Since we have posted so many good blogs and articles this year, I thought I would share a few of my favorites so far:

• Your Existing ERP Software System Can Bring a Happy New Year for Purchase Part Savings! – One of our first postings of the year, this provides a very tangible example of how companies can leverage their ERP system to realize a tangible improvement to their business operations.
• The Marathon Man of ERP Implementations – I’m a fan of sports analogies and this entry from Cliff Simms, our Director of Organizational Change Management, highlights the ways that ERP implementations require conditioning, focus, and effort that isn’t unlike training for a marathon.
• Are ERP System Customizations Starting to Feel Like a Build-a-Bear Workshop? – Written by Haoyan Sun, our Research Analyst, this is a good article highlighting the realities and dark side of ERP customization, a topic on the minds of most executives and project managers about to embark on an ERP implementation.
• When Jumping into an ERP Project, It’s Sink or Swim! – Our clients often struggle with how to mobilize resources for an ERP project, and this entry provides some tangible tips on how to best prepare your team.
• Six Steps for Executing Successful ERP Requirements Workshops – Another good entry with very tangible and real examples of how to define ERP business requirements, whether your are in the process of selecting, designing, or implementing a new ERP system.
• Winning in 2010: The Goal Line – Another good analogy of how ERP implementations are like sports, this one focused on how to focus your end-goal on tangible and measurable business benefits.
• ERP Software Clash of the Titans: SAP vs. Oracle – Of the blogs that I have written so far this year, this is easily my favorite. I can’t even keep track of the number of times clients ask me to summarize the strengths and weaknesses of SAP and Oracle, so I wrote a blog to address some of the key points.
• Powell’s Message: Insights on ERP Software – One of our more recent blogs, this is a good one because it relates leadership messages from Colin Powell and applies them to leading a successful ERP initiative.

In addition, below are the top five most-read blogs on our web-site so far this year:

1. Top Ten ERP Software Predictions for 2010
2. One Key Reason Why 72% of ERP System Implementations Fail
3. The 2010 ERP Vendor Analysis Results Are In, and the Winner Is…
4. Organizational Change Management Tips for Global ERP Software Implementations
5. Welcome to the Jungle: Lessons from ERP Software Implementation Failures

We will publish a more comprehensive year-end list later in the year, but we hope that these blogs provide some good summertime reading in the meantime.

The data reveals a number of interesting facts.  First, SAP and Oracle rate very closely in a number of functional areas, with a statistically insignificant difference of .1 or less:

• Logistics
• Customer Service
• Production Operations
• Quality Control

There are some modules and functional areas, however, where SAP scores higher than Oracle:

• Product Scheduling
• Regulatory Compliance
• Human Resources (HR)

On the other hand, Oracle scored higher in a number of areas as well:

• Sales and Marketing
• Product and Manufacturing Engineering
• Product Configurator
• e-Portals
• Finance and Accounting

Obviously, these are just averages of much more detailed client evaluation metrics, but they provide a general sense of where the perceived strengths and weaknesses of each of the software packages lie.  It is important to note that a client’s evaluation of a software’s functionality is likely to vary based on it’s unique business needs and requirements.  However, this is one of several data points that can be considered during an evaluation of potential manufacturing software packages such as SAP and Oracle.

Manufacturing Software Functional Comparison of SAP vs. Oracle

Want to view more independent research related to SAP and Oracle?  View our ERP video that highlights additional data comparing these two ERP systems.  In addition, visit our resource center for the SAP white paper on the topic and watch for additional research from other leading manufacturing software providers.

To recap, there are seven critical challenges that can disrupt an ERP implementation if not addressed appropriately:

1. Program management
2. Business process and workflow definition and improvement
3. Organizational change management and communications
4. Business and technical integration
5. Globalization and localization
6. Independent oversight of technical resources
7. ERP benefits realization

Unlike data captured in our 2010 ERP Report and other research we’ve conducted in the past, inadequate focus on benefits realization scored low in our online poll, with only 9% of respondents citing that as the biggest challenge. On the other hand, insufficiently defining business processes and workflows was the biggest challenge, according to 39% of respondents. Poor program management and not enough focus on organizational change management both followed close behind, with each gathering 26% of the votes.

The fact that business process and workflows are such a potential land mine for ERP implementations is not surprising for a number of reasons. There are six main reasons why this presents such a challenge for organizations:

1. Unrealistic expectations. We find that many of our clients expect that implementing a new enterprise solution will simply transform their business overnight, without carefully defining and engineering “to-be” business processes and workflows. This unrealistic expectation helps explain why, according to our 2010 ERP Report, most ERP projects take longer than expected.
2. Vendors often oversell and oversimplify. Many vendors oversell and oversimplify their software’s use of industry best-practices and streamlined business processes. While their software will inevitably improve business processes, they still need to be defined in the context of the implementing company’s operations and business policies and procedures.
3. There are often complex processes outside of the ERP system. Business processes may entail activities to be completed in the ERP system, but chances are, there are also processes that touch other systems or manual processes. These non-ERP processes need to be incorporated into the overall workflows in order for employees to better understand them.
4. Most ERP systems are very flexible. Most modern ERP solutions are extremely robust and flexible, so even a simple business process such as creating a sales order is likely to have multiple variations. It cases like this and hundreds of other business processes, it is not enough to say that you are going to simply adopt the software’s processes; even those workflows need to be defined, which takes time and resources.
5. Business processes are a source of competitive advantage. While some business processes, such as general ledger or financial reporting, are not sources of competitive advantage, other core functional areas are likely to differentiate your organization from competitors. For this reason, it is not always advisable to simply adopt vanilla functionality that can be easily replicated by others in your industry.
6. Employees need well-defined processes. Processes and workflows need to be clearly defined so employees can be adequately trained. Software developers and implementers have very different process definition needs than employees, who will ultimately be responsible for performing the tasks. Organizational change management, communications, and training activities are effective only with well-defined business processes.

ERP software is not implemented by simply plugging it in and assuming business processes and workflows will fall into place. Instead, organizations need to carefully define and re-engineer their processes. By keeping the above points in mind, your organization will be less likely to overlook a key, but often overlooked, component of an effective ERP implementation.

What do you think? Take the poll or review the full results from other readers.

