2012 ERP Report: ERP Implementation Budget and Duration Overruns are Down, but Companies Still Spend More Than Expected
Today is one of the biggest days of the year in the enterprise software industry, as the latest iteration of Panorama’s highly anticipated annual ERP Report is published (download the 2012 ERP Report). The independent study examines the results from a range of organizational sizes and industries ranging from smaller companies to global, multi-billion dollar organizations. The study also looks at ERP implementations from vendors ranging from SAP, Oracle and Microsoft Dynamics to Tier II solutions like Epicor, Infor and a variety of others. This year’s study of nearly 300 ERP implementations across the world demonstrates some of the same themes we’ve seen in years past: most projects not only cost more and take longer than expected but also fail to deliver anticipated business benefits.
However, there is good news in the report as well: the percentage of companies going over budget and taking longer than expected decreased compared to previous years. For example, 56-percent of organizations in this year’s study went over budget, compared to 74-percent in our 2011 ERP Report. In addition, 54-percent of organizations went over schedule, compared to 61-percent in 2011. While the numbers still highlight the challenges and risks that most organizations face, they also show that companies are starting to do some things better than they have in the past.
The bad news, on the other hand, is that of those organizations that go over budget, it is by a significant amount. This year’s study shows that that companies that blow project budgets do so by an average of 25-percent, hardly a immaterial number for most CFOs. In addition, 29-percent of the respondents indicated that they have yet to realize a payback on their ERP investments, another metric likely to make CFOs and other executives think long and hard about how they can better mitigate risk on their ERP implementations going forward. Finally, and perhaps most concerning, is that two out of three organizations indicated significant pain in changing their business processes and organizations to accommodate their new ERP systems; 63-percent said that this aspect of their implementation was either difficult or very difficult, suggesting that ERP projects are still by no means a cakewalk.
So why the change in this year’s numbers over last year’s? First, companies are less bootstrapped with their IT budgets than they were in years past. CFOs and CIOs aren’t forced as often to shave implementation budgets to the bone and cut corners as they were during tougher economic times. With more realistic estimates and expectations, organizations aren’t quite as likely to blow their budgets and project plans. However, as mentioned above, when organizations do go over budget, they do by a significant amount, suggesting more of a dichotomy between those that tightly manage scope and budget and those that don’t. In addition, even though companies are finishing on time and on budget slightly more than they have in years past, they still struggle with business process, organizational changes, and benefits realization, suggesting that they are not getting all they could out of their new ERP systems.
This year’s numbers suggest that there are still significant challenges in the marketplace, but they provide a thread of optimism that more companies are figuring out how to manage their ERP initiatives more effectively. Learn more by downloading our 2012 ERP Report and joining me at our free webinar, Review of Panorama’s 2012 ERP Report tomorrow at 10 a.m. MST.
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Back in the Saddle Again: Getting Your ERP Implementation Back on Track
Unfortunately, ERP implementations still aren’t any easier than they were 15 years ago when I started in the ERP world. Despite the enterprise software industry’s best intentions to mitigate risk with cloud ERP systems, implementation accelerators, and other tools, ERP failure rates are still high and most projects still take more time and money than expected. For example, our 2012 ERP Report, which will be released next week, shows that nearly half (44-percent) of all ERP implementations fail to deliver at least half of their expected business benefits.
The even more troubling trend we’re seeing at Panorama Consulting is an acceleration of ERP failures and lawsuits. We are seeing a spike in demand for our ERP consultants to provide guidance to implementations that have gotten off track or to attorneys involved in lawsuits related to implementation failures. We have a very solid and exhaustive process for helping clients assess their implementations and create a project recovery roadmap, which clients are taking full advantage of in recent months. While this is good news for us in that there is more demand for our services than ever, it is bad news for the industry and the organizations looking to implement new enterprise software solutions. Whether it’s software from SAP, Oracle, Epicor, Infor, or any other ERP vendor, the reality is that it is still difficult to implement a new system effectively without stepping into a landmine or two along the way.
The good news is that there are ways to get an ERP implementation out of the gutter. As we’re demonstrating with three clients we’re currently working with, there are a number of things you can do to get your project back on track. Here are three tips that are likely to make a difference on your troubled ERP implementation:
1. Look to organizational change management for low-hanging fruit. While it is tempting to blame your vendor or the ERP software itself, we find that most ERP failures result from organizational change management issues. In fact, if you evaluate the organizational change, communications, and training activities that you are and aren’t doing as part of your project, you are likely to find significant deficiencies and opportunities for improvement. It’s usually people that make a project fail, not the software, so more effective organizational change management will help mitigate this challenge. We often look to areas such as organizational impact, job design, process definition, customized training, and targeted employee communications as opportunities to “fix” the people side of the ERP implementation equation. Not only is this “people side” crucially important and often overlooked, but it is typically less costly than buying an entirely new ERP system or customizing to force the software to address the organizational resistance you may be facing.
