SaaS and cloud ERP solutions are the highest growth segment of the ERP software industry. Companies such as Salesforce, Plex Systems, and Netsuite all continue to show robust increases in revenue while traditional, on-premise ERP systems are showing much slower rates of growth. As outlined in Panorama’s 2012 ERP Report, the market share of cloud-based ERP systems has grown from 6% to 16% in a single year. Even the traditional ERP vendors are redirecting R&D dollars to cloud and SaaS ERP solutions.

However, as is the case with any ERP and IT strategy, there are pros, cons and tradeoffs for both the on-premise and cloud ERP paths. While SaaS solutions may be a good fit for many organizations, it’s not the right solution for everyone. But if organizations do indeed determine that cloud solutions are the right fit, they need to recognize and address the risks and tradeoffs that are inherent in any strategic ERP decision. They also need to recognize some of the complexities associated with migrating from the traditional on-premise approach to the cloud.

Below are three things to consider when transitioning from on-premise to cloud ERP systems:

1. Recognize that risk will shift away from technology to the business. Industry hype would suggest that SaaS ERP systems can be implemented faster, cheaper, and easier than their on-premise counterparts. While this may be partially true for the technology iteself since there is no software to implement on-site and there is less need for a physical infrastructure to support the solution, the tradeoff is relative lack of flexibility. As a result, CIOs and CFOs are forced to spend more time addressing organizational change management and training issues since the solutions can’t be easily changed to fit business needs, increasing the pressure on the organization to change its business processes and people.

2. It’s not as easy as the industry hype might suggest. ERP implementations are difficult, costly, and potentially risky to any organization, regardless of whether you’re implementing on-premise, SaaS or cloud ERP solutions. However, CIOs often make the mistake of assuming that business processes don’t need to be redesigned, employees don’t need organizational change management, or adequate resources aren’t required to make the project successful. Mismanaged expectations are one of the root causes of ERP failures in general, but especially so with SaaS and cloud ERP implementations.

3. Be prepared to address potential integration and data issues as your organization scales for growth. The blessing and curse of SaaS and cloud solutions such as Salesforce, Workday, Netsuite, and Plex is that the technology is often used to roll out point solutions for specific functions of an organization, rather than biting off an entire enterprise-wide solution all at once. For example, many of our clients have implemented CRM systems such as Salesforce as a way to get an immediate ROI for a focused part of the organization. However, integration and data complexities can be amplified when it comes time to bolt on manufacturing, accounting or other types of enterprise software solutions. These complexities often result in fragmented systems and data with challenging integration between systems. Before implementing a SaaS or cloud solution, organizations should have a clear IT strategy and roadmap for how it will address such complexities to avoid backing itself into a corner.

While some of the above points are relevant to all types of ERP systems – whether on-premise, SaaS, and cloud systems – they are especially important for the latter two. Even SaaS and cloud ERP systems require critical success factors to be successful, such as business process management, organizational change management and strong implementation project management. CIOs and CFOs interested in migrating from on-premise to cloud or SaaS systems should be aware of these challenges.

Learn more about choosing the best-fit ERP software for your organization in our on-demand ERP webinar series. Episodes of particular interest may include Understanding the Differences Between Leading ERP Software and Tips for Selecting the Right ERP Software for Your Organization.

ERP implementations are always difficult, and often times even more so for government organizations. An interesting recent Computer World article discusses how the Government Accountability Agency (GAO) recently uncovered the sad state of some of the US military’s ERP implementation projects. The agency issued a report that found “Many of the [ERP] projects are years behind schedule and significantly over budget, including one that is expected to rack up nearly 10 times its initial cost . . .” 

Unfortunately, the U.S. Military isn’t alone. Recent articles in the IT press have outlined other failed ERP implementations, including at the City of New York and other high-profile government organizations. We regularly work with our government clients to provide independent validation and verification (IV&V) and expert witness services to their large, high-risk ERP implementations, and failures like these underscore the need for government organizations to ensure they have the right ERP implementation experience, methodologies and independent counsel to help manage a successful implementation.

Although there are general best practices that organizations should implement, regardless of whether they are in the public or commercial sectors, there are some pitfalls that Panorama’s experience with government and public-sector entities tells us are more common in those sectors. Here are three common reasons why we’ve seen federal, state and local government entities struggle with their ERP software initiatives:

1. Too much focus on minimizing short-term costs. Unfortunately, the purchasing and procurements processes in the public sector are, at times, overly driven by the desire to minimize short-term costs. Government entities and government contractors often put a very heavy weighting in their Request for Proposal (RFP) processes, much more so than the commercial sector. As a result, system integrators, ERP integrators and ERP consultants will typically lowball their proposals and cost estimates to these entities – often by compromising scope and/or quality – all in the name of providing the lowest-cost solution to their government clients. In the end, this approach inevitably results in corners being cut, lower-quality processes and minimal efforts to complete the implementation, which (ironically) increases total cost of ownership of these ERP systems in the long-term.

2. Contract structures that set up implementations for failure. Our government and public-sector clients are much more likely than their commercial counterparts to negotiate fixed-cost or not-to-exceed contract structures with their ERP vendors. Little do they realize, however, that these contract structures create perverse and unintended incentives to cut corners, minimize focus on high-value activities such as organizational change management and business process management, and rush the organization to implement before they’re ready. Fixed-cost contracts, while appealing on the surface, can be the root cause for the very ERP failures, cost overruns and lack of benefits realization that they are intended to mitigate. In addition, purchasing or procurement managers who don’t know much about successful ERP system implementations often miss the fine print in contracts and statements of work that put the onus on the government entities to handle some of the ERP critical success factors, thus increasing overall costs.

3. Inadequate attention to organizational change management. Because government entities typically change at a slower pace and have ERP systems that affect more employees than most commercial organizations, organizational change management is even more imperative. However, government entity executives often don’t have the ERP experience to understand the necessity of organizational change management and, just as importantly, what exactly organizational change management means. Providing comprehensive organizational change management  goes beyond simple end-user training at the end of the implementation; it also includes organizational readiness, organizational impact assessments, business process-based training, and targeted employee communications, all of which can be perceived to increase short-term implementation costs.

While no ERP implementation is ever easy and risks can’t ever be completely avoided, avoiding the above pitfalls can be the first step to helping government ERP system initiatives to get back on track.

Learn more about how we help government entities manage their ERP implementations more effectively by reading our Government ERP Case Study and our Lessons Learned From a Government ERP Failure white paper. Feel free to contact us at 720-515-1377 if you have any specific questions about how Panorama can be of assistance in your government ERP initiative.

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. One episode allegedly explores the concept of shady ERP consulting practices, which is obviously of interest to Panorama since we are an ERP consulting firm. Although it may sound a bit far-fetched and 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 systems initiatives.

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.

The City of New York’s well-publicized allegations of fraud against the organization’s ERP system integrator is one example of such fraud. Although the City is not a client of Panorama’s, nor are we involved in any expert witness or other consulting work for them, it is clear that fraud is a real risk in the industry. In addition, other examples are out there, including consultancies looking for “proxies” to conduct phone screenings on behalf of more junior and less-qualified consultants in order to win the business, 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 fraud:

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 just important to manage those resources just as you would your own employees.

Read more about Panorama and our ERP services and contact us at any time to discuss how we might help your organization best select, implement or realize the business benefits from its ERP system.

I want to lay something on the line here, right from the outset: an ERP implementation is not an IT initiative. When an organization believes that it is, and tasks the IT department with everything from software selection to implementation to training to internal communication, it is setting itself up for ERP failure. Sure, the system might get up and running. And staff might actually use it to perform some basic functions. But it will probably never provide the true operational benefits it could have and should have. And that, my friends, is ERP failure — plain and simple.

There is no arguing — nor should there be — that the IT department plays an integral role in ERP implementations. These are the men and women who are the masters of the technical side of the system, handling configuration, customization and all the other complicated stuff that the corporate suits have incredibly little to do with — and that the system can’t run without. But an IT staff, talented and knowledgable as they are, typically are not the operational experts that need to drive an ERP project. Speaking in generalities, they don’t tend to have the broad, all-encompassing vision of the business that a COO has. Further, they don’t tend to have the authority to make the millions of  top-level decisions (about business process management, about standardization, about streamlining) that need to be made in order to derive ROI from an enterprise software solution. Yet they are all too frequently given the responsibilities of an enormous (and potentially thankless) job: choose, implement and oversee adoption of an entirely new way of doing business. Oh and manage the help desk too . . . you know, during “free time.”

So how should the skills of an IT department be utilized in an ERP implementation? Below is a partial list, highlighting some areas that the IT department might be able to provide invaluable insight into.

1. Participating in ERP software selection, including review of the business process management and blueprint documentation
2. Working with a third-party expert to map the “to be” business processes against the software to determine areas of customization
3. Helping to determine what the organization will do about the gaps between its needs and the system’s capabilities
4. Working with a third-party expert to implement and test the chosen system
5. Creating a plan to determine how the organization will handle user and system issues after the cutover
6. Participating in the determination of a legacy system phase-out approach
7. Contracting with a third-party to determine a training strategy, materials, etc.
8. Determining a multi-site training schedule

Of course, each organization is run differently — and has different people, with different skills, in its ranks. Some IT personnel are crackerjack whizzes at operations. And some wouldn’t know an ERP system if it sat on their lap. So view the above through the lens of what you know about your company and its people but remember: although IT employees likely are functional experts in a very important aspect of the system, they should not in charge of the project. That is a job for the executive level, and to pretend otherwise is doing a grave disservice to both the talents of the IT department and the future of the business.

Find out more about ERP implementation pain points — and critical success factors — at our webinar tomorrow, Review of Panorama’s 2012 ERP Report.

As we have pointed out in previous blogs and industry presentations, creating a business blueprint is critical to a successful ERP implementation. While most ERP software vendors, consultants, and system integrators claim to focus on business processes, most don’t do it well. In fact, a simple review of most ERP business blueprint deliverables that other system integrators and consultants have created even for some of our more complex client organizations leave much to be desired (see example below).

With that being said, our experience and research shows that a contributing factor high ERP failure rates is that lack of focus on business process management, mapping and blueprinting.

Before clarifying the difference between full-blown business process management and business blueprinting, it is first helpful to understand the importance of this critical activity. Succinctly, an organization’s business processes serve as the foundation of the entire implementation. In other words, several key activities – including training documentation, conference room pilot testing, organizational change management, system security profiles, end-user training delivery and benefits realization – all rely on clearly defined business processes. Without clearly defining business processes, organizational roles and responsibilities in the new system, and related performance metrics, organizations will undoubtedly end up with an ERP system that is misaligned with business needs and fails to deliver the expected business benefits. In other words, it’s no coincidence that most implementations fail to deliver expected business benefits (over 50% according to our 2012 ERP Report) and at the same time fail to focus on effective business process management.

Here are five things to look for when evaluating whether or not your project has the right degree of focus on business process management:

1. Software configuration checklists versus end-to-end business process workflows. The thing to remember about most ERP consultants and system integrators is that they are focused on software functionality, not your business, so most of their perspective focuses on defining what they need to know in order to configure the software appropriately. While this is certainly important to a successful implementation, it is a myopic focus that typically results in ill-defined end-to-end business processes and diluted user acceptance of the new processes. For example, we have found that most SAP system integrators’ business blueprint deliverables typically read like a high-level list of business requirements rather than a robust series of documentation that help employees understand the detailed end-to-end workflows. If this is the case for your ERP implementation, then you may want to revisit your overall business process management approach to ensure your project team has a more effective focus.

2. As-is versus to-be business processes. Although companies implement ERP software with the intent of improving and automating business processes, most end up with a product that largely “paves the cowpaths” by replicating legacy operational inefficiencies. This is the symptom of the deeper issue, which is lack of focus on defining “to-be” business processes. ERP vendors and system integrators further compound this problem by over-selling and misrepresenting things like “pre-configured solutions” and “industry best practices,” which are typically simply inventories of ways that past clients have automated their inefficient business operations. This is why organizations that are the most successful in their ERP implementations are the ones that take the time to define their to-be business processes prior to implementing new software rather than relying on the smoke and mirrors of industry best practices baked into the software, which typically don’t exist.

3. Business process mapping versus optimization and re-engineering. In addition to a focus on to-be versus as-is processes, one of the significant benefits of true business process management is the focus on improving business processes. Even among the few system integrators’ that have some level of focus on business process mapping, most hone in on simply documenting business processes rather than identifying measurable ways that these processes can be improved. Panorama’s business process management approach, on the other hand, embeds key components of lean Six Sigma and other business process improvement methodologies to ensure that clients define and implement processes that truly improve operations in a measurable way. So when evaluating your ERP project’s focus on optimizing and re-engineering business processes, look at how well your team or consulting firm incorporates solid methodologies and business experience into the project.

4. Business process implementation prior to and during the ERP system rollout. Well-defined business processes – no matter how much better they look on paper – are worthless if they are not adopted by your organization, and they won’t be adopted by your employees if you don’t take key steps to implement those new business processes. Perhaps the most flawed approach when it comes to this is to assume that simply implementing new software with better processes will result in improved business processes, which simply is not true. Employees need to be trained on new business processes, including how exactly the business processes will flow and what their role will be in the new environment, which is too much to cover in end-user training just a few weeks before go-live. For this reason, many of our clients hire us to help implement process changes and improvements in parallel — or even before — the ERP implementation. This helps spoon feed the changes to employees and enables the organization to recognize immediate business benefits even before the software is implemented.

5. Organizational roles, responsibilities and changes. New business processes and better ERP systems to support those processes are great, but it’s the people and the organization that will make those changes happen. In order for full acceptance and business benefits to take place, employees need to understand, embrace and own the business process changes, including their roles and responsibilities in the new operational model, the specific changes that they need to be aware of, and other key messages necessary from an organizational change management perspective. Unlike our competitors, Panorama bakes key organizational change management activities such as these into its business process management and approach.

At the end of the day, a business blueprint is important to an ERP implementation. In fact, it is a key deliverable of our extensive business process management services we provide to our ERP clients. However, it is only one component of a more comprehensive business process management methodology, which is one of the key reasons why most ERP consultants and system integrators have historically failed in their attempts to implement ERP software.

Learn more by attending our webinar, Business Process Management: A Critical Success Factor of ERP Implementations, on May 10 at 10 a.m. MT.

The ERP consulting profession has unfortunately received a few black eyes in the 15 years that I have been in the field. During the late 1990s, consulting firms were flush with cash as their client organizations scrambled to hire them to solve the Y2K problem with new enterprise systems, which led to cost overruns, failures and inflated consulting bills. While Y2K is no longer an issue, the real problem unfortunately hasn’t subsided. Our research and expert witness experience continues to show that ERP failure rates are still as high as they’ve ever been, even among those organizations that use outside consultants.

To add insult to injury, the industry has seen some high-profile and widely publicized failures over the last few years. Waste Management, Lumber Liquidators, and a host of other implementation failures in the media highlighted how their projects failed and/or resulted in lawsuits, despite the fact that many of them looked to outside consultants to help with the implementations. These companies relied on experts, but somehow their ERP implementations went sorely over budget, took much longer than expected, and failed to deliver the business benefits they had expected. Whether implementing SAP, Oracle, Microsoft Dynamics, a Tier II ERP system, or any other enterprise application, companies seem to have trouble with their ERP initiatives, whether they use consultants or not.

New York City recently had ERP consultant troubles of its own in relation to the City’s botched implementation of its CityTime payroll and time reporting system (functionality that organizations often implement as part of their ERP or Human Capital Management [HCM] systems). After spending nearly 14 years and more than $650 million on the large-scale implementation, the City realized that their Project Manager from SAIC, its system integrator, had received $5 million in kickbacks from the City. Although the system eventually went live with over 100,000 City employees, the scandal exposed a great deal of consulting incompetency and a lack of oversight and controls, and resulted in $500 million in refunded consulting fees. As a result of this scandal, the City is going to the other extreme by minimizing its use of consultants and instead building an internal team of resources to manage the CityTime project going forward.

While the City’s unfortunate plight may be an extreme example of ERP consultants gone bad – or perhaps an entertaining episode of Showtime’s “House of Lies” show about the management consulting industry – it does expose some realities and things to consider when evaluating potential ERP consultants for your organization’s enterprise software, CRM, HCM or business intelligence software initiatives. How can organizations leverage the skills of outside consultants when the risk of failure still exists? How can executives handle the complexities of their ERP initiatives when the internal competencies aren’t there and the skills are so hard to find? What is the right balance of doing it yourself versus leaning on outside experts?

The short answer is that it is important to find the right balance. The do-it-yourself approach has been proven to fail, as has the opposite model of letting consultants run rampant with the project (and the checkbook). Below are three things to consider when assembling the internal and external teams for your ERP software initiative:

1. What project controls and governance do you have in place? As was learned in New York, nothing replaces good project governance and controls. Even with the best, smartest and most ethical consulting team in place, the project will fail if the right governance and controls aren’t established up front and monitored throughout the project. Panorama’s PERFECT Path implementation methodology, for example, includes tight project controls to help clients take ownership of, have visibility into, and control the outcome of the project, while at the same time leveraging our team’s project management expertise and proven ERP methodologies.

