We often write and present about the challenges and pitfalls of ERP implementations as well as some of the best practices associated with making an ERP system work for organizations. Our clients look to us to provide the expertise, methodology, and toolset to make their ERP implementations succeed. While there are a host of things that can contribute to an ERP failure, troubled deployments often boil down to a vitamin C deficiency – lack of cash, controls and change.
Cash. As we detailed in our 2012 ERP Report, 56-percent of ERP implementations cost more than expected, and the average cost overrun is more than 20-percent. When we dived into that data and coupled it with our extensive ERP expert witness and ERP implementation experience, we found that a big driver of those cost overruns is mismanaged expectations and a lack of budget to invest in making the project succeed. Without the right experience and support, organizations most often fail to budget for “hidden costs” that software vendors and system integrators don’t advise you of, such as infrastructure upgrade costs, third-party implementation costs, customization and a variety of other items that the untrained eye won’t catch or plan for. If organizations simply budgeted an appropriate amount for their ERP software, this 56-percent metric would likely decrease dramatically.
Controls. ERP implementations can get out of control very quickly if they are not managed appropriately. An experienced ERP project manager should be able to provide project governance and controls to ensure that a project stays on track, in scope, on budget, and on time. For example, we work with our clients to manage a robust project governance framework surrounding escalation and decision processes related to customization requests. Every ERP implementation will include internal stakeholders that want to customize something in the software, so it is very important to have the controls in place to ensure that only customizations that are absolutely necessary to the operations are made. Organizations that over-customize their software typically begin with the “we’re not going to customize a single thing” mantra, but most lose that discipline as the project wears on.
Change. One of the biggest failure points for each and every ERP failure and lawsuit that we’ve been asked to advise on as part of our ERP expert witness work is a lack of organizational change management. It’s amazing how many CIOs and CFOs think that organizational change entails delivering some canned end-user training right before go-live and calling it good. This is a strategy that literally never works. Successful organizations instead implement much more effective organizational change management activities, such as process-based training that is tailored to the unique operations of the organization, change discussions, change impact analyses, employee communications, stakeholder alignment activities, benefits realization processes, and a host of other activities. Organizational change may seem like an optional or expensive investment, but in the end, it will always be less expensive in the long-term to invest heavily in organizational change to ensure that your organization and operations effectively adopts the software.
With these types of vitamin C deficiencies, organizations are very likely to suffer ERP failure. Our experience and research proves that effective organizations address these three areas well. Contact us today to learn more about how Panorama can help your organization achieve all of the benefits possible from its ERP system.