2. Revisit your implementation plan. Most ERP implementation plans are flawed from the start. Unrealistic expectations, unclearly defined milestones and resource requirements, and missing key activities are some of the common problems we see when clients ask us to get their projects back on track. Organizations too often rely on a project plan provided by their ERP vendor or system integrator, which usually focus too much on the technical components of an implementation on not enough on the business, process, and organizational aspects required to make a project successful. Implementation success is never guaranteed, but failure is guaranteed without a realistic and complete plan.
3. Know when to fold ‘em. Like Kenny Rogers once said, you’ve got to know when to hold ‘em and know when to fold ‘em. It may be time to hit the reset button on your enterprise software initiative. It may also be time to ditch an attempted ERP implementation and replace it with software that is a better fit for your organization. Or it may be a matter of some of the less drastic changes outlined above. One of the benefits of working with an independent ERP implementation consulting firm such as Panorama is that we help our clients make objective assessments of whether it’s time to head a different direction with the organization’s ERP strategy.
While a troubled ERP implementation is never fun, it is not as bad as an ERP failure and there are always ways to get your project and your team back on track. With the right expertise and toolset, your project can be recovered and even rejuvenated.
Find out more about both ERP failure and ERP success by attending my interactive webinar tomorrow, Lessons Learned from Failed ERP Implementations.
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What You Should Know About ERP Systems and SOX Compliance
Nearly a decade after the implementation of the Sarbanes-Oxley Act (SOX) at publicly traded US-based companies, the verdict is still out on whether or not the law has had a material impact on fraud, breakdown in internal controls, and other problems that the regulation is intended to address. Regardless, SOX is a reality that impacts many organizations in many ways, including how they implement their enterprise applications. Even in cases where a company is not required to be SOX compliant, there are other regulations and internal controls that ERP systems need to address.
When helping our international client base through their ERP implementations, internal controls and regulatory compliance is one of the necessary evils of ERP success. Processes need to be designed in a way that meets regulatory compliance, systems need to be configured to support those processes, and people need to be trained to execute on those compliant processes. In addition, CIOs and CFOs need to institute a framework to ensure that the implemented solution meets SOX and other regulatory requirements after go-live and on an ongoing basis.
Here are three things to consider during an ERP implementation when it comes to SOX, internal controls, and regulatory requirements:
1. Compliance begins during the business blueprint phase of an ERP implementation. While SOX and regulatory compliance may seem like a mysterious finance, CFO or Internal Audit function, compliance begins when creating the business blueprint for your ERP system. Business processes need to be defined in a way that ensures that the segregation of duties, oversight, and other compliance needs are addressed. The designed business processes need to be validated before the blueprint is finalized and before the technical team begins their software configuration. We’ve seen too many companies treat SOX and regulatory compliance like an afterthought, only to have their internal or external auditors raise red flags too late (e.g., after the system was in production or when they failed their first post-go-live audit). This challenge is further magnified by the fact that most modern ERP systems are very flexible and can perform business functions a number of different ways – some of those processes are going to be compliant with your internal our regulatory compliance needs, while others will not. We build this internal compliance, SOX and regulatory review into our ERP business blueprinting methodology for our clients.
2. Organizational change management solidifies SOX and regulatory compliance. Contrary to popular belief, ERP systems can’t always force compliance. They can make it easier to enforce segregation of duties, financial oversight, and approval workflows, but they can’t close off every possible loophole or process breakdown. Organizational change management and employee training is the key not only to ERP success in general but also to getting an ERP implementation to full compliance. These activities help employees understand the need for compliance, clarify the expected business processes, and hold them accountable for executing against those processes and workflows. All the generic software training in the world won’t help create this understanding, but effective organizational change management will. Our clients have found their business processes to be much more efficient, effective and compliant as a result of the organizational change management framework we provide as part of our ERP implementation methodology, toolset and expertise.