2. What is the right balance for you? The do-it-yourself model is clearly just as broken, if not more broken, than the “100% outsourced to consultants” ERP implementation model. Most companies need a balance somewhere between the two extremes, but they will fall in slightly different parts of the spectrum based on their unique needs. For instance, organizations with very little internal ERP knowledge and/or bandwidth to take on large, complex enterprise systems projects may err more on the side of external consulting guidance. Some companies, on the other hand, have strong project managers and employees with ERP implementation battle scars, so they may err more on the side of leveraging internal resources. 

3. What value can be provided by a system integrator versus an ERP consultant? As I posted in last week’s blog Hiring a System Integrator vs. Hiring an ERP Consultant, there is a big difference between a system integrator, value-added reseller, or software consultant that focuses myopically on the technical aspects of an implementation, versus a more business-centric ERP consultant that understands project management, business process design, organizational change management, and the host of other more important activities that are critical to implementation success. This is a subtle but important distinction that should be considered when assembling your team. In my years of industry experience, I’ve found that most consultants and system integrators in the ERP space are of the more technically-focused variety, which is a big part of why the industry gets such a bad rap and served as the impetus for starting Panorama.

At the end of the day, the right ERP consultants can make your enterprise software initiatives successful. While Panorama has a very positive track record of success and very satisfied clients, most of the traditional industry players do things the way they have always been, leading to the same flawed results. Finding the right consulting team with the right methodology, business focus, and project controls can be a good way to balance the skills and competencies missing from your internal team.

If you’d like to learn more about the key differentiators between ERP failure and success, please join us for our Lessons Learned From Failed ERP Implementations webinar on April 26 at 10 a.m. MT.

When our mid- to large-size clients ask us to help them choose an ERP vendor, they often also ask us to help them find the best system integrator or partner to help with their ERP implementation. In some cases, our clients will choose their ERP software at least partially based on the competencies of the implementation partner that they are considering. For example, if we assume that functional fit are roughly equivalent, choosing SAP All-in-One or ECC 6.0 with a great implementation partner can be the deciding factor when compared against a mediocre Oracle E-Business Suite consulting firm, or vice versa. The same can be said when considering Microsoft Dynamics, Epicor, Infor or any other ERP system for that matter.

The bigger question is: what exactly constitutes a “good” system integrator or implementation partner? For some of our clients, it equates to local presence. To others, it has to do with the number of certifications that the average consultant has or perhaps just a general comfort level or feel they get when meeting with the company. However, we have found that many organizations choose their system integrator for the wrong reasons. While the number of installations, certifications, and referenceable customers are all important factors, they are just a handful of the many variables that should be considered. It gets down to one simple question: do you want to hire a systems integrator to help you implement software, or do you want a higher-value ERP consultant that will help you translate the implementation in a way that improves your business? Those are two very different approaches to implementing ERP systems and can be the difference between ERP success and failure.

For example, in all of our ERP expert witness and project recovery experience, ERP challenges, failures and lawsuits are rarely (if ever) caused by lack of software knowledge. While understanding the software is the price of admission in any large-scale implementation, it is hardly a differentiator and is certainly not difficult to find in the market. Instead, it is the other things that make or break a system integrator or ERP consultant’s level of success.

Below are what we consider to generally be the most important criteria when selecting an ERP system integrator, implementation partner or consulting firm:

1. Knowledge of the selected ERP system. While it may seem fairly obvious, choosing a firm that has a good understanding of the most recent version of the software is critical. The firm and/or team you are considering should have strong implementation experience and certifications related to the specific product and version that you are implementing. For example, there is a big difference between understanding how to implement Oracle E-Business Suite and having experience implementing JD Edwards, even though they are both part of the Oracle portfolio of products. Similarly, you will want to find a firm that understands how to integrate your ERP system with any third-party bolt-ons you may be considering, such as Demantra advanced planning or Business Objects business intelligence.

2. Consulting methodology and tool-set. Although the team and system integrator’s track record and experience is important, it is not nearly as important as the toolset and methodology used to implement the software. Too many system integrators focus on staffing hired guns who are gurus in their respective products, but couldn’t follow or replicate a process to save their lives. System integrators or consulting firms without methodologies typically equate to inconsistency and risk, regardless of how “experienced” the individuals are. We’ve seen some of the most talented and knowledgeable ERP consultants fail because they didn’t have a proven process that equates implementation success and benefits realization.

3. Focus on the non-technical (and more important) ERP implementation success factors. When evaluating a system integrator or consultant’s methodology, it is important to look for not only tools that pertain to how to configure the software and train the core team, but also the non-technical aspects of the implementation. It is rarely the technical activities that lead to ERP failures. Instead, failures are typically attributed to deficiencies in project management, organizational change, business process management, and organizational change management. If you see an ERP consulting or system integrator methodology that relies too much on “best practices,” “pre-configuration” and “business blueprint checklists” – and not enough on organizational change management, job design, project governance and business process management – then your system integrator is probably focused on the wrong things. Again, all the software and technical knowledge in the world won’t make a successful implementation without these more important non-technical factors.

The differences between traditional ERP system integrators and more business-focused consultants are subtle, but extremely important. Focusing too much evaluation time and importance on the former will expose your ERP implementation to significant risk, while focusing on the latter will ensure that you find a firm that will help you implement your chosen ERP system in a way that results in better user adoption, more efficient business processes and higher realized business benefits.

As part of our 360-degree service offering, Panorama can either help you find a system integrator as part of our ERP selection process, or act as your technology-agnostic implementation partner if you have already selected an ERP system. Contact us today to learn more.

ERP implementations are a lot like the “Hunger Games” for CIOs, CFOs and other executives tasked with making their ERP projects successful. For those that aren’t familiar with the novel or movie, Hunger Games is predicated on a story where two children from each “district” of a futuristic United States are expected literally to fight to death. The children are selected at random, coached, mentored and dressed for the Hunger Games, but only one remains in the end. The home district of the surviving child is then bathed in riches and attention from the central government, making them the envy of the other districts.

It’s no exaggeration to say the Hunger Games are a lot like ERP implementations. The odds of “survival” – one in 24 – look interestingly similar to the success rates of ERP projects. And while CIOs aren’t battling to a brutal death, most are fighting not to bring their organizations to their knees during or after the implementation. They’re also fighting for their jobs. And anyone who’s ever sorted through a stack of client references can tell you that ERP vendors – like the fictional government of Panem – make no bones about trumpeting their own “winners” as some sort proof that the odds are indeed in each contestant’s favor. In fact, one of the lines repeated throughout the story is “May the odds be ever in your favor” – quite ironic and disturbing given the fact that the odds are completely stacked against them.

CIOs and CFOs are in the same boat. As we’ve outlined in our 2012 ERP Report, most ERP implementations take longer than expected, cost more than expected, and fail to deliver at least half of the expected business benefits. Despite this fact, purchasing organizations always are dazzled with the “may the odds be ever in your favor” marketing messaging around rapid implementations, low risk and easy user adoption. SAP frequently talks about industry best practices, pre-configurations, and “templates” that result in easy ECC, All-in-One, or Business One implementations. Oracle often refers to their Business Accelerators and User Productivity Kit as part of a low-cost, low-risk E-Business Suite (EBS), JD Edwards, or PeopleSoft implementation. SaaS ERP (software as a service) also provides promises of fast, cheap and easy implementations. Finally, Microsoft Dynamics, Epicor, Infor, and other Tier II solutions similarly focus on the ways that they each stack the odds of success for a rapid implementation.

However, despite the fact that most executives want rapid implementations for their organizations and ERP vendors promise as much, the data proves that most implementations are not done quickly. So where is the disconnect? The brutal Hunger Games-style reality is that these promises of implementation acceleration – while noble in their intentions – fail to deliver. At the end of the day, organizational challenges, business process breakdowns, standardization, poor project management, lack of business and technical implementation expertise, and a host of other challenges that have nothing to do with the software all combine to create implementation initiatives that take longer than expected.

Should CIOs, CFOs and ERP project managers simply throw in the towel and run for cover? Absolutely not. Instead, they should educate themselves, be realistic and ask their team some key questions. Here are three things to keep in mind when considering a rapid implementation:

1. Define what “rapid implementation” means. According to our ERP research, the average ERP implementation for an average-size company is 14 months. However, most ERP vendor proposals we review on behalf on our clients range from three to six months for small- to mid-size clients, six to nine months for mid-size clients and 12 to 18 months for larger, multi-national clients, suggesting that these proposals are clearly misaligned with reality. While most system integrators and VARs would suggest that these ranges are typical, we would suggest, based on our experience and independent research, that these numbers actually are the definition of a rapid implementation. So when reviewing an ERP vendor’s proposal, a good rule of thumb is that their proposed timeline is indeed rapid, and therefore aggressive, risky and probably unrealistic.

2. Understand the tradeoff between speed, cost and quality. It is simply impossible to drive speed while at the same time minimizing cost and maximizing quality. For that very reason, a rapid implementation suggests that you will pay for that speed with increased costs and/or lower quality. The key to ask your organization during an implementation is which of the three variables is most important to you and how much you are willing to bend on the other two. Some organizations are willing to compromise cost and quality to achieve speed, but most are not.

3. Recognize the difference between speed to implement and the speed to adopt. Implementing ERP software is relatively easy, but defining and getting the entire organization to adopt the related business processes is very difficult and the primary driver of duration, cost and risk of ERP implementations. When developing your ERP implementation plan, it is important that you not only consider the time it takes to implement the software – which could actually be done over a three-day weekend if you really needed it done fast – but also the time it takes to define new and improved business processes, make important operational decisions, change the organization and realize the business benefits that you expected from the implementation.

These three considerations will help drive your organization toward realistic expectations and a clear understanding of what you’re getting yourself into as you prepare to play the ERP implementation Hunger Games. The key is to understand what you’re about to get yourself into, plan accordingly, and hire the right experts to help you through the difficult process.

May the odds be ever in your favor. (But, if and when you realize they’re not, call Panorama.)

In the enterprise software industry, we hear a lot of talk about how ERP software can and should improve performance, reduce costs and make businesses more efficient. Marketing hype from ERP vendors and systems integrators creates a utopian promise of efficient operations that eliminates Excel spreadsheets, manual processes and outdated legacy systems. In fact, the concept is quite attractive to most C-level executives, especially those in Lean Six Sigma organizations.

The reality, however, is that most ERP implementations fail to deliver on these promises, leading a bad taste in the mouths of most organizations that have unsuccessfully tried to leverage ERP systems to drive measurable business value. To add insult to injury, many of these same organizations take pride in their lean and sigma initiatives. The irony is that the same companies that have six sigma teams, lean processes and business process improvement centers of excellence in place are the same ones wasting time and money on ERP initiatives that don’t deliver measurable business value to the organizations. These companies that have fully mastered the science of eliminating every possible dollar and defect from their supply chains are the same ones over-spending and under-delivering on their ERP implementations.

Not only are ERP implementations difficult to manage, with most projects going over budget, taking more time than expected and/or failing to deliver expected business benefits (according to our 2012 ERP Report), but they in many cases create more waste that they eliminate. For examples, organizations have a bad habit of over-investing in shelfware – licenses and modules that will never be used – which is hardly consistent with a culture of minimizing waste and eliminating defects. In addition, many organizations waste a great deal of time, money and resources on inefficient implementation processes simply because they don’t have the expertise to correctly implement the software. These organizations may be experts in manufacturing, supply chain management or procurement, but they rarely have the expertise to effectively and objectively manage their ERP initiatives.

So is it possible to integrate Lean Six Sigma and an effective ERP implementation? Absolutely. Here are three ways that an ERP implementation can effectively contribute to an organization’s culture and discipline of Lean Six Sigma:

1. Minimize waste and non-value-add activities. Despite the fact that most organizations get bogged down in their ERP implementations and end up with less efficient business processes than they had before, it is possible to minimize waste and non-value-add activities if implemented appropriately. The first step is to develop a business transformation plan that incorporates all the critical success factors of a lean implementation, including organizational change management, effective training, business process improvement and other key elements that will enable lean business processes and efficient organizational adoption of those lean business processes. Rest assured that pre-configurations and software best practices will not get the job done from a lean six sigma perspective – instead, organizations need to do the hard work of defining how software can best support their lean processes. Most of our clients find it more valuable to leverage Panorama’s industry best practices and business process mapping, blueprinting, and improvement services than trying to go at it alone.

2. Performance measures, KPIs, and benefits realization. ERP software alone won’t drive performance – only people, business processes and performance measure will. In other words, buyer beware when you hear the common refrain that your chosen ERP software will drive performance based on its technological capabilities. Sure, it’s possible that in theory the software alone will drive performance, but the reality is that nothing will improve without a comprehensive benefits realization plan that establishes key performance indicators (KPIs), analyzes how the metrics will improve as a result of the new business processes, and assigns accountability to those employees and stakeholders that will ultimately be responsible for achieving performance. This benefits realization plan should also be tightly coupled with the established lean business processes (per the first bullet above) and the organizational change management plan in order to achieve those expected business improvements.

3. Increase quality and reduce defects. Unfortunately, most executives want to simply get their ERP software up and running without bringing the organization to its knees or losing their jobs in the process, so increasing quality and reducing defects is often the last thing on the ERP implementation team members’ minds. Teams without extensive ERP implementation expertise, or those that are myopically focused on the technical aspects of a project (as is the case with most ERP implementation partners and system integrators), will often become overwhelmed with getting a bare bones project done on time and on budget. Much like Maslow’s hierarchy of needs, less experienced and effective implementation consultants and team members will focus on survival rather than the higher levels of the hierarchy that actually deliver business improvements. As with #1 and #2 above, effective business process mapping, organizational change management and benefits realization are three components required to reach the “self-actualizing” stage of an ERP implementation.

Lean Six Sigma is a complex process requiring cultural change, discipline and a commitment to business improvement. Companies that are able to effectively implement such a mentality clearly know how to manage complex transformations, but those same organizations tend to struggle with the complexities and risk of an ERP implementation. However, by incorporating the above three components into their initiatives, organizations can better integrate Lean Six Sigma and effective ERP benefits realization into a comprehensive approach that delivers measurable business value, lean performance and increased quality into day-to-day operations.

Click on the following links to learn more about Panorama’s Six Sigma service offerings, including our Six Sigma and Value Stream Analysis and Lean Manufacturing, Six Sigma and Supply Chain Management Workshop.

As a follow-up to our recent post, Avoiding Bankruptcy From an ERP Implementation: Three Dirty Secrets, we’d like to take it to the next level and discuss how an organization actually can recover from being driven into bankruptcy by an ERP failure. Indeed, it’s a worst-case scenario, but also one we’ve seen too many times to ignore. The good news is that bankruptcy, whatever its cause, doesn’t have to mean the end of the organization. Take Denver, Colorado-based jewelry retailer Shane Co., for instance. As we’ve detailed previously, the company filed for Chapter 11 bankruptcy protection in January 2009 following a failed SAP implementation. After closing three locations, it filed a plan of reorganization and eventually emerged from bankruptcy protection in December of 2010.

While we’re not privy to how Shane Co. managed its ERP failure preceding or following the bankruptcy filing, there are a number of ways that Panorama suggests companies emerge from a situation such as this:

1. Reassess the ERP software. In Shane Co.’s case, it’s arguable that SAP wasn’t the best fit for the organization. If the company is experiencing such a high level of difficulty with its ERP system that its threatening its operations on a whole, then there’s a good chance that the team did not evaluate or select the software appropriately.

2. Reorganize the ERP project. In the same way a company must reorganize its operations to emerge from a bankruptcy filing, it too must reorganize its ERP project to emerge from an ERP failure. Panorama offers the third-party, independent guidance needed to salvage an ERP implementation . . . and save a company.

3. Allocate the resources to move forward. Understandably, a company in bankruptcy is watching every penny. This doesn’t mean, however, that funding for the ERP system can be abandoned. Indeed, the company needs to hire a third-party ERP consultant to craft a comprehensive implementation and business benefits realization plan to get the project back on track. Throwing the baby out with the bathwater by renouncing the ERP system will do nothing but derail any future profitability.   

Panorama’s 360-degree approach to ERP projects means we can step in at any time during selection or implementation or following a failed or stalled selection or implementation. Click to learn more about Panorama’s ERP methodology and offerings, and don’t forget to download our recent white paper, Lessons Learned From a Government ERP Failure. Though the focus is on the public sector, the lessons learned are applicable to private organizations as well.

“Using our pre-configured industry best practices and off-the-shelf software, you can implement our software in no time,” says the confident ERP sales rep. “Our ERP software is hosted in the cloud, meaning that you don’t need to spend time defining business processes or workflows. Better yet, don’t worry about your business processes – our software will tell you how to run your business, meaning you can implement our software quickly.” Or how about this: “Some of our customers have implemented our software in less than 90 days.”

