One of the common themes we discussed in last week’s ERP Boot Camp is the ways that companies typically outgrow their ERP systems over time. Organizations change, enter new markets, respond to customer demands, and maybe even acquire other companies, leaving their more static ERP systems misaligned with business operations. In addition, companies also are often guilty of implementing software that is not aligned with business needs at the point of go-live, often because the company’s needs change during the course of the implementation or because the software was not implemented well in the first place. Simply stated, an ERP system that may have been a good fit 10-12 years ago is typically not well aligned from a business perspective later in the organization’s life.
Our independent ERP research shows that most companies fail to realize at least half of the business benefits they had expected, and employees and executives often blame software for such misalignments. However, the irony is that software is usually the least of the concerns. The issues and challenges related to these misalignments are more often than not related to business processes, organizational confusion, inadequate training, or a failure to manage the software to keep up with evolving requirements. Our ERP experience suggests that companies are notorious for defining the implementation “finish line” too early, causing them to lose out on the benefit of continuous improvements to their ERP software and processes.
So what are some signs that your ERP software and business needs are misaligned? Here are a few warning signs:
- You haven’t upgraded your ERP software in three or more years. This is often the first step toward misalignment. ERP vendors spend millions of dollars in R&D each year to enhance their products, make them more flexible, and incorporate expanded and deeper functionality. Companies that fail to upgrade are essentially leaving their ERP systems static, which typically leads to misalignments later on as business needs evolve. Upgrading to your ERP vendor’s most recent software can be an important first step to getting your software back on track with your business operations.
- Your people blame the software for the organization’s inefficiencies. As consultants, we are always somewhat skeptical when we hear employees blame the software for the company’s inefficiencies. Modern ERP systems are for the most part much more powerful and flexible than most organizations can handle, so it’s extremely rare that the software itself is the root cause of the challenges. More often, employees don’t understand how to use the software, business processes haven’t been well defined, or the software hasn’t been configured to match the organization’s business processes. An organizational and business process assessment can help you identify and prioritize some of the real root causes of these inefficiencies.
- Your business has gone through significant change. Perhaps you’ve entered foreign markets, increased revenue, opened new offices, added new product lines, and/or reorganized the company. If this is the case, chances are that your software hasn’t evolved as quickly, leaving a disconnect between business processes and the enabling software tools. Creating an ERP business blueprint, which should be a series of living documentation that keeps pace with your business, is a good way to manage the dynamic nature of your business along with your ERP software.
- You haven’t conducted a post-implementation benefits realization audit. It’s amazing how many organizations we see invest millions, and sometimes tens of millions, of dollars in their ERP systems without measuring and optimizing the results they get from the system. These post-implementation audits typically reveal underlying causes of system underperformance and operational and technical misalignment, such as broken business processes, unused software functionality, or lack of employee training. A robust benefits realization plan, including a post-implementation audit, is a prerequisite to realizing expected business benefits and ensuring business and technology alignment within your organization.
These are just a few of the major signs that you may have outgrown your ERP system. Unfortunately, many companies don’t invest the time or resources in these areas to avoid this “application erosion,” as some ERP vendors refer to it. Learn more about how Panorama can help by checking out our core ERP and IT service offerings or calling us at 720-515-1377.