too risky for all organizations to succeed, especially those that are overconfident in their own abilities or choose to leverage the support of subpar ERP consultants and system integrators.
Higher failure rates of ERP vendors and consultants. I take the view that ERP implementations don’t ever fail, but ERP consultants do. Up until recently, there has been too much money to be made and too little accountability for most ERP consultants to focus on their clients’ success. In the past, organizations had to choose ERP consultants focused on one particular software solution, which resulted in limited options, competition and accountability. Now, organizations can leverage independent ERP implementation providers (such as Panorama Consulting) to provide options to the myopically-focused technical consultants that have historically cornered the market.
Increasing dichotomy between ERP success and ERP failure. On one hand, and as mentioned above, ERP failures will not go away anytime soon. On the other hand, there are still plenty of success stories out there. The difference between the two extremes will continue to become more apparent. The successful ones will do all the right things – effective project management, business process reengineering and organizational change management, for example – while the failures will continue to ignore or underinvest in those areas. The differing results between these two groups will become even more extreme.
These are just a few predictions that we anticipate for the coming year. We will start to get a sense of the accuracy of these predictions when we publish our 2015 ERP Report at the beginning of the year, which will quantify the trends and outcomes of the past year in more detail.
What do you think? Have we missed anything or do you have different views? Please comment below and share your predictions for the coming year as well.
Well-conceived and executed business process management gives organizations the opportunity to gain true efficiencies and improvements – but only if they know how to take advantage of it. This webinar clip discusses the importance of business process management during any ERP implementation.
I’m a big fan of classic rock songs and the quotes that go along with them. However, I’ve found that rock and roll provides more than just solid riffs and anthems to pump your fists to – they can also provide valuable lessons for your ERP implementation.
Below are five lessons that we can all take away from the world of rock and roll and apply to our ERP software initiatives:
Avoid the ERP implementation highway to hell. Smart organizations realize that ERP implementations are not easy. Even if they are not qualified disasters – such as those experienced by Hersheys, Waste Management and Avon – they are always challenging. According to our 2014 ERP Report, most ERP software initiatives take longer than expected, cost more than expected and fail to deliver expected business benefits. Ironically, the organizations most likely to succeed are those that don’t expect their implementation to be easy. These organizations understand that to be successful, they need to invest the necessary time, resources and tools in their ERP implementations. This includes the all-important focus on success factors such as organizational change management, business process reengineering and project management.
Watch for smoke on the water. As challenging as ERP projects typically are, they don’t fail over night. Instead, ERP failures and challenges are an accumulation of issues, risks and poor decisions that accumulate over time. A strong project team and a team of ERP consultants should be able to spot and remedy the “smoke on the water” before it’s too late to avoid failure. For example, when a client hires our team to assess their ERP implementation midstream, we will watch for warnings such as inadequate time budgeted for business process reengineering end-user training, lack of a comprehensive organizational change management plan, or poor project governance and controls. Any one or more of these risks are easily identifiable and correctable – assuming you have the necessary skills, experience and focus.
The times they are a-changing. No matter how simple or open to change your organization is, chances are very high that organizational change management is going to be challenging for your organization. Even our clients who are using Quickbooks and Excel spreadsheets to run their businesses have employee acceptance and user-adoption issues. This comes despite the fact that employees are chomping at the bit for a new ERP system – at least on the surface. Once it comes time to get down to the nitty-gritty of role and responsibility changes, reassignment of work and taking away those old, manual business processes, employees will either directly or indirectly resist the change. And even when they don’t actively resist, they will not fully accept the changes until they fully understand them. This requires much more organizational change management support than basic end-user training to get the job done right.
Your ERP project should be about taking care of business. At the end of the day, it’s important to take care of business. While business process and people issues are the main factors that will make or break your ERP implementation, most organizations and ERP consultants focus too myopically on the technical aspects of the software. Though ERP software is obviously important to a successful implementation, it is the most cut-and-dry, straightforward part of the implementation. In other words, the software is either configured correctly or it’s not, but people and process issues are much more ambiguous and difficult to navigate. For this reason, successful organizations are the ones that invest adequate time in their business process reengineering and organizational change management initiatives.
Don’t stop believing. Because ERP implementations are so difficult, it can be easy to lose hope and lower the bar for success. By going in with realistic expectations to begin with, successful organizations are typically able to avoid this dynamic, along with the other challenges outlined above. Just because so many ERP implementations fail doesn’t mean that yours has to as well.
Having been in the ERP software industry for 20 years now, I am sometimes amazed at how complicated and difficult we have managed to make ERP implementations over the years. Despite all the advancements in technology, the industry as a whole has yet to crack the code on how to make ERP implementations successful on a more consistent basis. Perhaps going back to some of these simple rock and roll themes will help us get a better handle on how to make these initiatives more effective.
Ever since I started Panorama Consulting in 2005, I have heard more than a few ERP vendors sell the notion that business process reengineering is irrelevant to modern ERP implementations. Their ERP software, they say, can do away with the need for too much focus on business processes since the “off-the-shelf” best practices will dictate how those new business processes will look.
It sounds good in theory, right? After all, it’s what we all want to hear: a sort of business transformation utopia that doesn’t require too much thinking or effort on our part.
The bad news is that rarely do these perfect case scenarios play out. ERP implementation project team members more commonly find that modern ERP software is too flexible to simply start using “out-of-the-box.” Even the simplest business processes and workflows have multitudes of variations and options to choose from. While this is mostly a good thing, it runs counter to the “forget about process reengineering” mentality so often touted by ERP vendors.