3. Include your internal or external auditors throughout the entire ERP implementation project. Just as your executives and employees need to have buy-in into the project, your internal and external auditors also need to support the changes resulting from your new ERP software. As mentioned above, internal audits and controls should be built in to your implementation during the business blueprint phase, but you should also include a number of touch-points in other phases of the project as well. For example, key regulatory and SOX requirements should be defined during your ERP evaluation and selection to ensure you have chosen a system that addresses your needs. In addition, key process controls should be validated during the system design, software testing, user acceptance, and integration testing phases of the ERP implementation. In addition, a formalized compliance audit should be performed as part of a post-implementation benefits realization audit as well.
While Sarbanes-Oxley and regulatory compliance are often one of the last things on the minds of CIOs and relatively low on the list of reasons why organizations typically choose new ERP systems, it becomes very important when it’s time for that first internal and external audit of your business operations and systems. For this reason, it is important to bake these processes into your entire ERP selection and implementation lifecycle to ensure that your organization gets regulatory issues right the first time. It is typically much less costly to invest the time and resources up front rather than finding out after it’s too late.
To find out more about ERP success (and ERP failure), check out our free on-demand webinar series. Subjects include “Tips for Selecting the Right ERP Software for Your Organization,” “Tips on How to Build a Business Blueprint for ERP Systems,” and “Lessons Learned from Failed ERP Implementations.”
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The Case for and Against Using Multiple ERP Systems Across Your Organization
When most people think of ERP systems, they think of a single system. The common thinking behind enterprise software is that executives are generally looking for a single solution to integrate their entire business operations, processes and technologies. They want their entire employee base on a single system, a single source of truth for customer and financial information, and a seamlessly integrated technology to bring the organization together. Most organizations don’t explore options from SAP, Oracle or Microsoft Dynamics with the intent of deploying multiple systems – they instead look to these large solutions to consolidate their systems.
The reality, however, is that a single system isn’t always the most pragmatic way to address an organization’s business, technological and organizational needs. Businesses are becoming more complex, are evolving more quickly than ever, and are working hard to carve out unique niches to differentiate themselves from competitors. These competing priorities are often not conducive to a single ERP system from a single ERP vendor. In addition, best-of-breed solutions provide systems that are built with the depth to address one specific functional area, delivering potentially stronger functionality in that area than a single ERP system that addresses the breadth of an entire organization. In these cases, a best-of-breed enterprise software solution may make more sense. There are a number of solutions that fit this category: Salesforce for CRM, Workday for HR, Plex Systems for manufacturing, and Kinaxis for Supply Chain Management are just a few common examples of best-of-breed ERP systems.
The problem here is that opening the door to a potential best-of-breed solution can be like opening a can of worms. There are already nearly 200 ERP software solutions in the marketplace, but when you throw potential point solutions into the mix – such as CRM software, HR systems, or accounting software – the number of options and combinations grows exponentially. Organizations without much experience selecting and implementing ERP solutions find it difficult enough to find and implement the right ERP software as it is, but these inherent challenges are magnified when considering a best-of-breed solution.
So how is a CFO or CIO to make sense of the plethora of variables to consider when evaluating a single ERP system versus a best of breed option? Below are five things to consider as part of an ERP selection and implementation:
1. Business requirements are especially important with best-of-breed ERP systems. While it’s true that business process and requirements definition is important for any ERP selection process, it is especially true for multi-system initiatives. Before becoming overwhelmed with all of the available options for your functional point solutions for your CRM, HR, manufacturing and accounting systems, you will want to clearly define your business processes, pain points and requirements. This is important for two reasons: first, it will help you define what criteria will be most important to selecting the right software solutions, and second, it will help better define the scope of what systems you are looking for.
2. Understand your competitive advantages versus your non-differentiators. The difference between single system and best-of-breed ERP software often comes down to competitive advantages and differentiators. When working with clients that are not well-suited for a single system solution, we often help them determine their competitive advantages so that they can better define what to house in their “core” ERP system versus their outlying best-of-breed systems. One of the key benefits of taking a best-of-breed approach is that organizations can benefit from a solution that was designed with depth in a specific functional area, providing potentially strong functionality than a single ERP system that is trying to address the breadth of an entire organization. For example, when working with aerospace and defense companies, most accounting and HR processes and functions might be considered non-differentiators, while engineering and product configuration might be viewed as competitive differentiators. In this example, HR and accounting functions might be more feasible to house in the core ERP system, while engineering and product configuration might be more effective with a best of breed solution.
