The multitude of enterprise software options available in the market today overwhelms most organizations. They often realize they need to go back to the drawing board and define an IT strategy so they can narrow down their choices.
Not only do organizations need to decide between ERP vendors, but they need to weigh the costs and benefits of different deployment options, integration strategies and digital technologies, like IoT and artificial intelligence.
Do you already have an IT strategy? It doesn’t hurt to reevaluate it to determine if it’s really meeting your organization’s needs, both now and in the future. Here are five signs you need to redefine your IT strategy:
1. Your enterprise technology hasn’t been updated in the last decade. Most organizations replace their ERP systems every ten years – at minimum. If you’re not replacing your enterprise technology every decade or so, you’re falling behind your competition. While it’s wise to make the most out of your current IT investments, you should also be able to discern when systems become outdated.
2. Your IT strategy isn’t aligned with your overall business strategy. When CIOs decide to implement new ERP software, they have good intentions, but sometimes, those intentions aren’t aligned with the organization’s overall strategy. For example, an organization may want to reduce capital costs, but the CIO wants to implement a SaaS solution instead of an on-premise solution. Before selecting ERP software, you should first define your strategic objectives, and then define specific IT objectives that support those overarching business goals.
3. You haven’t considered all the strategic options. You may think an IT strategy entails a full-scale ERP implementation. However, ERP software is just one of many technology solutions that can improve your operations. Digital technology such as IoT, artificial intelligence and business intelligence are also viable options.
4. You don’t have an actionable plan for replacing your enterprise technology. You may have completed steps 1 through 3, but your IT strategy is useless without an actionable, strategic plan. This plan should include a multi-year roadmap for how you’ll achieve your organizational vision.
5. Your IT strategy doesn’t meet your organization’s ROI thresholds. Your IT strategy should fit the cost, benefit and risk tolerances defined by your organization. For example, let’s say you’re a risk-adverse organization in a mature industry with very low margins. Do you really want to implement a high-risk, high-cost solution?
How to Develop an IT Strategy
1. Define your company’s overall strategy. If you don’t currently have a well-defined company strategy, you should define and document a vision for where the organization is headed in terms of growth and transformation. This should influence how you move forward with your IT strategy.
2. Define IT’s role and purpose in your organization. Does your organization view IT as a commodity or as a competitive differentiator that provides unique value to your customers? The answer to this question will lead to one of two decisions: outsourcing IT functions or building IT competencies in house. This will also determine the types of technology you consider – cloud, SaaS, on-premise, best-of-breed, etc.
3. Assess your IT department’s competencies. If your IT department is sophisticated, your organization may be equipped to handle a best-of-breed, on-premise ERP system. A less sophisticated IT department may want to implement a SaaS ERP system instead. When assessing your competencies, be sure to consider your overall physical infrastructure.
4. Consider all your digital transformation options. The enterprise technology industry has evolved from just a few large ERP vendors to several vendors offering a variety of point solutions. Instead of implementing a single ERP system, you can now choose from industry-specific solutions and point solutions focused on certain functions. Aside from technology, you can transform your organization by reengineering your business processes or reimagining your business model.
5. Develop a long-term strategy. Some organizations rush into a short-term technology decision without considering the long-term impacts. For example, if you implement a CRM system without considering how it fits into your long-term strategy, you may find it doesn’t integrate well with certain ERP systems. This limits your options when you decide to implement other technologies. Be sure to have a long-term view even when embarking on short-term initiatives.
6. Consider the non-technical aspects of your digital strategy. Many organizations focus on the technical aspects of their IT strategies without considering the people and process aspects. Your IT strategy should address business process reengineering and organizational change management – both of which will help you realize the full benefits of digital transformation.
Every Organization Needs an IT Strategy
Defining an IT strategy before selecting an ERP system ensures your technology is aligned with your organizational vision. While this may sound like an expensive ordeal, you don’t have to be a large, billion-dollar organization to afford the luxury of an IT strategy – you just need to find the right consulting partner.
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More than three thousand years ago, the Chinese developed a strategy board game, called Go. It’s a complex, confounding game, but some have mastered it . . . or so they thought.
One day, a somewhat unconventional player came on the scene and began making moves no other player could comprehend. The player was artificially intelligent. It was using strategies it developed on its own – completely. It was only programmed with the basic rules of Go, not any human expertise or prior gameplays.
Depending on your perspective, this is either terrifying or exciting. The future of artificial intelligence (AI) is probably a mix of both. However, in the realm of ERP software, AI falls more into the “exciting” category. The AI within ERP systems is becoming increasingly advanced, and organizations are using this AI in conjunction with business intelligence to reveal new ways of improving operational efficiency and increasing customer satisfaction.
AI Functionality in Modern ERP Systems
While ERP software uses data to make basic predictions, AI uses this data to provide real-time recommendations based on multiple sources of data, both internal and external. AI augments the insights from your BI solution by providing what’s known as “prescriptive analytics,” which enables organizations to input hypothetical scenarios as AI calculates possible outcomes and suggests alternative solutions. AI uses machine learning to build its own logic for solving problems. All it needs is access to your data sources – your ERP system, cloud applications, IoT, mobile devices, etc.