Does this refrain and sales hype remind you of what you heard during your ERP evaluation and selection process? Unfortunately, we’ve encountered more than our share of these statements throughout our years of experience helping clients select their ERP software solutions. However, and as we’ve found via our ERP implementation and expert witness experience, one of the most common root causes of ERP failure is misaligned expectations at the start of an implementation. When an executive team has unrealistic expectations, it often acts as the first domino to fall during the slow, painful string of events that lead to failure. In addition, these risks are not relevant just to SAP, Oracle, Microsoft Dynamics, or other Tier I implementations – they are also important if you’re implementing Epicor, Infor, or any other ERP system for that matter.

Let’s look at a play-by-play from a recent ERP lawsuit, where legal counsel from one of the parties in the case hired us to serve as an independent expert witness. In this particular failure, the large, multi-billion dollar organization was sold a bill of goods that included ERP software licenses and an implementation across more than 20 different sites. Th party was told by their ERP vendor and systems integrator that by using industry pre-configurations, they could easily get their entire order to cash and procure to pay operations running on the new software in 18 months.

Side note: without knowing anything about the company other than what I shared above, I can tell you that 18 months is extremely aggressive, unlikely and fraught with risk, so it was not appropriate for any systems integrator to be suggesting otherwise. However, telling the client what they wanted to hear helped the sales rep to close the deal.

So how did their implementation pan out? As the project got underway, the implementing organization and its systems integrator quickly found that not 100-percent of its business requirements were addressed by this “off-the-shelf” solution. In fact, not only did a majority of the business processes and needs require re-configuration of the pre-configuration, but the system itself also required customization, two activities that were not accounted for in the original project plan. So less than a month or two into the project, it was already badly behind schedule.

Next, the systems integrator didn’t realize how significant the organizational change management needs were. It was a multi-site, multi-national organization with different operations, cultures, and business processes, so organizational change management would have been essential to the success of the project. However, the system integrator simply planned for a few employee newsletters and some end-user training a few weeks before each go live, which was woefully inadequate for a company of that size and magnitude.

As the project wore on, milestones and expectations were missed, leading the executive steering committee to fire multiple project managers and team members. They put more pressure on the new team to get it done on time and they couldn’t succeed either. In the end, the company was only able to get one single pilot location live in close to three years, or 50-percent longer than expected, and that was without touching any of the other 20 or so locations. The business processes were so broken and employees were so poorly prepared for the rollout that the organization eventually abandoned the implementation and reverted back to its legacy system.

The lesson here is that ERP failures are typically caused by a number of factors and they usually don’t happen overnight. However, unrealistic implementation expectations lead to a host of other problems. For example, our ERP research shows that the average implementation for mid-size organizations is 14 months, but we typically see ERP vendors and system integrators suggest 9 or even six months. Objective and independent data points to longer implementation times, but overly zealous sales reps will typically set duration expectations closer to half of what they actually end up taking.

So how can companies determine the most appropriate duration for their ERP implementations? Here are three tips to help develop a realistic estimate for your organization:

1. Benchmark to other organizations like yours. Sales reps are notorious for giving anecdotal examples of the one in a hundred customers that implement in a short period of time, but those examples are rarely relevant to your organization. More importantly, this approach only provides one data point out of thousands of ERP implementations each year, hardly the type of statistically significant data you would want to bet your entire ERP investment (and career) on. When we help our clients develop implementation plans, we use raw data from our benchmarks and research of thousands of implementations across the globe as a starting point. So when we work with a $1 billion multi-national manufacturer of consumer products, we’re looking at data from similar companies rather than providing anecdotal evidence.

2. Understand the variables that drive ERP implementation durations up or down. Even if you find statistically relevant data pertaining to industries or companies like yours, you still have to understand the variables that increase or decrease implementation durations. And by the way, here’s a hint: actual implementation durations have very little to do with pre-configurations, best practices, SaaS vs. on-premise, or anything else to do with the software itself. Our consulting teams use a proprietary implementation estimation model based on a number of criteria related to your business, such as supply chain complexity, level of standardization, use of organizational change management, and several other variables to develop realistic implementation durations. We also use this same model to develop an implementation budget that is more realistic than what most ERP vendors, consultants, and system integrators provide.

3. Develop an ERP implementation project plan. This may sound like a no-brainer, but most system integrators and consultants estimate implementation durations without a project plan. And of the ones that do have a project plan, they are incomplete , technically-focused project plans that do not take into account critical activities like organizational change management, business process design, multiple iterations of conference room pilots, and the many other non-software activities that a software vendor may not care about, but you as the implementing organization do. Without a realistic and complete implementation project plan in place, it is impossible to accurately predict how long your ERP implementation will take.

These three tips will help get your implementation planning activities on the right foot. Realistic expectations grounded in a complete implementation plan based on industry benchmarks, but tailored to fit your unique situation, will ensure that you don’t cut corners trying to meet unattainable implementation expectations.

Learn more about Panorama’s ERP implementation services and be sure to download our 2012 ERP Report for further data and analysis.

It’s no secret that most ERP systems fail to deliver the business benefits anticipated by the organizations implementing the software. More specifically, our 2012 ERP Report reveals that 50-percent of organizations fail to receive at least 50-percent of the expected business benefits from their investments in enterprise software. Adding insult to injury, and as outlined in our blog last week, is the fact that most organizations experience a misalignment between their business operations and ERP systems, which typically worsens over time as the companies go through acquisitions, international expansion, supply chain reorganizations, and other changes.

The reasons for the failures to achieve business benefits as well as operational misalignments with ERP software often point to business processes. As opposed to incorporating process best practices in their ERP systems, most ERP vendors and system integrators use the flawed practice of designing and configuring the software to handle a hodgepodge of transactional workflows in the system, most of which do not integrate in a cohesive end-to-end business process. Despite all the talk about best practices, order-to-cash and procure-to-pay business process workflows, and all the other buzz terms in this area, the ERP industry is still sorely lacking in its ability to develop, institute and manage business processes effectively as part of an ERP implementation.

So what can a company do to take more of a business-centric approach to its ERP system? Here are four best practices, proven through our years of independent experience, research, and expert witness work related to ERP lawsuits:

1. Define your ERP business blueprint. The common industry best practice favored by most system integrators, software vendors, and ERP consultants is to force the implementing organization to adopt the software by ignoring the “as is” processes and focusing on how to design the various transactions in the system. However, this methodology is flawed (as is proven by years of ERP failures), and doesn’t take into account the holistic, end-to-end business processes required to run the business. A technology-agnostic business blueprint, on the other hand, looks at the end-to-end workflows, organizational responsibilities, and metrics required to drive the business. In addition, this business blueprint approach defines how non-ERP processes and hand-offs will happen and, more importantly, focuses the implementation team’s attention on eliminating non-value-add activities and re-engineering broken business processes. The traditional and outdated approach of simply adopting the industry best-practices in the out-of-the-box software fails to address these critical issues.

2. Develop a business case and benefits realization plan. Simply put, your business processes won’t stick within the organization without the appropriately defined metrics to drive those business processes. In addition, without a benefits realization plan, expected business benefits will not be realized. It is no coincidence that most projects fail to create a full business case and benefits realization plan and most of those same projects also fail to realize the business benefits potential of their new ERP systems. In order to succeed and fully optimize your business benefits, your team will also need a comprehensive plan outlining how exactly the organization will achieve the planned business benefits. For example, the plan should include details of the specific measures used to drive business benefits, the exact business intelligence required to measure the benefits, the person(s) responsible for managing to the performance and so forth.

3. Create an organizational change management plan. Defining the software and business processes is the ante to stay in the game, but the organizational change management (OCM) component of any ERP implementation is the variable that will ultimately determine whether or not business processes “work” and whether or not people actually adopt those business processes. While most ERP system integrators and consultants think of OCM as a synonym for “training,” that is only one minor component of a successful organizational change plan. In addition to end-user training, an effective organizational change management program will include organizational impact analysis, employee communications plan, project branding, organizational readiness, and several other key components that we have proven to be the differentiators between ERP success and ERP failure.

4. Create an ERP Center of Excellence (COE). Once your ERP software is installed and “live,” it is important to manage it to mitigate the operational misalignments mentioned above. An effective COE should focus not simply on how to “fix” the software should it break or require upgrades, but more importantly, on the steps an organization can take to ensure that the software keeps up with evolving business needs and requirements. In addition, an effective COE will enable you to identify training needs, potential areas of organizational resistance, and broken business processes that can be continuously improved via better use of the ERP software. Most organizations and their system integrators define the finish line of their ERP implementations at the time of “go live,” but they should also be ensuring a framework and plan to create an organization that continuously improves its business processes and use of ERP software.

These four best practices are critical areas that we have seen in effective and successful ERP implementations, but which are typically absent in troubled or failed ERP projects. These are some of the remediations we often bring to the table when clients hire us to clean up their ERP implementations and constitute the core of the some of the best practices we implement when clients hire us to manage their implementations from the start.

For more information, download Ten Tips for a Successful ERP Implementation and join us for our upcoming webinar, Tips on How to Build a Business Blueprint for ERP Systems on March 22 at 10 a.m. MT.

It’s high time that CIOs and CFOs start thinking about some of the “softer” aspects of successful ERP implementations. After years or even decades of under-investing in the people, processes and organizational components of their enterprise software initiatives, executives are rightfully coming to the conclusion that they need to give careful consideration to organizational change management and other critical, non-technical activities that most software vendors, system integrators and ERP consultants fail to provide. For example, a handful of our current clients hired us to get their projects back on track because they found that their initial implementations were far too focused on the technical aspects of the project and didn’t have nearly enough time and resources dedicated to the other, more important facets of a successful deployment. Personally, I sometimes like ERP project recoveries even more than a clean slate implementation because, by that point, clients fully understand the value of what we do as a company. But the fact remains that implementing an ERP system twice is much more expensive than simply getting it right the first time.

Look at another startling fact: ERP implementations suffer from the 50/50 rule. As we outlined in our 2012 ERP Report, just 50-percent of ERP projects analyzed achieved 50-percent or more of their expected business benefits. This is hardly a compelling reason for a CFO to invest millions of dollars in a new ERP system, and executives are starting to catch on. They are starting to realize that ERP failures and lack of business benefits doesn’t have much, if anything, to do with the software. After all, software vendors have cracked the code on making software the easy part of an ERP implementation. SAP offers customers ASAP (Accelerated SAP) and RDS (Rapid Deployment Solutions) methodologies, Oracle has a business accelerator toolset, and even the Tier II ERP vendors have developed methodologies and toolsets designed to make the ERP implementation process go smoother.

Despite these best intentions, however, most ERP projects still fail. In addition to the longer-term ramifications of the 50/50 rules on the business benefits side, our research also shows that most ERP implementations take longer and cost more than expected. In fact, the average implementation cost overrun is over 20-percent, and these metrics haven’t improved much at all since we began conducting the annual study in 2006. Even if we isolate the data related to SaaS and cloud ERP solutions, these alleged “slam-dunk projects” take longer and cost more than expected. Since SaaS ERP vendors all promise fast deployments and even quicker business benefits, surely it can’t be the software’s fault, can it?

Again, these issues have very little to do with the software. Most modern ERP software “works” and is relatively easy to deploy from a technical perspective, but none of that matters if employees and end-users don’t use and embrace the system to perform their jobs and conduct business processes. As we’ve found in our ERP implementation experience, as well as our research of enterprise software deployments across the globe, user resistance and lack of understanding is one of the root causes of most ERP failures. And one of the key factors that contribute to user resistance is the “usability” of the software.

Clients often ask us about the usability of ERP systems because it’s a vague term. When we think of usability, we generally think of user-friendliness. Pandora makes it easy to create a custom radio station, Netflix makes it easy to watch streaming video, and Twitter makes it easy to post tweets – all examples of user-friendly types of software. Similarly, when most executives think of the usability of their ERP software, they look at the surface of how easy it will be for employees to navigate the system via the user interface.

However, usability means much more than the ease of use of a GUI. Usability also relates to how well the software fits your business operations and vice versa. In other words, are your business processes easily executed in the system? Can employees perform their basic job functions without the software getting in the way of their day-to-day responsibilities? Does the software allow the company to seamlessly, efficiently and effectively run its operations? If so, then the ERP system has a high usability factor.

The problem then becomes more of a misalignment between the software and the business operations. As outlined in the graphic below, companies change over time via merger and acquisition activities, growth, international expansion, new regulations and a host of internal and external drivers of change. Unfortunately, however, most ERP systems fail to keep up with these changes, creating a misalignment over time. So after 10 to 15 years of an organization’s business operations evolving and changing over time while the ERP system remains stagnant, the organization and its employees reach a breaking point where they can’t take it anymore – the ERP system is terrible, employees hate it, and it’s time for a new system. We hear it all the time and are amazed at how often misaligned ERP systems are attributed to the software itself rather than the failure to allow the technology to keep up with the business. This misalignment ends up creating problems with the usability of the system.

So how can an organization avoid the pitfalls of poor usability? Here are three tips to proactively stay ahead of this particular challenge:

1. Ensure initial ERP system usability. When you are first evaluating potential ERP systems, you must make sure that you have clearly defined what employees will need to do with the system. In other words, how specifically will the business processes need to look and how will the software support the business? It may sound elementary, but we see far too many organizations gloss over this important step to achieving ERP usability.

2. Train the system to be usable. That is not a typo – the system needs to be trained to be usable. Once business processes are clearly defined, the system needs to be designed and configured to run the business. Far too many companies assume that they’ll just flip the switch and the software’s “best practices” and “industry pre-configurations” will magically get the job done. Make no mistake that unless you are a start-up or a very simple organization, this approach is a recipe for disaster so you’ll want to ensure that your processes define how the software will be used. Today’s enterprise solutions are far too flexible to rely solely on best practices to get the job done.

3. Assess ERP software usability along the way. Employees not only need to be trained on your organization’s specific business processes and shown how the system will support those processes, but both your staff and your processes need to be assessed prior to and periodically after go-live in order to identify and address misalignments over time. As the business changes, the software needs to change as well, and ongoing organizational assessments to evaluate the usability of the system is the only way to allow the software to keep up.

Focusing on employee and operational usability is a key to ERP success. In addition, it is a key to ensuring that the software and the business stay in sync as the company evolves over time. Not only does this focus exponentially increase the potential business benefits of the enterprise solution – effectively allowing your organization to dodge the 50/50 bullet – but it also allows you to get a much longer lifespan from your ERP system. Most of our clients replace their ERP systems after 10 to 12 years, but they don’t necessarily need to and wouldn’t have to if they maintained this level of operational and technical alignment over time. So in other words, ERP usability is a multi-million dollar proposition for most organizations.

Learn more by downloading one or more of our white papers on ERP implementation, benefits realization and user acceptance or watching our recorded ERP webinars on organizational change management and ERP failures.

We often write and present about the challenges and pitfalls of ERP implementations as well as some of the best practices associated with making an ERP system work for organizations. Our clients look to us to provide the expertise, methodology, and toolset to make their ERP implementations succeed. While there are a host of things that can contribute to an ERP failure, troubled deployments often boil down to a vitamin C deficiency – lack of cash, controls and change.

Cash. As we detailed in our 2012 ERP Report, 56-percent of ERP implementations cost more than expected, and the average cost overrun is more than 20-percent. When we dived into that data and coupled it with our extensive ERP expert witness and ERP implementation experience, we found that a big driver of those cost overruns is mismanaged expectations and a lack of budget to invest in making the project succeed. Without the right experience and support, organizations most often fail to budget for “hidden costs” that software vendors and system integrators don’t advise you of, such as infrastructure upgrade costs, third-party implementation costs, customization and a variety of other items that the untrained eye won’t catch or plan for. If organizations simply budgeted an appropriate amount for their ERP software, this 56-percent metric would likely decrease dramatically.

Controls. ERP implementations can get out of control very quickly if they are not managed appropriately. An experienced ERP project manager should be able to provide project governance and controls to ensure that a project stays on track, in scope, on budget, and on time. For example, we work with our clients to manage a robust project governance framework surrounding escalation and decision processes related to customization requests. Every ERP implementation will include internal stakeholders that want to customize something in the software, so it is very important to have the controls in place to ensure that only customizations that are absolutely necessary to the operations are made. Organizations that over-customize their software typically begin with the “we’re not going to customize a single thing” mantra, but most lose that discipline as the project wears on.

Change. One of the biggest failure points for each and every ERP failure and lawsuit that we’ve been asked to advise on as part of our ERP expert witness work is a lack of organizational change management. It’s amazing how many CIOs and CFOs think that organizational change entails delivering some canned end-user training right before go-live and calling it good. This is a strategy that literally never works. Successful organizations instead implement much more effective organizational change management activities, such as process-based training that is tailored to the unique operations of the organization, change discussions, change impact analyses, employee communications, stakeholder alignment activities, benefits realization processes, and a host of other activities. Organizational change may seem like an optional or expensive investment, but in the end, it will always be less expensive in the long-term to invest heavily in organizational change to ensure that your organization and operations effectively adopts the software.