3. Business process and technological integration is crucial. When exploring best-of-breed solutions, it puts more pressure on your internal IT group to manage the technical complexity of integrating multiple systems with potentially disparate data standards integration tools. In addition, functionality and system user interfaces can be materially different between the various systems, creating even more of a need to ensure smooth and integrated business processes. This requires better organizational change management and business process clarity to ensure processes and people are aligned with the systems, along with adequate time for integration, testing, and data conversion to ensure that the systems function well together before go-live.
4. Trade-off between user acceptance and technical complexity. Another variable that comes into play is the balance between user acceptance and technical complexity. A single ERP system is often less technically complex in that it doesn’t require a great deal of integration or disparate data structures. However, the fact that best-of-breed solutions often provide more powerful capabilities within their functional areas of focus can increase user acceptance and make it easier for end-users to learn. In either case, an effective organizational change management and training program is critical to your project’s success, but this need can be amplified in a single ERP system environment.
5. Your longer-term ERP software strategy. In today’s economic climate with strained IT budgets, it is not uncommon for organizations to choose point solutions that will give them the most immediate return on investment rather than committing to a full-blow ERP implementation. However, it is important not to make this decision in a vacuum without first understanding your longer-term enterprise software strategy. For example, we recently worked with a large manufacturing company that couldn’t commit resources to a full ERP system, but they knew they could get an immediate ROI from a more robust CRM system such as Salesforce or Sage CRM. We encouraged them to define their overall enterprise-wide ERP requirements so they at least knew where they were headed in the long-term before making the shorter-term decision. This recommendation helped ensure that they didn’t back themselves into a corner later on when they chose to address their other ERP software needs.
At the end of the day, either route involves a tradeoff. If you choose a single ERP system, you are usually giving up some best-of-breed functionality or depth in exchange for a more tightly integrated system that can be easier and more cost effective to manage. If you go the best-of-breed route, you are giving up this tight integration for more depth and capabilities within specific functions. As with most decisions related to ERP systems, there is no single one-size-fits-all answer – instead, it depends on the specific business needs, priorities, competencies and risk tolerance of your organization. Discover more tips and techniques to ensure ERP implementation success by attending tomorrow’s free webinar, Lessons Learned From Best-in-Class ERP Implementations.
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Where to Cut Costs in Your ERP Budget . . . And Where Not To
As we outlined in our ERP predictions for 2012 and our look back at the ERP industry in 2011, one of the major issues that CFOs, CIOs, and other c-level executives are and will continue to focus on is how to reign in ERP costs. Unfortunately, despite their best intentions and their relatively low risk tolerance given the current economic climate, most organizations still see their ERP implementations take longer and cost more than expected. As a result, executives are watching their ERP budgets like hawks and looking for ways to control costs.
The problem these executives face is that there is a fine line between cutting costs and undermining the success and effectiveness of an implementation. Too often, cuts to ERP budgets that look good on paper can have disastrous consequences in the long-term (e.g., cutting organizational change management and training budgets), so it is important to understand where it makes sense to pragmatically minimize costs versus taking the slash and burn approach that could create a “throwing the baby out with the bathwater” situation.
Here are a few tips to help executives and project managers control and maintain costs within their ERP budgets:
1. Begin with realistic expectations. This is often the root of budgetary issues and cost overruns. More often than not, ERP vendors and their system integrators mismanage expectations on what total costs will look like, leading organizations to cut corners down the line when they realize that they never had the right budget to begin with and find that their management team isn’t willing to increase the required funds. It may be more painful to have clear, realistic expectations up front, but it is much less painful than losing your job because you can’t manage to the budget, or worse yet, losing your job because the implementation was botched due to lack of resources. Panorama’s ERP software selection and implementation planning methodologies help clients define (and budget for) these more realistic expectations from the start.
2. Detail each of the critical cost components of an ERP implementation. You can’t have realistic expectations without a realistic view of what each of the budgetary cost components will need. This includes hidden costs: hardware upgrades, internal resources, external consulting support, customization, and a host of other budgetary items that executives and project managers often overlook or underestimate. Once you have identified all of the major cost components, you can then benchmark these line items to actual costs for companies and industries similar to yours — not unrealistic “back of the envelope” low-ball guesses that your vendor or system integrator might provide during their sales cycles. Panorama’s 2011 ERP Report and other independent research can be good starting points for these more realistic benchmarks.