But that’s what’s happening in the market now. What will the year 2020 look like as it relates to business process management? Unlike the constantly evolving nature of ERP systems in general, business process management won’t change much between now and then. Here are a few things to expect over the next several years:
Business requirements will still need to drive ERP software. It’s easy to get caught up in the astonishing technological advances of new ERP software. Each year, ERP vendors spend hundreds of millions of dollars on making their systems more robust and user-friendly, but a successful ERP implementation is about the needs of the business – not the software. As such, implementing organizations should determine their business process reengineering needs first, before selecting and implementing the system that best fits those needs. This approach results in many secondary (but important) benefits, including the fact that it helps ensure selection of the best-fit software, and the technical implementation of the software is done faster and cheaper than if those activities were saved for the implementation phase of the project.
Implementing organizations will need to ensure that they budget adequate time and resources for business process reengineering. Business transformation takes time. In fact, it takes materially more time than the technical configuration, testing and deployment of ERP software. When developing ERP implementation project plans, the more successful organizations recognize this reality and budget time and resources accordingly. Rather than ensuring that new business processes can be defined in a matter of weeks, a more realistic approach is to ensure sufficient time for defining, documenting and implementing new business processes. Think of it this way: it probably took your organization several years or decades to adopt your current processes, so it is highly likely that it will take some time to change those well-established processes.
Business processes need to tightly integrate with organizational change management activities. Organizational resistance is one of the key reasons why process changes typically take longer than most people expect. Convincing employees to understand and accept process changes takes time – more than the “they’ll do it because we said so” philosophy we often see in our clients’ boardrooms. Employees typically don’t actively resist change. Instead, they more commonly struggle to grasp the details and purpose of changes to their jobs, which can be challenging to overcome. An effective organizational change management plan ensures that this doesn’t cause business process reengineering issues and ERP implementation failure.
Integrate analytics into business processes. Robust analytics, business intelligence, data warehouses and reporting are some of the more significant innovations of ERP systems in recent years. Instead of simply storing massive amounts of data in their ERP software, organizations can now glean real-time insights into their operations and financial results. However, none of this matters if these analytics aren’t built into the standard business processes of your organization. Therefore, successful companies now and in the future will more effectively integrate data and analytics into their day-to-day business processes and ERP software initiatives.
While none of this is much of a change from best practices of today, we expect that more organizations will embrace these proven critical success factors in 2020. We already see a distinct difference in the ERP implementation success rates of organizations that adopt these philosophies and frameworks versus those that don’t.
While, business process management (BPM) is a key component of ERP success, most ERP consultants aren’t well-versed in this competency or don’t dedicate enough time to it during implementation.
The majority of organizations don’t realize expected business benefits from their ERP implementations. Business processes are either not well-defined prior to the technical implementation of the software, or organizations simply “pave the cowpaths” in a rush to finish the project on time. In other words, organizations struggle in their business process reengineering efforts, which typically leads to project delays, budget overruns and lost business benefits.
Our 2014 ERP Report outlines the financial impact of weak business process reengineering. In addition, a poll on our website asks participants to select the component that they believe to be most important to ERP implementation success. The results at the time of this blog reveal that “well-designed processes and workflows” is the #3 most important success factor, after organizational change management and executive buy-in and support.
Given the importance of business process management and consultants’ lack of focus in this area, it is important for your organization to identify consultants who understand this key success factor. Following are three questions to help you find the right ERP consultants to address your business process management needs:
1. What business process reengineering methodology do you use? There is a big difference between the gunslinger approach to business process reengineering versus a more predictable and repeatable approach. No one person can possibly be an expert in all functional areas, such as supply chain, manufacturing, finance and sales and marketing, so your consultant should have a strong methodology that enables the team to leverage a more extensive knowledge base. When digging into this area, it is important to understand the specific processes your consultants will follow, see specific templates that will be used and view sample deliverables. It is also helpful to know whether the methodology incorporates aspects of Six Sigma and Kaizen principles of improvement.
2. What relevant industry and cross-industry experience does your team have? It’s important that your BPM consultants have a good understanding of your industry. It’s just as – if not more – important to look for cross-industry experience that will augment industry knowledge with best practices from other industries. Many of our manufacturing clients love the fact that we have extensive experience in the manufacturing and distribution industry, but they also appreciate the fact that we bring accounting best practices from our experience in the financial services industry – as well as repair and maintenance best practices from the oil and gas industry. Experienced business process consultants are able to optimize and improve business processes regardless of the industry.
3. How do you help “operationalize” business processes you define? Business process reengineering should be much more than a nice Visio diagram. It’s one thing to define a business process at a conceptual level and a much different thing to implement that process. Your ERP consultant should be well-versed not only in reengineering best practices and cross-industry best practices, but they should also know how to manage those changes from an organizational change management perspective. Effective organizational change management and implementation of new business processes should include training, employee communication, change impact analysis, benefits realization and a host of other activities critical to making the changes “real” within the organization.
Finding an ERP consultant that meets all three of the above criteria is no easy feat. Even the best business process management consultants may not have the “soft” skill sets required for organizational change management. Don’t sell yourself short and settle on the same ERP consultants that have contributed to so many failures in the past. The ideal ERP consultant has a team, methodology and toolset that address both organizational change and business process management.
“ERP failure” is a pretty dirty word when it comes to ERP systems, but there are plenty of lessons to be learned from missteps and stumbles experienced during ERP implementations.
Our team’s collective battle wounds provide some of the best lessons for making ERP implementations successful. In fact, we prefer to hire ERP consultants who have slugged their way through tough implementations versus those that have only experienced smooth sailing along the way. Not only that, but we are constantly improving our implementation methodology to reflect our ongoing lessons learned from our various implementation projects across the globe.
When it comes to process manufacturing ERP implementations, there are plenty of lessons to share. Process manufacturing entails making something that is recipe-based, not easy to take back apart and typically measured in weight or volume. Examples include manufacturers of food, beverages and chemicals.