With these types of vitamin C deficiencies, organizations are very likely to suffer ERP failure. Our experience and research proves that effective organizations address these three areas well. Contact us today to learn more about how Panorama can help your organization achieve all of the benefits possible from its ERP system.

Anyone who follows ERP industry news knows that ERP implementations fail at high rates in both the private, commercial sector and the public, government sector. As recently discussed in Panorama’s 2012 ERP Report, not only do the majority of organizations across all industry verticals spend more time and money than initially forecasted but, adding insult, also fail to realize the business benefits that they anticipated. And, when they fail — they fail big and they fail hard, with both the ERP vendors and the implementing organizations often taking a beating in the court of public perception. This is especially true when failures happen in government agencies, who need to justify their failed actions, huge expenditures and mismanaged processes to the taxpaying public footing the bill.

What many don’t realize is that while ERP failures may, on the surface, appear to be caused by different issues and problems, they share many of the same themes. And this goes for both companies and governmental organizations. While the structure and oversight of the ERP implementation often differ between the two sectors, the root causes of failure are distressingly similar. In Panorama’s ERP expert witness work analyzing extreme ERP failures, we often have been struck by the similarities across all ERP missteps and mistakes. Three of the common ERP failure factors are:

1. Lack of due diligence during the ERP software evaluation and decision phase. Neither government agencies nor commercial companies operate in a vacuum. When it comes to ERP software purchases, both are subjected to the same hype, pressures and sales cycles as the other. And both often find themselves in the mindset of either “We MUST have a SAP / Oracle / Microsoft Dynamics ERP system because they’re big and expensive and important and so are we” or “We MUST have a SAP / Oracle / Microsoft Dynamics ERP system because that’s what company/agency X down the street has and they’re so much more educated about this stuff that we are.” Not to pick on the Tier I systems, but for companies who don’t do their due diligence and just assume that a big, complicated ERP solution is the answer to all their woes — the failures come fast and easy. It’s like thinking the only options for college are Harvard, Oxford and Georgetown. All great schools, but if they don’t fit a student’s particular needs or desires, then they’re the wrong choice. And an expensive one at that.

2. Poor business requirements and system design. Organizations that fail to properly define their business requirements via business blueprinting up front often end up with a “moving target” of an ERP system. By that I mean it is shot at and battered by a cavalcade of ever-shifting requirements as the project progresses. These inadequately defined requirements also lead to inaccurate or incomplete assumptions about scope, cost, time and resource requirements, causing blown budgets and deadlines and heightening the risk for massive ERP failure. These deficiencies also tend to lead to software designs that are misaligned with the organization’s operational needs. Takeaway? Get your requirements done early and done right.

3.  Inadequate project planning and controls. It’s no secret that the key to ERP success is strong project management, planning, governance and controls. When these dominoes start falling, the success of the project is in great peril. One example we’ve seen in our expert witness work is improperly formalized change control and sign-off processes when team members decide that the scope or software must be changed to meet certain requirements. This bloat quickly can lead to scope creep and inadequately managed timeframes, both precursors to ERP failure. The way to remedy this is through careful definition and validation of project plans and mindful oversight of the project timeline, scope and resources throughout the implementation.

The bulk of this blog post has been adapted from our Lessons Learned From a Government ERP Failure white paper released today. Even if you don’t work for a governmental agency, the points made are universal across ERP implementations and should be considered and discussed prior to beginning the project. Like all of our publications, the white paper is free for download (with registration). Learn more by downloading Lessons Learned From a Government ERP Failure today.

A recent article published by Tien Tzuo on the CIO Network blog on Forbes’ website suggests that ERP is dead. While it was a well-written article and isn’t necessarily inconsistent with what many other analysts have stated over the last three to five years, I’m still not buying it and still don’t see ERP software going anywhere anytime soon.

Just as a full disclaimer, just as the author of the above referenced article used to be a key employee at Salesforce and may be a bit biased toward cloud and SaaS solutions, Panorama provides ERP consulting solutions and the argument could be made that my biases lean toward traditional ERP. However, at the risk of sounding flippant, I really don’t care what happens to ERP software. It could all migrate to SaaS, the cloud, best of breed solutions, or stay exactly as it is today for all I care. Because we are an independent, technology-agnostic firm, any of those potential industry outcomes will still result in huge opportunities for us to add value to our clients and will do very little to nothing to jeopardize our business model.

With that in mind, I am still not at all convinced that ERP is dead. Let’s set aside all the fears and phobias executives have about cloud ERP software, because those will eventually go away. CIOs will soon realize that most cloud providers can provide more stable and secure solutions than any internal IT organization. However, even after neutralizing those unfounded fears, there are a number of more concerning and real flaws with the assumption that the cloud is going to push ERP systems to a slow and painful death:

This story is a rerun from the ‘90s. I love watching reruns of Seinfeld and Frasier just as much as the next guy, but I know how all those episodes end because I’ve seen them before. During the same era that I was infatuated with Jennifer Aniston on Friends, I was also hearing early in my consulting career that a new “ASP” (application service provider) model was about to kill traditional ERP. It was a pretty compelling story then, but the reality is that ASP – just like SaaS and cloud solutions today – had significant limitations that prevented widespread adoption. For example, lack of flexibility and lack of integration were two big limitations that the ASP model shares with SaaS and cloud ERP. Many companies that did migrate to the ASP model ended up needing to revert back to traditional ERP systems to standardize and integrate their operations better. The side exhibit in this blog visualizes the fact that just as the political pendulum will always swing back and forth between conservative and liberal ideologies, the ERP industry will always swing back and forth between traditional, single ERP systems and SaaS/best-of-breed/cloud/ASP models.

Most companies are still buying ERP. As our 2012 ERP Report, which was published earlier this year, shows, only a small fraction of companies are using SaaS or cloud solutions. It makes sense for smaller or less complex businesses to leverage SaaS technologies for their relatively vanilla business needs, but these solutions simply aren’t ready for the needs of larger organizations. To Tzuo’s credit, his article does accurately convey the fact that most CIOs are looking for alternate deployment options, such as subscription-based pricing and/or ERP systems hosted in the cloud. These are two very real and very viable alternatives for CIOs, but neither movement requires ERP to die. All can peacefully co-exist and provide the best of all worlds to customers.

Business software is not the same as a consumer using Pandora or Facebook. The author suggests that the consumer movement to web-based solutions like Pandora, Spotify and Facebook is proof of the allegedly inevitable enterprise movement to subscription-based and SaaS ERP models like Salesforce and Netsuite. However, this comparison is like comparing apples to oranges – the needs of a consumer posting a Facebook status update is much less complex than an aerospace and defense contractor that has to manage the millions of parts, people, tasks and resources required to build a satellite or aircraft. So while they may be perfect for simple transactions like streaming music, SaaS ERP solutions are nowhere close to being able to handle the types of complexity inherent in most global businesses and supply chains.

Although I’m not at all convinced that ERP is dead, I do agree that ERP is changing and will look very different in five to ten years. Business intelligence, mobile solutions, social media integration, subscription-based pricing models, and private clouds are all exciting new changes to ERP systems. Companies are also getting smarter about how they implement ERP systems – for example, they know not to bite off more than they can chew and they understand they have multiple deployment options. However, SaaS and subscription-based solutions are just one of a portfolio of options available to CFOs and CIOs, and traditional ERP systems will continue to be a viable option for a number of organizations now and in the future. Some of the risks of each are illustrated below:

At the end of the day, the argument over SaaS vs. cloud vs. traditional ERP is simply noise that masks a bigger and deeper problem: most enterprise software initiatives fail. Call it what you want and use all the cool technologies that you want, but your project will still fail if you don’t address the real differentiator between software success and failure, which is more related to business processes and organizational change than it is to software. The sexiest and slickest SaaS software in the world doesn’t matter one bit until those bigger issues are addressed. I can’t predict the future and I don’t bet, but if I could or did, I would put big money on that problem not being automated in my lifetime. So instead of discussing whether or not ERP is going to die, we should be asking: “Are enterprise software implementations ever going to stop failing?”

For further discussion of this topic, please join me for tomorrow’s interactive webinar, Cloud vs. Traditional ERP: Which is for You? 

Purchasing ERP software has become easier and more flexible over the last several years. The advent of public and private clouds, SaaS ERP software, on-demand offerings, and hybrid deployments all provide more options to executives looking to deploy new ERP systems in their organizations. This is good news to most CIOs and CFOs.

The bad news, however, is that comparing options and navigating through the related contract and licensing scenarios add a layer of complexity that most buyers of ERP software don’t have experience with. For example, when evaluating between a SaaS ERP system and an on-premise one, cost and contract structures are entirely different, which can be difficult for less experienced buyers to understand. This difficulty can lead to bad decisions and higher costs for organizations, which we see too often in our industry.

Here are three common “gotchas” to watch for when evaluating and purchasing ERP software licenses for your organization:

Getting Over-Licensed on Your ERP Software. One common pitfall is purchasing more software than you need, whether it be in terms of unnecessary modules, too many users, or other instances of “shelfware” which can be the equivalent of throwing away money. For example, we recently worked with a mid-size manufacturing company that estimated it had purchased $600,000 of shelfware licenses that were not going to be used by the company anytime in the near future. It’s always easier to add to your purchase over time, but nearly impossible to scale back on licenses that you’ve already committed too. Even if your ERP vendor is offering you a “once-in-a-lifetime” deal on software licenses in order to meet quarter- or year-end numbers, you are more likely to more than compensate for the alleged savings by over-purchasing software that you don’t necessarily need.

Failure to Consider to Total Cost of Ownership of Your ERP Software. Licenses are typically just one aspect of the total cost of ownership (TCO) of your ERP software purchase and account for less than 25-percent of TCO according to our research of nearly 2,000 ERP implementations across the globe. Most organizations fail to consider the remaining 75-percent of total outlay, such as hardware costs, internal and external project resources, integration and customization, and other hidden costs. Executives should have a clear picture of the TCO for their purchases – not just their direct software license costs – and this understanding should be applied to negotiate contract terms accordingly. In addition, the TCO should be quantified for at least seven years, which can paint an entirely different picture than if you simply consider the first year or two (think: SaaS vs. on-premise ERP systems). For example, SaaS ERP systems often entail additional vendor costs, such as storage or transactional volume fees, in addition to other non-vendor fees associated with deploying the software.

Negotiate a Long-Term License Deal. Rather than focusing solely on the immediate purchase, it is more important to view the acquisition of ERP software as a long-term deal. Since most implementations take between one and two years (longer for larger organizations) and another one to two years to realize the benefit from these implementations, it rarely makes sense to front-load license contracts to acquire the software all at once. Instead, companies should purchase what they need when they need it and pre-negotiate the price on future purchases to avoid unanticipated license cost increases. For example, we typically negotiate deals for our clients allowing them to purchase additional licenses, modules, or users at pre-defined costs for three years or more, while at the same time minimizing their up-front capital outlays.

Negotiating ERP software licenses and contracts is part art, part science, and requires a solid understanding and breadth of experience. We have helped more than 100 organizations negotiate software license contracts of all types over the years and have amassed experience that most CIOs and CFOs simply do not have. However, with the right expertise and guidance, executives can effectively negotiate long-term deals that make sense to their organizations and consider the various complexities, nuances, and constantly changing realities of ERP software contracts.

To find out how exactly Panorama’s services can save your organization time, money and headaches, check out our ERP vendor and contract negotiation services or contact our team of independent ERP experts today.

When guiding our clients through the ERP selection process, we often hear executives say that they are concerned about the viability of their ERP vendors. Even after we’ve confirmed that a product is the best functional fit, made sure it meets the business requirements of the organization, and negotiated a great contract for our clients, the viability of ERP software vendors is often the last unresolved concern for client CFOs and CIOs. After all, it is the job of executives to mitigate risk and ensure the long-term success of their organizations, so it only makes sense that the last thing they would want is a recently purchased ERP system to be discontinued or not supported as a result of an acquisition.

ERP software vendor viability has become even more relevant with the recent merger and acquisition activity in the enterprise software market. For example, Infor recently acquired Lawson, Epicor and Activant were acquired as part of a private equity buyout, and JD Edwards and PeopleSoft were both acquired by Oracle several years ago. Some of the leading ERP vendors, including Oracle, Infor, and SAP, have been extremely aggressive in acquiring other ERP software solutions, as well as best of breed points solutions, to augment their core solution offerings. With each of these acquisitions comes uncertainty – will the new parent company continue providing maintenance and support? Will it invest in future enhancements? Or will it force a costly and risky migration to another product?

These are all valid questions and concerns. And although it is impossible to predict the future, there are common signs that could give some insight into whether or not a company is on the chopping block. Here are three things to look for when determining whether or not an ERP vendor is ripe for an acquisition:

Product roadmap. Companies typically stop investing R&D in their product if they are looking to sell in the near future. For example, we have been hearing from some of Oracle’s competitors for the last several years that the company was going to stop supporting JD Edwards as part of their acquisition of the product. However, this still has yet to happen. In fact, some of our team members just last week attended the JD Edwards Summit near Denver and learned about the company’s roadmap for the product through 2026. Companies with no clear roadmap are much more likely to be sold and/or discontinued as part of an acquisition than vendors like JD Edwards who have a clear vision for their future.

Current R&D investments in the product. Another telling sign is the current and recent investment in the ERP software in question. If the product has become stagnant and it becomes apparent that R&D spending is on the decline, this could mean that the product is on the chopping block. Again using JD Edwards as an example, the company recently launched a cutting-edge user interface and mobility solution as part of its core offering – hardly the sign of a product about to be discontinued, despite the fact that a larger company acquired the product. If, on the other hand, the software is still using dated technology, isn’t keeping up with the competition, or doesn’t have a decent size R&D budget, chances are more likely that it is (or will be) a target for another company.

Organizational viability and stability. A third sign to watch for is organizational stability and viability. In other words, does the company look and act like a company that is growing for the future, or one that is trying to maximize short-term results to get a higher valuation in a potential takeover? For example, we had a strong opinion nearly three years ago that Epicor was positioning itself for an acquisition, simply because of the way the company was acting. Although it had just replaced its flagship Vantage product with Epicor 9, it was aggressively cutting professional services staff, offshoring much of its development work to Mexico, and even making cuts within its sales organization. These are typically not indicators of a company that is looking to remain independent in the short-term, which eventually proved to be the case with Epicor.

While it is not always a bad thing for an ERP vendor to be acquired, it is important to understand and mitigate the risks associated with a takeover. An acquisition could mean more R&D muscle behind a product or additional technical strength, or it could result in discontinuation of the product and a forced migration to the parent company’s flagship product. In either case, it creates a level of uncertainty that makes most executives nervous.  The associated risks can be managed by ensuring a solid contract with clear SLAs.

For more information about specific companies, access our database of ERP vendor profiles or read the ERP Industry News section of our website.

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.

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.

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.”

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.

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.

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.

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!

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.

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).

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!

Sometimes I think the ERP software market is a sham. After over 15 years consulting in the industry, I still see far too many overzealous system integrators and VARs hell bent on mismanaging customer expectations in order to close a sale. Worse yet, most that I run to in the industry fail to recognize perhaps the most important fact of ERP implementations: they have very little to do with the software itself. Sure, a good software solution is a prerequisite to a successful ERP transformation, but the reality is the business and organizational issues are hands down the most important things to adequately address when deploying successful ERP systems. Key among those business and organizational issues is user adoption.

Here’s another fun little fact: most VARs, system integrators and their customers know very little about user adoption. It’s not nearly as simple as industry consultants typically suggest, and it’s certainly more complex and risky than most customers expect. While most tend to focus on canned training, user adoption is depending on a variety of prerequisites, with user training being just one relatively minor part of the equation. Unfortunately for the misinformed, failing at user adoption will absolutely lead to ERP failure, no matter how well the software is “implemented” in the traditional one-dimensional sense.

So how can one ensure that their SAP, Oracle, Microsoft Dynamics, or Tier II ERP implementation be successful from a user adoption perspective? Here are three keys to ensuring successful user adoption:

1. Ensure clearly defined business processes. I still get mildly nauseous when I hear system integrators and VARs suggest that their software or technical consulting teams can define business processes for their customers. This statement is complete garbage and is a big reason why so many companies fail miserably in their ERP implementations (over 70-percent, according to our independent research). Here is the simple fact: ERP software defines transactions, and transactions mean nothing without bigger-picture end-to-end business processes. When most software vendors talk about a business blueprint or system design, they are typically referring to designing transactions in the system. Imagine a giant puzzle; the software vendor provides you with the 1,000s of pieces of the puzzle (the transactional blueprint), but they do not put it together for you (the true business blueprint). Without this critical activity and deliverable in a project, your people will not truly understand the new business processes, what is expected of them, or how to tie together all those pieces of the puzzle in a way that makes your business more efficient and effective. A proper business blueprint is something that will take months to complete, especially if you want to consider re-engineering your business processes before implementing the software, which we always recommend to our clients.