3. Understand the “untouchables” of your ERP budget. There are certain, critical elements of an ERP implementation that should never even be considered for the chopping block: organizational change management and project management expertise, for example. Just like any investment portfolio that your company pursues, you will want to identify the areas of the project that you are willing to invest heavily in and those that you are willing to spend less on if push comes to shove. For example, customization is one area that many companies decide not to spend money on, and rightfully so. And here’s a hint: if you want your implementation project to be successful, then you will want your budget to reflect a heavier focus on the business and organizational aspects of the project rather than the technical aspects, which are typically not only the easiest parts of an implementation but also the areas the system integrators and vendors tend to over-emphasize.
Setting an ERP budget that is aggressive while at the same time realistic is easier said than done. You have to have extensive experience with ERP implementations, be objective and independent when defining the budget, and understand the full spectrum of costs outside of the direct vendor-related technical costs. At Panorama, we help our clients define a realistic budget, along with appropriate areas of focus, as part of our ERP implementation planning service offering and PERFECT Path methodology. Without this focus and understanding, organizations are walking into a black hole of uncertainty and risk. Find out more about ERP implementation success by attending our January 12th webinar, Lessons Learned From Best-in-Class ERP Implementations.
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Panorama’s Yearly ERP Industry Wrap-up: The Good, The Bad and The Ugly of 2011
With another year quickly drawing to an end and our predictions for ERP in 2012 already in place, we thought it would be worth taking a look back at the past year in the ERP industry. As we reflect on the major milestones of 2011, it reminds us of the large spectrum of positive and negative industry incidents. For example, on one hand, Panorama Consulting continued its growth and success by merging with The Prescott Group while, on the other hand, several high-profile organizations failed miserably in their attempts to implement ERP systems.
Here is a look back at three of the major milestones of 2011:
Proliferation of ERP failures and lawsuits. Even with the economy still in the dumps and CFOs and CIOs more risk-averse than ever, lawsuits, fraud and project failures continued to grab headlines. For instance, Lumber Liquidators, CareSource Management Group, Tesco Bank, Whaley Foodservice Repairs, and the City of New York all reported failed or troubled ERP implementations in 2012, reminding us all how awry ERP projects can go if they are not managed well. Case in point: the CityTime payroll system implementation, which had an initial budget of $63 million and rapidly grew to $760 million in actual costs, along with allegations of kickbacks amongst the project’s system integrators and sub-contractors. While our firm will undoubtedly provide ERP expert witness testimony in several high-profile lawsuits in the coming year, we would much rather be earning our revenue by helping companies do ERP right the first time. Hopefully, these examples serve as reminders of the value of independent ERP consulting experts to help select and implement enterprise software effectively.
Industry growth and consolidation. Despite the accelerating rate of ERP failures, the industry as a whole showed continued signs of life in a tough economy. Panorama expanded its reach into new industries, service areas, and geographies by merging with The Prescott Group to form Panorama Consulting Solutions, while Infor continued its march toward becoming a viable Tier I ERP vendor by acquiring Lawson. In addition to these and several other high profile merger and acquisition deals in the enterprise software space, other ERP vendors demonstrated aggressive growth by expanding their footprints of new customers, embracing software as a service (SaaS) and cloud delivery models, and focusing on emerging markets such as China. SAP, for example, continued to push its Business By Design SaaS offering and indicated that China is its number one geographical growth priority in 2012 and beyond.
The cloud is for real. 2011 appears to have been a turning point for cloud ERP software and SaaS solutions, with it becoming more clear that the movement is not a flash in the pan. SaaS ERP vendors such as Salesforce, Workday, Kinaxis, and Netsuite all exhibited strong software license growth in the last year, while traditional on-premise vendors such as SAP, Oracle, and Epicor demonstrated stronger commitments to their SaaS and cloud offerings. While the heaviest rate of adoption is still very concentrated among smaller organizations, the adoption rates in these segments of the market illustrate that the cloud is here to stay. The next step for SaaS ERP vendors is to prove that they can crack the code and concerns of the enterprise software needs for larger organizations.
While 2011 may have been a mixed bag, it left us with enough positive news and opportunity to get us ready for an exciting 2012 with optimistic prospects. On behalf of everyone at Panorama Consulting Solutions: happy new year to our current clients, future clients and industry peers. Here’s to a successful 2012 and we look forward to working with you.
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The 12 Days of Christmas: Gifts Every CIO and CFO Should Ask For
While this year has been full of mixed news, with economic weakness, business volatility, and ERP failures and lawsuits taking more than their share of headlines, there is much to look forward to in the New Year. IT and finance executives in the C-suite are becoming smarter, more strategic, more flexible, and more adept with dealing with uncertainty, and we should expect no less from our ERP implementations.