Note: There is a poll embedded within this post, please visit the site to participate in this post's poll.

When working with clients, we often hear the perception that most ERP failures or lawsuits must pertain to SAP implementations . After all, Hershey’s, Waste Management, and a host of other high-visibility failures involved SAP’s ERP software. However, our research shows that there is no pattern to ERP failures and lawsuits, other that they happen more often than they should and no one ERP vendor appears more or less likely to experience failure than the others.

For example, two new lawsuits were announced in the last 30 days: one against Oracle and another against JDA’s i2 unit.

In fact, we looked at the most recent lawsuits to see if there was a pattern among vendors and software solutions. As you will see in the table below, there is no apparent pattern to the vendors named in recent legal matters. If anything, when expressed as a percentage of total client base, SAP and Oracle probably have a lower lawsuit rate than other vendors on the list. However, because large and high-visibility companies are more likely to embark on Oracle or SAP implementations, those organizations are more likely to receive attention when something goes awry.

Lawsuits Againt ERP Vendors

So what are some of the best ways to avoid becoming wrapped up in an ERP lawsuit? There are five key factors that can help you stay out of trouble during your ERP selection and implementation process, regardless of which software you are considering:

• Ensure functional and technical fit of the software you select
• Have realistic expectations about how long the implementation process will take and how much it will cost
• Ensure adequate executive buy-in and support
• Where possible, avoid customizing software rather than leveraging standard functionality
• Ensure sufficient internal and external ERP software implementation expertise on your project team

Read more about these five implementation factors by reading the full blog, Welcome to the Jungle: Lessons Learned from ERP Implementation Failures. In addition, share your opinion about which of the five failure points is the most crucial by taking our poll below.

Just as our country struggled for its independence from the British in the early days, the ERP software market also struggles with independence, or lack thereof. The market is full of consultants, industry analysts, and software resellers that are aligned with one or more ERP vendors. Even most companies that provide online resources and databases for software selection are paid big bucks by the vendors. So whether you’re subscribing to a vendor evaluation database, viewing a market briefing from a vendor analyst, or hiring a software selection consultant, chances are they are in bed with one or more vendors.

So what’s the fuss? After all, this is how the industry has worked for years, right?

That’s exactly true, it is how it has always been, and therein lies the rub. As our independent 2010 ERP Report shows, 72% of ERP implementations fail, and that’s no coincidence. For too long, companies have been sold products that aren’t good fits for their organizations or have had implementations managed by consultants that don’t have their best interests in mind. In software selection, you need an unbiased partner to help you find the right solution for your business. During implementation, you need someone that isn’t trying to sell you additional software or charge additional fees to customize the system to death. Up until recently, you had two choices: 1) hire a biased consultant or advisor to help you select and implement the right software, or 2) try doing it yourself, with very little to no expertise.

Having been a part of this unfortunate landscape for 15 years and seeing the impact it had on clients is exactly why I started Panorama Consulting Group in 2005. Our vision is simple: to be the world’s leading independent ERP consulting firm. The keys to that vision are independence and focus on being better at ERP than anyone else in the market. Fortunately, our clients and the ERP market see the value in what we do, which helps explain our extremely rapid growth in a down economy.

So what are the questions to ask a consultant, analyst, or online resource to determine how independent they really are? Here are three starting points:

1. Do you sell ERP software? This is probably the easiest one. If they do, it is impossible for them to be objective and to make your business requirements their priority. Even if they represent two, three, even five different software vendors, that’s only a tiny fraction of the overall ERP market.
2. Do you receive any financial kickbacks or have any financial ties to one or more software vendors? This is one is not so easy. Ever since I started Panorama five years ago, we’ve been offered large sums of money as “referral fees” in exchange for bringing clients to them. This would have been an easy way to make some cash on the side, but completely goes against our business model. About two years ago a client asked us to guarantee our independence in writing, so we included a clause in our contract that if they found evidence that we were financially or any way aligned with one or more software vendors, we would refund 100% of our consulting fees to them. I have yet to find another firm that is willing to put money where their mouth is. Most consultants, industry analysts, and online vendor database subscription services charge vendors fees of some sort.
3. Do you have a staff of consultants that focuses on one or more software packages? Having worked for one of the Big 5 firms earlier in my career, this is where a lot of the bigger consulting and audit firms get you. They may technically be independent, but they are going to be more than a bit biased if they have a staff of SAP or Oracle specialists that they’re dying to staff on the next project. I did several ERP selection projects with my former Big 5 consulting firm, and it was no coincidence that we recommended SAP in each and every one of our software selection engagements. Even in cases where SAP was a good fit, our blinders were such that we couldn’t objectively advise the clients on where the risks and weaknesses were with the solution, which every ERP solution has.

In case you’re not familiar with Panorama, we can answer these three questions with a resounding “no,” which is how we’re able to provide independent advice and bring knowledge of over 140 different ERP software solutions to the table. In addition, our independence allows us to provide an unfiltered, unsponsored view of the strengths and weaknesses of each solution, as well as how to most effectively implement them.

Want to learn more? Listen to our most recent podcast below for a more detailed interview with me about the value of hiring a truly independent ERP consulting firm like Panorama Consulting.

Have a happy and safe Independence Day!

A company’s industry and/or unique business processes may result in dramatically different ERP considerations, so it is highly recommended that the ERP selection team fully understand the ERP vendor and their own business strategies and processes before making a final decision and awarding business to an ERP vendor.

One of our recent ERP podcasts featured an interview with a client of ours, the President of a mid-size field service provider that recently selected and implemented new ERP software for their organization. There were several helpful lessons from that interview. For example, the client highlighted some of this lessons and tips from his company’s software selection process:

• The importance of an independent ERP consulting firm. One of their difficulties was finding a consulting firm that was truly independent and didn’t represent one or more specific software vendors. They looked long and hard before hiring Panorama Consulting to help them select and implement their chosen software.
• Define business processes and requirements. One of the key aspects of their evaluation was to document the tribal knowledge throughout the organization. They defined new, more clearly defined and standardized business processes that would take their company to the next level. In addition, they used the evaluation as an opportunity to define their business requirements and priorities.
• Focus on the important stuff. They understood that no ERP system would address each and every business requirement, but they knew which business needs they absolutely had to address.
• Vendor negotiations are critical. They leveraged Panorama’s experienced team to act as the bad guy and establish their position with vendor, while at the same time protecting them from potential strains with the vendor as a result of the negotiations.
• Address major challenges. One of their biggest challenges was getting everyone across the company on same page to define what was critical to the company as a whole. In the past, different departments and functions had focused on what was important to their area rather than to the entire company, so ERP was a challenge and opportunity to change that mindset.
• Key pieces of advice. His comment to those about to select new ERP software is to set realistic expectations for implementation and to understand the total cost and ROI of the investment in the new solution. These are two pitfalls that they almost fell into before being advised by Panorama to set realistic expectations.

