Most ERP implementations take longer than planned, cost more than expected and don’t effectively mitigate risks. It’s perplexing why this happens so frequently. What can be done to avoid falling into the same trap of so many implementation teams?
According to Panorama’s 2018 ERP Report outlining the results of hundreds of recent ERP software initiatives, 64% of organizations spent more money than they budgeted and 79% took more time than expected. Perhaps even more surprisingly, over half of respondents indicated they experienced some sort of material operational disruption after go-live – for example, unable to ship product or close the books at period end.
The good news is, although ERP implementations are difficult, some organizations crack the code on how to overcome the challenges. We’ve practiced and studied implementations for over a decade and success isn’t due to luck. Project success is initiated at the onset, correlating to a deliberate and strategic approach, which effectively navigates the many pitfalls and risks. Based on this year’s research and Panorama’s experience, here are the top five drivers pointing to successful implementations:
1. Clear Alignment with Overall Business Strategy
Misalignment between a project and an organization’s overall strategy is one of the most common – and most difficult to overcome – challenges of an implementation. For example, we recently worked with a company that was driving an overarching business transformation focused on leveraging technology to surpass its competitors. Their main goal was to improve the customer experience. However, their ERP implementation was more focused on using technology to automate and streamline back office functions, rather than customer-centric improvements. This misalignment resulted in confusion, higher project costs and diluted results failing to live up to executive and customer expectations.
2. Realistic Expectations During Implementation Planning
We’ve found many ERP implementations are (unfortunately) doomed from the start. Often, it’s because their project teams had unrealistic expectations from day one. When expectations aren’t aligned with reality, bad decisions with rippling effects can result. For example, if you commit to your management team to complete your project with an unrealistic timeframe and/or budget, you are more likely to cut critical project activities such as organizational change management and business process improvement. This will ironically accelerate your risk of time and cost overruns, among other challenges.
SAP vs. Oracle Case Study
SAP and Oracle both invest heavily in cloud technology. However, our client was skeptical about cloud scalability and unsure if the products were mature and proven.
3. Laser Focus on People, Organizational Change Management and Workforce Transition
According to our 2018 ERP Report, organizational and people issues are the number one reason most ERP implementations take more time and money than expected. The key is to not become overwhelmed by this issue but find ways to overcome the people issues and build stakeholders. While doing so you’ll also need to deliver more business benefits, ROI and value than expected. These best-in-class implementations and project teams understand that erring on the side of investing heavily in organizational change management will result in a lower cost and risk implementation.
Recommendation: invest as heavily in your organizational change management activities as you would in your software and technical project activities. It will cost you less time, money and risk in the long term.
4. Effective Business Process Management and Process Improvement
One of the biggest (and most common) mistakes is to defer to your chosen ERP software to determine how your business processes will look in the future. Today’s ERP systems are far too robust and flexible, meaning you need to define your business processes before your implementation. The last thing you want, is your expensive functional and technical consultants, billing their time while your team decides how it wants its business processes to look going forward.
Recommendation: define your future state business processes and improvements before you begin your technical software implementation.
5. Strong Project Management, Governance and Controls
Poor project management and controls can wreak havoc on any implementation:
- Make sure your project charter clearly defines your governance controls and structure
- Clear roles and responsibilities must be in place for your project manager, executive steering committee and other key internal and third-party project roles
- Governance must align with the unique needs and dynamics of your organization
- The framework of your governance must be comprehensive yet dynamic, as well as specific and repeatable
Since ERP implementations can be complex business transformations (rather than just technology initiatives) it’s important to have the right people, controls and governance in place prior to beginning your implementation.
Recommendation: clearly define your project team, governance and controls as part of your project charter. Consider hiring independent, third-party experts that manage these sorts of implementations for a living.
While this blog is intended to alert you to (or reinforce) key drivers of successful implementations, I’ve only scratched the surface of this topic. I didn’t write much about risk management, issue identification, communication or transparent reporting to name a few others. Effective project governance provides direction and hopefully decision-making protocols. It does not replace the need for effective leaders who can hone in on managing accountability, management resolution and validating metrics.