Most organizations have so much data that it can be difficult to determine what data matters. If you think in terms of what matters to your different business functions, prioritizing data becomes easier. You can apply AI to any area of your business to gain competitive advantage. At the end of this post, you’ll find an infographic detailing how AI functionality can benefit several areas of your organization.
How to Define a Business Intelligence Strategy
Before you select a BI solution or an ERP system with BI functionality, you should develop a business intelligence strategy so you can evaluate AI functionality in light of your business needs. Here are five steps that will prepare you for the ultimate AI and BI mashup:
1. Determine key stakeholders – Contrary to popular thought, the IT department isn’t the main stakeholder in a BI initiative. Business intelligence should be owned and accessed by all areas of your organization. Executives, of course, have a vested interest in business intelligence, but so do department managers. Today’s BI tools are intuitive so you may have more end-users than expected. Each of these stakeholders rely on business intelligence to inform decisions and achieve objectives. If these objectives align with corporate strategy, they should be part of your business intelligence strategy.
2. Assess your current state – What is your current portfolio of enterprise systems and IT infrastructure? What are your current business processes? What’s your organization’s overall strategy? This knowledge will help you determine what’s working and what’s not. For example, maybe you’re storing data in multiple places but you need one version of truth. Pain points like this are an opportunity for improvement when defining your business intelligence strategy. You should also assess your current AI and BI functionality and determine if its advanced enough to “think outside the box” and provide your organizational competitive advantage.
3. Set KPIs – You probably have more data than you know what to do with. You can prioritize this data by determining what KPIs you need to track based on your business goals. Creating a data dictionary will help you align stakeholders when it comes to calculating and interpreting different KPIs. Most importantly, you should develop a strategy for acting on business intelligence. While AI is advanced, it can’t execute a full organizational change management plan and it can’t write marketing collateral for you – yet.
4. Evaluate your options – Your organization might need an entirely new ERP system with enhanced BI functionality and advanced AI. Alternatively, you might need a BI solution that fits with your current best-of-breed portfolio. Other variables to consider include scalability, level of customization and on-premise vs. cloud deployment. BI solutions in the cloud typically are self-service, allowing users to easily run queries and produce immediate reports. When evaluating AI functionality, you should consider ease-of-use. More advanced AI often requires more advanced statistical and programming knowledge.
5. Obtain buy-in – Business intelligence is only beneficial if employees use it. They won’t use it unless they know how and understand why. If you already have executive buy-in, you can develop a communications plan to help employees understand why you’re investing in a new BI solution. You should also develop a full organizational change management plan that addresses cultural barriers and emphasizes system training.
A Note About Artificial Intelligence
Some people will claim that true AI does not yet exist. While a perfect replica of the human mind doesn’t exist, we have designed AI systems that use human reasoning as a model. Definitions may differ, but the concept remains the same: machine intelligence imitates human reasoning to provide immediate insights humans might not conceive after years of contemplation.
Developing a business intelligence strategy can help your organization take advantage of the AI functionality available in many of today’s ERP systems. The infographic below details the benefits of AI for a variety of business functions.
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Organizations should develop an enterprise IT strategy that aligns with their overall vision and strategy. A disconnect between the strategic direction of your organization and your ERP system can lead to trouble. Unfortunately, many organizations fall into this trap.
Tune in to this podcast episode to learn how to ensure ERP success by developing an IT strategy that aligns with your enterprise strategy. Join January Paulk, Director of Operations, for answers to questions such as:
How can organizations determine their overall enterprise strategy?
Why do so many organizations fail to align their IT strategy with their enterprise strategy?
What are some other challenges organizations face when it comes to IT strategy?
When developing an ERP strategy, there are many factors to have into consideration depending on the type of business, the size of the organization and the purpose of the initiative. But regardless of the particular circumstances of every case, an ERP strategy must consider the following points:
Organizations need to realize the scope of the project and how an ERP implementation, when done properly, can affect their company. An ERP strategy is not just an IT project, it is rather a companywide initiative and getting executive sponsorship as well as sponsorship from all across functional areas will drive the success of it.
A successful ERP strategy has a tremendous effect on the company efficiency and revenue. Internal and external resources, project timeframes and the overall cost of the initiative are the foundations of an ERP strategy. All too often organizations underestimate what an ERP implementation is going to take from the cost perspective, the resource perspective and how long it will take causing time and costs overruns.
Too many companies make the mistake of not fully involving a VAR or third-party assistance such an independent consulting firm. A third-party involvement, from the strategy planning stage through the implementation, provides a comprehensive vision and helps to maintain the project on-track.
Companies can achieve higher benefit realization by truly emphasizing areas for improvement early on, benefit realization is a living and breathing entity and should be addressed during weekly or monthly company meetings. If goals and metrics are not clearly set from the beginning, they will not be attained.
We had a recent apparel manufacturer client that went through a full ERP software implementation process. At a high-level, they had the goal to grow with technology and limit FTE expansion. Every time they felt they needed new employees they went through exercises to see if technology was a better answer.
The company set realistic goals of process definition, software selection, process improvement and organizational change management. This plan was a companywide plan and whenever they had turmoil within the industry or a change at the management or C-level, they always went back to the plan as the foundation. It was a two-year implementation but they accomplished it within budget and timeframes because of realistic expectations set from resources who had the expertise and were able to define the right ERP strategy for the company.
Digital transformations are complex undertakings – even more so than your average, run of the mill ERP implementation.