There are a host of challenges and lessons in any ERP system selection process. However, these are just a few pieces of advice provided by one of our clients. Listen to the full podcast interview to hear more ERP selection and ERP implementation lessons from the company.

Sound too good to be true? That’s because it is. Unfortunately, however, these are common messages in the ERP software industry. These unrealistic expectations are a key reason why most ERP implementations fail (read more in our 2010 ERP Report).

In order for any ERP project to be successful, you first have to define what you mean by “implementation.” If your definition is a technology implementation, then yes, it is relatively easy and can probably be done in a matter of weeks or months. However, if by implementation you mean true business transformation with full employee adoption, improved business processes, and tangible business benefits, then it’s going to require a bit more effort.

When assessing your ERP project timeline, it is important to make sure you have included key elements that will help you make your project successful. Below are seven key items that, when overlooked, constitute the seven deadly sins of ERP software implementations:

1. Program Management. Managing the installation, configuration, and testing of the ERP software is the easy part. Managing the business, process, and organizational aspects of the business transformation is much more difficult. Managing all of the different moving parts of the software implementation, such as business process improvements, business acceptance, and organizational change management, requires strong program management, governance, and controls.
2. Business process and workflow definition and improvement. On the surface, it may make sense just to adopt the business processes and workflows built into the software and hope for the best. For those of us that have been through dozens of ERP implementations, however, it just isn’t realistic. Today’s ERP systems are so robust, flexible, and powerful out of the box that processes and workflows still need to be defined in detail. In addition, business process improvements, workflows within and outside the system, and employee roles within the system all need to be defined before the system can be fully adopted.
3. Organizational change management and communications. For most organizations (if not all), an ERP implementation involves massive change. Employees at all levels are impacted significantly, which creates anxiety and resistance to change. A robust organizational change management program is crucial to gaining employee adoption and business benefits from the system. And organizational change management is much more than software training – it includes communications targeted to each major workgroup, business process training, organizational impact assessments, redesign of employee roles and responsibilities to match the new system, and a host of other key activities.
4. Business and technical integration. A single, fully integrated ERP system with no integration to other systems or business processes is an urban legend. Every implementation that we see involves some type of integration to systems and business processes outside the system. This integration needs to be managed from a technical and business design and testing perspective; otherwise, the system will be fragmented and disjointed, which defeats the whole purpose of ERP.
5. Globalization and localization. Our larger, multi-national clients often ask us to implement their ERP solutions in a way that will help them standardize business processes across multiple locations and countries. This is a noble goal that might be realistic for 90% of your business, but some level of localization needs to take place. Whether we’re talking local regulatory needs, reporting requirements, or shipping and customs processes, some aspects of the global rollout may require localization and can delay a project if these aspects aren’t defined early on.
6. Independent oversight of technical resources. One of the top reasons that clients hire us to manage their ERP implementations is to help manage the scope, efforts, and costs of functional and technical software consultants. Without clear direction, guidance, and project controls, it is easy to fall into a spiral of unnecessary customization, configuration and set-up that doesn’t meet key business requirements, higher costs, and longer durations. Our research shows that hiring independent consultants like Panorama to manage ERP deployments significantly reduces total costs.
7. ERP Benefits Realization. This may be the biggest sin of all. Too many companies spend millions of dollars only to fail to realize the expected business benefits. In fact, our independent research shows that most ERP implementations fail to realize at least 30% of the expected business benefits. A key reason for this is a lack of a robust ERP benefits realization program. This is an area that most ERP consultants and software vendors fail to address, usually because they don’t know how. This is also one of the reasons that our organizational change management and benefits realization offering is in such high demand.

While it may be possible to implement ERP systems quickly when defined in the narrow technical sense, it is more important to focus on the big picture and do it right the first time. ERP implementations are usually expensive, but they are even more expensive when they’re not done right the first time. When assembling your project team or software vendor’s proposed ERP implementation plan, it is important to keep these seven deadly sins in mind.

What do you think? Share your thoughts by taking the below poll.

The new ERP database provides information on the enterprise software industry and lists over 140 software vendors with groupings for the various tier I, II, and III segments. Each ERP vendor has a detailed profile that includes a list of their product offering, an overview of their target market and industry experience, contact information, and recent news or press releases. In addition to the basic profile information, the vendor listings provide an opportunity for website visitors and ERP users to rate their existing software supplier based on a variety of criteria such as presales activity, technical support, functionality, and obtainment of ROI. We feel the vendor profiles and their respective scorecards are imperative for providing an unbiased and unaltered view of the ERP vendors direct from within their user community.

As we move forward into phase two of this launch, we are encouraging the ERP vendors to review their profiles and provide updates, as well as information on their social media communities, literature, white papers, and any images or supplemental content that will help provide the most informative profile possible.

What differentiates this information from other ERP vendor listings is that it is provided for free, without need to register, and without restrictions. While ERP selection and ERP implementation is at the center of our core service offering, website visitors should be informed and educated even if they chose not to engage with Panorama as their chosen independent consultant. This philosophy is aligned with Panorama’s mission statement and the original reason I founded the company years ago.

While the ERP database is quickly becoming one of the most content rich areas of our website, our ERP database is only a part of the upcoming changes. We have more enhancements planned for the 2010 calendar year. I applaud my team for performing due diligence in their research and I look forward to the next phase of functionality that is coming to the ERP vendor profiles.

All of us at Panorama hope the new ERP database helps you and your ERP selection teams become acquainted with the ERP market, as well gives you a baseline for understanding the various offerings and a baseline for choosing the best ERP vendor for your organization’s unique requirements. As always, if my team can be of assistance, I welcome you to contact us so that we can help you make your ERP project a success.