2. Define clear roles and responsibilities. Once the business processes and supporting workflow transactions are defined, you still need to define employee roles and responsibilities in the new processes and systems. Just because they have been trained to create a work order or demand forecast doesn’t necessarily mean that employees understand their roles and place in the overall process. Most ERP transformations involve significant changes to people’s job roles, so it is important that you facilitate a process and structure for defining, documenting, approving, and rolling out those job roles and changes. Your HR department, management team, unions, and other key stakeholders will need to be involved in this potentially time consuming process. Again, these are things that your ERP vendor or system integrator is not in a position or qualified to provide.

3. User adoption doesn’t stop at go live. Most ERP project teams are relieved when they cross the finish line of a go-live. Many months or years have been spent getting the project off the ground, so the last thing anyone wants to do is talk about how to extend the project or make it take longer than it needs to. But the reality is that most user adoption issues are identified after go-live, and most of the benefits realization framework doesn’t kick in until well after go-live, so defining go-live as the project finish line is a common misguided assumption.  An effective user adoption and organizational change management framework will ensure that your people are not only prepared to adopt the system at the time of go-live, but also ensure that they continue to improve their individual and team performance in the weeks and months after go-live. This incremental investment in time and money after go-live has returns that exceed the investment multiple times over, but most organizations fail to recognize this need.

The good news is that these three factors are included in any effective organizational change management plan, including the methodology and tools we use at Panorama Consulting. We have a very well-defined and structured way of maximizing user adoption throughout the ERP implementation and after go-live, and the corresponding results are often the difference between implementation success and failure.

For example, we just started working with a manufacturing client that is having user adoption problems with their Epicor Vantage rollout, so we are helping them assess how to optimize acceptance and use of the system. Some of the client’s departments had completely abandoned the software and reverted back to their legacy processes and the implementation was at risk of completely failing. Without our help, this particular client was staring down the possibility of having spent significant amounts of time and money in software licenses and technical implementation services that resulted in expensive shelf-ware that is failing to deliver any business value whatsoever.

Learn more about our organizational change management services to understand how Panorama can help you ensure that your employees accept and embrace your new ERP system in a way that not only mitigates the risk of failure, but ensures that your implementation delivers real business value to your organization. Whether you are implementing SAP, Oracle eBusiness Suite, Microsoft Dynamics, or a Tier II ERP system, our methods, tools, and framework will help make your project more successful.

This last year was another eventful time for the ERP software industry. Vendors continued to consolidate, the rate of ERP failures and lawsuits accelerated, and enterprise software technologies continued to evolve. Our company, Panorama Consulting Solutions maintained its aggressive growth and merged with TPG Solutions, reflecting the dynamic and evolving nature of the ERP market and its customers.

• Infor acquired Lawson
• Lawsuits, fraud and project failures continued to grab headlines (e.g., Lumber Liquidators, CareSource Management Group, Tesco Bank, Whaley Foodservice Repairs, City of New York, etc.)
• Cloud ERP gained steam
• Social ERP gained credibility
• And, worthy of a second mention, Panorama Consulting merged withTPG Solutions to become Panorama Consulting Solutions

As we look forward to 2012, there are a number of trends we expect to continue, while we expect a few new developments as well. Here are our highly anticipated top ten predictions for 2012:

1. Continued consolidation in the industry. Infor’s acquisition of Lawson was just the start. Barriers to entry in the ERP space are low and there are way too many players in the industry (in fact, we track nearly 200 ERP vendors in our proprietary ERP database). At the same time, global economic uncertainly isn’t necessarily creating an environment for robust industry growth that might support the crowded field, so we expect the merger and acquisition activity to continue among ERP vendors.

2. Shake-up in the Tier I space. This coming year may be when we finally see a shakeup among the big Tier I ERP vendors. While SAP, Oracle, and Microsoft Dynamics certainly aren’t likely to lose their foothold as the Big 3 of the ERP software market, we do expect that some of the larger Tier IIs are going to pose legitimate challenges to their market share and reach. For example, after their acquisition of Lawson, Infor is just a couple steps behind the traditional Tier II players, while companies such as IFS, Epicor, Kinaxis, and QAD are continuing their aggressive growth, especially in the SMB space.

3. Acceleration of ERP failures. Unfortunately, we’re still seeing the collateral damage from poor decisions of years past, and this isn’t likely to change in the next year. Tight IT budgets and a “do it yourself” mentality to ERP projects of the last few years have finally started catching up in terms of the large number of publicized ERP failures in the latter part of 2011. Companies have simply under-invested time, money, expertise, and resources in their ERP projects in recent years, so we will see those bad decisions catch up to us in the coming year.

4. Increase in the number of ERP lawsuits. If we look at demand for our ERP expert witness services as a leading indicator, 2012 is going to entail a huge number of ERP lawsuits. We are typically engaged by courts and legal counsel to consult on lawsuits before they are formally filed, and we have seen a marked uptick in demand for these services in late 2011. Combine this with the #3 prediction above, and it is clear that 2012 will be a year of epic ERP lawsuits.

5. Less “do it yourself” ERP projects. Because of #3 and #4 above, we expect fewer companies to attempt the DIY approach to ERP selection and implementation. Installing a light fixture from Home Depot may work for do-it-yourself home improvement projects, but CIOs and CFOs are becoming smart and risk adverse enough to know better than to try this approach when it comes to transforming their entire business with a new ERP system. These companies will lean on outside consultants and experts more than they have in recent years, with the understanding that an expert consulting firm that has fine-tuned selection, implementation, and organizational change management methods over 100s of organizations will be able to deliver better, faster, and cheaper results than they can internally.

6. SaaS ERP providers will continue picking off smaller pieces of ERP. Software as a Service (SaaS) vendors such as Salesforce, Plex Systems, Netsuite, Kinaxis, and Workday have successfully poached smaller customers from the traditional ERP vendors over the last few years, but next year they will start making broader in-roads among mid-size companies. In addition to riding the SaaS wave of hype, the above vendors offer a sort of best-of-breed system approach that allow companies to rollout enterprise technology focused on one or a handful of specific functions within organizations, such as CRM, supply chain, or HR. Also feeding into this trend is the risk-adverse propensity for organizations to not bite off more than they can chew with their software initiatives.

7. Convergence of CRM and social media. Industry analysts have been talking about it and software developers have been working on it for years, but next year is when we will finally start to see some meaningful integration between the “enterprise” side of CRM and the “social” side of Twitter, Facebook, and LinkedIn.  Enterprise and social technologies will finally converge in a meaningful way that will allow organizations to better manage internal customer relationship functions in tandem with the external and less structured social media functions.

8. Misalignment of ERP systems. A lot has changed in the last few years – the economy tanked and recovered moderately while companies evolved, customers demanded more, and mergers continued, but many companies did not proactively invest in their ERP software, leaving organizations with systems that are misaligned with their current business needs. This points to a large subset of organizations wanting to realign their enterprise software with their operational realities, whether it be through investing in new systems or attempting to get more out of their existing software.

9. Conducting a business blueprint as part of the ERP selection process. Fortunately, companies are starting to learn from others’ mistakes (see #3 and #4 above) and are realizing that they shouldn’t rush the ERP evaluation and selection process. Too many failures and lawsuits are caused by choosing the wrong software that is misaligned with business needs, so companies are being more diligent about blueprinting their business processes prior to selection rather than after. We at Panorama are seeing an uptick in the number of companies wishing to engage us to facilitate more robust blueprinting as part of the selection process, which is a reflection of CIOs and CFOs wanting to mitigate their risk.

10. Technology-centric system integrators will continue to struggle to be effective. As I’ve seen in the industry over the years, the traditional technology-focused implementation approach of most system integrators, partners, and value-added resellers (VARs) is clearly not getting the job done. Too much focus on the software, its functionality, and capabilities typically means under-investing in the things that really matter, such as business process design, organizational change management, and effective project management. System integrators will need to either learn to do these things, which they typically don’t have the competency to provide, or partner with firms that do.

Last year was a good year for the ERP industry and we expect even more exciting and positive things in 2012. What do you think? Feel free to leave your comments below or discuss these predictions in more detail in our upcoming webinar, Top Ten Predictions for ERP in 2012, on December 1.

Today we published our highly anticipated Clash of the Titans report. Last year’s report, which provided a comparison of SAP vs. Oracle based on our independent experience and research, was our most popular and most referenced research article of the year. This year, we created a new version to not just include updated research data but also add Microsoft Dynamics to the mix.

This year’s findings are interesting. The report outlines actual results from more than 1,800 implementations across the globe over the last six years. Some of the results validate research of previous years, such as:

• SAP still leads in terms of ERP market share with 24% of the market, followed by Oracle and Microsoft Dynamics, respectively
• Consistent with its leading market share, SAP is short-listed more than Oracle and Microsoft Dynamics (38% of all organizations evaluating new ERP software)
• However, once on the short list, Oracle is selected at a rate higher than the other two vendors (22% of the time, followed by SAP and Microsoft Dynamics, respectively)
• Implementations still take longer and cost more than expected across the board
• Actual vs. expected benefits are still terribly misaligned, with 60%+ of SAP, Oracle and Microsoft Dynamics implementations combined realizing less than 60-percent of the expected business benefits

In addition to findings consistent with last year’s research, this year’s report highlights some compelling new facts. For example:

• Oracle has the highest satisfaction rate, at 80%
• However, satisfaction rates for the others are lower, with SAP at 39% and Microsoft Dynamics at 33%
• On average, Microsoft Dynamics takes the longest to implement at 14 months, followed by SAP (13 months) and Oracle (11 months). Microsoft Dynamics also has the highest discrepancy between planned and actual implementation duration, suggesting that its customers’ expectations are misaligned with reality.
• Microsoft Dynamics offers the quickest payback and return on the investment, with 84% of organizations realizing a payback period of less than 3 years
• In addition, Microsoft Dynamics has the lowest average total cost of ownership (approximately $500k), followed by Oracle and SAP, which is the most expensive
• SAP has the lowest average cost overrun (8% over budget), followed by Microsoft (14%) and Oracle (15%). This suggests that although SAP customers spend more than those of other ERP vendors, SAP customers have a better sense of what it will take to implement and are able to budget accordingly.

Perhaps the most interesting finding is the potential correlation between implementation duration and satisfaction. The more time that customers of the three “titans” of Tier I enterprise resource planning (ERP) software take to implement their systems, the lower their self-reported satisfaction rates. The online survey found that while Microsoft Dynamics had the longest average implementation duration (14 months), it also had the lowest satisfaction rate (33-percent). Conversely Oracle, which has the shortest average implementation duration (11 months), had the highest satisfaction rates (80-percent).

Another interesting finding is what we didn’t find: the ERP software with the quickest payback period (Microsoft Dynamics) does not have the highest satisfaction level. In fact, and as mentioned above, Microsoft has the lowest satisfaction rate, suggesting that business benefits may not be the key determinant of an organization’s satisfaction with a particular ERP system. Instead, it may be that implementation duration is the bigger driver of customer satisfaction.

These are just a few of the findings. Download the full 2011 Clash of the Titans report and join us this Thursday for a free webinar to review and discuss the findings in more detail.

We regularly work with clients to help them estimate their ERP implementation budgets as part of the ERP selection and planning process. Given the hidden and unanticipated costs associated with a successful ERP implementation, this can be one of the trickiest parts of an enterprise solution initiative. In fact, and as we’ve seen in our analyses of ERP failures in our expert witness work, a company’s unrealistic expectations regarding the total cost of ownership of ERP software is often the first domino to fall in an ERP implementation failure. Without a realistic budget, companies end up cutting corners on activities that are critical success factors and paving the way towards a disastrous conclusion.

Panorama research indicates that the average company invests 4.1-percent of its annual revenue into its ERP implementation. However, most companies fail to budget anywhere near this amount. Part of this disconnect is driven by software vendors that outline a one-dimensional estimate of the implementation costs for their ERP solutions. These estimates often fail to include hidden expenses associated with ERP implementations, such as internal resources, external consultants, hardware upgrades, and a host of other items necessary for a successful project.

Further, a software vendor will usually estimate implementation costs to be a 1:1 ratio between software licenses and technical implementation costs — meaning $1 of technical implementation costs for every $1 spent on software — these estimates are woefully low for most companies. Based on our research and experience, a 1:4 ratio (e.g., every $1 a company spends on ERP software translates to $4 of total implementation costs) is much more reasonable.

Below are some of the cost components commonly overlooked by organizations in both the ERP implementation planning and implementation stages:

• Hardware and infrastructure upgrades. It is rare that an organization can implement a modern ERP system without a modern IT infrastructure to support it. Servers, databases, bandwidth, PCs and other components of an organization’s IT infrastructure often need to be upgraded to support the new system. In addition, IT staff often need to be augmented with additional resources, training, or outside consulting to support the new environment.

• Longer than planned implementation durations. Contrary to popular belief in the industry, implementation duration and implementation costs are not independent. Our research suggests that 67-percent of implementations take longer than expected, which leads to higher costs. Given the amount of resources, time, and money dedicated to an implementation project, even the slightest delays will affect the budget. The first step to having a realistic budget is to have a realistic implementation plan and timeframe, as the latter will always drive the former.

• Organizational change management and training. Proper organizational change management (OCM) and training is too often overlooked, with many companies and vendors over-simplifying OCM to equate to team training. Vendors and systems integrators will typically train the internal core team on how to use the “vanilla” software, but often fail to facilitate end-user training to reflect the software as specifically designed and built for the company. In order to be effective, proper time and money needs to be allocated to develop tailored training materials that employees can relate to in the context of their individual business processes. In addition, a host of other OCM activities – such as organizational gap analyses, employee communications and job design – needs to be incorporated into the overall implementation plan, which results in higher than expected costs for the less astute ERP customer.

These are just a few of the pitfalls to watch for when developing an ERP implementation budget, and a big reason why the average implementation runs over budget. If you’re budgeting for anything less than 4-percent of your annual revenue or four times your software license costs on your total cost of ownership estimate, than you may want to revisit your assumptions and expectations. By addressing all of the “hidden” costs in your implementation budget, you’ll be headed in the right direction on your ERP project. For more early-stage implementation advice, please join me at tomorrow’s free webinar, Tips for Building A Business Blueprint for ERP Systems (10 a.m. MT).

Given the uptick in recent ERP failures, executives are looking for ways to mitigate risk and hold their ERP vendors accountable for the success of their implementations. Organizations are well aware of the challenges and pitfalls of implementation cost overruns, lack of vendor accountability, and troubled implementations, so they are looking for ways to leverage the potential business benefits of their ERP systems without the risk. One mechanism commonly employed is the concept of fixed-cost or fixed-bid contracts as part of the purchase of ERP software.

On paper, it’s a brilliant idea: 100-percent cost predictability and shifting the risk from your own organization to your chosen ERP vendor or system integrator. Hold the vendor’s feet to the fire, guarantee a successful on-time and on-budget implementation, put the responsibility for the success of the project on the people that know the software best and can best influence the outcome, right?  It may sound good in theory, but they are more often than not a bad idea in theory.

Here’s a dirty little secret in the ERP industry: fixed-bid contracts have some potentially disastrous consequences that are even more destructive than the problems they were intended to address. In our extensive experience with ERP implementations and serving as expert witnesses for some of the world’s highest profile ERP lawsuits, we found that fixed-bid contracts are often the root cause of enterprise software implementation challenges and failures. It’s not to suggest that they are never a good idea, but it’s never a good idea to enter into a fixed-cost contract without fully understanding the costs and risks.

Here are three consequences of engaging in a fixed-bid contract with your ERP vendor or system integrator:

1. Incentives are misaligned between the ERP vendor and the implementing company. In fixed-bid arrangements, you know exactly what you’re going to pay your system integrator or implementation partner. However, you’re not always getting from the vendor what you need to make the project successful. In fixed-bid engagements, the vendor is financially incentivized to provide a bare-bones implementation scope and provide cheaper and less experienced resources, which may optimize the vendor’s profitability, but is clearly not in the best interest of an inexperienced company about to engage in a risky initiative. Such a relationship with such out-of-sync incentives is not conducive to a successful long-term partnership , as we’ve seen in many of the ERP implementations and ERP failures that we have been asked to consult on.

 2. Abdication of responsibility for the success of the ERP implementation. Executives typically don’t understand the complexity and magnitude of a successful ERP implementation, which is why they lean on their selected ERP vendors to help guide them. However, it’s not the implementation partner or even the software itself that is going to make or break the project – it’s the implementing organization itself. Only internal executives and management team members are going to provide the direction, resources, operational decisions, and oversight required to make any ERP implementation successful. However, fixed-bid contracts are more often than not used as a way to abdicate responsibility and expect that the vendor and their software will unilaterally make the project successful. It’s ultimately the way that the non-technical aspects are managed that will determine the success or failure of the project, such as business process design, organizational design, training, employee communications, and project management and oversight. No vendor is going to magically make these issues go away without strong leadership and ownership from the client’s executive team.

