ERP failure can include anything from operational disruption to cost and schedule overruns to a lack of benefits realization. Organizations experiencing ERP failure often file lawsuits and hire attorneys to defend their cases. These attorneys then seek the help of an expert witness.
An ERP expert witness provides litigation support to attorneys representing software developers, system integrators or end-user clients. The expert witness works closely with attorneys to determine where the failure points lie within failed ERP implementations.
If you’re an attorney, software developer, VAR or end-user seeking a software expert witness, here are ten tips for finding a good one:
1. Look for an expert witness who is unbiased
Does the expert witness have any connections to software vendors or system integrators? If so, this should disqualify him or her from being involved in a case. This bias is not always revealed upfront.
2. Find an expert witness who has worked with both vendors and end-user clients
An expert witness who does not have experience with both, should be disqualified, as this may indicate bias toward particular clients.
3. Assess their testimony experience
Do they have the technical expertise to analyze a case accurately? Do they have experience being deposed, and have they given expert testimony before a judge or arbitrator?
4. Determine if they use an individual or team-based approach
Will one expert do all the work themselves? This comes down to a cost issue. There may be thousands of documents to review to find the root causes of failure, and you don’t want to pay the rate of the expert for work that a qualified analyst can accomplish.
5. Determine if the expert has previously been disqualified
Has your expert ever been disqualified prior to testimony? This is one of the first questions opposing council will ask, and if the answer is “yes,” then the expert will likely be disqualified again.
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6. Consider the amount of expert witness experience
How many cases has your expert worked on? If the answer is one (or fewer), you should question the expert to see how he or she holds up under intense scrutiny.
7. Find an expert who has consistent historical documentation
Does your expert have a consistent history represented in his or her CV, resume, expert witness listings, social media and other sources? Inconsistencies will be researched by opposing council and brought to light in deposition or testimony, which may result in disqualification.
8. Look for an expert with a history of publication
Has your expert been interviewed by reputable media sources? Has he or she personally published articles or whitepapers? Some experts will take another person’s work and represent it as their own.
9. Look for schedule flexibility
Often, deposition and court dates are not fixed. Is your expert’s schedule flexible enough to adjust to movements in times and dates by opposing council or the court?
10. Find an expert who is detail-orientated
Is your expert a detailed person who will dedicate the required time and effort to provide an exhaustive examination of the facts? Or are they a person who will improvise when faced with tough questions? Your expert needs thorough knowledge of the issues impacting the case.
Following these guidelines when looking for an expert witness will save you time and money in the long-run. While it takes time to investigate expert witness qualifications, your efforts will pay off when your chosen expert delivers a testimony that wins the case.
An Expert Witness Case Study
A state government agency experienced a failed software implementation and considered suing its selection and implementation partner. The consulting firm was tasked with replacing the agency’s tax collection systems, but project deliverables were delayed, and the project suffered from a lack of staffing. The project had also run overbudget and had poor project management.
The government agency engaged an expert witness to determine the feasibility of a lawsuit. Had the consulting firm met the contract terms? Was legal action warranted or were the delays and staffing issues within reason?
The expert witness team audited several thousand case documents to develop an analysis and argument for the legal team. The expert witness team determined the project delays were unreasonable, and the consulting firm hadn’t provided promised resources. Documenting their findings in a 70-page analysis, the team gave the agency confidence in their proposed lawsuit.
The lawsuit helped the agency recover tens of millions of dollars in lost business benefits and consulting fees.
The government agency was successful because they hired an expert witness team as opposed to a single expert. The team had a breadth of experience working for both plaintiffs and defendants and had significant selection and implementation experience. This is the type of team you need when your ERP implementation fails.
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One of the high points of any digital transformation is the moment you’ve decided to replace your old legacy systems and consider ERP implementation.
During the software selection stage of a project, chances are you’ve evaluated and maybe even already selected new systems with the potential of improving your business and making employees’ jobs easier. You’ve also likely come to the realization help is on the way and you can finally move into the 21st century with your enterprise software.
All this excitement and momentum can be a good thing and it’s important to have a solid plan on “how” to move forward. Too often, companies let the project momentum speed towards implementation without first assessing the situation, assembling a realistic implementation plan, corralling resources and doing a number of other things that need attention prior to commencing the implementation.
To position you and your team for success, here are the top five things you should do prior to starting your implementation:
1. Validate the scope and timing of your ERP software purchase
Once you’ve decided on the best software solution(s) for your organization, it’s important to validate what exactly you’re purchasing. Too often, companies experience a disconnect between the software viewed during demos and the ones purchased via your software. Be sure you are purchasing the right modules, bolt-ons and user licensing types for your organization. Remember, you don’t have to buy all the software up front; you can always negotiate the timing of the purchases to coincide with your deployment schedule. One way to navigate the complexities of an enterprise software contract is to enlist the help of an independent, third-party ERP consultant to help negotiate an agreement that makes the most sense for you. ERP consultants are keenly aware of current software pricing and price flexibility (think discounts) that may not be offered when buying direct from a software vendor or reseller.
2. Source Your Internal and External Implementation Project Resources
Your software vendor sales rep may want you to start your project right away since doing so will optimize their compensation, but it’s important you only do so once you have the right team in place. There are a number of business, IT and consulting resource considerations (internal and external) to be identified and sourced prior to beginning. Roles and responsibilities should be defined for the program manager, internal and external project managers, organizational change leads, business leads and a host of other roles.
3. Build a Complete Implementation Project Strategy and Plan
Software implementations require focus, effort and planning well beyond what a system integrator, vendor or VAR can provide so it’s important to develop an implementation plan incorporating all the critical components required for success. Some of these components will come from your software vendor and you will want to augment these with critical tasks outside the purview of most ERP vendors and consultants. For example, organizational changemanagement, business process improvement and program management are just three areas commonly overlooked. Be sure to enlist the help of agnostic, third-party consultants to help define/develop a well-honed implementation strategy and plan that’s the most suitable solution for your company’s unique situation.
4. Begin Key Implementation Critical Path Activities
Even though most ERP implementations take more time than expected, delays aren’t typically caused by technical or software issues. More commonly, there are other critical path activities delaying projects, even if the software is fully configured and tested. For example, issues related to people, business processes and data are much more likely to delay your project and create cost overruns than the software. It’s important to focus your early efforts less on software configuration and more on those critical path activities, such as data migration, organizational change planning and defining business process improvements.
5. Define your implementation project charter
Once all the above have been completed, a fifth area of focus should be to define a clear project structure and governance. Ensuring you have the right structure and controls in place, will enable you to optimize limited resources and maximize your ROI during implementation. A formalized project charter, including your plan, project roles, project governance and controls is the best way to accomplish this.
Considering most companies go ten or more years between major system updates or changes, ERP implementation experience is not usually a core competency. Recognizing this is not a weakness but a strength. An independent consultant like Panorama provides a unique value proposition. While clients often think of ERP consultants as software selection pros, the expertise goes much deeper. A few of the smart reasons for considering outside help include having a partner that can assist you with validating your overarching strategy, helping to predefine the business benefits, build the business case and help define KPIs. Enlisting the support you need during a complex ERP implementation can help you through the project, give you strategies to deal with the situation and give you a perspective you probably won’t otherwise have.
Over years of being an ERP expert witness, I’ve had the opportunity to examine, analyze and testify in court on all types of implementation failures.
I’ve been an expert witness for SAP implementations, Oracle projects,Microsoft Dynamics transformations and a host of other solutions as well. In addition to these expert witness engagements, we’ve also helped countless companies recover their failed implementations before they reach the lawsuit stage.
