Many organizations begin ERP implementation with the goal of selecting ERP software that will bring a high ROI and measurable business benefits. They soon realize the project is much more complex than they expected, and the benefits are much more elusive.
So, how do you set realistic expectations for the selection and implementation process? The first step is understanding the scope of change and the role technology will play in your ERP project. At one end of the change spectrum, technology is used to support existing processes. At the other, technology enables process redesign and supports changes to an organization’s business model.
In the latter case, technology is not the focus of the project. Instead, the project team focuses on transitioning people and processes. Before selecting technology, the organization defines a corporate strategy and technology strategy and designs new business processes to support their vision. Reengineered business processes mean new roles and responsibilities for employees. Both business process reengineering and organizational change management account for significant time, budget and resources. If you’re at the other end of the change spectrum, your expectations will look very different.
Still not sure what level of change your project entails? Ask yourself why you’re implementing new technology in the first place. Maybe you’re changing your business model or expanding into new markets. If so, your ERP project could be more aptly called a business transformation, as you will experience significant changes to not only your technology but also your people and processes.
How to Set Expectations
Once you’ve determined the scope of change, you can begin developing a business case. Some organizations use business cases to justify their investments. Others use business cases to estimate their return on investment. In both cases, you will need realistic expectations.
By benchmarking against technology transformations at similar organizations, you can ensure you’re setting achievable goals. Executives, the project team and other stakeholders should have a clear understanding of the expected timeline, budget, resource allocation and benefits realization. If issues arise, they should be informed so they can readjust their expectations. It’s normal for slight adjustments to occur throughout the project.
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What to Expect
The total cost of ownership of an ERP system can be difficult to determine. Don’t assume that smaller vendors will be substantially cheaper than large vendors. The cost depends on several factors, such as level of customization. Also, don’t assume that cloud solutions will be less expensive than on-premise solutions. The cloud may be cheaper upfront, but more expensive over time.
The project timeline can also be difficult to estimate. Sometimes, years can go by before you realize all expected business benefits. The project itself can take years, so add a few years on to this, and you have your benefits realization timeline. The selection phase can take up to six months.
To make matters more difficult, the budget and timeline are both subject to change. During the span of a technology transformation, you will undergo normal organizational changes unrelated to the project, such as staff turnover. You should take this into account when developing a project plan.
Some changes to budget and timeline are avoidable, however. Accounting for all project activities upfront will help you avoid surprises. Here’s a partial list of overlooked activities to include in your project plan:
- Quantifying specific benefits you hope to achieve, such as visibility into real-time data, visibility across functional areas, reduced inventory and decreased days to close
- Developing a master data management strategy and data migration strategy
- Conducting an organizational readiness assessment
- Developing and executing an organizational change management plan
- Assessing staffing needs for each phase of the project, and possibly augmenting your staff with outside resources
- Working with functional leads to map current and future state business processes and identify pain points
- Working with functional leads to define requirements, validate requirements and schedule software demos
- Recruiting stakeholders from different departments, business units and locations to help define requirements
- Distributing workshop guides to prepare employees for requirements gathering workshops
- Prioritizing functional requirements into three categories (mandatory, value-add, nice to have)
- Balancing the need for software customization with the cost of training
- Reskilling employees whose jobs will become automated
- Meeting with the vendor for an organizational design session
Why Set Expectations?
When your organization needs new ERP software, it’s tempting to just focus on technology. In many cases, CIOs are expected to do so. However, if you want to set realistic expectations, you must account for the people and process aspects of technology transformation. These account for significant time, money and resources.
You should also develop a business case to give executives an idea of the ROI and business benefits they should expect – and articulate the benefits realization timeframe. Most importantly, you should understand why you’re implementing new ERP software, so you can determine the scope of change.