A few weeks ago, ComputerWorld published an article about a recent Epicor implementation failure and lawsuit. The suit alleges that Whaley Foodservice Repairs tried and failed to implement Epicor Vantage after an extended period. One of the key difficulties with the project was that Epicor’s professional services group had estimated that the implementation would cost $190,000, while the actual implementation cost ended up exceeding $1 million by the end of the project. In addition, the company alleges that its wasn’t able to use the system as expected after two years in production, requiring additional work and costs.
The alleged failure and lawsuit underscores two widespread industry problems: misaligned expectations and inaccurate estimation methods. This problem is by no means a problem with Epicor – it is a common problem across all ERP vendors. Throughout my 15+ years consulting organizations on their ERP initiatives, I have time and time again seen companies initiate ERP software purchases and implementations without a clear or realistic understanding of what it will really take to make the project successful, while at the same time finishing on time and on budget.
When you look at the root cause of these problems, it is usually the fault of both ERP vendors and their customers. The vendors are eager to make a sale and gain a new customer, so it is in their best interest to underestimate the time, money, and resources required to effectively implement their software. In addition, vendors and system integrators typically don’t know enough about a prospect to make realistic assumptions about implementation duration and cost. On the other side of the relationship, customers often latch on to what they want to hear: that implementing their chosen vendor’s software can be done quickly, cheaply, and easily with very little to no risk. In addition, most customers don’t have the expertise to know what it takes to make an ERP implementation succeed, and most certainly don’t know what they don’t know.
Unfortunately, ERP failures and lawsuits are not uncommon. Because of our extensive experience helping clients across the globe successfully implement various ERP solutions, we are commonly engaged by attorneys to provide independent expert witness testimony for failed implementations, and we have done so on a number of the highest profile lawsuits in recent years. Based on our implementation and expert witness experience, here are three lessons from the Epicor and other ERP implementation failures:
1. ERP vendors and system integrators typically underestimate implementation duration and cost. The first key to developing a realistic implementation project plan and budget is to understand that most vendors underestimate implementation estimates. This shortcoming isn’t necessarily intentional, but it has more to do with their understanding of client needs and incomplete project plans. There is a lot that vendors and consultants don’t know prior to an implementation, so they are in some ways shooting in the dark. In addition and more importantly, software vendors and system integrators are focused on implementing the technical components of their software, not necessarily addressing the business process and organizational aspects of the implementation. Business processes need to be defined and standardized, operational decisions need to be made, organizational change needs to be managed, and business benefits need to be realized, none of which are in the scope or estimates of most ERP vendors and implementation partners. It is up to the client to develop a master implementation plan and budget that takes both the vendor’s and internal activities into account, which typically looks much differently than a software vendor’s more one-dimensional plan and estimate.
2. Business process definition and re-engineering is not driven by the software, vendor, or system integrator. Most software vendors and sales reps use the terms “best practices,” “industry pre-configurations,” “out of the box functionality,” and other buzzwords to sell the value of their software in helping drive business process improvements. While these concepts are true to some extent, most true business improvements and standardization decisions are going to be driven by the implementing organization. New ERP software will certainly drive improvements at the transactional and vanilla, back-office process levels, but organizations implementing the software need to clearly define and document their business blueprints so the technical consultants have a clear vision on the higher-level business processes and requirements that their software needs to support. Imagine a complex jigsaw puzzle: the new software provides the pieces of the puzzle, but the implementing organization needs to provide the picture that provides guidance on how the pieces will all fit together.
3. Nothing matters without effective organizational change management. Business process improvements driven by the ERP software are a moot point without the organizational changes and management required to realize them. Even the most perfectly designed business processes and software won’t matter if employees within your organization can’t embrace and execute the new operational model and systems. Just as the software provides the pieces of the business process jigsaw puzzle, organizational change management provides employees with the big picture understanding of how the new software supports and enables the new business processes. In addition, organizational change brings employees from Point A to Point B, which is a critical outcome of an effective ERP implementation. Effective organizational change management plans accomplish these things via organizational impact assessments, organizational readiness reviews, customized training to fit your specific business processes, job and role design, and a host of other activities that should be executed throughout the entire ERP project lifecycle.
One of the key reasons clients hire Panorama to plan and manage their implementations is because we provide a realistic and technology-agnostic perspective on what organizations need to do to make their enterprise software initiatives more successful. We have the experience, benchmark research, and objectivity to help clients clearly understand what is required to make their projects succeed with realistic expectations. The above three lessons are just a few that we bring to companies looking to initiate their implementations. But no matter what stage of ERP implementation your organization is in, we can help. Contact us today.