As Panorama grows and continues to work with more large, sophisticated, and global clients, we see more comprehensive digital transformations beyond more traditional ERP implementations. Along with these projects, we also see several pitfalls and traps that CIOs commonly run into.
One of the biggest challenges is failing to recognize and address everything that needs to be addressed as part of an effective and comprehensive digital strategy. Here are five things that CIOs commonly overlook:
1. Defining an IT organizational strategy. When done right, digital transformations entail significant changes to your IT organization. Your future state skill sets, people, roles and responsibilities, and reporting relationships should look quite different after your initiative compared to before. Failing to define how you will address the people side of the equation will completely undermine your efforts and increase the odds of failure.
2. Opportunities to bust down organizational silos. While redefining your IT organization, you have an opportunity to break down silos, consolidate, and standardize where appropriate. For example, if you are a larger, multi-business unit company with multiple IT groups and departments, you have a real opportunity to use your digital transformation as an opportunity to migrate to more of a shared services model. Digital transformations need corresponding organizational structures to support them, so be sure not to overlook this important component.
3. Developing an organizational change and workforce migration strategy. A well-defined and well-executed plan to migrate your employees to the future state organizational design is a key component of effective digital transformations. Without it, the impact of your digital transformation efforts will be limited to a nice-looking PowerPoint presentation or report. You will need to define a comprehensive and effective plan to migrate your workforce to the future state organization, skill sets, and reporting relationships that you define. This includes organizational change management, organizational design, training, communications and other tactics to keep workers informed and on board.
4. Improved business processes to drive the technology transformation – not the other way around. Just as you don’t want to attempt a digital transformation without changing the IT organization, you also don’t want to skip attempts to improve your business processes. If anything, your business processes should drive the technologies you select, how you implement and how you realize business benefits from those initiatives. Operational improvements should ultimately drive the technological side of the equation. Doing the opposite by using technology as the starting point will inevitably lead to failure.
5. It doesn’t pay to be distracted by emerging technologies. Many of our CIO clients love to talk about cool, emerging technologies. While we enjoy the conversations as much as they do, this can often be a distraction from the more important aspects of your transformation (such as points #1 through 4 above). Which type of technology you adopt is much less important than how you adopt it, how you redefine your business processes, and – most importantly – how it all ties into your overarching business strategy. Don’t get sidetracked or overly enamored by technology along the way and you’ll be one step ahead of many of your peers.
Many IT departments and CIOs fail to employ an IT strategy that is right for their organization. However, when these strategies are well-defined, aligned and executed, they can be very powerful.
Here are five signs that your IT strategy may not be working:
Your current technologies haven’t been updated in the last decade. Our average client replaces their ERP systems every ten years. For some, even that is a few years too long. As a good rule of thumb, if you’re not replacing your major enterprise systems every decade or so, you’re falling behind your competition, and failing to leverage the exponential improvements in technology over time. It’s one thing to take a low-cost, low-risk, incremental approach by keeping your IT investments for as long as possible, but it can be a slippery slope of falling too far behind on technology.
Your IT strategy isn’t aligned with your overall business strategy. Too often, CIOs and IT departments have good intentions that aren’t aligned with a bigger picture business strategy. For example, a company that wants to reduce capital costs, but implements a SaaS solution instead of an on-premise technology, will have conflicting priorities. During IT strategy engagements, we typically start by defining the company’s top five to seven strategic objectives, then define specific IT objectives that will support those overarching business strategies. This enables the recommended IT strategy to align with bigger picture and longer-term organizational strategies. Below is an example of a strategy articulation map that we often use to define this alignment:
You haven’t considered all of your technology options. Some think that an IT strategy needs to include a big, complicated and costly ERP implementation. However, ERP software is just one potential technology solution for your organization. Digital transformation, mobile, business intelligence, CRM systems and eCommerce are just a few potential technology alternatives. In addition, business process reengineering and organizational change management are two potential options that don’t involve technology. Whatever paths you explore, it’s important to objectively consider all of your options to develop the strategy that makes the most sense for you.
You don’t have an actionable plan to begin upgrading your enterprise technology. You may have already completed steps 1 through 3, but your IT strategy is meaningless without an actionable and realistic plan to implement. Once you’ve defined your general strategy and direction, it is important to outline a multi-year roadmap for how you’ll realize your overarching vision.
Your IT strategy doesn’t meet your organization’s ROI thresholds. Successful IT strategies should ultimately meet the minimum ROI thresholds defined by the organization. Strategies that fail often do so because they don’t meet these simple criteria. Your IT strategy should fit the cost, benefit and risk tolerances that have proven to work well within your organization. For example, we recently began a project with a very risk-adverse organization in a mature industry with very low margins. Based on these economic realities, we know that we won’t be recommending a high-risk or high-cost solution that compromises those already thin margins and risk intolerance. Ensuring that the cost-benefit of your strategy fits with your needs is an important aspect of a successful IT strategy.
If you haven’t thought about your IT strategy lately, it may be time to take a look. When the backbone of your organization isn’t adding value, your organizational goals become harder to attain.
An event that will spur your organization’s IT transformation is coming to Atlanta this September. You may have heard of it. It’s called ERP Boot Camp!