3. The fixed-bid buffer can be more costly than managing time and materials. When we advise clients in their ERP selection initiatives and contract negotiations, it is rare to see vendors fix-bid a proposal without including a buffer, often ranging from 30- to 40-percent. In other words, they will take their estimated time and hourly rates and add a buffer to insulate them from the risk of overruns. In addition, as noted in #1 above, they will at the same time reduce their implementation scope, leaving more time- and cost-consuming activities for the client to manage. At the end of the day, this doesn’t reduce cost, it simply shifts costs from the vendor to the implementing client. To add insult to injury, most companies don’t fully understand the magnitude of the costs being shifted from one party to the other, so they end up having extremely unrealistic expectations in addition to increased costs.

This is all not to say, however, that fixed-bid contracts are never a good idea. Rather, it is simply to say that they more often than not result in more unintended consequences than they do benefits. ERP vendors will often use the appeal of fixed-bid proposals to land a deal, and executives typically won’t scoff at the idea, but they rarely deliver the expected benefits and value.

So how can you leverage the potential benefits of fixed-cost contracts without running into the challenges outlined above? First, ensure you have a solid contract review and negotiation process, which Panorama provides to its clients. The fine print and details around scope and responsibilities of each party in the contract can in fact be the silent killers of an ERP implementation, so make sure you have an experienced team helping you through the process.  Investing in this process early on can also ensure that you have realistic expectations of what it will take to get your ERP implementation done right, rather than cheaply, quickly, and poorly.

Second, there is no substitute for independent program management and oversight, another service that Panorama provides. This will ensure that you are tightly managing scope, project milestones, budget, and vendor activities in a way that will ensure an on-time and on-budget implementation project.

Finally, don’t forget about the non-technical aspects of your project. This is true of any ERP implementation, but it is especially true for fixed-bid engagements. Make sure you’ve designated enough time and resources for business process definition, organizational change management, conference room pilots, user acceptance, and benefits realization. Odds are your vendor will not include that in their implementation contract scope, but these and other non-technical activities are critical to the success of your project.

Learn more about how Panorama can help your ERP selection, negotiation, implementation and organizational change efforts by visiting our the ERP and IT services section of our website. And remember: our negotiation skills save our clients an average of three to five times the cost of our fees. Don’t sign a contract without us.

As recently outlined in the press, two high-profile organizations have fallen victim to yet two more ERP implementation failures. SuperDry and Tesco Bank, both based in the UK, blamed their recent financial woes on disastrous ERP failures. SuperDry, a fashion retailer, was allegedly unable to stock the appropriate risk of product through its distribution chain as a result of their implementation. Similarly, Tesco Bank, a consumer bank, experienced problems with its ERP system as well, resulting in customers being locked out of their accounts for three days and profits dropping by nearly 2/3 in the first half of this year.

There is good news and bad news here. First, the bad news: unfortunately, these are just two examples of a plethora of high-profile failures in recent months and years. Lumber Liquidators, Shane Company, and Waste Management are just a few of the many organizations that suffered high-profile and well-publicized failures in recent years. The good news: most ERP implementations succeed or fail based on how organizations handle their implementations – factors completely within their control – rather than uncontrollable issues related to their chosen ERP software, ERP vendors, or system integrators.

Panorama Consulting is frequently called in to provide independent expert witness testimony for some of the highest profile ERP lawsuits, many of which you have probably read about in the press. For confidentiality and court-ordered reasons, we can’t share specific information about any of the cases we’re involved with. However, in our recent ERP Boot Camp, we presented a session outlining some of the lessons learned from our extensive experience with ERP software implementations and service as an expert witness for ERP lawsuits. Below are three common trends we see in most ERP failures in lawsuits that we are asked to consult on:

Lack of clarity surrounding business processes and business requirements. Most ERP lawsuits involve situations where the client and their system integrator did not clearly define business requirements. While most ERP vendors and implementation consultants will go through a checklist of items that need to be defined in order to configure the software, this is not nearly enough to provide a comprehensive and complete view of how an organization’s business processes and workflows will look. However, clearly defined business processes are critical to keep the project on track and to ensure employees clearly understand the big-picture of how the organization’s operation will run in the future. This lack of business process clarity will typically result in over-customization, lack of understanding from employees, and configuration that is misaligned with business requirements – all of which often lead to implementation chaos and failure.

Mismanaged expectations. The first domino to fall in an ERP implementation is often mismanaged expectations. In the heat of trying to land a new client and in the midst of not clearly understanding the scope or magnitude of an implementation, ERP vendors and system integrators often underestimate the amount of time, money, and resources required to complete and implementation. To add insult to injury, organizations often rely on vendor estimates that only consider technical implementation activities and overlook other key implementation activities such as organizational change management, business blueprinting, thorough conference room pilots, business integration testing, and other critical items. Mismanaged expectations lead to underfunded and understaffed projects, which results in cutting corners and scope, snowballing and leading to failure.

Poor organizational change management. Most ERP vendors and system integrators define organizational change management as “training.” However, there are two problems here. First, vendors provide generic training that is focused on transactions rather than the big picture and are not tailored to fit the implementing company’s business processes, so this sort of canned training is typically mediocre at best. Second, training is one of several key components of an effective organizational change management program. Employee communications, change discussion guides, organizational design of roles and responsibilities, project branding, and benefits realization are just a few of the additional elements of organizational change management that will make or break your ERP implementation.

Through our years of experience in ERP implementations and consulting on ERP lawsuits, we have actually defined ten key things that go wrong in implementation failures vs. those initiatives that are successful. These are just three things to keep in mind as a starting point to not only avoid failure, but to make your ERP implementation successful. If you’d like to learn additional strategies and tactics to ensure your organization realizes all of the business benefits possible from its ERP system, check out our free ERP webinar series.

Enterprise 2.0, social ERP, and other buzzwords related to enterprise software combined with social media are quickly gaining momentum in the ERP software industry. Industry analysts and research firms regularly cover the potential convergence of social applications like Twitter, Facebook, and Yammer with traditional ERP systems like SAP, Oracle, and Microsoft Dynamics. For example, last year IFS North America and Affinity Research Solutions conducted a study of manufacturing executives to determine their interest and understanding of social ERP.

The study from IFS outlined several potential benefits of social ERP, including the ability to better capture the tacit knowledge of employees and ability to better streamline communications between employees and customers. In addition, executives also pointed to increased organizational flexibility and an ability to cater to a younger generation of employees more accustomed to Facebook and Twitter than they are to structured manufacturing ERP systems. Based on this and other research conducted in recent years, it is clear that this potentially inevitable convergence of enterprise- and consumer-based technologies is on the radar of most executives and industry analysts.

However, following these trends has led me to question how two very different types of technologies will really align themselves. One the one hand, you have informal and unstructured consumer-oriented social media tools like Facebook and Twitter where anyone can say about anything they want without any real controls or structure. On the other hand, you have large structured enterprise systems with controls surrounding master data, security profiles, and standard workflows. One is simple, flexible, and supportive of a flat organization, while the other is more conducive to a larger and more controlled organization.

To illustrate the contrast, look at the situations of many of our clients: they have outgrown their simplistic and uncontrolled systems and are looking for something more standardized and structured to help them scale for growth. Many have multi-national or multi-site operations that are misaligned with their current systems. As such, our client executives are often looking to ERP systems to help them standardize, control, and scale – not exactly terms one thinks of when describing social media tools. So the real question is: can both structured enterprise software like SAP or Oracle co-exist with unstructured social media tools like Twitter and Yammer?

I think the short answer is not yet, but companies will need to find a way to leverage the best of both worlds. Below are four considerations when examining the potential integration of social enterprise systems within your organization:

1. Make ERP systems more flexible and social interactions more structured. One of the frustrations most organizations and their employees have about their current ERP systems is the relative lack of flexibility. As companies grow, their enterprise software needs to remain aligned with evolving business processes and requirements, but this is often unachieved. Social media capabilities similar to Twitter and Yammer provide potential flexibility in how employees interact with customers, vendors, and internal colleagues. Social media tools and their flexibility can be powerful, but employees also need clarity and definition on how to use the tools. You obviously don’t want employees sharing too much information about customers, products, and financial information, so there needs to be a balance between flexibility and standardization.

2. Focus on the strengths of each technology. Enterprise software is good at providing back-office controls and standardization in areas such as finance and accounting, while social tools can be more beneficial when it comes to customer interactions and capturing undocumented knowledge in people’s heads. It is important to identify where the strengths of each fit within your organization and business processes and leverage each competency accordingly. Just as you want to avoid misalignments between traditional ERP and your business processes, you also want to make sure that social ERP systems are aligned with your operational needs.

3. Define your business blueprint. Just as with any ERP implementation, successful organizations should clearly define their business blueprint for social ERP. Clarity around business processes, organizational roles and responsibilities, and performance measures will ensure that the system is designed to support business processes and tested accordingly. Documented business processes and use cases should clearly define where standardization is required and where there is some latitude to deviate from standard business transactions. These components are critical to a successful social ERP implementation and should be addressed prior to rolling out the new technologies. In addition, this clarity and definition will help ensure that you select the right ERP system that addresses the various social and enterprise software needs of your organization.

4. Don’t forget organizational change management. It’s easy to forget about organizational change management and assume that social ERP is going to be much easier to adapt than traditional enterprise systems, but the reality is that it will entail significant operational and cultural changes for most organizations. Tenured employees will need to adapt to a less structured and different way of doing things, while newer or younger employees will need to adapt to balancing social tools that they’re more accustomed to with more structured ERP processes and systems that they may not be comfortable with. In both cases, organizational change management activities should be incorporated into the overall implementation plan to assure processes are understood, employees are trained, and that roles and responsibilities are clearly defined.

At the end of the day, social ERP and CRM applications will be a reality for most organizations sooner rather than later. By incorporating the above four tips into your enterprise 2.0 initiatives, you will ensure you get the best of what the convergence of these two technologies has to offer.

What is your take on social media applications in the workplace? Do you think it’s advisable (or even viable) for organizations to pursue? Let us know your thoughts and experiences in the comment section.

Last week, we hosted our fourth ERP Boot Camp in Denver, CO. The three-day training session, which was attended by 20 CIOs, executives, project managers, and ERP project team members across the globe, covered a number of topics designed to help organizations better manage their ERP initiatives. The discussions and presentations focused on helping ERP practitioners understand the variables required to make ERP implementations successful, such as overall IT strategy, ERP selection, vendor negotiations, business cases, and organizational change management.

Prior to jumping into the content, we facilitated a session asking the attendees to introduce themselves, their organization, and their top two concerns or fears regarding their ERP initiatives. As you might imagine, this interaction is invaluable to understanding the mindsets of people attending our training and especially so when your participants come from organizations and government agencies as diverse as Boeing, Cook County, City of Charlotte and Crown Equipment, among others. In addition, it is always interesting to see and hear the common themes that participants share, regardless of industry, company size or geography.

For example, this session’s most commonly stated concern related to organizational change management and business blueprinting. On the organizational change management front, participants shared concerns with how to determine organizational readiness, manage resistance to change, and include staff members in the ERP implementation process to increase buy-in and support. In terms of business blueprinting, concerns centered on how to standardize business processes across multiple countries or departments, determine the pros and cons of adopting the functionality of the software vs. forcing the software to adopt to the business, and clearly define business processes in a way that would ensure a more business-centered implementation rather than one with a more one-dimensional software focus.

Here are some of the additional concerns that this focused and bright group of executives and team members shared during the sessions:

• Adapting ERP software capabilities without customization
• Vendor management, including software vendors, system integrators, and consultants
• Risk management and mitigation
• Implementing without disruption
• Transitioning internal IT to support commercial off-the-shelf (COTS) software
• Implementation strategy
• Program management, including costs and scheduling
• Ensuring engagement at all levels in the company
• Integrating with other systems
• Considering the “soft” aspects of evaluating ERP vendors
• Finding a system that can grow with the organization, including global growth
• Distinguishing between core competencies that may need to be customized in the software and things that the organization should change to better fit the software
• Overall implementation and approach for the entire ERP lifecycle

These were just a few of the topics that we proceeded to cover over the course of the three days. By the end of the training, attendees had a better sense of blindspots to watch for, an understanding of technology-agnostic ERP best practices, and a tool kit to apply to their ERP implementations back home. It was a very good session with very positive feedback from attendees. The lesson to be learned here is that a lot of knowledge, planning, and work goes into making ERP software initiatives successful, so it is important to proactively address the potential risks and failure points of ERP initiatives to ensure their success.

Our next ERP Boot Camp will be December 7, 8 and 9 in Denver so start planning now to ensure you can attend (and maybe sneak in a few days of skiing). If you can’t get away, please also note that we can bring Boot Camp to you and your teams with customized on-site ERP training.

Earlier this month, Salesforce hosted Dreamforce, its annual conference for cloud ERP vendors. The event drew over 45,000 participants this year, underscoring the significance of the company in the ERP space, and more importantly, the significance of cloud and Software as a Service (SaaS) based ERP solutions.

Dreamforce also featured the launch of Kenandy, a Silicon Valley startup focused on SaaS ERP solutions for the manufacturing industry vertical. While ERP vendors such as Salesforce, Plex, and Epicor already provide SaaS manufacturing ERP systems, this particular industry has been sorely lacking the software options required to give most manufacturing executives the choice and comfort required to fully embrace the SaaS model. Kenandy’s launch, which is backed by over $10 million in venture capital funding, helps mitigate these concerns.

Don’t get me wrong: the SaaS and cloud trends are very real and are quickly changing the game for ERP vendors and their customers. Despite the relatively low market adoption rate, SaaS acceptance is still growing incredibly fast, up from 6% to 16% adoption between 2009 and 2010. In addition, ERP vendors such as Salesforce and Workday are providing best of breed point solutions in the CRM and HR arenas, which are more likely to be embraced by manufacturing executives. However, when it comes to fully integrated solutions that tie together a manufacturer’s data and business processes – ranging from financials to inventory to manufacturing workflows – into a single system, SaaS ERP systems have been lacking, with only a handful of solutions providing the truly integrated processes desired by most manufacturing and distribution companies. With each new company like Kenandy and Plex, executives in this industry vertical will become more comfortable and more likely to adapt the SaaS model.So does this mean that traditional manufacturing ERP systems are obsolete, only to be replaced by SaaS options like Kenandy? Not quite yet. Although many industry analysts strongly disagree with my lukewarm opinion of SaaS solutions, I still feel as if we are still three to five years from seeing widespread adoption of SaaS enterprise solutions in the manufacturing industry. Indeed, our most recent research – as outlined in our 2011 ERP Report – indicates that only 16-percent of organizations that implemented ERP systems in 2010 had adopted SaaS-based solutions. Despite the hype and long-term potential, the fact of the matter is that SaaS and the cloud have not yet quite killed traditional enterprise software.

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.

I’m a big fan of American football and I get excited with the start of each new season. One of the things I like most about the sport is that each moment of the game is carefully scripted and executed, with a tremendous amount of detail going into each play. Each team has eleven people on the field at any given time and with each snap of the ball, each player has clearly defined roles and responsibilities. Whether a team member is on offense or defense, he has to know what is expected of him, where exactly he needs to be on the field, and what he needs to do to help his team make the most of each play.

One intriguing aspect of football is how every little detail seems to matter. From how a receiver runs his route, to how the offensive linemen protect their quarterback or help the running back run the ball, to how a defender covers his receiver, each play hinges on the little things, each of which can ultimately affect the outcome of the game. It’s also a game of inches – a ball thrown just inches from a receiver’s fingertips can be the difference between a touchdown and an interception to the other team, just as a defensive lineman lined up just inches off of his position can be the difference between sacking the quarterback and not moving off his position.

Whether or not you follow or enjoy football, the sport provides some important lessons for ERP implementations. Similar to football, ERP initiatives require a great attention to detail, carefully scripted project team roles and responsibilities, and clear orchestration among the various project activities. Perhaps most importantly, it is the little things that can make or break an ERP implementation.

Here are a few details that may seem like subtle nuances of an ERP implementation, but they are actually very significant and important differences between managing a successful ERP project versus an ERP failure. These minor adjustments in your ERP system playbook can be the difference between winning and losing during your ERP implementation:

1. Business blueprint vs. technical blueprint. Most ERP vendors and system integrators provide software design or blueprint activities, as it is a critical step in helping them design and configure the software for your business. However, there is a subtle but big difference between creating a technical blueprint and creating a true business blueprint. The technical focus tends to define transactional details, such as how the screens will look, user options will be defined, and master data will be set up. However, traditional and common technical blueprints do not address the more important fundamental issues, such as how the overall business process will flow, employees’ specific roles and responsibilities in the system, and performance measures that will be used to drive performance in the new environment. So while most vendors and consultants use the term “blueprint” loosely, it is important to ensure your organization develops a business blueprint rather than a more limited technical blueprint. Without a business blueprint, you will have a configured ERP system that may work technically, but won’t necessarily work for your business.