Process manufacturers are often times more complex than the average organization, simply because their products can be harder to plan for and because of regulations unique to those industries. Given these complications, the risk of failure can be high. Even for those that are not in this industry, there are plenty of lessons learned applicable to all industries:
Identify and focus on industry differentiators. Process manufacturers are in many ways completely different than other types of manufacturers and non-manufacturing organizations. For example, they often deal in more complex units of measure, which can make planning, purchasing and manufacturing more difficult than a manufacturer of widgets. Whatever the differentiators for your industry, they are likely to be important areas of focus during your ERP selection and implementation process. A laser-focus on these unique aspects of your industry will ensure that you are able to select and implement the ERP system that best fits your organization’s needs.
Clearly define business process reengineering opportunities. Once you are aware of these industry differentiators, it becomes important to focus your business process reengineering and workflow definition activities on these areas. For example, your accounts payable process may not be overly complex or require an abundant amount of focus during your selection and implementation, but your planning for purchasing recipe-based raw materials may be more likely to create complications during your project. It is important to understand that these unique aspects of your business are more likely to require attention throughout the selection and implementation phases of your ERP project. In addition, these processes should garner a great deal of time from your organizational change management team as well.
Manage the risk of operational disruption. Organizations that are unique in nature or are part of a unique industry (such as process manufacturers) are more likely to encounter operational risk at the time of go-live. For example, our 2014 ERP Report reveals that roughly half of all organizations experience some type of material operational disruption at the time of go-live, such as not being able to ship product or close the books. These numbers are even more concerning for process manufacturers and industries with relatively unique operational complexities, so it is important to be cautious by not holding too firm to go-live dates, managing budgets too tightly or not allocating enough resources to the project. While you may never reduce the risk down to zero, you can certainly do better than 50/50 odds by avoiding some of the common mistakes of other organizations.
Every organization in every industry has its own unique challenges and complexities. Whatever your specific industry challenges may be, it is important to recognize and focus on them during your ERP implementation. Too many organizations treat all business processes equally, but these more complex operations are more likely to make or break your project.
These summer months provide many of us with good reasons to slow down and relax. Whether it be summer vacations, time at the beach, or enjoying the longer days, many of us find the time to enjoy a slightly slower pace whenever possible.
When it comes to ERP implementations, a leisurely pace is the exact opposite of what we tend to pursue. Most of us want to select and implement new software as quickly as possible to minimize budget and avoid disruptions to our day-to-day processes. In fact, I have yet to meet a CIO, CFO, CEO or project manager with the stated objective of “slowing down” their ERP implementation.
As counter-intuitive as it may sound, there is something to be said for an ERP implementation that doesn’t operate at a breakneck speed. Many of our must-know tips for executives about to begin an ERP project can be achieved by operating at a more measured and deliberate pace (see our video below for the complete list of 20 tips). As our hundreds of implementation clients and ERP consultants can attest, faster is not always better when it comes to rolling out new ERP software.
Here are five important examples of how more measured – yet counterintuitive – tactics can benefit your project and actually help you implement new software in less time than if you were to rush:
1. Take time to develop a solid implementation plan. Once you have completed your ERP software selection, it can be tempting to jump right in and start implementing. After all, this is usually the most exciting point in the project, so it’s tempting to keep the momentum going. Moving ahead without a solid plan is ill-advised and typically results in plenty of wasted time and budget along the way. For example, expensive technical resources and consultants start the meter running the minute they hit the ground – regardless of whether or not their project roles and responsibilities are clearly defined or whether or not they are being productive. Taking the extra time to create a clear project strategy, plan and charter will save you a great deal of time later on.
2. Define business processes before you start implementing ERP software. It’s common for less experienced CIOs and project managers to view ERP software as a silver bullet that will define business processes going forward. While this may be true for specific transactional details within the software, most ERP systems are flexible and robust enough to handle high-level business processes in a number of ways. With this in mind, it is important that you define your general workflows and business process reengineering initiatives before you begin implementing and configuring your software. This will ensure effective use of your technical resources once they begin designing, configuring and testing the software, while at the same time ensuring that your new system delivers tangible business improvements rather than simply “paving the cow paths.”
3. Get the right resources in place. Moving forward without the right project resources in place can create even more delays than not moving forward at all. Again, it may be tempting to rush into implementation, but it is counterproductive to do so without involvement of the right resources. For example, beginning implementation planning without stakeholder input may cause the project team to overlook operational limitations to key project milestones. Similarly, defining business processes without internal stakeholder commitment can undermine organizational buy-in and create misalignment between the software and operational needs. It may be difficult, but ensuring the right resources will save you time and money later in the project. This challenge should be addressed as part of a comprehensive organizational change management plan.
4. Quantify expected business benefits. As the old saying goes, you can’t achieve what you don’t measure. With a majority of ERP implementations failing to realize expected business benefits (according to our 2014 ERP Report), this rule of thumb is certainly true with ERP implementations in general. Even if you are 100% certain that your ERP investment is justified and that you “need” a new system regardless of the potential benefits and ROI, you still need to quantify specific business benefits if you want any chance of actually achieving them. Just as importantly, quantified business benefits will provide a framework to make key decisions throughout the project – such as whether to customize certain functions or invest in additional modules. A quantifiable business case is critical for these project governance and benefits realization purposes.
5. Remember that your ERP implementation is a marathon, not a sprint. As much as I would like to tell you that ERP implementations can be done quickly and easily, I can’t in good conscience suggest that. Even our own clients, who implement faster and less expensively than most organizations, have to prepare to be in it for the long haul. Business decisions, resource constraints, day-to-day operations, budgetary constraints and limitations of your ERP software all contribute to the “marathon” nature of ERP implementations. You are about to overhaul your entire organization, which takes time no matter how well you plan and execute. This is an important point to keep in mind when developing and executing your ERP implementation plan.