Panorama’s ERP Boot Camp equips project teams with the tools and information they need to transform their organizations’ processes and technology. As Panorama’s experts share best practices from their recent project experience, your team will . . .
Become better implementation project managers
Understand the human impact of digital transformation
Learn how to make the most of your investment in enterprise technology to achieve your organizational goals
Join us September 21-23 at the Embassy Suites Atlanta at Centennial Olympic Park.
If you’re an executive, CIO or project manager, it’s easy to feel hamstrung by a lack of internal interest in and commitment to implementing new ERP software.
We’ve noticed in the market lately that a decent number of companies are hesitant to bite off on large ERP software implementations. Perhaps it’s because of a relatively weak economy, perhaps the upcoming U.S. election or because companies are being cautious before embarking on an initiative that has burned so many companies in the past.
Regardless of the reason, some of our current and prospective clients face limited capital budgets and/or lack of internal buy-in to support a new enterprise software initiative. The good news is that there are a few steps one can take to overcome these obstacles:
Define an enterprise and digital transformation strategy. Some see single ERP software as a foregone conclusion. However, this is just one of many options available to CIOs and executives as part of their overall digital transformation and enterprise IT strategy. Because of this, organizations should spend time defining these strategies. It’s important to carefully consider everything from enterprise-wide technology deployments to lower capital cost options such as simpler technology upgrades and business process enhancements. When considering specific technologies, it is also important to take an objective and technology-agnostic look at the various options available, including ERP, CRM software, HCM software, mobile solutions, eCommerce and other potential alternatives.
Consider non-technology options. Now may not be the right time for new technology. Whether it’s because the ROI isn’t there, the risk is too high or employees are simply too resistant to change, it may be that other non-technology options are better suited for your current situation. For example, we sometimes recommend business process reengineering, organizational change management or upgrading technology already in place as potential alternatives to more massive technology migrations. ERP vendors and sales reps may strongly push the need for you to implement a solution (their solution now), but that’s not always the right thing. It’s important to have an objective, outside view of what’s right for your needs – and this should be someone without a vested interest in seeing you invest in their software.
Whatever you do, consider both the long-term and short-term implications of your decisions. Short-term constraints may drive short-term decision making to some degree, but it’s also important to make these decisions in the context of a longer-term and overarching IT and digital transformation strategy, which is why step #1 is so important. For example, we are working with with a mid-size manufacturer that decided that they would not be in a position – financially or organizationally – to implement a new ERP system for at least 1-2 years. However, they also know that their current situation is not sustainable to support growth and earnings expectations. Because of this, they opted to have our team overhaul their business processes, look for options to upgrade current technology and evaluate potential new enterprise technologies that could act as further enablers of the process changes that we are implementing. They are working within short-term realities, but within the parameters of their longer-term technology and organizational vision.
While you may think of this transformation to be heavy on the wallet, there are so many options to consider that could help your organization skyrocket in efficiency among everything else.
In today’s uncertain global environment, organizations and their executives need a clear path to a positive return on investment before taking on the cost, risk and heartburn associated with implementing new enterprise software.
ERP systems and other enterprise technologies can achieve a ROI by preserving, enhancing or creating a competitive edge for the implementing organization. Unfortunately, few organizations get to this state of utopia and instead struggle to realize the expected business benefits of their investments. Our 2016 ERP Report reveals that only 35-percent of organizations realize at least half of the expected business benefits of their investments in enterprise software.
Some companies do in fact realize business benefits, but they are more effective, strategic and deliberate in how they plan and executive their enterprise initiatives. Here are three ways that we see companies leverage technology to maintain their competitive edge:
1. First and foremost, manage your project as a business transformation initiative. The most successful clients we work with treat their projects as business transformations rather than simple technology refreshes. Your chances of failure and/or underwhelming results increase dramatically when you start with the technology and expect everything to fall into place accordingly. The more successful companies, on the other hand, begin with strategy (see point #2 below), people and processes, then allow technology to fall into place from there.
For example, our team is currently working with a large distribution company that is looking to grow from $250M in annual revenue this year to $1B by 2020. This is no small undertaking, and technology alone won’t get them there. But they will get there by effectively aligning their IT strategy, business process reengineering, organizational change, and ERP systems initiatives.
2. Begin with your strategic goals first, followed by how you will leverage technology to get there. Alignment of your various business transformation initiatives is made possible by a clear definition of your overarching strategic goals. When embarking on enterprise and IT strategy initiatives with clients, we typically begin by constructing a strategy articulation map, which defines how bigger-picture strategic goals translate into more specific enterprise, technology, people and process initiatives that will ultimately enable those goals.
When defining this strategy, it is important to not get too prematurely caught up in specific technologies or trends, such as single ERP, best of breed, SaaS or cloud solutions. Instead, start with your strategy and use that as a framework to narrow the playing field and define your overall direction. This also helps avoid the “analysis paralysis” trap.
3. Take the time to reengineer critical business processes. Not all business processes are created equally, so not all business processes should be reengineered equally. Instead, business process reengineering efforts should focus on those workflows that are most critical to your business success and are a source of your competitive advantage.
We recently met with a mid-size, engineer-to-order manufacturing and distribution client that views customer service and product lifecycle management as the keys to their success. With that in mind, they asked us to reengineer those business processes, but focus on more incremental improvements in other functional areas. This allows us to focus our efforts, cost and value on areas that will have the biggest impact – and deliver the largest sources of competitive advantage.