You can visit the ERP database at: http://panorama-consulting.com/resource-center/erp-database/

Below are five things to consider when managing a global ERP implementation:

1. Global vs. Localized Business Processes. Companies with global offices, particularly those acquired from another company, often have very non-standardized business processes. A global ERP software implementation provides an opportunity to standardize processes across locations, such as in a global shared services ERP model, but such changes can be difficult. A global ERP implementation needs to find the right balance between standardized vs. localized business processes and system. Often times, these decisions boil down to identifying processes that are crucial to staying close to the customer vs. those that are not adding as much value.
2. Big Bang vs. Phased Implementation. Once the system and corresponding business processes have been defined, it is important to define how to rollout to end-users. For example, do you go-live with all functions and geographies at one time? Do you rollout in multiple phases based on region and/or function? Or is it some combination of both? Most of our clients take some sort of a hybrid approach, largely based on their tolerance for risk, resource availability, and legacy system constraints.
3. Global vs. Localized ERP Support Structure. The actual ERP implementation is only one step in a longer-term ERP process. Before the first go-live is completed, it is important to define how and where your ERP software is going to be managed going forward. Many companies look to centralize ERP support and help desk functions, while others choose to offer decentralized support to cater to a diverse end-user base. The sooner this support structure is defined and established, the sooner end-users will fully adopt the business software and start realizing the expected business benefits.
4. Language and Currency. One of the key business benefits of ERP software for global organizations is the ability to standardize business processes and provide global visibility into operations. However, local requirements often create a competing force to allow for flexibility to manage data and transactions in local languages and currencies. Finding the right balance between standardizing to English and US dollars across the globe vs. allowing multiple languages and currencies is an important decision point.
5. Master Data Management. Master data is an important but often overlooked aspect of an effective ERP initiative. Not only does master data need to be cleansed and migrated to the new system, but global companies need to define how it will be managed going forward. For example, will local entities have the flexibility to manage their own local chart of accounts, or will changes require centralized and global governance? The same needs to be decided for other types of master data, including customer, supplier, and inventory master records.

Most of the above decision points are not black or white; instead most require an organization to choose where it plans to fall on a spectrum of options. What is more clear, however, is that companies need to start making decisions related to the above issues sooner rather than later to provide direction and focus to their global ERP implementation.

Learn more about key things to consider in a global ERP implementation by reading Panorama’s presentation on the topic.

A recent poll on our web-site asked visitors to choose the top ERP vendor for small and mid-size businesses (SMBs). Microsoft Dynamics, which includes the Axapta (AX), Navision (NAV), and Great Plains (GP) suite of products, finished with the most votes at 33%. Microsoft Dynamics was followed by “other” (26%), SAP (17%), JD Edwards (11%), NetSuite (6%), and QuickBooks (4%).

But how do these results compare with Panorama’s experience with mid-size companies and research? It is fairly consistent. For example, we have found that Microsoft Dynamics can be more flexible, user-friendly, and easier to implement, features that many SMBs value more than their larger counterparts. On the flip side, Microsoft Dynamics is often considered to have less robust manufacturing, product configuration, and other complex functionality sometimes required for larger or more diverse organizations.

Below are a few other key metrics that highlight some of the strengths and weaknesses of Microsoft Dynamics:

• Its product line is evaluated, selected, and implemented in an average of 18 months, compared to an average of 20 months for other solutions
• The total cost of ownership averages $2.6 million for the initial investment, or 5% of the implementing company’s annual revenue, the lowest of all the leading ERP solutions covered in our study.
• Highest predictability of actual ERP implementation costs compared to other vendors
• Leads all vendors in the product’s level of employee satisfaction, largely due to the Windows look and feel that many employees are accustomed to

However, in addition to the above strengths, there are three tradeoffs to consider when selecting or implementing Microsoft Dynamics ERP:

• Below average executive and management satisfaction
• Highest variance and unpredictability of actual implementation duration
• Above average level of business and operational implementation risk

These are just a few points to consider as part of a more robust ERP software selection process. Your organization’s unique needs and requirements should be clearly defined so you can make a decision that’s right for your organization. We’ve found that Microsoft Dynamics ERP is a viable ERP software option for many SMBs, so it may be worth including on your company’s long-list or short-list.

What do you think? Take our poll to vote which ERP solution provides the overall best functionality for small and mid-size companies.

This creates somewhat of a Bermuda Triangle for ERP implementation initiatives. We’ve all heard horror stories about ERP projects that have started the journey toward implementation, only to be lost somewhere along the way. The three forces that contribute to this ERP Bermuda Triangle are:

1. High implementation cost and risk
2. Long implementation duration
3. Low business benefits and return on investment

So how is one able to navigate this ERP software Bermuda Triangle? Below are three tips to navigate each of the ominous forces apparent on any ERP initiative:

• ERP implementation cost and risk. The first step to avoiding the pitfall of high cost and risk is to set realistic expectations. Many organizations fail to adequately budget for critical project activities that will make their ERP implementations successful. While on the surface it may be possible to complete an enterprise software project with limited costs or resources, cutting corners will cost more in the long run. Therefore, it is important to take budgetary estimates provided by ERP software vendors with a grain of salt and make sure that they include “hidden costs,” such as hardware upgrades, training, internal staffing to backfill your project team, and organizational change management.
• ERP implementation duration. An accelerated implementation timeframe may be possible, but it will inherently increase risk. Similarly, an overly optimistic project plan will cause project teams to lose sight of doing more than just going live with the software. For example, any ERP software can be implemented in a very short period, perhaps even days. The question becomes: what do you mean by implementation? If the answer is technically installing the software and perhaps doing some quick configuration, then yes, fast implementations are possible. However, if your definition is business transformation, adoption of the software, and measurable business benefits, then it is important to have realistic expectations for how long this will take.
• Realization of business benefits. The saying goes that if you don’t measure it, you won’t achieve it. The same holds true for ERP initiatives. If you are expecting to see tangible results from your ERP investment, then it is important to not only create a business case to justify the costs, but also to track and manage business benefits going forward. In addition, identifying and implementing business process improvements and executing a robust organizational change management are key contributors to ERP benefits realization.