Having a front row seat to ERP disasters provides a unique understanding of what makes projects fail. More importantly, it helps us better understand what it takes to succeed in an ERP implementation. Rather than focusing on the negative failure points, it is often more constructive to look at the things that you should be doing to be successful.
Below are five best practices from our expert witness experience that will help you be more successful in your digital transformations:
Begin with realistic expectations
Many failed projects were caused by unattainable timelines and/or budgets, while our most successful clients begin with realistic expectations and adjusted them (as needed) during the project. ERP software vendors may not have (nor are they necessarily incentivized to attain) a realistic view of all the resources, tasks, budgetary line items and internal requirements to make your project successful. It’s important to create a realistic implementation plan, timeline, resource allocations and budget based on your company’s needs. This is an area that independent ERP consultants can help with.
Define and document your business processes and requirements as early as you can
Even though you may not yet have approval to move forward with your entire ERP project, it is important to define and document your business processes in as much detail as you can as early in the project as possible. If you’re able to do so during your evaluation phase, it will only help ensure you have a more complete picture of your evaluation criteria, while allowing you to begin implementing process improvements before the new system is implemented. At the very least, you should document in detail “future state” business processes before your functional and technical resources begin configuring software.
Invest heavily in organizational change management, training and communications
Each project failure I’ve been consulted on failed to effectively manage and prioritize organizational change management. This is no coincidence. Successful project teams realize that there is no such thing as over-investing in people, communication and training. The technical components are probably the least likely reasons for failure. An effective organizational change strategy should include organizational readiness assessments, change impact analyses, benefits realization and a host of other best practices. (Click here to download a white paper on organizational change management best practices).
Don’t hesitate to postpone go-live until your organization is ready
Successful projects don’t treat a go-live date as a “Hail Mary” pass at the end of an American football game. Instead, they are measured, deliberate, and focused on mitigating risk. Even with a realistic implementation strategy early on, you may still find yourself faced with a crucial decision: go-live before I’m ready, or do I delay until the organization is fully prepared? The only way to get to the right answer is to conduct an independent and agnostic go-live readiness assessment to determine the pros, cons, and risks of your pending go-live date. Too often the pressures of a predetermined go-live date or budget may cloud your judgment.
Remember this is your company and your project
At the end of the day, you own the result. It’s not your software vendor’s or your system integrator’s responsibility. It’s also not realistic to completely outsource your project to an outside party without the appropriate oversight, input and accountability. Yes, you should be able to rely on outside experts, but don’t be afraid to pivot if things aren’t going as planned.
An independent ERP consultant can be invaluable in offering up suggestions and/or concerns to keep you on the right path. An “outside” opinion can also be an effective support mechanism for your team, who has been working long and hard. They may benefit from complementary insights that can affect the end project result in a positive way.
I came to a revelation this weekend that today’s social media is the 21st Century version of the famed Speakers’ Corner in London. For those of you who don’t know, the original Speakers’ Corner is in Hyde Park. Speakers’ Corner was the first institutionalized venue for and is symbolic of free speech. So much so that not only are there venues around the world modelled on the original, but the phrase itself has entered the lexicon.
As an ERP Expert Witness I review cases of software ERP failures. Panorama Consulting Solutions receives enquires from law firms looking for someone to help them untangle the mess of a failed implementation. The scope of engagement can be as simple as asking for advice on a technical aspect, commentary as to the suitability of the application of a specific piece of software, a brief report or declaration, or even a report regarding the failure of a multi-million dollar, multi-year implementation. As you can tell, these engagements are all over the map in complexity.
I won’t bore you with the details of pouring over thousands of pages of documents, customer requirements, technical specs, contracts, statements of work and the never-ending supply of emails, but this is where the revelation came from. People continue to do things that don’t make sense, but they do them anyway.
What kicked off my desire to share my experiences with you? It was while reading an article in the Sunday paper that stated that after a 70-year absence, the 10th Mountain Division is returning to Colorado (in limited form – training with the Colorado National Guard). There is so much history with the 10th Mountain Division and why they should be here in Colorado (sorry, but Fort Drum, NY is a paltry 600 feet above sea level, hardly the location for ‘mountain’ conditioning comparing Camp Hale at 9,200 feet). The story here? Why did the Army move the 10thMountain Division to upstate New York? To me, it doesn’t make sense, but they did it anyway.
Why is this relevant? The same behavior that repeats itself before, during and after the failed implementations that we examine. Common sense doesn’t prevail, people lose sight of the end goal and issues are compounded when mistakes are made, ignored, missed or hidden. More of that in another blog but it was all these ideas floating around in my head that has compelled me to start this blog.
Now to end with a phrase from the famous Speakers’ Corner, “Thanks for listening, I’ll get off my soapbox now…”
Contrary to the beliefs of many, an ERP implementation is far more than a large IT project. It affects stakeholders in every functional area, and if it fails, it has dramatic consequences throughout an organization. With that said, an ERP failure is not unlike a car crash. Both are disasters that leave trauma and retrospection in their wake.
Despite this, there are notable differences between a car crash and an ERP failure that provide important lessons on mitigating risk in your ERP implementation. Heed these lessons and you will avoid the mistakes that lead to ERP crashes.
1. A car crash happens suddenly. In most cases, car accidents occur in an instant and have little or no warning. Not so with an ERP failure. In virtually all cases, ERP failures are preceded by numerous red flags over the course of months or even years. Warnings such as a lack of executive or employee buy-in, inadequate change management and unrealistic deadlines are often present leading up to an ERP failure. Identifying and addressing these warning signs are integral parts of a successful ERP implementation.
2.In most car crashes, one or two individuals are culpable. In an ERP implementation, there are many parties involved that all bear part of the responsibility for project success. Examples of parties with responsibility in an ERP implementation include ERP vendors, system integrators, third party consultancies, and of course, teams from the organization itself. While the ultimate responsibility for ERP failure may lie more with one of these stakeholders than others, being vigilant of risk arising from one party is a duty shared by many. ERP failure is often attributable to failures in communication between many individuals. To avoid this, always ensure that roles and responsibilities among project stakeholders are defined and clear, and channels of communication are established and open.
3. Car crashes are sometimes the result of mechanical or system failure. A faulty computer in a vehicle may lead to a crash (or a recall), but this is rarely the case in ERP failures. In virtually all failed ERP projects, the technology is not to blame. Mismanagement of ERP implementations is a far more likely culprit than a problem with the system itself.
4. In most car crashes, emergency response is imminent. In many car crashes, help is on the way to preserve life and limb as well as to clear the street to allow the regular flow of traffic. No such guarantees exist in ERP failures. Coordination of recovery from an ERP failure is rarely as efficient as emergency response to a car crash, as there is no precedent for these situations within a given organization. This fact makes early identification of project risk all the more critical.
5. If another driver is at fault, they foot the bill. Assuming the driver at fault has insurance, the financial consequences for a car crash are generally born by the culpable party. This is not a sure bet in an ERP implementation. Even if the third parties involved are contractually liable for certain points of failure, significant financial damage is always suffered by the organization itself. When ERP failures do lead to litigation from organizations seeking recompense from partners who failed to deliver, damages awarded often do not approach the true financial cost of ERP failure.
While a failed ERP implementation may have a lot in common with a car crash, ERP failure is much more preventable. If you take away one lesson it should be this: prevention is always less costly than recovery.
For anyone that has seen an episode of the television series “House of Lies,” it paints a disturbing (yet at times entertaining) picture of the consulting industry. Although the show strives for a strong shock-factor, it does underscore the potential risks of ethically questionable practices when hiring consultants to help with your ERP implementation.