In this ever-evolving technological world, it is vital to leverage your enterprise system to help keep your competitive advantage. If you don’t keep up, you’re going to be left behind.
Dependent upon the size and growth of an organization, opinions on the importance of IT strategy can vary. A current audit of your organization’s infrastructure, staff and budget can give you a baseline to benchmark against during organizational and IT changes.
Gathering quantitative and qualitative data regarding IT can be overwhelming if it is done ad-hoc. When developing an IT strategy, your organization should consider alignment with current business processes and total cost of ownership. Defining an IT strategy with current and future business needs in mind makes decision making a lot easier.
The general perception is that selecting the right ERP software is the main factor in gaining competitive advantage. However, true realized benefits are derived from having integrated technology across the organization that facilitates a swift IT and business strategy. Once these benefits are understood and noted, a technology roadmap can be developed for further investigation.
Technology roadmaps are a great tool to provide insight for planning and coordination purposes. Prioritizing needs over “nice-to-haves” is the first step in the process. Critical system requirements drive the framework that assists in weeding out unknown functionality of a particular ERP system. Whether it’s ERP software or new hardware, the cost of the product must be taken into consideration. Total cost of ownership (TCO) analysis takes many variables into account and provides criteria for comparing multiple ERP systems. Organizations should compare apples to apples when it comes to licensing, maintenance and training.
The importance of IT strategy is inarguable – organizational goals must be taken into account before making as significant of a purchase as ERP software.
It goes without saying that the best foot should always be forward when it comes to your customers. Products and services provided to customers are generally the most polished aspect of an enterprise as they represent the organization in the eyes of past, present and future clients. Now consider the inner workings of the organization. Do the internal mechanics need to be hidden? What would your customers think if your internal processes were laid bare? Would you show your customers your ERP system?
While your customers may never see your ERP system, it’s a useful scenario to imagine when evaluating the effectiveness of your current IT landscape. If one or more of the following items are true, you may want to take extreme measures to ensure that your customers never see your ERP system – as an alternative, you could simply re-examine your IT strategy:
1. Your customer data is managed in spreadsheets. As security and privacy continue to be at the forefront of consumer’s minds, the last thing your customer wants to hear is that their personal and professional information is stored in spreadsheets without any kind of system-driven security protocols. If the crashing of a network or a single computer is all that is required to disrupt your customer relationship, you are due for a thorough examination of your system and infrastructure. Data security is the cornerstone of a successful IT strategy and should be a guarantee for your customers.
2. Your internal processes do not have the same level of quality that your service offerings do. You pride yourself on your product or service, but what does the process behind your “storefront” say about your organization? If your client-base were to have a glimpse of your redundant data entry and manual workarounds, would your product or service still be viewed as the paragon of quality that your organization hoped to convey? IT strategy is, at its core, about freeing your business of the constraints that hold it back and giving you the tools to meet your strategic goals. While your organization may shine in terms of your service offerings, imagine what you could accomplish without the weight of non-value-added activity and inefficient processes slowing down your staff.
3. Your business is run on a mish-mash of systems. Is your output limited by the aging canvas of your current set of systems? Do you have several third-party systems cobbled together with modifications? Your legacy systems may have brought you to your current level of success, but when considering the future, scalability is vital to your organization’s success. Sustainable growth should be one of your primary objectives if you intend to provide the same, if not higher, level of service that your customers expect while simultaneously expanding your customer base.
No organization is perfect, especially on the inside. Many organizations achieve success without streamlined processes and systems – but only to a point. As organizational size and complexity grows, so does the need for efficiency in processes and systems. Before your organization contemplates its future and strives toward strategic goals, be sure to consider the old adage, true beauty is on the inside.
Public sector technology has brought us to a unique time in history. Government organizations now have the opportunity to take advantage of cost-effective innovation that delivers a high return on citizenship (ROC). Due to the ongoing financial crisis and budget cuts, government CIO’s, IT managers and civil servants are looking for ways to save money while implementing the best possible technology in their agencies and organizations.
If public sector leaders want to implement innovative technology, they need to think outside-of-the-cubicle. Innovation has underappreciated strategic value that extends beyond cost savings and streamlined procurement. In the public sector, innovation can enable government cooperation, interagency collaboration, shared services, flexible working environments and common compliance standards in the federal government.
In order to reap all of the benefits of innovative technology, public sector leaders must work together to define an ideal future-state and a clear strategic roadmap. A vision of the final network, infrastructure and capability is easy to put down on paper but very difficult to achieve. While this takes cooperation and patience, it is the necessary foundation for success.
How far should CIOs and IT managers go to ensure that cost effective innovation reaches its potential? Very far – innovation is a journey that most certainly will require new thinking. Changing processes and altering “business as usual” is a necessary component of innovation and should be viewed as a way to enhance cooperation and collaboration rather than simply to save money.
On the surface, these are simple concepts, but in practice, they are very difficult to implement. An organizational change management strategy will absolutely be necessary. Technology is the easy part of collaboration; the people-side always proves more difficult and requires significant change management.
The key to IT success is learning to repurpose existing technologies and processes to yield more efficiency. By reaching out to other successful public sector IT project managers and government portfolio leaders, you can learn from their success.