It’s difficult to make it through an ERP implementation unscathed. However, these tips will help you navigate the ERP Bermuda Triangle and make it through your journey not only alive, but in a way that delivers a high return on investment.

What do you think? Take our poll below and tell us how much business benefit you’re realizing with your current ERP system.

Take a moment to vote and then check back to review the poll’s overall results. Responses to this poll and other recent polls are available in our resource center.

However, ERP software projects are chalked full of challenges. For example, as we’ve pointed out in our 2010 ERP Report:

• 35.5% of ERP implementations take longer than expected
• Only 48.6% of projects are completed on or under budget
• Only 33% of companies realize at least half of the business benefits they expect from their ERP software

The good news is that your ERP implementation doesn’t have to have these same results. There are ten key things than we often advise our clients to do to avoid the above pitfalls.

Learn more by downloading our latest white paper entitled “Ten Tips for a Successful ERP Implementation.”

Take a moment to vote and then check back to review the poll’s overall results. Responses to this poll and other recent polls are available in our resource center.

The term “best practices” is a bit loose and vaguely defined in the industry. ERP vendors often interpret it as the way one of their biggest clients does business, which often becomes the pre-configured ERP solution for a given industry. However, best practices for one company may or may not relate to other organizations and is heavily dependent on the company’s business model, competitive advantages, and other considerations. In addition, given the diversity of functionality in most ERP solutions in the marketplace, who is to say which solution(s) provide the real best practices?

In addition to software vendors, some online tools and lower-end software selection consultants provide checklists or templates of “best practices.” While there are large volumes of such information, the relevance to any given specific company is questionable. In addition, best practices are not checklists of functionality – they are efficient business processes that provide competitive advantage to your business.

So how does a company leverage best practices during their ERP initiatives? Here are three tips:

1. Focus on measurable business improvements, efficiencies, and non-value-added activities. Every company is different with unique competitive advantages. Some are extremely customer-centric, while others contain costs via efficient supply chain management processes. The key is to identify and measure the areas that are most important to your business and provide the greatest opportunities for ERP to improve your results. One you have done this, it is easier to identify potential ERP systems that will provide more efficient or effective business processes to support your operations.
2. Leverage benchmarks and data to drive improvements. Consultants with a broad view of the ERP space, your industry vertical, and data to support ERP initiatives are likely to bring best practices from other clients. Be leery of consultants or software vendors that have a one-size-fits-all canned best-practice solution.
3. Standardize processes that aren’t differentiators to your business. If something isn’t providing a competitive advantage to your business, then chances are most ERP solutions have standardized functionality to provide standardized and proven efficiencies. Examples often include financials, A/R, A/P, fixed assets, and warehouse management. If a particular business function is competitive or unique to your business, however, it is less likely that most ERP software vendors will provide standardized best practices, and less likely that you would want to leverage generic functionality used by other companies. Examples of areas that are differentiators and more difficult to find in most ERP packages include product configuration, process manufacturing, and vendor managed inventory.

These are three starting points to help you on your journey to identifying and leveraging ERP software best practices. What are your thoughts? Take our poll and compare your opinion to others in the ERP and business community.

This led me to revisit a poll we had posted on our web site several weeks ago. We asked visitors to our site to share their opinion on how accelerators affect the duration of ERP implementations. Unfortunately, the poll results confirmed some of the skepticism I sensed in our webinar on the same topic: only 39% said they think accelerators can dramatically reduce implementation time. Another 59% of respondents said that they only slightly reduce implementation time, have little to no impact, or that there is no such thing as an accelerated implementation (our token response option for the cynics).

So what’s the disconnect between how ERP vendors and consultants sell their acceleration tools vs. people’s actual experience? As we outlined in a previous blog, although accelerators may speed up the software configuration process, configuration only consumes a fraction of the time and resources required in an overall ERP implementation. We estimate that no more than 20% of a project’s duration is related to configuration; the other 80% is related to key project activities such as workflow design, conference room pilots, organizational design, training, and other items.

This isn’t to say that these other project activities can’t be accelerated as well. Consultants with extensive ERP implementation and organizational change management experience may have tools, methodologies, and expertise (think Panorama Consulting Group) to help you implement faster than you might on your own or with a lesser-qualified consulting or software firm. But the ERP system accelerators offered by software vendors typically won’t materially impact the overall implementation.

What do you think? Vote or view results from our ERP system accelerators poll, or learn more about Panorama’s PERFECT Path ERP implementation framework.

So what do wholesale distributors look for in a new ERP system?  Take a moment to answer our weekly ERP poll and then check back to see how your response aligns with that of the average visitor.

As our ERP research has shown, both SAP and Oracle eBusiness Suite (EBS) have strengths, weaknesses, and tradeoffs. Different clients have different needs, ranging from functional requirements, technical maturity, tolerance for risk, budget, and a host of other factors. The vast differences between these two ERP solutions are underscored by the fact that we often recommend different solutions for different clients in the exact same industry.

So what are the differences between these two solutions? Although there are numerous variances in the detailed workflows and functionality of the solutions, there are five key high-level variables to consider when evaluating SAP and Oracle EBS:

1. Best of breed functionality vs. more tightly integrated modules. The software strategy of the two vendors could not be much different. While SAP has built a solution primarily from the ground up, Oracle has grown primarily through acquisition of best-of-breed point solutions. For example, Oracle has acquired Demantra for advanced sales and operations planning, Hyperion for financial reporting, and Siebel for CRM, while SAP has built much of this functionality into its core ECC and All In One ERP solutions.
2. Product roadmap. SAP continues to build upon and enhance its core product offering, while Oracle is moving toward Fusion. While some may suggest that Oracle is more innovative or visionary in its technology direction, it also means that there may be more uncertainty with Oracle’s product lines. This is especially true for clients considering Oracle’s JD Edwards and Peoplesoft solutions.
3. Flexibility. Although very powerful, SAP can be more difficult to change as a business evolves. This is both a strength and a weakness: it is tightly integrated and helps enforce standardized business processes across an enterprise, but it can be more difficult to modify the software to adjust to evolutions to core processes and requirements. Oracle’s best of breed approach, on the other hand, can allow for more flexibility to accommodate changing business needs, but this strength can become a weakness when it becomes harder to enforce standardized processes across a larger organization.
4. Implementation cost, duration, and risk. Although both solutions typically cost more and take longer to implement than most Tier II ERP software, there are distinct differences between the two. Oracle has a slight advantage in average implementation duration and an even larger advantage in average implementation cost, at 20% less than SAP. SAP, on the other hand, has the lowest business risk of the two, measured via the probability of a material operational disruption at the time of go-live.
5. Business benefits and satisfaction. This is perhaps SAP’s greatest strength. Although Oracle has the highest executive satisfaction level of all ERP vendors included in our 2008 ERP Study of 1,300 implementations across the globe, SAP leads the pack in actual business benefits realized. Assuming the #1 reason most companies implement ERP software is to achieve tangible business benefits, this can be enough to justify SAP as a solid solution for many companies.