I have also spent time researching and reading about fraudulent activities in the industry, typically in the context of providing expert witness testimony to high-profile failures and lawsuits. In these cases, we are hired by attorneys looking for an objective and independent view of what went right or wrong in the ERP implementation in question, and unfortunately, we often find that shady consulting practices are a root cause of the failures. While the issues may not always entail something as extreme as flat-out fraud or misrepresentation, there are often signs that the consulting firm or system integrator in question did not have the client’s best interest in mind. For example, system integrators and traditional ERP consultants are notorious for peddling the products that provide them the most lucrative kick-backs or solutions that aren’t best for the client but somehow line their own pockets.
Some consultancies look for “proxies” to conduct phone screenings on behalf of more junior and less-qualified consultants in order to win the business, by over-billing and receiving kick-backs for recommendations made to their clients. While these behaviors may not be the norm, there are certainly enough real-life examples to make the stomach of any CIO or CFO turn.
Most organizations do not have the internal competencies, bandwidth or methodologies to effectively manage their own ERP software initiatives and need hardworking and ethical consultants to lead the way to ERP success. So what can be done to avoid these types of problems? Here are a few tips to uncover the warning signs of ERP consulting deception:
1. Ensure proper project governance and controls. With each and every one of our clients, our team conducts weekly project reviews to review the project plan, actual versus budget costs to date, resource requirements, critical decisions required to move the project forward, and a host of other components designed to provide proper project governance. These project controls are crucial to not only ensuring that your consultants are staying honest, but so that you have complete visibility into the progress, issues, costs, and risks of the project, along with control as to the overall direction of the project. Any organization hiring consultants should ensure that these controls are in place.
2. Assess your consultant’s ERP selection and implementation methodologies. Consultants are a lot less likely to go rogue when they have very clearly defined consulting processes, methodologies and standards in place. This goes beyond the typical ERP consultant’s PowerPoint deck outlining a fancy methodology acronym, but it includes clearly defined steps in the process that have ultimately been fine-tuned over years of experience in the ERP systems space. Whether you are evaluating or implementing ERP systems, you want to ensure that your consulting team is following a best-practice and repeatable framework to ensure you’re getting the quality of services you deserve. This is exactly what we at Panorama provide to our clients, as an example.
3. Provide checks and balances. Another crucial component to uncover and avoid potential fraud is to ensure the project is being reviewed regularly. Many of our clients, especially in the government and public sectors, hire us to provide independent verification and validation services to ensure that their technical system integrators are performing to expectations and best practices. Even for our own consulting engagements where we are providing the entire soup-to-nuts management of a client’s ERP initiative, we build in stage-gate reviews into our consulting processes, which are conducted by someone other than the day-to-day consultants on the project. This ensures that checks in balances are in place and that our clients leverage the broader experience of our entire firm.
While it is impossible to completely eliminate the risk of ERP consulting fraud, these are just a few tips to help you uncover and/or mitigate the likelihood of shady behaviors from your consultants. While good ERP consulting firms are hard to come by and are important to leverage where needed, it is important to manage those resources just as you would your own employees.
The last year in the ERP industry has been an exciting one, with plenty of advances, changes and opportunities for improvement. As another year winds down and we prepare for the holidays, it is helpful to look ahead at what we think will be in store for the next year.
We may not be able to predict the future with 100% certainty, but there are a number of existing and emerging industry trends that will affect potential ERP buyers and implementers in the next year. Below are our top 10 predictions for the ERP industry in 2016:
1. Classification of Tier I ERP system will become obsolete. Although the systems themselves may not become obsolete, the definition of and difference between Tier I, Tier II and Tier III ERP systems certainly will. There are simply too many options and sophisticated technologies in the market to think that the big 3 incumbents (SAP, Oracle and Microsoft Dynamics) are the only packages capable of addressing the needs of large, upper mid-market and high-growth organizations. Even the biggest and most complex organizations have a multitude of options at their disposal. Our classification of Infor as the new Tier I system earlier this year was the first domino to fall in the demise of this dated and arbitrary classification scheme.
2. Increasing adoption of ERP systems among small and mid-size organizations. Up until recently, larger enterprises had a big technological advantage over their small and mid-size rivals. However, new SaaS ERP software and mobile technologies are becoming more cost-effective and easier to deploy, which is causing the smaller and mid-market to catch up to their Fortune 500 counterparts. Gone are the days where a company needs millions of dollars to deploy new enterprise technologies, which will make ERP systems, CRM software and other business technologies accessible to most.
3. Cloud ERP becomes a non-issue. The buzz behind cloud ERP systems is finally starting to die down – largely because most ERP vendors and third-party hosting providers have provided plenty of affordable options for companies wanting to migrate to the cloud. Research and data outlined in our 2015 ERP Report suggests that this trend will continue for the foreseeable future, but the big difference is that it will become a normal and accepted part of most ERP systems rather than a trendy buzzword hyped by industry analysts. The question is no longer about whether or not the cloud trend will continue, but it is instead about which organizations will move in this direction and which ones won’t.
4. High-profile ERP lawsuits expose the causes of ERP failures. Our ERP expert witness practice is growing like gangbusters, which is a reflection of the state of ERP implementations. Too many are failing and getting mired in lawsuits, many of which are very high profile and will expose the industry’s shortcomings. The parties and issues involved in these lawsuits are likely to underscore the reasons why ERP implementations fail, and more importantly, what can and should be done to avoid them.
5. Increasing gap between ERP implementation success and failure. ERP failures do not appear to be dissipating anytime soon. On the other hand, there are still plenty of success stories out there. The difference between the two extremes, however, will continue to become more apparent. The successful ones will do all the right things – effective project management, business process reengineering and effective 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 be even more extreme.
6. ERP project recovery becomes a hot skill set. As ERP failures continue to accelerate, those that can recover troubled ERP implementations to get them back on track will be in high demand – perhaps even more so than traditional project managers. It requires a unique skill set that can get to the root cause of what is causing the failure, which is why our project recovery services are in such high demand at the moment. Add to the fact that ERP failures are not likely to slow anytime soon, and it’s easy to see why these skills and toolsets are so hot right now.
7. Best of breed makes a comeback. For the last several years, single ERP systems with very little integration to other third-party systems have been the name of the game for most organizations. However, the increasing ubiquity of Salesforce, Workday and other functionally-focused enterprise systems has provided viable alternatives for companies looking for solutions that aren’t trying to be everything to everyone. Look for these best of breed solutions to take an increasing share of the market from incumbent ERP vendors.
8. SOA and technology integration becomes cool again. I’m not sure how cool it ever was – and there are certainly plenty of organizations that have been burned by trying to integrate a hodgepodge of ERP systems – but there are plenty of tools that are making this a feasible option for many. Given the rise of best of breed systems (see prediction #7), integration-related skillsets and toolsets are becoming important to a growing number of organizations and IT departments.
9. Customization becomes more accepted by the mainstream. For as long as I’ve been in the ERP industry, the word “customization” has terrified CFOs, CIOs and other executives. As outlined in our 2015 ERP Report, 9 out of 10 ERP implementations require some sort of customization in order to meet business needs, suggesting that this is a hard risk to hide from. Current ERP systems are making this concern a more acceptable and less risky form of implementation. It’s a slippery slope for certain, but one that can be managed in small doses.
10. Techies begin regaining control of ERP implementations. The previous three predictions are in many ways shifting the balance of power back toward the technical types and away from business stakeholders. Technical complexity typically increases dependence on IT and creates the risk of underemphasizing the business transformation aspect of ERP implementations and other enterprise software initiatives. This is not a welcome trend by any means since it escalates the risk of failure and runs counter to the fact that ERP implementations are more successful when treated as business transformations, but it is the reality of the current technological landscape outlined above.