Written by Rich Farrell, Senior Account Executive at Panorama Consulting Solutions.
All types of organizations, from commercial to government, can benefit from an ERP implementation. Efficiency gains and increased data visibility are two outcomes of a successful ERP implementation that are not relegated to any particular type of organization. To achieve these outcomes, both private and public sector organizations should define goals and objectives during the early stages of an ERP implementation.
The following guidelines are indispensable when defining goals and objectives:
1. Understand the risks. Government agencies face risks in an ERP project beyond those of private sector organizations. Budgets, in particular, are inflexible and often not created with contingency in mind. Unexpected costs are a constant risk in an ERP implementation, and, when added up, can quickly decimate a hastily constructed project budget. While it may be painful to do so, commercial organizations can adjust and absorb unexpected project costs with an alacrity not enjoyed by most government agencies. Furthermore, government agencies tend to be far more exposed to public scrutiny – especially when it comes to ERP failure – than most commercial and non-governmental organizations. A failed government ERP implementation is viewed as a waste of taxpayer money, which invites criticism and often has lasting repercussions. When setting goals and objectives, it is important to consider that the stakes are higher for government agencies.
2. Be realistic. Given the risks involved in an ERP implementation, the importance of realistic goals cannot be overstated. Aggressive go-live dates and shoestring budgets are hallmarks of ERP failure. While no project has the luxury of unlimited funds and time, realistic estimates benchmarked against ERP projects in organizations of similar size is a good place to start. Benefits are not magically realized upon go-live, and it is not uncommon for an organization to take up to a year after go-live to truly begin seeing efficiency gains. A healthy dose of pragmatism in the early stages of a project can mean the difference between a successful implementation and a disastrous miscalculation.
3. Plan, Plan, Plan! Government agencies should assign a timeframe, cost and scope to every aspect of their project, especially the goals and objectives. Be sure to plan for contingencies and variables, such as peak seasons, elections and funding cycles. Like key performance indicators (KPIs), goals and objectives should be specific, measurable, attainable, realistic and time-bound (SMART). This will help your organization build a framework for assessing the cost, duration and scope of your ERP project.
By assessing risks with a rational understanding of expectations, government agencies can set the right goals and objectives to prepare them for a successful project delivered on-time, on-budget and within-scope.
A number of government organizations are considering the idea of merging internal IT departments and infrastructure by sharing service arrangements. There are financial savings and potential operational advantages to this approach. Relying on one, centralized IT organization ensures improved performance, better security measures and synergistic resilience.
Due to budget pressures, changing work habits and citizens’ expectations, public sector organizations are being pressured to be more mobile, adaptable and capable. “Cheeks in seats” is no longer the only option for public sector organizations and their workforce. There are many cloud, SaaS and hybrid approaches available that can give the public sector workforce the mobility and flexibility required to remain relevant in the 21st century.
There have been numerous IT success stories in the private sector where organizations took advantage of centralization facilitated by cloud solutions. The public sector, on the other hand, is not as agile and bottom-line driven as the private sector – and for very good reasons. Rather than saving money, some public sector IT initiatives actually have a negative ROI – and a negative return on citizenship (ROC). Failure to manage organizational change and a tendency to adhere to old and inefficient processes are the two of the main culprits.
Public sector organizations need third party guidance in order to achieve an optimal mix of technology upgrades and organizational change management. An independent third-party can walk a municipal, city, state or federal agency through the tall cotton and capture, validate and join long-term strategic goals with short-term functional, IT and user requirements.
An independent organizational change management consultant can facilitate frequent horizontal and vertical communications and ensure that long-term employees do not feel threatened by new technology or the concept of shared and centralized services. While the cloud provides several possibilities, a complete move to the cloud is not always practical, particularly for large agencies or organizations. Specific departments or agencies within a larger organization should migrate distinct offices or operations to the cloud in a three-step process:
Define clear IT policies. The organization should implement a central IT infrastructure with clear and distinct policies that are standardized for crucial capabilities and applications. There needs to be a storefront for applications and a single IT throat to choke for management and control.
Acquire private cloud infrastructure. By acquiring a private cloud infrastructure, the organization can highlight the automation and provision behind a single point of management and control.
Evaluate who is using the services. Total cost of ownership can be calculated by determining which applications and capabilities are required and who is using each service. The CIO should evaluate the return on investment and decide which services can be efficiently used in the cloud and which ones need to be provisioned internally. Public sector organizations can also offer cloud services to smaller agencies and bill those customers based on their usage.
Organizational transformation and innovation cannot happen without the right technology and strategic organizational change management. You will not only save money in the long-run, but you will maximize your agency’s quality of service and its ability to achieve a high return on citizenship.
Too often, companies jump right into selecting new ERP software without first understanding their overarching enterprise and IT strategy. It’s an easy mistake to make when your current systems seem so dated compared to newer options in the industry, but it typically leads to disappointment.
A disconnect between the strategic direction of your overall company and your selected and implemented ERP system can lead to trouble, so here are some tips to develop an enterprise IT strategy that aligns with your overall company strategy:
Define your company’s overall strategy. Some organizations have well-defined strategies, while others don’t. In either case, it is important to either define and document your strategy if it doesn’t already exist, or leverage your existing strategy to complete the additional steps below. This entails ensuring that you have a clear vision for where the organization is headed in terms of growth prospects, future markets or customer bases that you plan to pursue, potential M&A activity and other key strategic criteria that should ultimately influence how you move forward with your IT strategy.