While summer vacation may be a brief, annual reprieve from the usual day-to-day bustle, there is a lot to be learned from the summer, if we take a step back and look at what really makes ERP implementations succeed. The end of summer does not mean the end of “slowing down.”
As soon as summer ends, we are hosting an ERP Boot Camp, which despite its name, is actually all about slowing down and planning before implementing ERP software. Join us September 23-26 in Vail, CO for this comprehensive, interactive training provided by top ERP experts.
While you may hopefully never need to train an actual dragon to use your ERP system, you certainly will need to train change-resistant end-users – which is arguably more difficult. Nothing will derail an ERP implementation more than “fire-breathing” employees who do not understand how to use new software and do not care to learn.
Many organizations implementing ERP software assume that employees will learn the technical aspects through intuition and common sense. While interfaces are becoming more user-friendly, employees may be intimidated by new business processes and feel as if they are starting an entirely new job. To ease this transition, you don’t have to be a knight in shining armor – you simply have to conduct ERP training, and the benefits you longed for will soon be realized.
Following are a few tips for training end-users throughout an ERP implementation:
1. Use customized training materials. Out-of-the-box training materials provided by ERP vendors are not tailored to your organization’s unique business processes. Organizations should customize training materials to ensure that they can be applied to both current- and future-state processes.
2. Allocate enough resources. Organization change management, including communication and training, is often forgone for the sake of saving money. A fully-staffed organizational change management team could mean the difference between ERP success and failure. To ensure high user-adoption before and after go-live, organizations cannot cut corners when it comes to training.
3. Start now. Organizations should begin training at least 60 days before go-live. To verify that the project team has enough time to conduct all necessary training sessions, be sure to include training requirements in the initial project scope. As our 2014 ERP Report shows, ERP implementations frequently go over-budget and exceed planned durations. Planning an ERP training schedule at the outset, ensures that unexpected costs and requirements do not delay go-live.
While not everyone is brave enough to battle a dragon, end-users are not nearly as frightening. With the right expertise and resources, any organization can prevent learning-curve anxiety from escalating into anger and resistance.
One of Panorama’s most popular pieces of thought leadership each year is our Clash of the Titans Report, which compares the industry’s three leading ERP vendors: SAP, Oracle and Microsoft Dynamics. Because of the breadth and scalability of these three ERP vendors, this report is particularly valuable to our larger and more complex clients.
However, not all of our clients are in the market for a larger, Tier I ERP system. Some don’t have the budget, appetite for risk or need for SAP or Oracle, so they are more likely to consider Tier II or Tier III solutions that are more focused on their specific industry and business requirements. The upside of considering Tier II and Tier III solutions is that it opens up a world of potential ERP vendors well beyond SAP and Oracle.
Navigating the breadth of options in this space can be overwhelming. Similar to larger, Tier I ERP systems, each Tier II and Tier II system has its strengths and weaknesses based on the needs of your organization. We’ve selected and implemented ERP software for hundreds of small- to mid-size organizations and have found that there are a number of distinct factors to consider. Below are a few items worth noting when looking at some of the leading Tier II ERP vendors:
Microsoft Dynamics.Microsoft Dynamics has long been considered a strong alternative to Tier I solutions. In fact, based on market share and number of customers, we often argue that this product should be considered among the SAPs and Oracles of the world. Our Clash of the Titans Report found that Microsoft Dynamics takes much less time and money to implement compared to SAP and Oracle, but the average customer takes longer to realize the potential business benefits. Given the fact that the product straddles the line between Tier I and Tier II solutions, it can be a good alternative for companies that want the best of both worlds.
Infor. Infor has in many ways become a sort of mini-Oracle, with aggressive growth and acquisition strategies to boot. The Infor SyteLine product has strengths in its configurable workflows and graphical planning, but the vendor’s real strength is in its ability to cater to multiple industries and provide breadth of functionality typically reserved for Tier I ERP vendors. Our clients often consider Infor’s suite of products when they are looking for the breadth and scalability of SAP or Oracle but without the corresponding price tag and risk.
Epicor. Epicor’s flagship E9 product has the look and feel of Microsoft Office, along with an appealing graphical planning board, robust product configuration, configurable workflows and a host of other features that tend to appeal to Tier II ERP vendors. Our clients – especially those in the manufacturing and distribution space – often consider and evaluate Epicor as part of their ERP software selection process. With its new private equity backing, the company also appears to be positioning itself for greater growth in the not-too-distant future.
JD Edwards. Although technically a part of Oracle, JD Edwards is often considered more of a Tier II vendor because of its appeal to the mid-market. Either way, it has strong features that are often considered by our small- to mid-size clients. For example, in our recent ERP Vendor Showdown webinar series, attendees rated the software’s user interface, ability to scale and distribution and workflow scores highest among other Tier II ERP systems that they had seen. And, despite industry rumors, Oracle does not seem to have any plans to phase JD Edwards out of its portfolio.
Although there are plenty of other Tier II ERP systems that can be considered as part of a robust software selection process – IFS, Sage, Netsuite and QAD, for example – the above are just a few that are often considered among our client base. As is the case with any ERP system, each has its strengths and weaknesses, which should be evaluated in the context of your specific business needs rather than relying on sales or industry hype.
Last week, one of our blogs covered some misconceptions about the age-old SAP vs. Oracle debate. While this topic is typically most relevant to larger organizations, we wanted to follow-up with a relevant discussion more suitable to organizations outside the Fortune 1000: choosing the right ERP consultant for your smaller to mid-size businesses.
Choosing an ERP consultant is an important decision for any organization, but perhaps even more so for small to mid-size companies. These companies typically don’t mesh well with the larger, Big 5 consultancies, and smaller consultancies are hit and miss in terms of independence, depth of knowledge and breadth of services. So does that mean that companies outside the Fortune 1000 need to throw in the towel and handle their ERP implementations on their own?
