One misconception I had before researching enterprise software was that an ERP project was simply an IT project and that it was all about installing and testing software. I believe many people think the same way I once did, because when I tell people that I am an analyst and that I perform research on the ERP industry, often times people asked, “so you work for a software company?” I gradually developed a standard answer for these kind of questions: “ ERP software is just a tool. We advise people how to select the best tool, how to use the tool efficiently and how to manage the concurrent organizational issues when implementing the tool.”
Lao-Tzu, the great ancient Chinese philosopher and also a central figure in Taoism, said, “Give a man a fish and you feed him for a day. Teach him how to fish and you feed him for a lifetime.” ERP software, in this metaphor, is like fishing gear. Only when it aligns with an organization’s business strategies and business processes will it improve the enterprise’s actual performance.
Different companies can buy the same ERP system but have dramatically different results because of the various ways of utilizing the ERP software application. Panorama’s 2010 survey results indicate that companies use different strategies to accommodate their business processes for their ERP implementation.
Results show that 22.3% of companies “had very little or no focus on business processes,” which means that their ERP projects were treated more like IT project. This is the worst strategy a company could adopt. Companies like these lack clear business objectives, and the efforts on ERP selection and implementations usually go waste.
Nearly 41.9% of companies “changed business processes to accommodate ERP functionality.” Consultants usually suggest reengineering business processes prior to or concurrent with the ERP implementation and allowing a change agent to manage the numerous changes and ease the transition to the new processes.
A small percentage of companies (8.8%) “changed their business processes independent of ERP, then selected or configured software to align with new processes.” To utilize this strategy, companies usually rely on the assistance of ERP consultants, as they need to select the best software fit, as well as define the most favorable business processes for the organization.
About 27.0% of companies “changed or customized their ERP functionality to accommodate current business processes,” which to most consultants is a surprising figure. It is not typical for a company to totally change or customize ERP software to fit their current processes, as it requires a tremendous amount of work to customize the ERP system while also accurately defining current processes. This relatively high percentage is most likely due to responses from companies which had not yet started their ERP implementation and expected to maintain the lowest level of change to their current business processes. However, what they really should do is not to be afraid of change but to take advantage of the ERP systems’ inherent best practices to improve their business processes.
In a nutshell, an ERP system is just a tool. Learning how to use the tool to effectively leverage operational success within the organization is the key to a successful ERP project.
You can find more interesting content in Panorama’s recently published 2016 Organizational Change Management Report.
Blog entry written by Haoyan Sun, Research Analyst at Panorama Consulting Group.