Today, we released our 2020 ERP Report analyzing trends from the past year and looking toward the future to determine what these trends mean for ERP projects in 2020. One conclusion at which we arrived was that an in-house implementation of ERP can mean a less intense focus on organizational change management.
Fortunately, an in-house ERP project was not the preferred choice of companies in our study. In fact, 78% of companies used some type of consultant to assist with their ERP projects, and 51% of these companies sought change management guidance from a consultant. Of those seeking change management guidance, almost all dedicated a moderate to intense focus to change management.
The 2020 ERP Report
This report summarizes our independent research into organizations' selection and implementation decisions and their project results.
In our experience, change management is not the only ERP success factor companies overlook when doing an in-house ERP project. They also overlook success factors like business process reengineering, strategic alignment and data migration.
Companies overlook these success factors in an effort to trim their project budget, but the main reason is that they lack relevant expertise. In other words, they don’t focus on all the components of ERP success because they refuse to seek expert guidance.
A Brief History of ERP
Enterprise resource planning (ERP) didn’t come around until the 1990s, but its foundation came about in the 1960s. Back then, it was known as inventory management and control.
In the 1960s, a greater focus on factory output began. To help increase production, computing solutions were created. During this time, software developers focused on creating applications to handle inventory management.
By the 1990s, these solutions evolved to handle all aspects of business, including accounting, human resources, customer relationship management and more.
We now find ourselves in 2020 – a time where ERP software is not simply a means to automate processes but to create digital business models. This is known as digital business transformation.
According to our 2020 ERP Report, almost half of companies (43%) describe their project as a digital business transformation as opposed to an ERP implementation. While respondents were only given these two choices, most companies actually fall somewhere along the spectrum between a basic ERP implementation and a digital business transformation.
Regardless of the type of project you’re pursuing, it’s important to seek third-party guidance.
6 Reasons to Avoid an In-house Implementation of ERP
If any of these statements are true of your company, consider hiring outside experts to help you achieve your project goals:
1. Your Business Lacks ERP Experience
Most companies lack the expertise and experience to handle an ERP project. As a result, they face a huge learning curve.
They don’t know how to differentiate between the hundreds of ERP systems on the market. They also don’t know about all the people and process activities essential for ERP success, such as business process management.
ERP consultants with business process management expertise can help you map your processes, improve inefficiencies and identify your highest priority ERP requirements. Fortunately, 86% of companies in our report focused on business process management as part of their ERP project.
2. Your Company Lacks Technical Expertise
ERP systems are constantly evolving, and it’s challenging to stay current with the latest changes unless it’s your job. Therefore, we recommend supporting your ERP project team with not only business experts but technical experts, as well.
ERP consultants can support your project team with their knowledge of features, functionality and technical considerations for a wide range of ERP systems. In contrast, an internal team can take far longer to select an ERP solution, and they may fail to gather requirements that help ERP vendors understand the unique functionality the company needs.
The technical implementation of ERP software also can be challenging without the right expertise. For example, many ERP vendors do not focus on data migration. However, this is a difficult and time-consuming activity that must be initiated well before implementation. As a result, it’s important to hire an implementation expert with data migration experience.
The need for implementation guidance was evident in both this year’s and last year’s ERP Reports. However, there has been a 10% year-over-year decrease in companies seeking ERP selection guidance from consultants.
3. You’re too Close to the Project
If you use an internal team for your ERP project, you won’t get an outside perspective based on broad experience and best practices.
ERP consultants have lessons learned from several ERP projects across a variety of industries. As a result, they make no assumptions about the way your business should run. In other words, they are not attached to the idea of doing things a particular way just because it’s the way things have always been done.
For example, many of our clients include their incumbent ERP vendor in their shortlist. They may want to maintain a good relationship with their vendor, get discounts for staying with them, ensure an easier implementation or keep employees happy. Whatever the reason, they shouldn’t assume their incumbent vendor is a good fit for their business goals.
An open mind and an outside perspective are essential if you want a system that can support the business you are today as well as the business you want to become. Therefore, it’s important to hire a consultant to evaluate your enterprise strategy and outline expected ERP business benefits. After all, an ERP project is an opportunity for innovation.
It appears that companies in our 2020 ERP Report understand this concept: 63% of companies outlined expected business benefits before implementation, and 61% realized these benefits to the extent they expected after implementation.
4. You Lack Adequate Internal Resources
Most companies lack sufficient internal resources for an ERP project because they’re either short-staffed or lack the necessary skills.
If you’re short-staffed, you won’t be able to take employees away from their day jobs unless you backfill these jobs. ERP consultants can mitigate this challenge by providing additional project resources and finding appropriate backfill resources.
In addition to being short-staffed, many companies’ staff lacks ERP project expertise. In cases like this, companies struggle to develop an effective ERP project plan and successfully transition employees to new processes and technology. These companies would benefit from hiring ERP consultants because they can show department managers how to involve employees in project activities.
Consultants also can show project team members how to communicate with employees about organizational changes. Unfortunately, only 30% of companies in our study communicated with employees before ERP selection, despite the fact that most used consultant guidance.
This is probably a good time to mention the importance of not just hiring consultants but hiring the right consultants. While a mediocre consultant may be able to ensure a strong focus on change management during and after ERP selection, the top ERP consultants ensure a strong focus on change management before ERP selection.
We follow this methodology because it makes employees feel more involved in the project. In fact, many employees should be directly involved in planning activities, like software requirements gathering.
5. You Have Strategic Misalignment
Your project team may not be able to grasp that an ERP project is a business project rather than a technology project. It’s an easy line to blur, as an ERP project does require technical knowledge.
However, it also requires a knowledge of business strategy and people management. In addition, you must understand the various functions of your business and how they interconnect with each other.
An ERP consultant with change management and business process management expertise understands the importance of aligning people, processes and technology. They know that real ERP business benefits come from optimized processes and end-user buy-in.
If there’s any doubt that people and processes are just as (if not more) important than technology during an ERP project, then take a look at these findings from our report:
DIY Works for House Projects, not ERP Projects
ERP projects require an intense focus on organizational change management. Fortunately, the percentage of companies reporting a moderate to intense focus on change management has increased since last year.
This increased focus on change management was accompanied by stronger benefits realization as well as fewer budget and timeline overruns. You can download our 2020 ERP Report to learn more.
In the meantime, you can request a free consultation below to learn about Panorama’s comprehensive suite of service offerings. Our trusted and unbiased ERP consultants understand both the technical and business aspects of ERP projects.