With the right decision framework, this need not be the case. Below are three questions that small and mid-size businesses should consider when choosing an ERP consultant:
1. Are you considering 100% independent ERP consultants? When we started Panorama in 2005, we were one of just a few ERP consultants that weren’t aligned with or taking kickbacks from one of the major software vendors. Unfortunately, not much has changed over the years, as most consultants are still aligned with one or more ERP vendors. Although that model may be a faster and easier way to grow their businesses, that doesn’t necessarily mean that it’s the best for your business. The only way to ensure completely objective and unbiased advice is to know that your ERP consultant isn’t receiving any form of financial incentive dependent on the specific software you purchase or implement. This means weeding out consultants that are resellers, receive referral fees from vendors and/or share in the negotiation savings – a tactic that is often gamed by vendors to serve as an indirect form of kickback.
2. How broad is the experience of your ERP consultant? Even if your ERP consultant passes the first litmus test, it is even less likely that they will pass this one. If you think about it, any consultant that doesn’t know anything about ERP systems is technically independent since they pass question #1. However, being independent without understanding the hundreds of ERP systems in the market is not a good combination. Most of our competitors that are in fact independent do not understand the strengths and weaknesses of more than just a handful of ERP systems – either because they are too small to have the breadth of experience or because their focus is too narrow to have hands-on experience with all the options in the market. This trait is especially important for smaller to mid-size organizations, as they are more likely to consider the myriad of industry-specific options available to them. To see if your consultant passes this test, ask for examples of which systems they have hands-on experience implementing (versus simply evaluating during software selection) and how many they have evaluated over the years.
3. How robust and innovative is your ERP consultant’s methodology? Finally, methodology is a key differentiator and value point for the best ERP consultants. Our smaller and less sophisticated competitors like to tout the value of having gray-haired veterans shooting from the hip based on experience without structure, but no one person – no matter how experienced or talented – can replicate the value of a finely tuned methodology that has been proven and improved over the course of hundreds and thousands of ERP implementations. For example, our proprietary ERP database contains detailed data, differentiators and functionality assessments of each ERP system we’ve evaluated and implemented over the years. No one person has this level of understanding, so this is just one example of why a robust methodology is so important. Another example: since most ERP implementations fail, it is important that your ERP consultant have a very well-defined and comprehensive methodology to help counter this risk.
These are just a few questions to ask the ERP consultants you may be considering for your smaller or mid-size organization. Companies like yours are less likely to simply call on a Big 5 consulting firm or large system integrator, so it is important to leverage a framework to find the one that is the best fit for your organization.
Panorama’s 2014 ERP Report is an independent analysis of ERP market data and trends culled its ongoing benchmark survey of recent enterprise software selection, implementation and benefits realization projects. Among the discussion points covered in this podcast are an organization’s likelihood to exceed cost and timeline expectations and recommendations on how to achieve enhanced business benefits from an ERP implementation. Join Kim Harrington, Director of Client Services for Panorama, and January Paulk, Senior Manager of Organizational Change and Business Process Management Services, for this succinct summation of Panorama’s recent ERP market data to help benchmark your own selection and implementation project.
Determining the best ERP implementation strategy can be tricky. It sounds easy enough: define what you need, design and configure the system, run some testing, train the employees and boom – you’re in business. Most ERP vendors, system integrators and less experienced ERP consultants may make enterprise software initiatives sound this easy, but as anyone who has been involved in ERP implementations in the past can attest, this is typically not the case.
Despite the tendency of the industry to over-simplify the effort and risk associated with ERP implementations – which explains why so many of them fail – defining the best strategy for rolling out a new ERP system involves a number of variables. In addition, there is no one-size-fits-all strategy that works in every situation. The type of strategy that may not work well for one of your industry peers may work very well for you, and vice versa. Too often, organizations fall prey to the fallacy that a generic, boilerplate ERP implementation strategy and plan is going to work for them.
So how can you avoid the same mistakes when defining the best ERP implementation strategy for your organization? Here are a few things to think about when defining the implementation approach that makes the most sense for your organization:
1. Reengineer business processes or pave the cowpaths? Companies that rush into their ERP implementations without a more deliberate focus on business process reengineering are more likely to automate their already inefficient processes. The business process reengineering guru Michael Hammer popularized the notion of “paving the cowpaths” to describe this phenomenon, and many companies head down this troubled path when beginning their projects. After all, the path of least resistance is typically to keep doing things the way you always have, so spending millions of dollars on a new ERP system isn’t going to fix that without the right mindset. CIOs and project managers who are more interested in transforming and improving their business processes need to build the appropriate level of effort and focus in their project plans, or else their organizations will naturally revert to the cowpaths, no matter how hard they may try otherwise. Unfortunately, inexperienced ERP consultants and system integrators will typically underestimate the time and effort required to focus on business processes, which further complicates this issue.
2. Standardization versus autonomy. During the project planning phase, it is important to determine if and where the company will standardize business processes across the organization. Despite the internal resistance that typically rears its ugly head when the rubber meets the road, most of our clients embark on ERP implementations intending to heavily standardize across the company. Regardless of where your organization may fall on the spectrum, it is important to recognize that standardization will require more time up front in the business process reengineering and business requirements phase of the project, while companies that lean toward less standardization will require more time and resources during the design, test and training stages. This is a prime example of where a one-size-fits-all strategy won’t work – you have to tailor your strategy and corresponding plan to fit your company’s needs and priorities and build an ERP implementation plan accordingly.