While the above points highlight some of the key differences, there are a number of similarities between the two. Both are aggressively pursuing Software as a Service (SaaS) and/or on-demand ERP offerings. Both are also more likely to take longer and cost more to implement than other ERP solutions in the marketplace, such as Microsoft Dynamics ERP, Epicor, and Infor, even when normalized to account for larger clients. And both are scalable, able to handle international requirements, and proven among larger organizations.

The key takeaway here is that, as with any ERP solution, SAP and Oracle both have their strengths and weaknesses. One solution may be the best fit for one organization, while not a good fit for others, even within the same industry. The only way to make sense of the pros and cons in a way that is meaningful to your organization is to engage in a robust ERP software selection process that considers your requirements, priorities, and competitive advantages to find the right fit.

Learn more about an effective ERP selection process by reading about Panorama’s software selection process.

So why do companies choose manufacturing focused ERP software over traditional horizontal ERP packages?  Take a moment to answer our weekly ERP poll and then check back to see how your response aligns with that of the average visitor.

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Take a moment to answer our weekly ERP poll and then check back to see how your response aligns with that of the average visitor.

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For example, the January 27, 2010 edition of the Wall Street Journal featured an article about how companies are struggling to address the “bullwhip” effects of the economic recovery on their supply chains. The article discusses Caterpillar and other companies that are not seeing a slow and steady increase in production, but instead are seeing highly volatile swings in their supply chains and demand for their products.

During better economic times, companies may have been able to deal with some level of inefficiency in their forecasting and inventory management processes. However, 2010 features leaner business environments with more limited resources, so it is even more imperative for companies to leverage their ERP, CRM, and other enterprise systems to help manage seemingly unpredictable supply chains.

Five Key Factors Contributing to the Need for More Effective Use of ERP Systems to Manage Supply Chains During the Economic Recovery

1. Businesses are restocking inventory. As outlined in the aforementioned WSJ article, most companies burned off inventory during the last downturn in order to be more lean. As the economy shows signs of life in 2010, companies are forced to restock their inventory levels. This, in turn, is trickling throughout the entire supply chain; if a big company like Caterpillar decides to order a large quantity of materials such as steel, this has a big downstream effect on suppliers throughout its supply chain.
2. The economic recovery is poised to be uneven. Unfortunately, most economic indicators suggest that this will be a choppy rather than a steady or robust recovery. This makes it even more important for companies to anticipate changes in demand and manage their inventories accordingly. This is especially true for companies with a multi-national presence, as different regions of the world are emerging from the recession in very different ways.
3. Inventories are likely to be leaner in the foreseeable future. Most businesses are still finding it difficult to access credit, are uncertain about the future, and are therefore more likely to keep inventories as lean as possible. As a result, even relatively small upticks in demand are likely to challenge safety stock margins of error.
4. Head-count is not likely to increase in the near future. Most economists agree that unemployment will not ease until 2011 at the earliest, which suggests that companies are not going to be hiring to relieve their lean labor forces anytime soon. As a result, poor forecasting and supply chain management functionality in companies’ ERP systems are more likely to result in overlooking early warning signs of needing to adjust inventory to match demand.
5. Managing receivables is more important than ever. For most businesses, the next best thing to cash is receivables. Although not directly related to supply chain management software, robust financial and receivables management in an ERP system will help better finance inventory investment needs in the long-term.

These five reasons underscore the importance of leveraging an ERP system to better manage increasingly turbulent supply chains. Learn more about how manufacturing and distribution companies are doing so by watching the video below.

For example, here are some key findings from the study:

• Tier II software vendors increased their market share by several percentage points in 2010 compared to 2008, up to 30% of the total ERP market
• SAP is the most short-listed ERP solution
• Oracle eBusiness is the most selected option
• Microsoft Dynamics delivers the fastest payback and ROI of all the major ERP vendors, followed by Infor and Epicor
• Tier II solutions are more likely to deliver a majority of expected business benefits, while Tier III (including many SaaS solutions) are the least likely

In addition to these comparison points among leading ERP solutions, the report also outlines some not-so-good news for the average ERP implementation:

• 72% of implementations require at least some customization to meet business requirements, while a full 24% required heavy or complete customization
• Tier I solutions (SAP, Oracle EBS, Microsoft Dynamics) are much more likely to require customization than Tier II and Tier III counterparts
• Although 72% of organizations are at least somewhat satisfied with their chosen ERP vendor, 55% of organizations realized 30% or less of the expected business benefits

Interested in reading more detail about our ERP vendor analysis? Click to download the full report.

Take a moment to answer our weekly ERP poll and then check back to see how your response aligns with that of the average visitor.

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Take a moment to answer our weekly ERP poll and then check back to see how your response aligns with that of the average visitor.

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But first, how do we define implementation failure? People talk about failures all the time, whether it’s related to companies filing lawsuits against software vendors, pulling the plug on troubled implementations, or in some extreme cases, filing for bankruptcy due to their failed implementation (think Shane Co. in early 2009).

Aside from extreme cases such as these, there is a spectrum of implementation challenges that can result in varying degrees of failure. In short, we consider an ERP implementation to be a failure if one or more of the following occurs:

1. Takes longer to implement than expected
2. Costs more than expected
3. Fails to deliver at least half of the expected business benefits

In our most recent study, which is technology-agnostic and one of the most thorough studies conducted in the ERP space, we found that there is a 72% likelihood that one or more of these three things will happen. There is a 31% chance that two or more of these things will occur.