With the holidays upon us and thoughts of how to spend new budgets in the New Year, we thought it might be helpful to share some of the “gifts” that every CIO and CFO should ask for before jumping in to a ERP software initiative in 2012 and beyond. For that discerning executive in your life, here are 12 gift ideas that are likely to trump any “world’s best boss” coffee mug or Christmas sweater:
1. The right ERP software for your business. It may seem like an easy process on the surface, but evaluating and selecting the right ERP software for your organization is a complex and challenging task. Many of our competitors provide “cheap” alternatives to software selection via automated checklists and over-simplified views of your business, but navigating through the many good options in the marketplace to find the right software for your organization requires a hands-on understanding of your business, true technology independence (both in theory and in fact), and recognition as the world’s leading experts in ERP software.
2. A competent project manager. While the “do it yourself” option may sound appealing at first, and you certainly will always want an internal project manager to manage the many internal activities that need to happen during an implementation, external project management support can be a perfect way to augment the internal competencies of your project management team. More importantly, external experts that manage ERP implementations every day will help you implement faster, less expensively, and more effectively than you would have otherwise.
3. A shiny new project plan. There is a reason that a majority of ERP implementations take longer than expected: the project plans were never realistic to begin with. Most project plans we see created by organizations and their ERP vendors or system integrators are woefully inadequate, missing or inadequately addressing key critical success factors, such as time for data conversion, conference room pilots, organizational change management, business process and workflow design, and user acceptance. In order for your implementation to get off on the right foot, you might consider benchmarking your plan against best-in-class and technology-agnostic implementation plans, which will highlight gaps in the business, people, and organizational aspects that are so crucial to any successful implementation.
4. More money for your ERP budget. Research presented in our 2011 ERP Report shows that a majority of ERP implementations go over budget, primarily because companies either mismanage their projects, or, even more commonly, under-estimate their budgets to begin with. Your direct ERP vendor, software license, and system integrator costs will actually be a minority of your total cost of ownership, so you should budget accordingly. A good rule of thumb to see if your budget is in the right ballpark or not is that your software license costs are likely to be just approximately 20-25% of your total implementation cost. In other words, take your license costs and multiply by four or five to arrive at your ballpark implementation figure. Anything less is too little and will require you to cut corners later on.
5. Well defined and re-engineered business processes. I can’t think of anything that saves more time and money in an ERP implementation than well-defined and documented business processes. Without this component, the software vendor or system integrator will show up with their checklists or transactional-based workflows, expect answers on how to configure the software, and spin their wheels (and billable hours) helping you make decisions on how you want to run your business. Since most ERP software is very flexible, the concept of software “best practices” is a farce, and business process re-engineering takes time, you need to have a clear vision for how you would like your operational model will look before you begin implementing your selected software.
6. More organizational change management. Whether your project succeeds or fails will be largely dependent on how you manage the organizational and “people” aspects of your enterprise software deployment. Basic generic vendor training materials won’t cut it, so you’ll need an approach that is more tailored to your business, including process-based training, organizational impact assessments, targeted employee communications, and clearly defined roles and responsibilities in the new business and systems environment. Our organizational readiness assessments help clients clearly see the areas of resistance and organizational risk that need to be addressed as part of an effective organizational change management plan.
7. More resources. Organizations are notorious for implementing (or trying to implement) with inadequate internal and external resources. No matter how talented your internal team is, chances are that they are not experienced enough to implement without outside help that can bring expertise and business methodologies to help your team implement faster and more inexpensively than they would otherwise. In addition, most executives could use more ERP staffing support to help them assemble a world-class team with the right balance of internal and external resources.
8. A Better educated team. Unrealistic expectations and lack of experience are two of the hardest things to change with a client that is about to embark on what is likely to be their biggest business transformation project in at least the last decade or two. For example, is your team armed with the knowledge that most implementation teams over-customize their software and do they know what to do to keep that from happening with their project? Do they know how to keep the project on track and identify warning signs along the way? Clients often ask us to conduct an on-site ERP Boot Camp as a way to educate and arm their teams for battle heading into their ERP initiatives. You can even start educating your team now by visiting our ERP resource center to view our on-demand ERP webinars, listen to ERP podcasts, or read our extensive ERP research and white papers, all free of charge.
9. Tangible business benefits and ROI. Your executive team is not going to be happy with your implementation unless it delivers tangible business benefits that they can see, feel, and touch on their profit and loss statements. We all know that simply implementing the software is not going to deliver business benefits, so you’ll need to go one step further by establishing a benefits realization framework that translates some of the expected business benefits into measurable metrics that can be used throughout the organization. In addition, this benefits realization plan will call for a post-implementation audit to help optimize results after go-live.