3. Waterfall versus agile software development. This may sound like an overly technical concept that shouldn’t concern CIOs or others within the boardroom, but this decision will materially affect your ERP implementation strategy and plan. Traditionally, most ERP consultants and system integrators follow a waterfall approach, which entails a more sequential and formalized approached to design, build and testing. Agile development, on the other hand, entails a more iterative and less structured approach to rolling out new functionality. Waterfall approaches typically work for larger organizations or those that are looking to standardize business processes, while agile approaches can work better for smaller or more nimble organizations that aren’t as concerned about standardizing operations. Most of our clients prefer the waterfall approach, but many have found the agile approach to work as well. Either way, it is important to understand the pros, cons, risks, and tradeoffs of each approach and decide where on the spectrum your ERP implementation will fall.
These are just three important variables to define when defining your ERP implementation strategy. There are plenty of other strategic considerations that should also be defined before signing vendor contracts and beginning implementation, such as organizational change management and communications, integration, data, language, single system versus best of breed and a host of others. The three variables discussed above are a good place to start and should be further defined along with others as part of an effective ERP implementation strategy and planning process.
Many ERP vendors will tell you that defining future state business processes is the key to ERP success. They say that ERP success is all about throwing out current state business processes and adopting new processes supported by their ERP software. While this may sound appealing, this strategy will most likely leave your organization with an out-of-the-box ERP system that dictates all of your business processes – even those that served as differentiators and offered your organization competitive advantage.
In contrast to many ERP vendors, experienced and knowledgeable ERP consultants believe that the definition and mapping of current state business processes should drive an ERP implementation. Organizations that understand their current state are better able to increase buy-in among end-users by communicating how new ERP software will make employees’ jobs easier. Mapping current state business processes also helps organizations define exactly whom the new software will impact and how they will be impacted.
To some extent, both ERP vendors and ERP consultants are right. Organizations should clearly define both current and future state business processes in order to identify how ERP software will support their business. But it’s easy to get so carried away with future state processes that your organization forgets to define its current processes.
Successful ERP implementations are not driven by software but by business processes – namely the current state business processes that offer your organization competitive advantage. The “best practices” promoted by an ERP vendor are not necessarily best practices for your business. Rather, they are best practices for that particular software package or industry vertical and they likely will not contribute to your organization’s competitive advantage. Think about how many other organizations are using that same software and those same “best practices!”
Before selecting ERP software, your organization should define current state business processes and high-level business requirements without regard to specific software functionality. This helps you identify process gaps and non-value added work and lays the groundwork for business process reengineering. Based on current business processes, your organization can use a business blueprint to design the architecture of future state processes and guide software selection, configuration and customization. Blueprinting should be performedat a technology-agnostic level that does not yet address how processes will be completed within a specific ERP system.
Mapping current state business processes drives every phase of implementation from selection to business process reengineering to organizational change management. While organizations should let go of inefficient and non-value added business processes, they should keep the current state business processes that work. To learn more, watch our free, on-demand webinar, Business Process Reengineering: A Key Component of ERP ROI.
There is nothing magical about “lean manufacturing” or “lean thinking,” yet the adoption of lean practices can bring companies huge benefits in competitiveness and profitability. Lean methodology uses pragmatic, proven tools and techniques to systematically identify and eliminate different types of waste within business processes.
The application of lean principles during an ERP implementation results in significant cost savings, improved quality and enhanced delivery within manufacturing processes. Lean concepts and methodology can be applied to service and administration processes as well.
To apply lean manufacturing to business processes, organizations should adhere to the following five principles:
Identify what creates customer value (from the customer’s perspective)
Identify the different steps within the process chain
Streamline the processes
Produce only what is consumed by the customer
Strive for perfection by continuing to identify and remove waste
2019 Top 10 Manufacturing ERP Systems Report
Find out what ERP vendors made the Top 10 list this year!
One objective of lean manufacturing is to shorten the amount of time to process a customer payment from the time of order. This is achieved by first identifying and then removing waste steps within a standard quote to cash process. Potential areas of manufacturing waste, or “muda,” include:
1. Over-production of material: Manufacturing material before an item is required can lead to overproduction. It’s important for companies to practice ‘just in time’ vs. ‘just in case’ inventory management. Schedule and produce only what is necessary and needed to ship immediately.
2. Excess inventory: Work in progress (WIP) is a direct result of overproduction and waiting. Excess inventory tends to mask production floor issues and can result in increased lead times, minimized production floor space and decreased communication. Create a seamless workflow between work centers to help minimize the amount of WIP inventory on the production floor.
3.Transport time: Transporting product between processes adds no value to the product, and can result in the overall deterioration of the product. Map out product flows to determine which processes belong next to each other.
4. Processing time: Companies tend to use larger, more expensive equipment to perform simpler tasks. Invest in smaller, more flexible equipment when possible to reduce high asset costs, reduce manufacturing cells and combine steps within a process to gain efficiencies.
5. Wait time: Wait time occurs when goods and materials are not being processed. One hour lost in a bottleneck process results in one hour lost in overall output. Link processes together so one process feeds directly into another process to reduce wait time.
6. Operator motion: Operator motion refers to physical actions such as stretching, bending, pulling, walking, lifting and reaching required of operators within a process. Tasks that may require such physical motion include machine set up and the movement of product across the production line. Document, analyze and redesign processes to eliminate excess movements, gain improved efficiencies and reduce overall labor costs associated with the process.
7. Poor quality: Quality defects that result in rework and scrap can have a high cost impact on an organization. To reduce quality defects within a process, focus on the six areas of waste identified above and invest the time and effort required to engage in ongoing continuous improvement activities.
Lean manufacturing is a methodology that can be applied to ERP implementations in both large and small organizations. It is a mental approach to work that uses a defined set of principles and focuses on removing waste. One improvement gained leads to another improvement opportunity identified. Lean thinking is not about the destination but rather the journey to continuous process improvement.