Define IT’s role and purpose in your organization. Ask yourself a key question: does your organization view IT as a commodity or support role in the company, or is it viewed as a competitive differentiator that can help provide unique value to your customers? The answer to that question will likely lead you down one of two paths – one that leads to outsourcing IT functions and applications, or another that leads to building those competencies in house. This will also determine the types of enterprise solutions you might pursue in the future, such as cloud, SaaS, on premise, best of breed, etc. The graphic below shows a basic framework that can be used to drive some of those decisions.
Assess your internal IT group’s competencies. Based on your answer to #2, you also need to look at how sophisticated your group is (or isn’t). A more sophisticated group, for example, may be better suited to handle a best of breed on premise environment, whereas a less robust IT department may be better suited to manage a SaaS ERP system. When assessing your competencies, be sure to take into account the breadth of your team’s skills, as well as your overall physical infrastructure.
Priority of short-term benefits versus long-term benefits. Certain companies move faster than others. Some are more patient in realizing benefits, while others may not be. It is essential to understand how important it is for your team to implement solutions quickly and inexpensively versus focusing on maximizing longer-term business benefits. Those two paths can lead to very different IT strategies. Either way, it is important to look for low-hanging fruit to realize some benefits early to help build momentum.
Other considerations. There are a host of other considerations to keep in mind when building your enterprise IT strategy. For example, how open are your employees to change? How unique is your business compared to peers in your industry? How much are you looking to standardize your business operations across multiple locations or business units? Which areas of your business are the “real” competitive differentiators that you want to focus more resources on? All of these and other questions will help determine the appropriate enterprise IT strategy for your organization.
These five areas will help define an enterprise IT strategy that is aligned with your company vision and strategy. That alignment is more likely to lead to enterprise software success than your industry peers and counterparts.
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.
Rapidly evolving technology trends and their associated organizational and operational impacts can be overwhelming. It is nearly impossible to constantly keep up to date with this ever-changing landscape–making the job of today’s CIO so difficult. Proving why leveraging outside expertise can be so beneficial.
With that in mind, here are four challenges in particular that you won’t want to face alone.
Creating an IT strategy and roadmap that fits your business. The proliferation of enterprise software and other business technology options is mostly positive for organizations – especially those in the small and mid-markets that historically couldn’t afford many enterprise solutions. But the number of these options can be dizzying to navigate. For this reason, it’s critical to work with an outside expert who can help in developing a technology-agnostic ERP strategy and roadmap to define the best path forward based on your organization’s overall direction. Your roadmap should include a three to five year plan along with more immediate low-hanging fruit that you can begin implementing right away.
Organizational adoption of new systems. Whatever you decide to execute within your IT strategy and roadmap is sure to lead to relatively significant organizational changes. Even seemingly simple technological implementations typically result in direct and indirect changes to employee’s jobs, roles, responsibilities and the communication between departments. Because of this, it is important to never underestimate the need for organizational change management. Many IT-types focus on the more techie aspects of IT initiatives. This explains why so many struggle in this area. The good news is that there are organizational change consultants that can help you navigate this vital pain point of any IT initiative.
Alignment between new technology and your current business processes. Technology itself doesn’t mean much if it isn’t aligned with your business processes. Even before selecting which technology to implement within your organization, it is important to define how you envision your business processes looking into the future. Beware of simply documenting how things are done today instead focusing on pain points, opportunities for improvement and “to be” business processes that will best support your organization going forward. Look for ERP consultants who are also experts in Six Sigma and manufacturing (or your specific industry vertical) to help facilitate this process for you and your team.
Realizing the ROI of enterprise technology investments. One of the biggest shortcomings of enterprise IT initiatives is failing to deliver a solid return on investment (ROI). In fact, according to our 2015 ERP Report, most ERP systems and IT initiatives fail to deliver expected business benefits. New technology may sound good in theory, but if it doesn’t deliver tangible business benefits, then it isn’t helping your organization.
Go beyond developing a business case for your initiative and instead develop a more robust benefits realization plan if you expect to truly realize meaningful benefits. Regardless of how technology evolves in coming years, these commonalities will be relevant to your job. It doesn’t matter if you are struggling with the implementation of a new ERP system, rolling out technology to automate your shop floor, applying a new CRM system and mobile devices to your sales team or pursuing any other enterprise software initiative –mastering these challenges will help you succeed well into the future.
The biggest problem with ERP implementations is that they often lack a strategic framework. According to our 2015 ERP Report, ERP implementations often take longer than expected, cost more than expected and fail to deliver expected business benefits. So what are you really paying for?
During our 10 years in business, we have found that most of these organizations lacked a strategy when they began their project. Although it can be difficult to define an IT strategy, there are several steps you can take to make sure you are not throwing your money at a failure.
An audit of your organization’s infrastructure, staff and budget can give you a benchmark to compare your organization against others. You have to set a strategic direction for the years to come. Once you have made that decision there are a few more considerations. These can include the following:
Are we more interested in a single system or a best-of-breed system?
Would a Tier I or Tier II ERP system work better for us?
Would we prefer the software to fit our business, the business to fit our software or a combination of both?