The ERP industry is constantly changing, so understanding the dynamics at play are important in helping navigate and prepare for success. The above trends are the 10 biggest things to keep in mind as you prepare for your ERP implementation in the new year.
“Worst case scenario.” Those are never the words you want to hear when starting a new ERP implementation. However, based on how many system integrators and implementing organizations run their initiatives, these implementations too often lead to moderate or extreme failure.
In unfortunate cases, these implementations turn to lawsuits. Over the last several years, I have had a front row seat to over a dozen of the highest profile lawsuits in the world as an ERP expert witness – and some interesting lessons come along with our forensic reconstruction of what went wrong in each of these cases.
Below are five things to keep in mind as you’re building – or defending – a potential legal case involving your ERP implementation:
A successful case begins with avoiding ERP failure in the first place. Of course, the most effective case is one that doesn’t get escalated to attorneys in the first place. Planning a project with reasonable assumptions, expectations, resources, budgets and both team roles and responsibilities will dramatically decrease the likelihood that your implementation ends up being told as a story in the courtroom. Most importantly, it is important to recognize that as the company implementing new enterprise technology, you and your team are ultimately responsible for the success or failure of the project.
ERP failures and lawsuits typically come down to issues with people and processes – not technology. Many cases that we’ve been involved with attempt to focus on technical issues such as whether or not the software “works” or whether or not the new system could handle the data requirements of the business. However, these issues rarely make or break an implementation. Instead, these are more commonly symptoms of deeper root causes related to people and processes, such as failure to engage in effective business process reengineering or organizational change management. Whether you are implementing SAP, Oracle, Microsoft Dynamics or any variety of Tier II ERP systems, your chances of success are likely to have little to anything to do with the software itself.
Organizational change management is a key issue in every ERP lawsuit. Speaking of organizational change management, this is an area that is commonly one of the most important issues in a case – if not the most important. In every case that I have provided expert witness testimony on thus far, a project’s failure to address the people side of the equation is one of the key root causes of failure, which often leads to a domino effect of other issues throughout the implementation. Whichever side of a lawsuit that you may be on, it is vital to carefully explore what may have gone wrong in your OCM initiative.
Both the implementing organization and the system integrator are typically at fault. You typically hear two extremely different stories of what went wrong. It goes like this: company hires vendor or system integrator, project fails, company tries to pin all blame on vendor or system integrator and then the system integrator attempts to deflect blame back to the implementing company. While it takes two parties to make an ERP implementation successful, it is possible that a project can fail mostly due to the acts of one party or another.
Recognize that ERP failures don’t happen overnight. It can be tempting to blame an ERP failure on a single, catastrophic event, but in reality, ERP failures brew for quite some time before they reach the breaking point. While managing your project, look at all the little things – which in fact are big things – that slowly kill your project. And if you have reached the point of litigation, fully analyze and understand all the little things that added up to one giant failure rather than honing in on one singular cause.
There are many more lessons to be had from these cases, but these five tips will help ensure your organization is able to build a strong case, or better yet, avoid failure in the first place.
A successful ERP implementation relies on the engagement of many stakeholders, but the involvement of executive-level leadership is especially critical. Considering the vast number of variables that affect an ERP implementation, effective governance from the very top of an organization is an absolute must. A tried and true method for organizing and deploying executive involvement in an ERP implementation is organization an executive steering committee. This group, which is generally comprised of executive-level individuals from ERP stakeholder functional areas, provides several key functions that are integral to ERP implementation success. So what exactly is the role of an executive steering committee? There are several answers to this question all of which are correct:
Role #1: To provide direction and alignment. Perhaps the most critical role of the executive steering committee is overall leadership. Effective ERP implementations are aligned with organizational trajectory and culture. The executive steering committee ensures that a project stays on course and achieves the desired benefits through championing the project within the organization. The committee helps secure buy-in at all levels of the organization and helps drive project branding. In this way, the ERP project becomes an extension of the enterprise itself, rather than a time-consuming obligation that gets in the way of regular operations.
Role # 2: To approve project changes and decisions. In a perfect world, ERP implementations would proceed as planned without ever needing course adjustments. Unfortunately, it is exceedingly rare that an implementation as large as an ERP project proceeds without hiccups. While proper planning and expectation setting can mitigate the need for extensive changes, the scope, budget and schedule changes that invariably occur require executive-level approval in order to be executed. This is also true of forward path decisions that have an effect on the entirety of the project. When an important decision needs to be made, it is escalated to the executive steering committee to ensure the best course of action for the organization.
Role # 3: To provide leverage for execution of strategies. Related to role #2 is the leverage that the steering committee provides as executives in the organization. When changes or strategies are proposed by a project team, the leverage of the steering committee can be a powerful force in efficient execution. A common example of this is securing resources such as subject matter experts (SMEs) for each functional area. Securing project time during a busy work day can sometimes be opposed by a given SME’s department manager. The executive steering committee has the clout to ensure that the right people devote part of their work day to the ERP project when necessary.
Although there are a multitude of other functions that an executive steering committee can provide, the above roles are the most common and arguably the most critical functions of the steering committee. Identifying, organizing and deploying the executive steering committee is a crucial component of a successful ERP implementation, and those organizations that pay necessary attention to this step will be rewarded for their effort. Learn more by watching our on-demand webinar, Lessons Learned From Best-in-Class ERP Implementations.
Written by Ian Doubleday, ERP Consultant at Panorama Consulting Solutions.
A few months ago, I wrote a blog about how effective ERP implementations are much like Subway sandwiches (read the original post here). As it turns out, I happen to be a big fan of both successful ERP implementations and Subway. Apparently, so do many of our clients, since this was one of our most popular blog entries over the last few months.
The follow-up question to that blog is this: if successful ERP implementations typically pull from Subway’s playbook on how to make sandwiches, then how can best be described? We know from the research outlined in our 2014 ERP Report that most ERP implementations take longer than expected, cost more than expected and fail to deliver expected business benefits. There are a number of ways to describe what leads to failed ERP implementations, but it can be difficult to summarize those “worst practices” in a simple way that the average layperson can understand.
With that in mind, one of the simplest ways to summarize ERP failure is to illustrate how they are different from a Subway sandwich:
1. ERP failures typically involve rushing into an ERP implementation without first defining what the business needs are. It’s awfully tempting to think that maybe – just maybe – the ERP software we are about to purchase will act as a silver bullet to help us facilitate our business process reengineering efforts. I get it. Having been through the ERP implementation process hundreds of times, however, I can say with confidence: “don’t do it.” How successful do you think your lunch would be if you were to walk into Subway and tell them to just give you whatever they felt like making for you? Similarly, today’s ERP systems are far too flexible to assume that they will provide clear direction on how your business processes should function, and companies that fall into this trap typically end up simply automating their existing business processes rather than clearly defining a new way of doing business. For this reason, some of Panorama’s most successful ERP initiatives have been the ones where we have spent time helping the client reengineer their business processes – long before they’ve even begun evaluating potential ERP systems.
2. Challenged ERP implementations typically put too much stock in ERP software “best practices.” You may be saying to yourself, “But you haven’t considered the fact that many ERP vendors have baked ERP best practices into their ERP systems.” This is another common misconception that is an unintended key contributor to ERP failures. This would be the equivalent of walking into your nearest Subway and asking them to make you the “best” sandwich as defined by the last 30 people to order a sandwich from that particular store. First of all, your company is surely and hopefully different from industry peers, especially as it relates to your competitive advantages, so you probably don’t want software functionality that everyone else is using. Secondly, and probably even more importantly, who is the all-knowing-definer of these so-called ERP best practices? Ask yourself whether you really want software consultants, that only know their specific functionality, to define how your business is going to run, or whether you would rather have a more technology-agnostic approach to redefining your business operations going forward. At Panorama, we typically attract clients that treat their ERP projects more as business initiatives rather than technology implementations.