This 60-minute interactive webinar will explore the ways that organizations can be more effective in addressing the people and organizational aspects of their ERP implementations. The webinar will be hosted by Eric Kimberling, managing partner of Panorama Consulting Solutions, an independent ERP consulting firm.
The webinar will cover the following: •Overview of common people and organizational challenges of average ERP projects •Best practices in ERP organizational change •Things to consider in your ERP organizational change management plan •Common challenges for global and multi-site ERP implementations •Question and answer session
This session is ideal for those that are either in the process of or are about to implement an ERP, CRM, or enterprise solution.
Business Process Reengineering can have different meanings to different organizations. Some have found great success by using BPR/BPM, while others have put it on the back burner. How do you feel about it? Take a moment to vote in our poll and then check back to review overall results.
Earlier this week, we kicked off our first ERP Boot Camp and Vendor Showdown of 2014. We have a number of attendees and ERP vendors from across the globe with us here in Vail, CO, so we have had a chance to have some good discussions with companies about to implement ERP systems in their respective organizations.
Based on our sessions and conversations so far, here are five key takeaways that we’ve learned from the various attendees:
1. Planning is critical to ERP implementation success. It was interesting to hear how many of the participants are eager to learn about how to jumpstart their implementation planning process. More specifically, many are looking for guidance on how to develop a solid and complete implementation plan, as well how to consider all the key activities required to make their projects successful. Rather than myopically focusing on the technical activities of an ERP implementation project plan, attendees seem to understand the need to incorporate key business activities into their plans as well, such as business process reengineering, organizational change management and other key dimensions that most system integrators and ERP consultants are not typically well versed.
2. There are many strong ERP vendors in the market. This year, we combined our traditional Boot Camp content with additional tracks of ERP vendor demonstrations for those attendees that had yet to choose an ERP system for their organization. Attendees are able to see overview demos from vendors such as SAP, JD Edwards, Epicor, Infor and a handful of other solutions. These sessions underscore the fact that there are many viable ERP software solutions in the market and revealed how technologically advanced and flexible ERP systems can be, regardless of your specific business needs or what industry your organization may be in.
3. There are many lessons to be learned from ERP failures. One of the common themes we heard in Monday’s opening session is that project teams are eager to learn from the mistakes of others. In particular, many have indicated that they look forward to today’s session covering lessons learned from ERP failures, which outlines some of our experience and findings from acting as expert witnesses in some of the highest profile ERP lawsuits in the industry. Perhaps more than anything, participants look forward to the opportunity to understand where others have gone wrong, how that contributed to their failed ERP implementations, and what they can do to avoid the same pitfalls.
4. Understanding the importance of as-is and to-be business processes. Several of our attendees were very interested in understanding the appropriate approach and timing for addressing business processes during their ERP implementations. With the various conflicting viewpoints in the industry on how to handle business process reengineering, it can be challenging to determine the best approach for your organization. A few of our Boot Camp sessions covered how and when to facilitate business process reengineering, how to incorporate Lean Six Sigma into an overall ERP implementation, and how to appropriately define and prioritize business requirements during the ERP selection stage of a project.
5. User adoption and organizational change management is critical to success. It was interesting to see how many attendees expressed concern that user adoption and organizational change management would be one of the biggest challenges of their ERP implementations. Given the fact that most tend to overlook or downplay the importance of organizational change management, it was refreshing to see the level of interest and focus on this important topic. Some of yesterday’s and today’s sessions dive into the specifics of organizational change management in more detail as well.
We still have a full day of content to cover today before wrapping up ERP Boot Camp and Vendor Showdown but these are some of the initial takeaways and lessons we’ve observed so far. It will be interesting to hear some of the additional lessons and discussions from today’s remaining sessions.
Learn more by downloading Chapter Six of An Expert’s Guide to ERP Success.
Achieving a successful ERP implementation is never easy but it is near impossible when an organization is not on the same page as its ERP software vendor or systems integrator (SI). Implementation contracts are generally clear-cut and comprehensive but it is not unusual for third parties to overlook critical details.
An organization should ensure that its implementation contract addresses who is responsible for ERP critical success factors such as project management, data migration, customization and organizational change management. Some integrators offer fixed-bid implementation contracts in order to help organizations manage cost and risk but ultimately, it is up to the organization to plan ahead and define its business processes well enough to avoid unforeseen costs and keep its project within budget.
The table below illustrates what Panorama typically sees included in ERP implementation scopes, broken down by what is usually expected of third-party integrators and implementing organizations:
Some organizations choose to hire an outside party to provide independent oversight and ease the burden of ERP implementation. Panorama’s independent ERP consultants provide independent verification and validation (IV&V) to clients in order to objectively monitor their ERP project and position them for success.
While the success of an ERP implementation is dependent upon the efforts of the SI and other consultants the customer contracts with to assist, it’s the organization that has to know its business processes well enough to train end-users, manage risk and guide teams in developing the enterprise solution to best support the critical functions of the business. Ultimately, attaining the highest ROI from an ERP system is in the hands of the customer.
Almost all project management disasters have a common pathology. Even if the participants are well-intentioned, the same issues surface in the after-action reviews of failed projects. Poor project management is composed of seven common sins that organizations should review before and during a project to avoid ERP failure.
Envy. The first deadly sin is a weak software evaluation and selection process. Organizations often select ERP software based on price, professional/personal relationships or envy (e.g., “That’s what our competition uses.” Weak software selection usually stems from poor requirements definition, a misunderstanding of software functionality or poor role definition between client and vendor. While most failed ERP implementations have other more severe issues than those related to software, poor software selection is often a contributing cause.
Pride. The second deadly sin is having unrealistic implementation expectations. ERP implementations always seem to take more time and money than initially planned. If the implementation is complicated by multi-site or multi-organizational requirements, reigning-in expectations is vital. Clients and vendors often lie to themselves and say, “Our ERP solution will be 100% ‘out-of-the-box’ with minimal training and no software configuration or customization.” While this is a way to slice time and budget off the project, a sober and stern assessment is critical to shaping expectations.