If we assume that these are three valid failure points, then there are a number of things companies can do to avoid one of these three outcomes, most of which are outlined in our report. Perhaps the quickest and most direct way to ensure these things don’t happen is to have realistic expectations to begin with. A realistic view of what an ERP implementation will cost and the business benefits that can be realized will go a long way toward avoiding these failure points. It is important to augment software vendor sales hype with a realistic view from independent and objective sources that fully understand ERP and your business.

Want to learn more about our 2010 ERP Report? View the brief video presentation below, which provides an overview of these and other findings from our study.

Take a moment to answer our weekly ERP poll and then check back to see how your response aligns with that of the average visitor.

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CRM evaluations should include elements inherent in effective ERP software selection processes. For example, a CRM software selection process should include the following steps:

• Clearly define business requirements
• Evaluate the technical fit of potential options
• Assess vendor viability
• Evaluate functional fit via a scripted demo process
• Develop a business case
• Negotiate with vendors
• Create a realistic implementation plan

In addition to the above, there are five factors that are somewhat unique to CRM software evaluation processes:

1. Evaluate how you might extend CRM to ERP. It’s short-sighted to choose a CRM system without defining a plan for integrating with other key functions such as order entry, product configuration, inventory management, and financials. If your longer-term plan is to implement other enterprise software modules, it is important to have a sense of which will be the right fit beyond CRM so you don’t back yourself into a corner later on.
2. Clearly understand your business and technical integration needs. CRM can be powerful software with tangible benefits, but some of these benefits may be undermined if processes and data are not integrated with other enterprise modules. For example, sales reps need to see inventory levels and order status and to determine available-to-promise dates based on available capacity and production plans. Another example is the finance department, which may want to see how product costs compare with sales pricing models. Needs such as these may be met via integration with additional enterprise software modules or business intelligence and reporting solutions.
3. Don’t forget that it’s about the people, not the technology. The beauty (and the curse) of CRM is that there are plenty of viable options with sophisticated functionality in the marketplace. Whether it’s software as a service (SaaS) deployment models, cool bells and whistles, or other sexy functionality, it can be easy to get caught up in the technology. However, it’s important to remember that as with any enterprise solution, CRM is more about people and processes than the technology itself. It is key to find and implement a CRM solution that is a good fit for your business, processes, and organization.
4. Understand the tradeoffs of SaaS vs. on premise CRM delivery models. Before jumping straight on the SaaS bandwagon, it is important to carefully consider the pros, cons, and tradeoffs of different deployment models. As we outlined in our 2010 ERP Report, SaaS implementations are typically implemented in less time and at a lower initial cost, but average business benefits realized and likelihood of going over budget are also higher. It is important to determine which CRM delivery option is best for your business.
5. Set realistic expectations for implementation cost and duration. One of the most common reasons for CRM failure is not allocating sufficient time and resources to the implementation. Whether you are implementing CRM to 1 or 100 users, there are key project activities that need to be factored into your implementation plan. Business process design, training, and conference room pilots are just a few examples of key implementation activities that need to be included when budgeting the time and resources required.

These key steps will ensure you begin on the right path toward a successful CRM evaluation and selection. Read more about actual CRM and other enterprise software results from over 1,600 organizations in our 2010 ERP Report.

Companies typically spend 15-20% of their software license fees on maintenance and support each year. In fact, according to a recent survey on our web-site, 69% of companies spend at least 15% per year for ERP support and maintenance (view the current ERP poll results). On the other hand, 8% indicate that they are no longer paying support for their systems. Given the 10- to 15-year average lifespan of ERP investments, license costs are often eclipsed by maintenance costs in the long-term. So it’s understandable that companies would want to reduce these costs.

However, there are some risks to consider before canceling your ERP software maintenance contract. Here are three reasons to think carefully before canceling your ERP maintenance contract:

1. Inability to upgrade your software. Once you cancel your maintenance contract, your organization will generally be ineligible for automatic upgrades. ERP vendors spend significant sums of money on R&D to improve their software functionality incorporating best practices from their client bases, so there may be opportunity costs and lost business benefits associated with canceling your maintenance.
2. Business operations become frozen in time. Because upgrades and support stop when the maintenance contract is canceled, it becomes very unlikely that you will change the system to keep up with the evolution of your organization. As a result, your business needs are likely to become misaligned with the functionality of the software. This misalignment may accelerate the need to completely replace your ERP system, which can be more costly than the savings from reducing annual maintenance.
3. Proliferation of workarounds outside the system. Because of the first two reasons, users are more likely to become frustrated with the system and start adopting their own business processes and workarounds outside the ERP system. This will generally decrease user satisfaction with the system and undermine business benefits. Companies generally make significant investments in enterprise software implementations to take steps forward, so regressing backwards can damage your overall return on investment.

However, this is not to say that companies should blindly pay high costs for annual maintenance. These annual contracts are a high-profit area for ERP vendors, so these costs and terms should be negotiated accordingly. In addition, it is important to negotiate service level agreements (SLAs) to hold your ERP vendor accountable for the duration of the contract. Both negotiation tactics should be incorporated into your ERP selection process.

What do you think? Take one of our weekly polls on the topic or view the results regarding ERP software maintenance.
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However, this person had an interesting counter-point. Despite the potential risks and downsides of customization, there are upsides as well. Companies with true competitive advantages in their industry are likely to have one or more key business functions that are not addressed by leading ERP software vendors. The added costs may be immaterial compared to the potential upside, especially for a larger high-volume company. Therefore, customization can become somewhat of a necessary evil.

However, there are a few caveats to this perspective. First, as with any indulgence, customization can be acceptable only in moderation. ERP implementation failures often over-customize to accommodate an endless array of user requests, so it is important to have strong project governance and controls in place to ensure you are only customizing functionality that is absolutely necessary.

Second, don’t let customization be an excuse to choose the wrong software. An effective ERP selection process should weed out the software solutions that are not a good fit for your operational needs, which will minimize your need to customize the software.

Finally, customization should not be a surrogate for leveraging the best-practices embedded in your ERP solution. If the functionality in question is not a core competency or competitive differentiator (think G/L or procurement), then carefully consider the processes that are built into the software. It may be difficult to change your business to fit the software, but it may be the lesser of two evils in such instances.