3. Every ERP failure we have studied over the years severely neglected organizational change management. Yes, you read that statement correctly. In each and every single lawsuit that has retained Panorama to be the ERP expert witness in the case, we found that organizational change management was overlooked. Whether there was simply no organizational change management team in place, whether organizational change was myopically viewed as an end-user training exercise or the organizational change management consultants simply didn’t know what they were doing, each of these high-profile failures botched the “people” aspects of their implementation. Just as ordering a sandwich can be overwhelming to a person that doesn’t like making decisions, new ERP systems typically entail significant change and should be treated accordingly.
These are just a few ways that illustrate how ERP failures can differ from Subway sandwiches. To be successful, you need to be able to decide exactly what you want before ordering your sandwich, so to speak, and you also need to be prepared to address all the options you have. Successful ERP implementations may not be quite as simple as a quick lunch break, but some of these basic best practices will help ensure success.
Now that the New Year is upon us, many of our clients and industry peers are beginning to consider what they can do to make their ERP implementations more successful in 2014 and beyond. While many prefer to analyze case studies of successful ERP software initiatives, it is also helpful to learn from ERP failures as well.
Unfortunately, or fortunately, depending on how you look at it, there are plenty of ERP system failures to consider when looking for lessons from the field. Our 2013 ERP Report, for example, shows that a majority of ERP implementations take longer than expected, cost more than expected and fail to deliver expected business benefits. This is no surprise since many of the same ERP consultants that were contributing to failures ten or twenty years ago haven’t necessarily changed and are still making the same mistakes – just for different project teams at different companies. Further, we have seen several high-profile failures over the last year, including botched ERP implementations at organizations such as U.S. Steel, the State of Massachusetts and the State of Florida.
If we look under the hood of some of these failures, there are several lessons that can be learned from others’ misfortunes. This is perhaps the silver lining of failure: there are plenty of lessons to be learned. Below are three lessons we can draw from ERP failures:
1. ERP failures can be a good reminder that implementing is difficult. For implementing companies – and, in many cases, their ERP consultants – ERP failures can be a humbling reminder that ERP implementations are difficult. Too often, ERP vendors and consultants oversimplify and downplay the risks and complexities of ERP system initiatives. When an ERP initiative led by a high-profile and well-respected ERP implementer occurs – as is the case in most high-profile failures – it proves the humbling facts that ERP implementations are by nature difficult. Anyone who suggests otherwise is either in denial or doesn’t know what they are doing. Even with our experience applying our proprietary PERFECT Fit methodology to over 100 ERP implementations across the globe, the Panorama Consulting team is always in character about the fact that each ERP implementation is going to have its own difficulties and challenges.
2. CIOs and CFOs are generally more educated now than they were before. The proliferation of ERP failures has also helped CIOs, CFOs, project managers and other ERP project team members be more sophisticated in their understanding of ERP software risks and challenges. After all, just as open heart surgery has plenty of examples of patients that haven’t made it through alive, so too is the case with ERP implementations. (By the way, implementing new ERP systems is very similar to open heart surgery, in that it involves ripping out and replacing the “guts” of an organization.) Fortunately, many organizations are able to embark on enterprise software initiatives with their eyes wide open as opposed to naively failing to recognize or address the various complexities and risks.
3. Failure helps good ERP consultants be better. Good ERP consultants may be few and far between but those that are good at what they do are able to learn from their own mistakes and failures. For example, when hiring new consultants at Panorama, we prefer hiring those that have struggled, tripped up and recovered from past ERP implementations. Those that don’t have a few battle wounds under the belt are oftentimes dangerously naïve, which is the case with many of our competitors. Another example is the continuous feedback loop of our ERP implementation methodology: each year, we apply the collective experience and lessons of our dozens of ERP implementations and ERP expert witness cases over the past year to make the methodology even better than it was before. Just as ERP systems are constantly evolving, so too should the methodology deployed by your ERP consultants and internal team members.
These are just a few examples of the silver lining offered by ERP failures. If it wasn’t for Hershey, Waste Management, Lumber Liquidators, U.S. Steel and dozens of other publicized ERP failures and lawsuits each year, we wouldn’t be able to learn from the mistakes of others – and we would probably all be over-confident in our abilities at the same time. Indeed, our ERP expert witness practice helps the Panorama team be aware of the blind spots and risks associated with ERP implementations. It is these lessons that can make your ERP implementation more successful in 2014 and beyond.
Another year has nearly flown by already. In 2013, much in the ERP software industry stayed the same but plenty of things changed as well. In terms of things that haven’t changed in the past year, ERP failure continued rearing its unwelcome head among CIOs, CFOs and project managers. For example:
Both the states of Massachusetts and Florida recently announced high-profile failures related to their ERP and HCM systems.
US Steel spent hundreds of millions of dollars on their ERP implementation, which is now slated to run through 2016.
Panorama’s ERP expert witness practice has hit record levels of revenue and demand, which is a troubling indicator for the state of ERP implementations across the globe.
While the rate of ERP failure doesn’t seem to have subsided in 2013, there are plenty of positive and exciting changes that gained traction in the last year. For example:
As we predicted at this time last year, mobile and business intelligence are gaining steam.
SaaS and cloud solutions continue to enjoy increased adoption, although the hype has started to subside.
But that’s looking backward to what has already happened. How about next year? What does 2014 have in store for the ERP software industry? Here are our top ten predictions for the coming year:
1. ERP failures aren’t going away anytime soon. Unfortunately, and as mentioned above, ERP failures aren’t going away anytime soon. 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. Our growing expert witness practice is a good indicator of ERP failure rates and we see our growth in this area accelerating, suggesting that ERP failure rates are not slowing.
2.Buyers of ERP systems are becoming more educated. The upside of ERP failures is that they tend to educate (and scare) people about to embark on their own ERP implementations. Each SAP failure or troubled Oracle ERP implementation you read about serves as a case study of what not to do. In addition, there are plenty of free or inexpensive resources available to educate on how to make your ERP implementation successful. For example, Panorama’s 2013 ERP Report and our on-demand ERP webinars are good reference points for teams wanting to educate themselves before embarking on an ERP implementation.
3. Less abdication of responsibility for ERP success. As part of their self-education, CIOs, CFOs and ERP project managers are realizing that they are ultimately responsible for the success or failure of their ERP implementations. It may sound easy enough to delegate full responsibility to your ERP consultant, ERP vendor or system integrator but your implementation will succeed only if you make the correct – and oftentimes difficult – decisions related to your business. For example, if your ERP consultant isn’t delivering results, then fire them. If you don’t fully trust your ERP vendor, look at third-party oversight options. If you don’t want a hodgepodge of different consultants working on your ERP implementation, then hire a single throat to choke. These decisions can’t be outsourced to third parties.
4. Will SAP, Oracle and Microsoft Dynamics continue holding off Tier II competitors? Our Clash of the Titans 2104 report reveals that SAP, Oracle and Microsoft Dynamics have all done a good job of reversing previous years’ loss of market share to Tier II ERP vendors, such as Infor, Epicor and IFS. For the first time in over three years, the big three vendors regained some of the market share they had lost, which we didn’t anticipate. The Tier I vendors appear to have the marketing and sales machines but plenty of Tier II vendors now have private equity backing so it could go either way. I’ll be honest, I don’t have a clear prediction on this one but it will be interesting to see play out in the coming year.
