“Using our pre-configured industry best practices and off-the-shelf functionality, you can implement our software in no time,” says the confident ERP sales rep. “Our ERP software is hosted in the cloud, meaning you don’t need to spend time defining business processes or workflows. Our software will tell you how to run your business. Some of our customers have implemented our software in less than 90 days.”
Does this refrain and sales hype remind you of what you heard during your ERP software election process? Unfortunately, we’ve encountered more than our share of these statements throughout our experience helping clients select ERP software. We’ve found one of the most common root causes of ERP failure is misaligned expectations at the start of an implementation. When an executive team has unrealistic expectations about the implementation timeline, it often is the first domino to fall during the slow, painful string of events that lead to failure.
Let’s look at a play-by-play from a recent ERP lawsuit, where legal counsel from one of the parties in the case hired us to serve as an independent expert witness. In this particular failure, the large, multi-billion dollar organization was sold a bill of goods that included ERP software licenses and an implementation across more than 20 different sites. The party was told by their ERP vendor and systems integrator that by using industry pre-configurations, they could easily get their entire order-to-cash and procure-to-pay operations running on the new software in 18 months.
Even without knowing anything about the company other than what I shared above, you can guess that 18 months is extremely aggressive, unlikely and fraught with risk. It was not appropriate for any systems integrator to suggest otherwise. However, telling the client what they wanted to hear helped the sales rep to close the deal.
So how did their implementation pan out? As the project got underway, the implementing organization and its systems integrator quickly found that not all of its business requirements were addressed by the off-the-shelf solution. Not only did a majority of business processes require re-configuration, but the system itself required customization – two activities that were not accounted for in the original project plan. Less than a month or two into the project, it was already behind schedule.
The systems integrator also didn’t realize how significant the organizational change management needs were. It was a multi-site, multi-national organization with different operations, cultures and business processes, so change management would have been essential to the success of the project. However, the systems integrator simply planned for a few employee newsletters and some end-user training a few weeks before each go live, which was woefully inadequate for a company of that size and magnitude.
As the project wore on, milestones and expectations were missed, leading the executive steering committee to fire multiple project managers and team members. They put more pressure on the new team to get it done on time and they couldn’t succeed either. In the end, the company was only able to get one single pilot location live in three years (50-percent longer than expected), and that was without touching any of the other 20 or so locations. The business processes were so broken and employees were so poorly prepared for the rollout that the organization eventually abandoned the implementation and reverted back to its legacy system.
The lesson here is that ERP failures are typically caused by a number of factors and they usually don’t happen overnight. So how can companies determine the most appropriate duration for their ERP implementations? Here are three tips to help develop a realistic estimate for your organization:
1. Benchmark to other organizations like yours. Sales reps are notorious for giving anecdotal examples of the one in a hundred customers that implement in a short period of time, but those examples are rarely relevant to your organization. More importantly, this approach only provides one data point out of thousands of ERP implementations each year, hardly the type of statistically significant data you would want to bet your entire ERP investment (and career) on. When we help our clients develop implementation plans, we start with raw data from our research of thousands of implementations across the globe. For example, when we work with a $1 billion multi-national manufacturer of consumer products, we’re looking at data from similar companies rather than providing anecdotal evidence.
2. Understand the variables that drive ERP implementation durations up or down. Even if you find statistically relevant data pertaining to industries or companies like yours, you still have to understand the variables that increase or decrease implementation durations. Actual implementation durations have very little to do with technical variables, like pre-configurations, best practices and deployment options. Instead, implementation duration depends on criteria related to your business, such as supply chain complexity, level of standardization and use of organizational change management. You can use this model to develop an implementation budget that is more realistic than what most ERP vendors, consultants and systems integrators provide.
3. Develop an ERP implementation project plan. This may sound like a no-brainer, but most systems integrators and consultants estimate implementation durations without a project plan. The ones that do have a project plan are technically-focused and do not consider critical activities like change management, business process design, multiple iterations of conference room pilots and the other non-software activities. Without a realistic and complete implementation project plan in place, it is impossible to predict how long your ERP implementation will take.
Realistic expectations grounded in a complete implementation plan and based on industry benchmarks tailored to your unique situation, will ensure you don’t cut corners trying to meet unattainable implementation expectations.