10. An ERP project that never ends. This may look like a typo or sound like a cruel White Elephant gift for that executive that has been a little too difficult to work for over the last year, but it is in fact one of the best things you can do for your organization in the long-term. A key problem with ERP projects is that they are treated like sprints to a go-live finish line, when they should instead be treated like a marathon of continuous improvements and adjustments to account for business and technology changes over time. In fact, we find that most organizations that come to us for help finding a new software solution to replace their old ones could have extended their ERP lifespans by 50% or more if they would have simply kept the software and business operations better aligned over time.
11. A resounding ERP success. Unfortunately, most executives go into ERP implementations with the low expectation of simply not failing or not bringing the organization to its knees. This is hardly the best-case result one should expect after making a risky, multi-million dollar investment in the business. The good news is that we have proven with our clients that ERP implementations can be resounding successes that do more than avoid failure – they offer relatively smooth go-lives, more efficient business processes that deliver tangible business results, and an organization that is well-aligned with the new business processes and software. The question should be not whether or not you will be successful in your ERP initiative, but how successful will you be?
12. An independent advisor to help along the way. All of the above Christmas and New Year gifts are very realistic and available to your executive team with the guidance and support from an outside consulting and services firm that does this type of thing for a living every day. We are well-known as the world’s leading independent thought leaders in the ERP industry not just because we talk a good talk and are quoted by hundreds of journalists and bloggers as such, but because we have hands-on experience making our clients successful, whether it’s helping them select the right software, implement their chosen software, or get more out of their existing ERP investments.
Panorama Consulting is happy to help you provide any one or more of these gifts to your CIO or CFO. Learn more about our ERP consulting services as you plan for your ERP project in the new year. And don’t forget to visit our ERP resource center to educate you and your team with the knowledge required to make your ERP implementation successful.
Here’s wishing you all a Happy Holidays and even Happier New Year. Best of luck in 2012!
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Top Signs That You’ve Outgrown Your ERP System
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.
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Mobile ERP is Gaining Popularity . . . But is it Right for Your Organization?
The advent of mobile devices is gaining significant momentum in the consumer space, as evidenced by statistics showing that shoppers are using iPhones, tablets, and other mobile devices to conduct their holiday shopping at a rapid accelerating pace. However, the business world is also beginning to show some signs of early adoption of mobile capabilities in their evaluation, selection, and implementation of enterprise software systems.
For example, a recent study by ERP vendor IFS reveals that 13-percent of executives identify mobile functionality as the most important feature in selecting enterprise software for their organizations, while another 68-percent feel that it is just as important as other features. The study of executives from nearly 300 North American manufacturing organizations underscores the significance that mobile functionality is playing in modern ERP systems.
And it’s not just the manufacturing sector leading the charge toward adopting mobile capabilities; the retail industry is also leveraging iPads and other mobile tablets to replace cash registers. An article in the Wall Street Journal earlier this week reveals that approximately half of the retailers are considering replacing traditional cash registers with mobile devices, while another 6-percent have already adopted mobile point of sale (POS) systems. Nordstrom’s is one major retailer that is in the process of rolling out iPod Touches to serve as the chain’s POS sale system.
Since businesses in general are clearly still in the early phases of adopting mobile technologies, it begs the question of whether it is the right fit for all organizations. As with any new (or existing) wave of enterprise technology, it all depends on the needs of your organization. For example, just as security is a concern with cloud computing, it is also a concern with mobile technologies.
So how is an executive to make sense of what is or isn’t right for your organization when it comes to mobile ERP? Here are a few things to consider when weighing the options:
Potential Business Benefits and Return on Investment. What potential benefits will contribute to the return on investment you might expect from adopting mobile enterprise software? For example, Nordstrom estimates that each iPod Touch it uses costs just 20-percent of what is required to support a traditional POS system. Our manufacturing clients cite increased productivity, improved visibility to inventory and work in progress, and more transparency on the manufacturing floor as benefits of adopting mobile technology. Our utilities, energy, and telecommunications clients cited increased efficiency of routing mobile work crews and scheduling their service orders, as well as better tracking assets and maintenance in the field. So the key is to look at your specific needs, business processes, and pain points to identify the potential business benefits that your organization may realize from mobile ERP.