5. Continued emergence of mobility and business intelligence. As companies look to get more out of their large investments in ERP systems, more will invest in mobile solutions and business intelligence software to get their ROI. More companies 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 increasing pressure in a shaky economy, which will put more pressure on their employees to provide decision-making tools and dashboards designed to support executives’ need for information, no matter where they are.
6.Convergence of ERP implementation, organizational change management and business process reengineering. It’s no longer a secret that lack of focus on business process reengineering and organizational change management is a key driver of most ERP challenges. As a result, successful organizations will realize that they need to bake these activities into their overall ERP implementation, rather than ignoring them or operating them in a silo. When choosing an ERP implementation partner, it is important to separate the ones with integrated and comprehensive implementation, business process and organizational change management methodologies. For example, Panorama’s PERFECT Path ERP Implementation Methodology fully merges these critical success factors with the more fundamental technical activities.
7. 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 simply 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 to provide options to the myopically-focused technical consultants that have historically cornered the market.
8. Shakeup among ERP consultants. The ERP consulting space is slowly changing – and for the better. Implementing organizations no longer have to choose between 1) software selection firms that don’t do implementation, 2) system integrators that provide functional and technical consultants but aren’t good at project management or organizational change management, or 3) manufacturing consultants that don’t really understand ERP implementations. Good ERP consultants should be able to provide all of the above and the ones that do are more likely to succeed than those that don’t.
9. Flaws in the ERP software industry will finally be exposed. The primary reason that I started Panorama in 2005 was because I saw opportunity to provide objective guidance in a sea of imperfections and shady practices. Although I don’t consider myself a jaded person, it is somewhat disappointing to see that many of these flaws are still very much real. Whether it’s contracts that increase risk for clients or “independent” consultants that take a cut of negotiated savings with ERP vendors (leading to vendors gaming the system), there are still far more pitfalls for our clients than we would like to see. In the coming months, look to us to provide an independent inside scoop on what these risks are and how to navigate them.
10. ERP success rates will increase. Despite the gloom and doom of ERP failures, those that are successful will actually be more successful than ERP implementations of the past. In other words, there will be more of a divergence between the successful and the not-so-successful ERP implementations. The good news is that while this trend won’t completely neutralize ongoing failures, they will demonstrate that ERP success is possible when implementation best practices are followed. This trend will also reinforce the fact that cheaper is usually not better when it comes to considering various ERP implementation options.
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 2014 ERP Report at the start 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.
At the beginning of an ERP implementation, no one involved wants or expects to get caught up in a lawsuit. Despite the fact that, according to our 2013 ERP Report,most ERP implementations take longer than expected, cost more than expected, and fail to deliver expected business benefits, most organizations commence their projects with the best of intentions. Other than the occasional CIO or CFO who is afraid of losing his or her job, not many are thinking about ERP failure this early in the project.
However, it is helpful to think about and understand the role and risk of ERP failure throughout the project lifecycle. This understanding will help you to mitigate potential and common risks by ensuring a “Plan B” is in place in the event that some of those risks come to fruition. From the onset of an ERP software initiative, it is very helpful to have the “plan for a worst case scenario” mindset of an attorney.
For example, many ERP failures and lawsuits involve instances of misaligned expectations regarding roles played in the project by both the implementing organization and the ERP vendor. The implementing company may expect that the vendor is going to take responsibility for activities such as data migration, business process documentation, training and other critical elements required for ERP success. However, these expectations may not necessarily be outlined in the contract and statement of work. If these expectations aren’t clearly outlined and understood in the contracts, things can get pretty messy if litigation occurs.
There are a number of pitfalls inherent in any project and a myriad of lessons that we’ve learned within Panorama’s ERP Expert Witness practice. When embarking on an ERP implementation, here are a handful of things to keep in mind to plan for a potential worst case litigation scenario:
Clearly define roles and expectations in your contracts. It may seem reasonable to expect that your ERP vendor will handle everything required to make your implementation successful, but you don’t want to assume anything unless it’s stated in your contract or statement of work. Remember that you are probably dealing with a sales rep – not an attorney – when discussing the needs of the project, so it’s up to you to make sure that expectations are clearly outlined in the contract. This is especially true if you have a fixed-bid or not-to-exceed engagement, in which case your vendor or systems integrator will have a negative incentive to take on additional work that might be required for a successful project.
Recognize that a successful ERP implementation is a lot less expensive than a lawsuit. It may look good on paper to skimp on organizational change management because you don’t think you need it or to gloss over business process reengineering because you assume the software will tell you how to run your business, but it’s important to remember that investing in these critical activities is a lot less expensive than pursuing or defending a lawsuit. Think of it as an insurance policy: the incremental cost and time associated with ERP critical success factors such as strong project management, organizational change management and business process reengineering is a small price to pay to make a project successful.
Remember that ERP vendors cannot fix your business. Even though ERP systems have the capability to transform your business, there is no magic button when it comes to implementation. Your executive team still has to decide how the business should operate, how much it will standardize, and how fast it needs to make decisions to keep the project on track. ERP vendors are capable of implementing software, but most are not good at transforming your business. For that transformation to happen, you need to invest in non-technical activities (such as those mentioned in point two) that involve ensuring the people, business processes and project are all on track for success. As stands to reason, these kinds of activities are typically outside the scope of most ERP vendors.
The beauty is that even though it is likely your project won’t go to trial, having these risk mitigation buffers in place will make your ERP implementation even more successful. Learn more by watching our on-demand webinar, Lessons Learned from Failed ERP Implementations.
Experiencing the sales cycle of a large, multi-million dollar ERP software solution can be stressful and overwhelming for most CIOs and CFOs. With large capital investments and careers at stake – along with a well-publicized slew of ERP failures in recent years – these purchases can be difficult to navigate.
Once the determination of the best ERP system for your organization has been made, the challenge swiftly evolves into difficulty delivering results in line with the expectations set during the sales cycle. Unfortunately for most implementing organizations, ERP vendors and sales reps don’t have a strong incentive to set realistic expectations while trying to close a deal, which is a key contributor to this misalignment. In fact, our ERP expert witness work has shown that improperly set expectations during the software sales cycle is one of the common triggers for ERP lawsuits.
So what’s a CIO, CFO or ERP project manager to do? The key is to educate yourself and keep your eyes wide open to what to expect during your ERP implementation. Here are three ways to better align sales promises with actual results:
1. Define a realistic ERP implementation plan and budget. According to our 2012 ERP Report, as well as our 2013 ERP Report being published next month, the majority of ERP projects take more time and money than expected. The most common and most simple reason for this variance is because ERP vendors and sales reps too often sell overly optimistic and unrealistic implementation scenarios. Most sales reps don’t understand what it takes to do an implementation right – and they’re typically nowhere to be found on the battlefield of their customers’ implementations – so it’s no wonder that they paint rosy scenarios to sell more software. The best way to set realistic expectations is to engage independent ERP consultants armed with quantitative data to better estimate implementation needs.
2. Don’t overlook the business case. Under no circumstances should you gloss over or downplay the importance of a business case. No matter how certain you are that a new ERP system is the right investment, no matter how sure you are that your organization has no choice but to purchase new software, and no matter how unreliable you think benefit projections may be, never skimp on the business case. The reason is simple: you won’t achieve what you don’t measure and you can’t make informed project investment decisions without a business case framework. I can’t tell you how many of our clients have regretted not creating a business case before or during their ERP implementations (despite our recommendations). Their regret stems largely from the millions of dollars of savings they couldn’t measure and the customization requests they couldn’t rationalize via an ROI estimate during implementation. If anything, every CIO and ERP project manager should create and manage to a business case for the self-serving purpose of demonstrating the impact the project had on the organization, not to mention the long-term business benefits that it will allow he or she to optimize.