How much will we standardize business operations across our locations and business units?
These are just a few of the questions that must be considered before beginning an ERP implementation. It’s all too easy to jump into an ERP project and start making decisions that you will later discover do not fit with your IT strategy.
Here are a few things to consider as you and your team begin making key strategic decisions and defining your IT strategy:
Assess your current IT landscape. The first step in any effective IT strategy is to assess the strengths, weaknesses and opportunities related to your current environment. Benchmark your current IT situation to other organizations and best practices to prioritize the various opportunities for improvement. You have to know what you’re starting with to know where you want to be in the future.
Look at all potential strategic scenarios. Once you have analyzed all of your organization’s longer-term objectives you must identify potential strategic scenarios to support the overall vision for the company. You must cover all bases. Make sure to evaluate several potential (and diverse) options. This can include anything from outsourcing your IT department, upgrading and better integrating current systems, replacing current systems, and standardizing operations across global locations. Include strengths, weaknesses and tradeoffs for each. In order to define feasible scenarios, it helps to look at what is happening in the industry and what tactics other organizations like yours are deploying.
Business case and ROI analysis.Ultimately, the strategic scenario your team chooses will be heavily influenced by the potential costs, benefits and return on investment of each. It can be easy to make an emotionally-charged decision – such as, “Our current systems don’t work correctly, so let’s go get a new ERP system” – but these potential scenarios should be evaluated in a rational, quantitatively-focused way to ensure that emotions don’t dictate the chosen approach. These quantitative comparisons of various scenarios should also consider long-term hidden costs, such as the technical and organizational costs of maintaining the particular solution. At the end of the day, your executive team and board will want to see how the costs, benefits and ROI stack up for each potential scenario you are considering.
The three- to five-year strategic roadmap.As much as we would all like to transform and improve our businesses overnight, successful initiatives are typically more of a multi-year process. Your final output from the strategic process should be a three- to five-year roadmap outlining the implementation strategy and key milestones critical to the success of the overall transformation. It is important to remember to include the following key components in your roadmap: what types of solutions will be deployed, how the organization will need to change, expected business benefits, business process reengineering strategy and the organizational change management plan.
That’s what brings us to our question: Are you paying for a potential ERP failure? These and other key strategic topics are covered as part of our proprietary PERFECT Plan™ IT Strategy Methodology, which we recommend and deliver for our clients.
Have you ever considered that your enterprise software strategy may be hurting your business more than it is helping? Most of us focus on the potential business benefits of leveraging enterprise systems, but few consider that we may be undermining our more noble intentions.
With all the industry hype around various types of ERP and CRM systems in the market, perhaps this isn’t such an odd question after all. CIOs and CFOs are often lured into making large software purchases without having a clear direction or reason for doing so. A compelling quarter-end financial incentive from a software sales rep – coupled with one or two irrational reasons for making the purchase in the first place – can be enough to entice an executive team into a poorly-thought-out decision.
The Cost of Not Having a Well-defined Enterprise Software Strategy
One of the challenges with enterprise software is that these systems are all encompassing. In other words, organizations are rarely able to implement the full functionality and benefits of their enterprise solution within a reasonable timeframe. With that said, project teams often do not consider their plan for systems outside of the phase being considered – even if they know that they will someday need or want that extended functionality.
For example, let’s say that your organization has multiple broken systems and processes, but your CRM software is the low-hanging fruit that you will tackle within the next 12 months. How will you address the other systems outside of CRM? How will the systems integrate with one another? When will you address those other areas? While you may not implement anything outside of CRM anytime soon, you will still want to know how the various systems will be addressed over time. Otherwise, you will lose quite a bit in terms of a cohesive set of systems.
Flawed or Incomplete Enterprise Strategies can Back you Into a Corner
Similarly, another common pitfall is choosing and implementing an ERP system that not only fails to consider an overall enterprise strategy, but also threatens to limit your options in the future.
Sticking with the CRM example above, let’s say your organization opts to select and implement Salesforce as its CRM software of choice. While this is typically considered the gold standard of standalone CRM systems, we have seen many companies limit their abilities by implementing the software in a vacuum because they didn’t consider how other systems would be addressed.
Salesforce is a SaaS-based system, which doesn’t always integrate well with other systems – especially some of your older legacy solutions. Decisions like this can actually limit your options going forward so it is important to align your short-term tactics with your longer-term strategies.
Enterprise Software Strategies Should Include People and Processes as Well
An enterprise software strategy without a focus on people and processes isn’t an effective strategy. Organizations need a well-defined plan to translate their defined strategy into reality, so it is vital to define your strategies and tactics for addressing the organizational change management and business process reengineering aspects of your enterprise software strategy. Without this angle, you will be setting yourself up to heavily invest in new technologies without the benefits and ROI of actual improved business results.
Your enterprise software strategy should define how you plan to tackle opportunities for business process improvements as well as which key organizational change tactics you will leverage to enable the system and process enhancements resulting from your overarching strategy. It may seem more intuitive to myopically focus on the technical aspects of your strategy, but the people and process aspects of your strategy is where the rubber meets the road.
Your goal should be twofold. First, you should make sure that your strategy isn’t so incomplete or ineffective that it actually hurts your bottom line. More importantly, you should define and execute your enterprise software strategy in a way that enables measurable business results and bottom line improvements.