Security of the Data. On the flip side, many CIOs worry about the security of data, including transactions and customer and product information. Since mobile capabilities will inevitably store and transact information related to your inventory, bills of materials, and customers, it can be a bit disturbing to expose this information to the wireless world. However, as is the case with any risk, this potential downside can be mitigated with the right strategy. Encryption of data, tight security profiles, and closely-monitored asset tracking of devices are all strategies that can be used to diffuse the potential security risks.
Rapidly Changing Technology. When rolling out gadgets as highly adopted by consumers as iPads or iPhones, you are inevitably subjecting your organization to the rapidly changing world of consumer technology. Unlike ERP systems used by a relatively small number of organizations and business users, consumer technologies change and require upgrades at a much more rapid pace. In addition, the mobile software itself needs to not only provide a look and feel that consumers are used to, but it also needs to be updated regularly and integrated seamlessly with back-office operations, which can be difficult to navigate. For this reason, mobile ERP is often a better fit for organizations with more sophisticated IT support staff.
These are a just a few variables to consider when evaluating potential mobile ERP solutions. As with any enterprise software investment, you will want to ensure that the costs are justified via tangible and measurable business benefits that provide a decent return on the investment. At the same time, you want to ensure that you are aware of the risks and tradeoffs and have a plan to mitigate those risks should you decide to move forward.
Learn more about the new advances and hot trends in ERP systems at Thursday’s interactive webinar, Top Ten Predictions for ERP in 2012 (10 a.m. MT).
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Giving Thanks for the Advances in ERP Software
As the Thanksgiving holiday approaches, it’s helpful to look at all the things that we are thankful for not only in our personal and family lives, but also in the ERP industry. Here are some of the things that strike me as major advancements and improvements in the enterprise software space over the last several years:
Deployment options have become more varied. It used to be that if a Fortune 500 company wanted to implement an ERP system, executives had to make a massive investment in the initiative and burden their organizations with huge amounts of risk. Today, not only are there more options to deploy ERP systems via software as a service (SaaS) ERP, cloud, and best-of-breed solutions, but there are plenty of options for non-Fortune 500 companies and small- and mid-sized organizations. ERP vendors such as Plex Systems, Kinaxis, Salesforce, Workday, and Netsuite all provide deployment alternatives to traditional ERP systems. In addition, solutions from traditional ERP vendors such as SAP, Oracle, and Microsoft Dynamics include SaaS and cloud options.
There are business ERP experts available to help. When I started in the industry more than 15 years ago, there were plenty of software consultants available for hire, but very few (if any) independent business consultants that had a broad understanding of the ERP market – including critical success factors surrounding project management, organizational change management, and business process re-engineering. While most consultants are still more myopically focused on a single ERP system or lacking independence and objectivity, companies such as Panorama provide more holistic, comprehensive, and independent advisory services to companies wanting to mitigate the risk of their ERP selections and implementations. In response to Panorama’s leading position in the independent ERP consulting space, a host of smaller firms have emerged across the globe as well.
Failure rates are still too high. While the industry is touting low-risk deployment options and tools such as SaaS, failure rates are still alarmingly high. Demand for Panorama’s ERP expert witness services – which companies and attorneys leverage when their failures are about to lead to lawsuits – are at an all-time high, suggesting that organizations are mismanaging their implementations more than ever. What’s more interesting is that our expert witness work, whereby we leverage best practices from our proprietary and proven ERP implementation framework, shows that companies are failing in key areas despite their use of more advances technologies and tools being touted by software vendors. Unfortunately, it doesn’t matter what kind of software or tools you are deploying – implementations will fail if you don’t effectively plan and execute some of the key factors required to make a project successful. Not enough organizations, consultants, or software vendors understand this key concept.However, while there are many things to be thankful for, there are still many areas where we still need to improve:
Companies still don’t treat ERP implementations as business, rather than technology, initiatives. Contributing to the high rate of ERP failures are the fact that too many executives are delegating their ERP projects to their CIOs or IT Directors and absolving themselves of business or operational responsibility for the success of the project. At the risk of offending our more technical clients or industry peers, CIOs and IT Directors are much more likely to underestimate the need for business involvement and potential outside expertise than their more operational or finance counterparts within the organization. Worse yet, most software vendors and ERP consultants focus far too much on software rather than business processes (not system transactions), organizational change management, and strong project management.
While there is always room for improvement, we are showing signs of advancement and for this I’m thankful. Happy Thanksgiving to our US-based clients and peers!
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- Director of Consulting Solutions
- ERP Consultant
- IT Project Manager
- Organizational Change Management Consultant
- Senior ERP Business Analyst