3. Invest heavily in organizational change management and business process reengineering. Whichever software you’ve purchased – whether it’s SAP, Oracle, Microsoft Dynamics or any Tier II or Tier III ERP system – is going to work from a technical and functional perspective. Much less certain, however, are the people and process issues that derail most implementation teams. The success or failure of your implementation will likely come down to how well you address organizational change management and business process reengineering, so be sure to invest your time, resources, and budget accordingly. Finally, don’t fall into the “we’re just going to adopt the system’s best practices” trap. This approach sounds good in theory and is a brilliant sales message among ERP vendors, but it is fraught with risk and rarely works.
Of course, realistic expectations alone won’t make an ERP implementation succeed. Instead, it’s more like an ante required to play the game and have a shot at winning. These three tips will help you avoid the pitfalls that have led to too many failures in the past.
Two decades of experience in one industry is a long time, especially in an area as dynamic as the ERP software industry. Over the years, Panorama has helped many companies succeed in their ERP implementations, watched competitors struggle with the same mistakes time and time again, and helped clean up many messes along the way. Clearly, enterprise software initiatives are not easy, which is why there are both so many ERP failures and so many opportunities to make a positive impact in the industry.
In his book “Outliers,” which is about the variables that make exceptional performers in their respective fields, Malcolm Gladwell suggests that it takes at least 10,000 hours of “practice” to become an expert. Over the last 20 years, I’ve probably accumulated somewhere around three to four times that amount of experience in ERP implementation, selection, project management and benefits realization. When we add the similar experience levels of Panorama’s global team of ERP consultants to the equation, it creates a staggering body of expertise that you simply won’t find anywhere else in the industry.
So what are the lessons of this unparalleled individual and collective experience? Through our extensive research, experience and thought leadership, we have spent quite a bit of time defining these lessons and baking them into our standardized methodology and toolset. While it is difficult to summarize 20 years of experience into a single checklist, below are some of the overarching themes we have encountered over the years:
1. ERP implementations are about business, not technology. We pioneered this concept in our early thought leadership and methodologies and, as evidenced by most of our competitors making the same assertion, it has now become accepted as part of the mainstream. ERP systems change over the years – and they have changed dramatically since I started in the industry in the 1990s – but the business, process and people challenges have remained the same. At the end of the day, SaaS technologies, business intelligence, sweet integration tools and other technical considerations have little to no impact on ERP failures or successes. Instead, it’s the company’s ability to address (or outsource) organizational change management, business process management, project management and planning, and other business considerations that ultimately determine the level of success of an ERP implementation.
2. The devil is in the details of ERP methodologies. It’s one thing to say you have a methodology, but it’s the details (or lack thereof) in those “methodologies” that often kill ERP initiatives. From what we’ve seen in person and in our expert witness work, most ERP consultants claim to have methodologies in place, but very few have them defined and standardized the level of methodological detail necessary for success. While the gun-slinging, heavy-hitting, industry veteran may look good on paper, that individual experience is not nearly as important as the methodologies leveraged by the team. When I look at some of the enormous project failures that we’ve analyzed as ERP expert witnesses, they often involved some of the strongest consultants in the field. The problem was that these consultants lacked detailed, time-tested methodologies to leverage during implementation. And, ultimately, it is their absence that leads to the demise of too many ERP projects.
3. Organizational change management is arguably the #1 ERP critical success factor. It’s tough to identify the single biggest contributor of ERP success or failure, but if we had to make a single declaration, organizational change management is our top choice. You can find the perfect ERP system, design and configure it flawlessly, and test it to your heart’s content – but still have a failure on your hands because your organizational change management was inadequate. Unfortunately, 95-percent or more of ERP consultants focus too much on software configuration and basic system training without mastering the art of organizational change. Our PERFECT Change™ OCM methodology identifies and addresses the most critical components of organizational change management, which goes well-beyond the myopic system-focused approach of most consultants. Learn more about organizational change management in chapter six of my book, An Expert’s Guide to ERP Success (available for free download with registration).
4. Realistic expectations are key. Unrealistic expectations can prove fatal to an ERP initiative. For too many years, ERP consultants, vendors and VARs have oversold and under-delivered, creating expectation gaps that lead to bad decisions. For example, if a $1 billion global manufacturing industry is sold a bill of goods that entails a full implementation across the globe in nine months, we can tell you with 90-percent or more certainty that this project will fail regardless of any other mitigating factors. In these types of situations, CIOs and CFOs end up having to cut short-term costs to meet unrealistic time and budget expectations, which ultimately leads to project failure and increases long-term expenditures.
5. ERP thought leadership makes us better practitioners. We’re considered the world’s leading independent ERP consultants not only because we have hundreds of thousands of hours of collective experience in the field of enterprise solutions, but also because we demonstrate our level of expertise in our thought leadership on a daily basis. When you read our blogs, listen to our podcasts, or attend one of our live or on-demand webinars – and then compare our content to that of our competitors – it is clear that we know what we’re doing. So the two-part question of the day for organizations considering an ERP initiative is: how much does your chosen ERP consulting firm appear to understand ERP systems and do they lead the industry in their knowledge and expertise?
There are many, many more ERP best practices and lessons learned that we will continue sharing with you over the years, but the above five points serve as a good starting point. And given the fact that we are the world’s leading experts on the forefront of our industry, I’m sure these lessons will evolve over time.
Now that the holidays are over and the predictions for 2013 are in, we can get back to the business at hand for the coming year. This is the time when many of our existing and potential clients are either planning for upgrades or improvements or looking for ways to get more out of their ERP software. New budgets and new resource plans for the coming year often lead to new investments in ERP systems.
In the last year, Panorama added several well-known international clients to our portfolio, doubled in size and revenue (again), and saw an increase in a number of our service offerings. The large increase in demand for our services is mostly due to an uptick in four key areas, which we believe is an indicator of where the ERP industry is headed in 2013:
Business process reengineering. Most of our clients hire us not only because we are the world’s leading independent ERP consultants but also because we understand their businesses. For example, manufacturing firms hire us because we know how to design and implement best practices within their organizations and because we speak their language. The same is true for our clients in the financial services, professional services, government, distribution and medical device industries. Clients are realizing that ERP initiatives are about much more than technology – they are about improving business operations with tangible, measurable results – which is why they lean on us to provide critical business process reengineering services.
Organizational change management. As the pioneers behind the most robust and effective organizational change management methodology and toolset in the industry, we are gratified to see more companies recognize the need to focus on this area. Since most of our clients are larger, more complex international organizations, they have a significant need for help transforming and standardizing their disparate organizations that goes above and beyond their ERP implementations. Our team, which is the most experienced organizational change management team you’ll find in the ERP industry, is seeing an increase in demand for these services as a result of this trend. Even the competitors and Panorama knockoffs in the industry are attempting to replicate this increased focus on organizational change management.
ERP implementation project management. Our biggest revenue source continues to be from our ERP implementation practice area, which is showing no signs of slowing. Companies are increasingly turning to Panorama to help manage their implementations from start to finish, which we are able to do effectively because of our technology-agnostic implementation best practices and our access to the world’s best functional and technical implementation resources for all of the leading ERP systems. Our broad and deep expertise in implementation project management, organizational change management and business process reengineering also makes us much more effective than our competitors at ERP software selection.
Expert witness and ERP implementation recovery. I’ve been in this industry for a long time and I’m still amazed at how many ERP implementations fail. This trend, combined with our position as the market’s de facto ERP experts, has resulted in an increase in demand for services to either help clean up and take over failed ERP implementations and/or serve as expert witnesses in ERP lawsuits. Fortunately, many organizations and their executive teams are recognizing the warning signs earlier in the implementation cycle, which is allowing them to recover faster than they would otherwise.
