The ERP consulting profession has unfortunately received a few black eyes in the 15 years that I have been in the field. During the late 1990s, consulting firms were flush with cash as their client organizations scrambled to hire them to solve the Y2K problem with new enterprise systems, which led to cost overruns, failures and inflated consulting bills. While Y2K is no longer an issue, the real problem unfortunately hasn’t subsided. Our research and expert witness experience continues to show that ERP failure rates are still as high as they’ve ever been, even among those organizations that use outside consultants.
To add insult to injury, the industry has seen some high-profile and widely publicized failures over the last few years. Waste Management, Lumber Liquidators, and a host of other implementation failures in the media highlighted how their projects failed and/or resulted in lawsuits, despite the fact that many of them looked to outside consultants to help with the implementations. These companies relied on experts, but somehow their ERP implementations went sorely over budget, took much longer than expected, and failed to deliver the business benefits they had expected. Whether implementing SAP, Oracle, Microsoft Dynamics, a Tier II ERP system, or any other enterprise application, companies seem to have trouble with their ERP initiatives, whether they use consultants or not.
New York City recently had ERP consultant troubles of its own in relation to the City’s botched implementation of its CityTime payroll and time reporting system (functionality that organizations often implement as part of their ERP or Human Capital Management [HCM] systems). After spending nearly 14 years and more than $650 million on the large-scale implementation, the City realized that their Project Manager from SAIC, its system integrator, had received $5 million in kickbacks from the City. Although the system eventually went live with over 100,000 City employees, the scandal exposed a great deal of consulting incompetency and a lack of oversight and controls, and resulted in $500 million in refunded consulting fees. As a result of this scandal, the City is going to the other extreme by minimizing its use of consultants and instead building an internal team of resources to manage the CityTime project going forward.
While the City’s unfortunate plight may be an extreme example of ERP consultants gone bad – or perhaps an entertaining episode of Showtime’s “House of Lies” show about the management consulting industry – it does expose some realities and things to consider when evaluating potential ERP consultants for your organization’s enterprise software, CRM, HCM or business intelligence software initiatives. How can organizations leverage the skills of outside consultants when the risk of failure still exists? How can executives handle the complexities of their ERP initiatives when the internal competencies aren’t there and the skills are so hard to find? What is the right balance of doing it yourself versus leaning on outside experts?
The short answer is that it is important to find the right balance. The do-it-yourself approach has been proven to fail, as has the opposite model of letting consultants run rampant with the project (and the checkbook). Below are three things to consider when assembling the internal and external teams for your ERP software initiative:
1. What project controls and governance do you have in place? As was learned in New York, nothing replaces good project governance and controls. Even with the best, smartest and most ethical consulting team in place, the project will fail if the right governance and controls aren’t established up front and monitored throughout the project. Panorama’s PERFECT Path implementation methodology, for example, includes tight project controls to help clients take ownership of, have visibility into, and control the outcome of the project, while at the same time leveraging our team’s project management expertise and proven ERP methodologies.
2. What is the right balance for you? The do-it-yourself model is clearly just as broken, if not more broken, than the “100% outsourced to consultants” ERP implementation model. Most companies need a balance somewhere between the two extremes, but they will fall in slightly different parts of the spectrum based on their unique needs.For instance, organizations with very little internal ERP knowledge and/or bandwidth to take on large, complex enterprise systems projects may err more on the side of external consulting guidance. Some companies, on the other hand, have strong project managers and employees with ERP implementation battle scars, so they may err more on the side of leveraging internal resources.
3. What value can be provided by a system integrator versus an ERP consultant? As I posted in last week’s blog Hiring a System Integrator vs. Hiring an ERP Consultant, there is a big difference between a system integrator, value-added reseller, or software consultant that focuses myopically on the technical aspects of an implementation, versus a more business-centric ERP consultant that understands project management, business process design, organizational change management, and the host of other more important activities that are critical to implementation success. This is a subtle but important distinction that should be considered when assembling your team. In my years of industry experience, I’ve found that most consultants and system integrators in the ERP space are of the more technically-focused variety, which is a big part of why the industry gets such a bad rap and served as the impetus for starting Panorama.
At the end of the day, the right ERP consultants can make your enterprise software initiatives successful. While Panorama has a very positive track record of success and very satisfied clients, most of the traditional industry players do things the way they have always been, leading to the same flawed results. Finding the right consulting team with the right methodology, business focus, and project controls can be a good way to balance the skills and competencies missing from your internal team.
If you’d like to learn more about the key differentiators between ERP failure and success, please join us for our Lessons Learned From Failed ERP Implementations webinar on April 26 at 10 a.m. MT.