2. Organizational change management vs. software training. Training employees on the new software is probably one of the more obvious needs of a successful ERP implementation. However, a common misconception is that employee training is the sole requirement from an effective organizational change management perspective.  The reality is that training is just one of many components of organizational change and is, in my opinion, the least important. Just as a business blueprint is more important than a technical blueprint, business process training is more important than transactional-based software training. Employees need to understand end-to-end business flows in the context of your organization’s unique operations and how it relates to the current environment that they’re used to, much more so than they need to understand how to punch buttons or choose menus in the software. For this reason, generic transactional-based vendor training materials need to be tailored to fit your specific workflows. In addition, employee communications, clearly defined job roles and responsibilities, and change discussions are all things that are arguably more important than training to use the software.

3. Program management vs. project management. Managing a software project is much different than managing an overall business transformation program. Sure, software vendors and consultants provide “project management” services to ensure the software is delivered, configured, and tested to your satisfaction, but this does not cover the broader and more important aspects of a successful project. For example, there are a number of activities that require more time, resources, and oversight than delivering the software, such as process design and blueprinting, organizational change management, benefits realization, making operational decisions that affect the software, and business process testing and acceptance. These activities are typically outside the scope and capability of software vendors and consultants, but this ability to program manage the ERP initiative is critical to its overall success.

4. Benefits realization vs. go-live. Perhaps the most important but subtle aspect of successful versus failed ERP implementations is the definition of a successful go-live. Most system integrators, vendors, consultants, and their clients define a successful go-live as when the software works from a technical perspective and things are a complete operational mess. This definition sets the bar for success way too low and causes many companies to leave millions of dollars of lost business benefits on the table, and in some cases, results in project failure. If you don’t measure it, you won’t achieve it, so it is important to not just get the system up and running, but to also optimize the business benefits you expect to see. As with any multimillion dollar investment, you should expect the best ROI possible for the risk that your organization is taking. A comprehensive benefits realization plan and methodology is the best way to ensure that this happens.

On the surface, the above variables may seem subtle or immaterial, but they are in fact critical success factors for any effective ERP implementation. These minor adjustments will have a huge impact on the likelihood of your project’s success and the overall risk profile of your initiative. We recommend making these adjustments to your ERP playbook before getting too far along in your ERP system implementation. Contact us today to learn more about how our team of independent ERP experts can help your organization bring home a win.

As summer draws to an end, people across the country are sending their kids back to school and getting ready for autumn. In addition, CIOs and other executives are finalizing their Q4 budgets and preparing for other end of year activities. For many customers of SAP and Oracle, these winds of change can also signal consideration of switching from one of the two Tier I ERP systems to another.

We work with many companies that are using one of SAP’s ECC, All in One, or Business By Design products and looking to switch to Oracle’s eBusiness Suite, JD Edwards, or Peoplesoft products. We also work with just as many companies that are looking to do the opposite and migrate from Oracle to SAP. In either case, we encourage clients to carefully understand what they’re trying to accomplish, fully understand the risks of switching out ERP systems, and consider their options.

Here are four key questions we ask clients that are about to consider a switch from Oracle to SAP or vice versa:

1. Is the ERP software a band-aid for other operational problems? We often see companies misplace their frustration with operational issues and blame the ERP system. Broken business processes, organizational design issues, lack of employee training, and poorly implemented software isn’t going to be remediated by a new ERP system. It’s easy to blame the SAP or Oracle software for operational or organizational challenges, but it’s important to differentiate between the two. Addressing non-software issues can be much less time consuming, expensive, and risky than completely changing out the software, so it is a good idea to be absolutely certain that the software is the problem before moving forward.

2. Is there another product from the same ERP vendor that can address your needs? If you find that the answer to the first question is that your problems do indeed lie with the ERP software, then you may want to consider whether your vendor has other viable solutions available to your organization. Both SAP and Oracle have a relatively wide variety of products to choose from, so it can be beneficial to consider alternative options from your existing vendor. For example, we often run into companies that are using JD Edwards but feel as if they have outgrown in and want a more robust or more comprehensive solution such as SAP. However, these companies may be well advised to consider eBusiness Suite since it would not require a complete migration away from their current vendor. Your current vendor may be able to provide migration credit and other financial incentives to stay in their family of products, and the implementation of a sister product from the same vendor can be less risky and costly as well.

3. Can your company handle the risk of a rip and replace ERP approach? SAP and Oracle implementations are generally more costly and involve more risk than Tier II systems or point solutions. However, if either SAP or Oracle is indeed the right product for your organization going forward, then it is wise to understand the risks of another Tier I rollout. Because the systems are complex and robust with differing data structures, you’ll want to make sure your organization has the resources and expertise to effectively implement. Effective SAP to Oracle and Oracle to SAP implementations require tedious project management, clearly defined business processes via a business blueprint, and effective organizational change management to address the significant difference between the two software solutions and their related business processes.

4. Are you looking for a single system or best of breed ERP strategy? As simple as it may sound, many companies choose to migrate to or from SAP and Oracle without fully understanding the type of solution that is best for their organizations.  SAP generally provides single system solutions that fully integrate data into a single package, while Oracle generally provides a more best of breed solution given their acquisitions of some of the leading business providers, such as Siebel, JD Edwards, and Hyperion. On the other hand, SAP’s single system approach can result in business workflows that aren’t ideal in each functional area, while Oracle’s best of breed approach can create data and software silos between the different systems they provide within their solution set. Either option has strengths and tradeoffs, so it is important to understand the type of software that is best for your organization before making the decision on which route to go.

The switch from SAP to Oracle or vice versa may provide business process and system improvements that enhance your operations. However, as is the case with any ERP implementation, migrating from one Tier I ERP system to another can be risky and resource intensive. The above questions should help ensure you are on the right track as part of your ERP evaluation and selection process.

For more analysis, download Clash of the Titans: An Independent Comparison of SAP vs. Oracle and be sure to look for our forthcoming report comparing SAP, Oracle and Microsoft.

Last week, I had the pleasure of being the keynote speaker on the final day of the Manufacturing ERP Experience conference in Chicago. The conference, which was hosted by MetalForming Magazine, was attended by just under 100 executives in the manufacturing industry. It was a good size group — a relatively large turnout for a first time conference, but small enough for attendees to have a chance to interact one-on-one with the speakers and ERP vendors involved with the event.

In my presentation, I gave a summary of the concepts and themes covered in our three-day ERP Boot Camp, the next of which will be in Denver September 21-23. It is difficult to condense three days of content into 45 minutes, but it appeared to be enough to stimulate some thought and discussion on how the executives in attendance can make their ERP selection and implementation initiatives more successful. The presentation covered ten key things executives should know before embarking on an ERP initiative, including topics such as the appropriate balance of business vs. technology, the use of organizational change management, and the role of business process re-engineering in effective ERP projects.

In addition to providing a keynote presentation, I was also able to take part in a panel discussion, which is one of the better ones that I have participated in. Approximately 80- to 90-percent of the attendees are about to embark on their journeys of selecting and implementing a new ERP system, so they had excellent and thoughtful questions that stimulated a great deal of discussion with myself and the other panelists.  It is clear from the questions asked that this group was well-informed and serious about making their ERP initiatives successful, which is always nice to see.

Below are a few of the interesting and sometimes controversial discussion points that came up during the panel discussion:

• The overall health of the ERP market. One participant asked about the overall health of ERP vendors and the ERP software industry in general. Although software vendors have been as affected as everyone else by a poor economy, the market is still healthy. There is a great deal of pent-up demand for IT software and services, which is validated by recent metrics on IT spending released by various sources over the last few quarters and is contributing to industry growth.  In addition, innovative solutions such as SaaS and cloud deployment options are fueling renewed industry in ERP software, and high-growth small- to mid-size companies are investing heavily in ERP systems to provide a foundation for their continued growth.

• SaaS vs. on-premise ERP. Software as a service (SaaS) ERP systems and cloud computing are talking points in most situations where I meet with CIOs, COOs, or CFOs. There is a great deal of interest and uncertainty related to this trend, which was reflected in many of the questions we received. During our panel discussion, we discussed how ERP vendors and cloud providers will typically provide better security than any internal IT department is able to, as well as the fact that the biggest security risks typically lie within the company.  One other topic we discussed was contract clauses – how to protect oneself if your SaaS vendor goes out of business, as well as understanding some of the escalation clauses in most SaaS software contracts.

• Measuring business benefits and ROI. One of the more lively and controversial portions of the discussion centered on the role and value of measuring business benefits as part of an ERP initiative. One panelist, who is from a company that recently implemented ERP software, suggested that measuring benefits is not important since new enterprise software will inevitably bring improvements to a business, so it’s a waste of time to measure them. I, along with a few other panelists, strongly disagreed, suggesting that if you don’t measure the business benefits, you won’t achieve them. In addition, even if you know you’re going to realize business benefits regardless of whether or not you measure them, you’re not going to truly maximize those benefits unless you closely track, monitor and follow-up with required corrective action.

Overall, it was a good conference with good ideas and best practices to make manufacturing ERP software initiatives more successful. The questions and answers covered in the session reiterated some of the advice we commonly provide our clients. If you’d like to hear more, register for our ERP Boot Camp. Both time and space are running out so be sure to reserve your spot today.

ERP systems come in all types of varieties, shapes, and sizes, ranging from the massive Tier I packages like SAP and Oracle, to the smaller, more focused nice point solutions like Salesforce and Workday. In addition, there are a host of industry-focused solutions cropping up every day, along with software as a service (SaaS), open source, and best of breed systems. There are so many options, in fact, that Panorama tracks literally hundreds of ERP software solutions in the industry research and consulting services we provide to our clients.

While there may not necessarily be anything to be afraid of when it comes to navigating through the dizzying array of options, it is easy to bastardize your ERP system to the point where it doesn’t fit with your business strategy, operations, and requirements.  Every day we see companies across the world make ill-advised decisions regarding when selecting and implementing their ERP systems. Here are some of the common mistakes we come across:

• Using Microsoft Excel and Access as your ERP system. One of the big mistakes organizations make is using disparate spreadsheets, databases, and inefficient manual processes to manage their businesses. Most companies don’t intentionally develop this strategy, but rather they reactively use this as a way to address business growing pains and deficiencies in their existing enterprise software. However, this strategy is a band-aid solution that inevitably leads to the need for a more intentional and well-developed ERP systems strategy. And companies that are already using ERP systems have to watch that employees don’t use this strategy as a way to work around the perceived deficiencies of the system or to address their lack of understanding how the system works. In both cases – for companies that don’t have good systems in place or those that don’t fully understand the capabilities of their business software – spreadsheets and databases can be expensive, error-prone, and inefficient ways to deal with those operational and technical deficiencies.

• Quilting together a best of breed patchwork of systems. Without a well-defined, long-term IT and enterprise software strategy, organizations are prone to deploying systems in a piecemeal fashion to address deficiencies as the arise. Companies that head down this slippery slope often struggle with inconsistent systems and processes, data redundancy, integration issues, and business processes that operate in silos. While not every organization is able to find a single, enterprise-wide ERP system to address their varied and complex business needs, some don’t look hard enough and end up taking an inconsistent and fragmented business systems approach that can make operations less efficient and more costly in the long-run.

• Relying too heavily on industry best practices, pre-configured solutions and business processes. This is probably the most dangerous and subtle of the three, because so many companies fall into the trap. Countless ERP vendors position their solutions as the end-all-be-all cure to broken business processes by providing industry best practices that can be deployed out of the box simply by installing their software and flipping the switch. Unfortunately, this concept is for the most part marketing and sales hoopla and causes some organizations to use software as a substitute for doing the hard work of defining business processes and their overall operational models. Unfortunately, no software can fix these types of problems, but the false hope of magical fixes from ERP software often leaves organizations with under-performing and under-utilized enterprise solutions and processes.

While these three types of black market ERP systems are common, they can be easily diffused and navigated via a clear enterprise software strategy and realistic expectations about what ERP software can and can’t realistically do for your business. Learn more about the specific ways Panorama can help your organization avoid these pitfalls at our ERP and IT service offerings page.

As kids across the country begin heading their way back to school for the new academic year, CIOs and their respective organizations appear to still be getting schooled on the harsh realities of ERP implementations. In the last week, two fairly high-profile lawsuits made their way into the technology media: one involving a case against ERP software vendor Epicor and the other against Infor.

In the first case, Whaley Foodservice Repairs sued Epicor for an implementation that was delayed repeatedly, cost five times more than originally estimated, and failed to work “as advertised” after two years of use. In addition, the suit claims that Epicor’s implementation team suffered from high turnover, Whaley was forced to hire a third-party software developer to fix some of the defects, and the software was unable to provide visibility into inventory movements or handle transaction volumes.

In the second case, also publicized last week, Paragon Medical is suing Infor for a failed implementation of the company’s product lifecycle management software. Paragon was an existing user of Infor’s Visual ERP software and selected PLM8, also from Infor, to handle the document management aspects of its business. However, the suit claims that the software was not able to support the company’s business processes or requirements.

Although companies still seem to be learning the hard way, their mistakes provide some important lessons learned for the rest of us. Here are a few factors that we have often seen in our years of experience being called upon as expert witnesses during ERP lawsuits:

• Fully understand the strengths and weaknesses of your enterprise software options. There is a dizzying array of options to choose from in the ERP software market. However, there is no perfect solution for most organizations. It is important to fully understand your business requirements in detail, as well as the strengths and weaknesses of various software options to meet those requirements. This can be accomplished through scripted demonstrations and other due diligence, but the first step is to clearly understand and articulate your requirements, as well as understand the important areas to focus on during and ERP software evaluation.

• Have realistic expectations. It’s not realistic to expect that a software vendor is going to know as much about your business as you do, or even enough to provide an accurate estimate of the implementation duration and cost. Therefore, it is important to develop a realistic and detailed implementation project plan, resource allocations, and budget based on factors unique to your business. In the case of Whaley, the organization expected standard configuration of the software, but ended up customizing the software during implementation. We often fully blueprint a company’s future-state business processes prior to selecting a client’s software, for the simple reason that it helps uncover potential unknowns in the implementation process. This type of guidance is usually not going to be provided by a software sales rep, so you may need outside assistance from independent ERP experts such as Panorama.

• Know what you don’t know. The above points are easier said than done, especially if you don’t have extensive ERP implementation expertise within your organization. In both lawsuits mentioned above, Whaley and Paragon appeared to have had blind spots and deficiencies in their knowledge of ERP systems. An outside opinion from independent and focused ERP consultants such as Panorama can provide the objectivity, knowledge transfer, and guidance to help identify and address your organization’s blind spots during the ERP evaluation, selection, and implementation process.

These are a few steps to help you avoid making the same mistakes that other organizations have made in their ERP failures. Learn more about ERP project success by attending our ERP Boot Camp in September. We’re holding a special Preview of our 2011 Boot Camp webinar tomorrow at 10 a.m. MT to give a taste of what to expect at the event. Attendees receive $500 off Boot Camp pricing.

Many of our clients hire us when they know they need help selecting and implementation a new ERP system. Often times, these clients know the general direction they want to go with their enterprise initiatives and simply need help navigating the options and implementing their chosen solution. This tends to be the sweet spot of our client base.

However, we are seeing more clients come to us that aren’t even sure they want or need a new ERP system. Many of them are earlier in their planning process and are opting to take a holistic approach to evaluating their entire IT infrastructure and defining a longer-term plan to upgrade to allow them to scale for future growth and acquisitions. Because we’re an independent consulting firm, we are able to provide objective guidance on how to evaluate and determine the best path to take with the organization’s enterprise software, IT infrastructure, and IT organization, whether or not that strategy entails a new ERP system.

We address these and other issues when helping a client define their three- to five-year IT strategy. Once we understand the strategic direction of the entire company and how the executive team views IT (e.g. as a core competency vs. an undifferentiated commodity), then you will be ready to develop a strategic IT plan. Here are some of the areas to consider when defining an IT strategy for your organization:

Current enterprise applications. Enterprise and ERP software is often the biggest pain point experienced by organizations. It’s the front-facing everyday tool that is the most visible thing to employees, so they often feel the pain of any inefficiencies or misalignments. For this reason, an effective IT strategic assessment should evaluate the functional fit of the organization’s enterprise software applications, including legacy ERP, CRM, HR, and any other systems that the organization may have in place. In addition, this assessment should consider the integration (or lack thereof) between these systems.

IT organization and infrastructure. In addition to systems, an effective IT strategy should evaluate the internal IT organization and infrastructure. This portion of the assessment will typically consider things like internal IT competencies and deficiencies, the potential of consolidating IT functions and/or leveraging a shared services IT delivery model, and the physical IT infrastructure. Often times, companies identify deficiencies in these areas and identify opportunities to upgrade their physical or “soft” infrastructure.

Low-hanging fruit. During a holistic assessment of an organization’s entire IT infrastructure and systems, there are bound to be low-cost yet high-value types of improvements that can be made in the short-term to provide immediate impact. For example, opportunities to retrain employees on key processes or systems to help make them more efficient, integrate disparate systems, or tweak business systems or processes are all examples of areas of potential immediate value that we often see. These changes can often be implemented in parallel or before making larger changes, such as a new ERP system.