While some of these trends were discussed in the 2013 predictions blog and podcast, they are worth revisiting as we benchmark to what other organizations are focusing on in the coming year. The smarter and more effective organizations that focus on the first three areas mentioned above will be less likely to find themselves in a position to engage our services in the fourth area.
Here’s to a prosperous and successful New Year and please contact us if you have any questions about how to achieve ERP success in 2013.
Over the past 15 years, I have seen my share of successful ERP implementations. The Panorama team and I have successfully managed a number of complex implementations over the years — ranging from SAP to Oracle E-Business Suite, to Microsoft Dynamics to Tier II ERP implementations — and have the battle scars to show for it. In addition to managing implementations, we’ve also been called upon to provide expert witness testimony and analysis for some of the highest-profile ERP and SAP failures in the industry, many of which you’ve probably heard or read about in recent years. This experience as an ERP and SAP expert witness has provided many valuable lessons that can help organizations avoid failure and make their projects more successful.
Just as a side note and point of clarification, our independent research shows that there is no correlation between ERP failure rates and the specific ERP software implemented. However, SAP just so happens to have the largest market share in the industry and some of the highest-profile Fortune 500 clients — with pockets deep enough to afford legal battles — so many of the lawsuits we’re hired for relate to SAP implementations. Although most cases we’re involved with have court orders prohibiting Panorama from sharing client-specific details, there are a number of interesting patterns that have emerged during the various cases we’ve supported over the years.
Below are just a few confessions I can share from approximately a dozen cases that I have supported as an SAP expert witness. After all the deep-dive reports, depositions, discussions with attorneys, and jury trials, I can say with confidence that SAP failures typically boil down to a handful of common themes:
SAP failures are rarely about the software. When looking at SAP failures, it is easy to get stuck in discussions about system configuration, Netweaver integration, poorly written customization code, and functionality of the software, but these minute details are typically indicators of deeper root causes. For example, poor project management, lack of organizational change management, and inadequately defined business process workflows are often the causes of some of these symptoms. Of all the expert witness cases we have been involved with to date, not a single one had much to do with the software itself. Instead, it had more to do with how the software was implemented.
SAP failures typically begin early in the sales cycle. Expert witness work is similar to crime scene reconstruction. In the thousands of pages of documentation available in most cases, we have plenty of evidence (and the benefit of hindsight) to be able to assess what went wrong and when and how it did. What we find in most cases is that the stage is set for failure early in the sales cycle — before implementation even begins. Mismanaged expectations, poorly reviewed contracts, ill-defined statements of work, poor project plans and a host of other breakdowns early in a project often create a domino effect of a series of failure points throughout the implementation. For this reason, we often advise our clients that they are actually influencing their likelihood of success or failure just as much in the software selection and implementation planning stages of the projects as they are in the execution phase.
Every SAP failure involves poor organizational change management. Poor organizational change management is the single (and only) issue that we can definitively say was a key contributing factor to each and every expert witness case we’ve been involved with. In each case, user resistance, unclear understanding of business processes, roles and responsibilities, and poor training are just some of the organizational change management issues experienced by the implementing organizations. Too often, organizations who have suffered SAP or ERP failures had implementations that were too focused on technology issues rather than the more important business process, people and organizational issues.
Executive abdication is one of the root causes of SAP failure. The above issues are often symptomatic of even deeper issues at the executive level. Too often, CFOs or CIOs delegate an entire SAP implementation to a project manager or project team with little to no executive involvement, which is a sure-fire recipe for disaster. Executives need to be engaged, make key decisions regarding how their operations will look going forward, and provide oversight and governance of the project. However, too many executives assume they can abdicate themselves of these responsibilities, which often lead to the issues outlined above.
While every ERP implementation and SAP expert witness cases involves various nuances and unique factors, most can be traced to the above four issues. The person or people most responsible for the above failure points vary from case to case, but regardless of who is at fault, they are issues that need to be proactively addressed and managed. Whether you are implementing SAP, Oracle E-Business Suite, Microsoft Dynamics, JD Edwards or any of the multitude of Tier II ERP systems, these lessons can help avoid failure and, more importantly, ensure that your ERP implementation is successful.
One of the main reasons our clients hire us to handle contract negotiations as part of our ERP selection process is because clients don’t want to – or necessarily know how to – deal with ERP vendors. Aggressive sales tactics, hidden fees, confusing contracts and over-licensing are just some of the pitfalls that most organizations aren’t well-equipped to deal with, either because they lack the necessary experience, don’t have the time or bandwidth, or both. Once a company has selected a new ERP software system, it is easy to forget that sometimes things go wrong with ERP vendors.
Case in point: last month’s federal lawsuit brought against Infor by a manufacturing company claiming that they were subject to roughly $130 million $130,000 (corrected from earlier publication) in additional license fees after a voluntary software audit from the vendor revealed that a number of outside contractors were accessing and modifying the system. We don’t know the details of this situation, as we did not help the plaintiff with their ERP selection or implementation initiatives and neither the plaintiff nor defendant has requested our ERP expert witness services as of the time of this posting, but we know that this scenario is a common fear and complaint of customers of ERP systems. While it’s impossible to say with certainty at this point, it is probably safe to assume that there was some sort of contractual clause subjecting the customer to additional fees as their user count increased over time.
Although most contracts with ERP system vendors don’t lead to lawsuits, this situation underscores of three key things to keep in mind when embarking on an ERP selection and implementation process:
Read and understand the contract. Most of our clients read their contracts, but most don’t understand what these documents really say and, just as importantly, what they don’t say. Unless you are an expert that reads and negotiates ERP software contracts for a living, as our team members are, then you’re not likely to fully understand many of the assumptions, hidden costs, liabilities and risks of your ERP license contract. For example, subtle but important clauses regarding caps on license and maintenance escalation in the future can have a multi-million dollar impact on the total cost of ownership of your ERP software. In addition, implementation services contracts from ERP vendors or system integrators are fraught with risks and pitfalls as well, especially those that entail fixed bid costs. To add insult to injury, most ERP vendors, VARs and system integrators only address the software aspects of an ERP system rather than the more important business process, project management and organizational change management components, which entail costs and resources as well.
Don’t poison the pond. Clients hire us because we are independent and therefore negotiate aggressively with ERP vendors, but we stop short of poisoning the pond with the chosen software provider. Although you don’t want to get raked over the coals as it relates to software and maintenance pricing, you also don’t want to create a relationship that isn’t profitable to the vendor as well. At the end of the day, you want to know that your ERP vendor has a vested financial interest in providing support and service for their product in the future.
Your sales rep likely won’t be around for the ten years that you use your ERP software. ERP software purchases are usually facilitated by sales reps that are very nomadic in nature. It is extremely uncommon for a sales rep to be in the same sales group, geography or even the same company for years at a time, so it’s not realistic to think that your software sales rep will be supporting your account for the duration of the ten to 12 years that most companies use their ERP software. For this reason, it is critical that everything you agree to be included in your software and services contracts. Sales reps come and go, and your contract is not with your sales rep – it’s with your ERP vendor – so it’s important that you think about and plan for the worst possible scenario.
Lawsuits and disputes happen, but ones such as Micromatic vs. Infor can be avoided with a tight understanding with your ERP vendor, clearly documented in a contract. The above tips and challenges aren’t by any means limited to Infor customers, by the way. Infor happens to be the defendant named in this particular suit, but these negotiation and contractual challenges are relevant regardless of your chosen ERP vendor.
Correction: Panorama initially wrote that the additional licensing fees were roughly $130 million; they were actually for roughly $130,000. We apologize for the typo.