Avarice. The third sin on the road to perdition is unclear business requirements and greedily defining requirements by site rather than across the organization. Disastrous projects usually follow a predictable path so heed the warning signs before it is too late. Business processes need to be consistent, locked-down and agreed upon across the organization in the early stages of the project, for it is the foundation of the hard work to follow.
Sloth. The fourth sin is a lack of executive sponsorship. If the executive team is taking a hands-off approach and pushing responsibility down without authority, the project is destined for failure. Without executive participation, decisions are slow or nonexistent. An ERP implementation without strong leadership tends to have infighting and internal misalignment.
Gluttony. Too much customization is a bad sign. A good rule of the thumb is that your organization should not have more than 10-15% of its requirements as customizations. You want to implement ERP, not create your own custom software.
Lust. Poor risk management takes the number six spot and never is absent from a failed ERP implementation. Struggling project teams tend to have overly optimistic (lustful) goals and nonexistent mitigation plans or risk management because there is no room for these items in their scope, milestones or go-live dates. When the go-live approaches, the team is left with an untested system, inadequately trained end-users and a preoccupation with going live despite assumed risks. An ERP project team should expect things to go wrong and take longer than originally planned. Although your project budget and timelines may move to the right, it is a much more palatable position to have the time and money to deal with issues rather than having zero project safety margins.
Wrath. The ugliest stepsister of the seven deadly sins is poor or nonexistent organizational change management – resulting in end-user wrath. Hardnosed executives may dislike organizational change management and dismiss it as “touchy-feely” or “paying for hugs,” but this could not be further from the truth. Change management is the foundation and scaffolding that supports leadership, both vertically and horizontally. It prepares the users for the inevitable change and helps answer the question, “What’s in it for me?” A lack of change management not only breeds friction or outright resistance, but often leads to excess customization and a poor understanding of project goals. Of all the tools in the ERP Devil’s toolbox, poor change management is the nastiest knife in the kit and inflicts the most damage.
While it is tempting to heap all the blame on the project manager, a failed ERP implementation has plenty of blame to go around. With indifferent executive sponsors, disinterested or disenfranchised project team members and overzealous budget cutters, it is not uncommon for a project to fail.
A failed project is not a complete waste of time. Often the lessons listed above are burned deeply into the psyche of team members and are not repeated on future projects. As a wise man once said, “Most people learn from bad experiences, but wise people learn from other’s bad experiences.” Avoid the seven deadly sins of poor project management and you will save your project from failure.
When we work with smaller to mid-size organizations – especially clients in the manufacturing and distribution space – we find a lower tolerance for overly complicated ERP software selection or implementation processes. Indeed, executives at these no-nonsense, meat-and-potato types of organizations built and grew their companies by providing outstanding customer service, superior operational excellence and unrelenting quality. Not surprisingly, these types of companies are not satisfied with the status quo when it comes to their ERP implementation.
Looking even more broadly across all organizations implementing new ERP systems, it is clear that most find a way to overcomplicate things. In fact, according to our 2013 ERP Report, roughly two out of three organizations experience some sort of material operational disruption at the time of go-live. In other words, despite all their efforts to build great organizations, most leaders find that they are not able to do something as simple as ship products or close the books when all is said and done with their ERP implementation.
It doesn’t need to be this way, however. Just as startups are finding that traditionally cumbersome business planning exercises are futile and overly complex, smaller organizations are leaning toward more pragmatic approaches to their ERP systems. By injecting proven business practices and common sense into their ERP initiatives, our clients have found that they can “cut through the fluff,” so to speak, to make their implementations more successful.
Below are three examples of how organizations can reduce the complexity of their ERP implementations and ensure more of a lean initiative instead:
Prioritize your business processes. New ERP systems may help automate most or all of your business processes but that doesn’t mean that all processes should be treated equally. Instead, when it comes to deciding which areas to engage in business process reengineering, it is important to segregate between your core competitive differentiators and those functions that aren’t unique to your business. Even though most business process reengineering efforts should focus on the former, too many organizations get tripped up by trying to overanalyze business processes that don’t add much end value to the organization. This typically leads to higher complexity, time, cost and risk.
Focus on incremental change rather than too much change at once. In addition, many executives and IT leaders fear that ERP implementations are their one and only chance to make lasting improvements to the organization so they end up trying to change too much all at once. For example, we’ve seen traditionally lean clients try to bite off migration to a shared services model or standardization of global business processes – at the same time they are trying to adjust to a new ERP implementation. Unless you are a large organization with sufficient resources and tolerance for complexity, this is more likely to spread resources too thin and increase risk than it is likely to succeed. Instead, our mid-size clients often find success by phasing their implementations and rolling out new ERP software that is imperfect but a good start toward the incremental improvements they are seeking.
Recognize that more than anything, people will make or break your ERP implementation. Last week, I met with a mid-size distribution company in the northeastern US that had enjoyed successful ERP and CRM implementations in the past. Their secret to success? People. Most organizations tend to focus on less important things like the software, data, reports or technological bells and whistles, but successful organizations understand that people are the key to success. An effective project team and organizational change management strategy are both critical to ensuring this people side of the equation is adequately addressed.
Lean ERP implementations aren’t for everyone. Larger and more naturally complex organizations may benefit from the traditional “big” ERP implementation approaches of the past but for the most part, smaller and mid-size companies don’t have the stomach or patience for these types of initiatives. Just as the world of entrepreneurship tends to be gravitating toward “lean start-up” models that cut through the red tape of over-planning and over-analysis, small and mid-size companies are increasingly looking for the same of their ERP implementations.