For anyone that has seen an episode of the television series “House of Lies,” it paints a disturbing (yet at times entertaining) picture of the consulting industry. Although the show strives for a strong shock-factor, it does underscore the potential risks of ethically questionable practices when hiring consultants to help with your ERP implementation.
I have also spent time researching and reading about fraudulent activities in the industry, typically in the context of providing expert witness testimony to high-profile failures and lawsuits. In these cases, we are hired by attorneys looking for an objective and independent view of what went right or wrong in the ERP implementation in question, and unfortunately, we often find that shady consulting practices are a root cause of the failures. While the issues may not always entail something as extreme as flat-out fraud or misrepresentation, there are often signs that the consulting firm or system integrator in question did not have the client’s best interest in mind. For example, system integrators and traditional ERP consultants are notorious for peddling the products that provide them the most lucrative kick-backs or solutions that aren’t best for the client but somehow line their own pockets.
Some consultancies look for “proxies” to conduct phone screenings on behalf of more junior and less-qualified consultants in order to win the business, by over-billing and receiving kick-backs for recommendations made to their clients. While these behaviors may not be the norm, there are certainly enough real-life examples to make the stomach of any CIO or CFO turn.
Most organizations do not have the internal competencies, bandwidth or methodologies to effectively manage their own ERP software initiatives and need hardworking and ethical consultants to lead the way to ERP success. So what can be done to avoid these types of problems? Here are a few tips to uncover the warning signs of ERP consulting deception:
1. Ensure proper project governance and controls. With each and every one of our clients, our team conducts weekly project reviews to review the project plan, actual versus budget costs to date, resource requirements, critical decisions required to move the project forward, and a host of other components designed to provide proper project governance. These project controls are crucial to not only ensuring that your consultants are staying honest, but so that you have complete visibility into the progress, issues, costs, and risks of the project, along with control as to the overall direction of the project. Any organization hiring consultants should ensure that these controls are in place.
2. Assess your consultant’s ERP selection and implementation methodologies. Consultants are a lot less likely to go rogue when they have very clearly defined consulting processes, methodologies and standards in place. This goes beyond the typical ERP consultant’s PowerPoint deck outlining a fancy methodology acronym, but it includes clearly defined steps in the process that have ultimately been fine-tuned over years of experience in the ERP systems space. Whether you are evaluating or implementing ERP systems, you want to ensure that your consulting team is following a best-practice and repeatable framework to ensure you’re getting the quality of services you deserve. This is exactly what we at Panorama provide to our clients, as an example.
3. Provide checks and balances. Another crucial component to uncover and avoid potential fraud is to ensure the project is being reviewed regularly. Many of our clients, especially in the government and public sectors, hire us to provide independent verification and validation services to ensure that their technical system integrators are performing to expectations and best practices. Even for our own consulting engagements where we are providing the entire soup-to-nuts management of a client’s ERP initiative, we build in stage-gate reviews into our consulting processes, which are conducted by someone other than the day-to-day consultants on the project. This ensures that checks in balances are in place and that our clients leverage the broader experience of our entire firm.
While it is impossible to completely eliminate the risk of ERP consulting fraud, these are just a few tips to help you uncover and/or mitigate the likelihood of shady behaviors from your consultants. While good ERP consulting firms are hard to come by and are important to leverage where needed, it is important to manage those resources just as you would your own employees.
Learn more by registering for our webinar, Confessions of an SAP Expert Witness.