Business case and ROI. In order to fully flush out your three- to five-year IT strategy, you’ll want a clear understanding of the costs and benefits associated with the various strategic options available. This will also help prioritize improvement opportunities and plan the timing of each strategic initiative that your organization may undertake. This also forces a focus on accountability and benefits realization so that your organization may actually realize the expected business benefits.

Organizational change management. Once the strategic initiatives have been identified, prioritized, and rolled into the actual deployment plan, the next step is to identify how to manage the organizational changes inherent in the transitions. Employees will need to be trained on new systems, communicated and trained on new processes, and the organization will in many cases need to be redesigned to reflect required competencies and reporting relationships to support the new strategy. Regardless of the exact types of changes involved, the transition is likely to entail significant change for employees, which requires an effective organizational change management plan.

These are just a few areas of consideration to help you get started on defining your IT strategy. Once these and other critical areas are addressed, you and your team should be in a better position to define exactly where you are headed as an IT organization via a strategic roadmap.

Learn more about our IT strategy service offering online or call us at 720-515-1377 to discuss options with our ERP consultants.

Cloud ERP is clearly the talk of the ERP software industry. The marketing engine supporting cloud options such as software as a service (SaaS) and hosted ERP systems is very strong, even reaching into the consumer-facing side of things with Microsoft’s push into the cloud with Windows-based products.

In fact, our 2011 ERP Report - published earlier this year – shows just how prominent the cloud is becoming in the enterprise software space: 17-percent of organizations are reportedly using SaaS-based solutions, up from 6-percent the previous year. In addition, another 24-percent are using the cloud to host their traditional, single-tenant ERP systems, while just over half of organizations are opting for traditional systems that are hosted on site.

So cloud ERP must surely be the wave of the future, right?

Not necessarily. Just as the cloud can be very practical for a consumer that doesn’t want to deal with hosting their music or pictures on their laptop, smaller businesses often find that the cloud is an ideal solution because it minimizes the need for costly IT support. Some mid-size companies find that point solutions – such as CRM or HR systems – are feasible to host in the cloud. In addition, cloud solutions can be faster and less costly to deploy, at least in the short-term. But larger organizations are simply not embracing the cloud like their smaller-company counterparts. How can this be, you might ask? First of all, a big limitation of the cloud is lack of flexibility. On-premise ERP systems have been and still remain easier to configure and customize to fit your specific business needs, while SaaS and other cloud-based solutions offer less flexibility in these areas. While that could actually be a positive thing for vanilla companies with fairly generic business operations, it can be very detrimental to more complex companies with distinct competitive advantages from their peers.  This problem is starting to dissipate with the advent of platform as a service (PaaS) and other development and integration tools, but those options are not yet mature or robust enough for most larger organizations we work with.

The other big issue larger organizations tend to have is with control and security. Although most SaaS and cloud ERP vendors are able to provide more stability and security than most internal IT departments, most CIOs are at least a little skeptical about not having complete control over security and other issues. These concerns can be mitigated via well-defined service level agreements, but they are still very real and valid concerns.

So what’s one to do when trying to determine whether or not the cloud is for their organizations? First, it is important to define what your specific needs are and recognize that there is no one-size-fits-all answer to ERP. Second, understand the tradeoffs between cloud versus on-premise solutions. The industry marketing sales hype may suggest that there are no tradeoffs, but they are indeed there and the tradeoffs are very distinct. Keeping these two points in mind will take you a long way toward making your way through the foggy and sometimes confusing landscape of cloud and SaaS ERP.

If you’d like to discuss your organization’s specific business processes and how they relate to ERP software selection, including cloud and/or SaaS solutions, contact our independent ERP experts today.

We see it every day with our current and prospective clients: company installs ERP system, it costs more time and money — and causes more pain — than it should have, and after years of usage, the business and software become misaligned. When this happens, the CIO or COO will inevitably call us insisting that the software is broken and that it’s time for a new solution, leading to an evaluation and selection of new ERP software.

It may sound crazy, but one of the first questions we usually ask is, “Do you really need a new system?” After all, it can take some time and effort to select new software, and implementations are costly and risky. Many cases do involve a legacy system that’s just not a good fit for the business and never will be, but if it makes sense, a rejuvenation of the existing solution can be less risky, less costly, and less disruptive to an organization. After some digging and analysis, we often find that companies are leaving a great deal of low-hanging fruit on the table that can easily be addressed by simply conducting refresher training, tweaking businesses processes, making updates to the software configuration, or in some cases, upgrading to a new version of the software.

Before heading off the deep end and assuming you need a new ERP system, it is helpful to ask a few key questions to start:

• Is your ERP system really the problem? Although we have plenty of clients that are in dire straights with their current legacy enterprise software, I would estimate that the software itself more often than not the real problem when a company first contacts us for a software evaluation. Even if it was implemented well, which most of the time it isn’t, ERP software tends to get misaligned with evolving business needs over the years. Instead, look at how well your business processes are functioning, how competent your employees are with the business processes and systems, and the cost-benefit of doing some reconfiguration or upgrades to the software.

• Are you running the latest version of the software? The evolution of ERP at most organizations is pretty common: the slow misalignments mentioned above build up until the company finally stops upgrading the software, which further exasperates the problem. We see clients that haven’t upgraded in several years, only to wonder why the software is dated and unable to meet their key business requirements. Although upgrades are never really simple, they can be a lot simpler than a full rip and replace of the system.

• What is the best way to align your business with your ERP software, and vice versa? The final question is to ask what else could be done to align business and software. What are the different available options and what is the estimated return on investment for each scenario? We often help clients look at the costs vs. benefits of several scenarios, such as process improvements or implementations of advanced modules of the current system, before making a final recommendation. Even if you are leaving some potential benefits on the table by sticking to your current system, the potential lower costs and risks combined with the overall return on investment may justify that approach.

So perhaps it’s not your system that’s the problem — maybe it’s simply time to rejuvenate your ERP software. Learn more about your options by attending our free webinar on August 4, Tips for Selecting the Right ERP Software for Your Organization.

Software as a Service, or SaaS ERP as it’s known in industry circles, has been receiving its share of media and business attention in recent years. The allure of SaaS – including potentially lower up-front costs, no software to implement, and relatively easy upgrades – can be enough to convince some CIOs that it’s the right choice for their organizations.

But is it right for everyone? That’s one of the more controversial questions we answer when working with current and prospective clients. If you ask industry analysts, academics, and media types, most will tell you that the future is all SaaS and nothing else. Some have been arguing for years that traditional “big” ERP is dead. In fact, Dun and Bradstreet recently reported Gartner’s estimation that 25-percent of ERP software purchased in 2011 will be SaaS solutions. In addition, SaaS vendors such as Netsuite, Plex, and Salesforce have been aggressively growing while other ERP vendors have struggled.

A couple of counterpoints are always in order when there is this much buzz surrounding an industry trend. First, while 25-percent may seem like a large portion, that still leaves 75-percent of ERP purchases that are of the traditional on-premise flavor. As for the steep growth of SaaS ERP vendors, they have a much smaller revenue base to start with relative to other more established software providers. And it also helps to understand the primary customers of SaaS ERP solutions: our experience and research shows that SaaS customers are disproportionately skewed toward smaller to mid-size companies. Larger and more complex organizations simply haven’t had a compelling reason to switch to these types of solutions.

Since SaaS may be perfect for some companies and misaligned with others, how is an executive team to decide the best fit for their organizations? Here are a few starting points to ask to determine whether or not SaaS is the right option for you:

1. How unique or complex is your business relative to others? The fact of the matter is that SaaS ERP systems are still not as flexible as on-premise solutions. While this may change with the continuing evolution of platform as a service (PaaS) and other development and integration tools, it is generally more difficult to change SaaS offerings to fit your business. If you have a fairly vanilla or less complex business operation, then SaaS may be a good option for you. If, on the other hand, you have unique competitive advantages or otherwise need the flexibility to materially change the software to fit your business, then the ability to heavily configure on premise solutions may make them more appropriate for your organization.

2. Are you more willing to increase capital versus expense budgets to support a new ERP system? Many high-growth companies are cash and/or budget strapped, which can affect the type of software you invest in. Companies with less cash reserves or capital budgets or more likely to invest in SaaS, while those that are more comfortable carrying depreciable assets on their balance sheets are more likely to invest in on-premise ERP. In addition, SaaS customers need to be more comfortable with the possibility that it will cost more in the long-term, despite the lower up-front costs. A realistic and objective business case will help determine a total cost of ownership estimate for either type of solution.

3. How much control and security do you need over your ERP systems? While this question isn’t 100% based on reality, it is based on the common perception among CIOs that SaaS affords less security and control. While SaaS can indeed offer less control (see #1 above), security should not be as much of a concern for most organizations. After all, SaaS vendors are able to provide more world-class security and reliability than most IT departments. However, our government, aerospace, pharmaceutical and other types of clients with sensitive business information are more inclined to retain control via on premise solutions.

While SaaS is a very real emerging trend in the market, like everything, it’s not for everyone. Your specific needs will determine the most appropriate needs more than industry or marketing hype. Learn more about how to evaluate SaaS vs. on-premise solutions by attending our upcoming ERP Boot Camp.

As we’ve covered in great detail in this blog over the last several years, ERP implementations can be a grind. It’s tough to finish on time and on budget while at the same time delivering expected business benefits. Whether you are working for a commercial company or are in the public sector, it’s no secret the the odds are stacked against you when it comes to ERP systems.

However, our experience with non-profits, federal, state and local entities have shown us that certain challenges are especially pronounced in the public sector. Public ERP systems face unique obstacles related to people, business processes, and complexities. It’s not that public ERP implementations are necessarily more difficult than those in the private sector, but there are things that make them unique.

Here are a few distinct challenges to consider before embarking on an ERP implementation for your public-sector organization:

• Organizational change management. Change is hard for employees at most organizations, but it can be even more difficult to manage in the public sector. Employees in the public sector haven’t traditionally been motivated by a fear of having to outperform peers to keep their jobs (although this is changing in recent years), so performance-based incentives may not be as effective. In addition, because government organizations often do not feel the same external market pressures to change quickly, employees may not be used to the large changes entailed by an ERP implementation. For these reasons, organizational change management plans need to pay particular attention to “selling” the changes and positively impacting the culture of the organization.

• Communications. In addition to the cultural change enabled by an organizational change management plan, general communications can be especially challenging with public sector entities. Not only is it important for the project team and executive sponsors to communicate major process and organizational changes to employees, but there are typically a complex series of stakeholders that need to be communicated to as well. Constituents such as internal customers, external taxpayers, and external “customers” all have a vested interest in ensuring the project is successful.  It is for this reason that public ERP systems often take so long and cost so much to implement.

• Complexity. Another challenge for government organizations is that they are generally larger, more complex, and impact people more than in the commercial space. It’s rare to find a small, nimble, and simple government organization – no matter how relatively small it may seem compared to other government entities – so the complexities can be material.  Business processes, systems, people, and organizational structures can all be more complex than what you might see in the commercial space. For this reason, you want to make sure you have a software solution and ERP implementation partner that is accustomed to these complexities.

ERP implementations are difficult, but as is the case in the public sector, they’re not impossible if managed effectively and with the right implementation partner. However, getting there is easier said than done.  The above three variables are three key complexities to consider as you begin your organization’s ERP initiative.

Learn more about how Panorama can help by attending our upcoming ERP Boot Camp or by reading about our ERP and IT consulting services for both private and public-sector organizations.

Like their counterparts in the private sector, most CIOs and project managers in the government space are concerned with implementing their ERP, CRM, payroll, financial, and other enterprise systems on time and on budget. Some even want to see actual improvements to their public-sector organizations. However, very few expect that they will be defrauded for hundreds of millions of dollars by their system integrators.

Unfortunately, that’s exactly the problem faced by the City of New York. Just last week, officials announced that most of the $600 million that the city paid to its main contractor (TechnoDyne) for its payroll system implementation involved fraud. In what seems to be a complex and long-term web of greed, the main contractor, sub-contractors, and city employees were taking kickbacks in exchange for awarding business.

This problem brings up two questions: 1) Why in the world would any organization pay $600 million for a payroll system, even if it did involve 160,000 end-users, and 2) How did it go undetected for so long? Both questions are worthy of additional discussion beyond this single blog, but there are some lessons to be learned here. Although Panorama was not involved and never has been involved with the City of New York or this project in particular, there are some conclusions we can make:

1. Independent validation and verification can ensure a project finishes on time and on budget. I’m not familiar with the details of NYC’s payroll project, but according to our research and benchmarks in the public sector, I can tell you that $600 million seems like an extremely high and unnecessary budget. With a budget this high, it would have behooved the City to spend a small sliver of their resources on independent validation and verification (IV&V), quality assurance, and oversight. An independent third party with expertise in complex systems implementations is able to identify signs of fraud, misuse of resources, and lack of implementation best practices. When contractors like TechnoDyne get fat, long-term contracts with a government entity – even when fraud is not involved – it can be awfully tempting to get lazy without a third-party to keep the project on track.

2. Outside ERP system experience is crucial to the success of any enterprise software initiative. Deeper and more relevant experience with complex enterprise system implementation could have probably materially reduced the amount of money the City invested in their project. Whether it be a payroll, financial, CRM, HR, ERP, or health insurance exchange system, government ERP projects can be very complex and risky. Only companies with a great deal of expertise in these types of implementations in a number of industry verticals should be trusted with such responsibility. In addition, these types of experts can help identify best practices, highlight opportunities to negotiate more favorable contract terms, and help provide other expert guidance that your average consulting firm would be unable to do.

3.  Proven best practices, tools, and consulting methodologies will drive down your implementation costs. While we don’t know much about the City’s project, our assumption is that the organization and its consulting contractors failed to leverage implementation best practices, tools, and methodologies. If it had, it most likely would not have required a $600 million investment on an incomplete initiative. Consulting firms that specialize in ERP implementations — such as Panorama Consulting — bring implementation tools that will accelerate your implementation timeframe and reduce the overall cost of your initiative, while at the same time addressing points one and two.

Most ERP initiatives are not destined to lead to fraud, kickbacks, and/or failure. However, the above tips will smoke out any signs of those tendencies.  More commonly, these same tips will also help prevent more moderate challenges and problems, such as budget over-runs, delayed implementations, and poorly implemented systems.

Learn more about how Panorama can help with your ERP systems initiatives by viewing our ERP and IT services.

Organizations typically implement ERP systems to help improve business operations, whether it be to increase efficiencies, streamline business processes, or increase revenues. However, our research shows that a full 54-percent of companies have a high level of business risk at the time of going live with their new ERP software. By “high level of business risk,” we mean a material operational disruption, such as not being able to ship product or close the books at the end of the month. Granted, some disruptions are more significant than others, but bringing a company to its knees isn’t exactly a reason most organizations implement enterprise software.

While just over half of companies experience this type of problem, an even greater number have more moderate difficulties. Employee resistance to new processes, unclear business processes, working outside the system, and corrupt data are other issues that may not necessarily bring a company to its knees, but certainly don’t make life any easier for anyone involved. It can be amazing to see how companies go from high expectations during the software selection process to merely hoping that the go-live doesn’t fail as the implementation proceeds.

So what’s the problem — why do ERP implementations so frequently bring organizations to their knees? More often than not, it boils down to three key problems:

1. Poorly defined business processes. ERP systems are very flexible and typically involve significant operational change, so it’s critical to clearly define how business processes are going to look in the new “to-be” environment. Even the most flawlessly designed software can result in failure if processes aren’t clearly defined and communicated to employees. And by business processes, we mean end-to-end business processes, not transactions in the system, which ERP vendors are more opt to focus on.

2. Ineffective organizational change management. Speaking of business processes changes, employees need to fully understand these changes in order for the business to function going forward. Software vendors are typically well-versed in training on how to perform transactions in their system, but they are not versed in facilitating a robust organizational change management program that helps employees understand what the specific differences are between the as-is and to-be business models, how it affects their specific jobs, and how the end-to-end business processes will look in the new environment. All of these areas should be addressed via an effective organizational change plan, and they should happen in addition to and well before end-user training.

3. Unrealistic expectations. One of the more overlooked ERP failure points is unrealistic expectations. You may have experienced the consequences of unrealistic expectations in the past – your ERP vendor tells you their software can be implemented in 90 days or less, then you budget and resource accordingly only to quickly find that you have severely underestimated the time and money required, thus requiring you to cut corners where no one in their right mind would. This is an all-too-common root cause of implementation failure and can quickly bring a company to its knees because it is forced to implement poorly, which is worse than not implementing at all.

By avoiding these three pitfalls, you and your project team will go a long way toward not only ensuring your implementation doesn’t fail, but more importantly, that it delivers measurable business value to your organization.

Learn more about how you can make your ERP implementation more successful by attending our ERP Boot Camp on September 21, 22 and 23 in Denver.