Just how does customization affect ERP implementation results, such as cost, duration, and overall satisfaction? Read our 2010 ERP Report to learn more about the results of over 1,000 organizations across the globe.

While we aggressively monitor ERP benefits with our clients, we are now opening this same question up for websites visitors to weigh in on the subject.  Take a moment to answer our weekly ERP poll and then check back to see how your response aligns with that of the average visitor.

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Oracle’s product suite, which includes eBusiness, JD Edwards, and Peoplesoft, is number two in the ERP market in terms of market share and install base.  In addition to our client experience with Oracle, we also recently compared the product to other leading enterprise software packages as part of our 2008 benchmark study of over 1,300 ERP implementations across the globe.  More recent data from our 2010 ERP Report will be made available in the coming weeks.

In the meantime, some of the findings we discovered from our experience and research include:

• Oracle is installed by 28% of organizations that use an ERP software solution.
• Its product line is evaluated, selected, and implemented in an average of 18.6 months, below the overall average of 20 months for other solutions.
• Oracle implementations have the highest level of predictability of all ERP software vendors in our study.
• The average initial cost to implement Oracle is approximately 25% less than SAP, its primary competitor in the marketplace.  Expressed as a percentage of annual revenue, Oracle’s total cost of ownership is nearly 50% less than SAP.
• Oracle software solutions tied for first in executive satisfaction (76%).

However, in addition to the above strengths, there are two key tradeoffs to consider when evaluating Oracle as a potential option:

• Oracle products are implemented with a total cost of ownership of $12.6 million or 10.6% of annual revenue, both of which are significantly higher than the overall averages of $8.5 million and 9%.
• eBusiness Suite, JD Edwards, and Peoplesoft as an aggregate had the lowest level of employee satisfaction of solutions in our study.

The point is not to suggest that Oracle’s products are better or inferior to other enterprise software solutions, but rather to provide one data point as part of a robust ERP software selection process.  While this provides useful information on the surface, it is also important to consider business requirements that are unique to your business, understand the key functional and technical differentiators, and assess the overall fit with your organizational and operational needs.

Learn more about how Oracle stacks up to other leading ERP software solutions by viewing the below video presentation.

Among companies that have recently implemented enterprise software initiatives, we found that an underwhelming number are at least somewhat satisfied with the end result. According to the study, 32% of executives are dissatisfied with their ERP software. Perhaps not surprisingly, end-users are even more dissatisfied (39%) with their enterprise software solutions.

Because companies invest such large amounts of time and money in their ERP software (as outlined in more detail in the report), it is surprising that there is only a 2 out of 3 chance that they’ll like what they end up with. This data underscores some of the key contributors to ERP software satisfaction:

1. Companies too often pick the wrong software. Many companies in the study underestimate the need for a thorough ERP software selection process. As a result, organizations often choose and implement solutions that are not good fits for their unique business requirements. It is simply not possible to be satisfied with software that doesn’t fit your needs.
2. Executive expectations are often misaligned with ERP implementations. The fact that executives are too often dissatisfied with their enterprise software investments, even though they are typically infrequent users of the system, suggests that their needs are not being met in providing more visibility and transparency to their organizations. Reporting and business intelligence, which are usually afterthoughts delayed until the last weeks of an implementation, often determine executive satisfaction.
3. ERP implementations too often go over budget and miss milestones. When an executive sees that his or her organization has just sunk an average of 6.9% of annual revenue in their ERP software, it better be worth it. Implementations generally take longer and cost more than expected, and executives will only be satisfied when they see clear and tangible paybacks on those investments.
4. Employees are often left behind. Best-in-class enterprise software initiatives include effective organizational change management activities to ensure employees are comfortable, efficient, and productive in the new system. However, companies that neglect this important activity are more likely to have dissatisfied employees. This issue is even more pronounced in today’s climate of layoffs, uncertainty, and declining employee morale.

Companies that effectively address the above areas are more likely to complete their ERP implementations on time and under budget and, more importantly, are also more likely to have satisfied executives and end-users. Read more detail in our 2010 ERP Report.

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While the day of go-live may be a huge step in a long battle, it is by no means a final step. It seems that many project teams use the go-live date as their single milestone and key measurement of success. This is a mistake, because going live is just one piece of the distribution software puzzle.

While a solid project plan and good end-user training schedule can mitigate many of the risks that organizations face at the time of cutover, there must be additional reinforcement after the distribution software is in use. An example of this is the “superuser”.

The superuser should be leveraged to provide general support and answer process and system related questions. Immediately after go-live, about 80% of user issues are related to lack of understanding, so a superuser should be the first level of support. Utilizing an organization’s superuser will help limit frustration and increase initial project success.

The need for superusers does not disappear once the organization passes through the initial post go-live period. Employees change roles and turnover occurs, therefore, new employees and reassigned employees will need training. The superuser is a perfect candidate for these ongoing training needs.

Finally, understand that functional use at go-live is only a start to obtaining full ROI. Once the team is comfortable with the new distribution software, it is time to further investigate functional usage and training. Whether you continue to train your superuser or the entire team on more in-depth functionality, ongoing training is a must. Ongoing training and increased functionality usage will go a long way in making sure your organization obtains the maximum benefits from your purchase.

By clearly defining your go-live and on-going support processes as part of your overall distribution software project, you will better leverage your software technology to realize the full scope of business benefits and ROI.

SAP, which leads the ERP market in terms of market share and install base, is typically considered one of the three leading ERP solutions.  In addition to our client experience with SAP, we also recently compared the product to other leading enterprise software packages as part of our 2008 benchmark study of over 1,300 ERP implementations across the globe.  More recent data from our 2010 ERP Report will be made available in the coming weeks.

In the meantime, some of the findings we discovered from our experience and research with SAP include:

• SAP is installed by 35% of organizations that use an ERP software solution.
• Its product line is evaluated, selected, and implemented in an average of just under 20 months; very close to the average of other solutions.
• SAP implementations have the lowest level of business risk expressed in terms of companies that experience a material operational disruption at go-live.
• The software has the highest levels of satisfaction and business benefits realized compared to other ERP software vendors.

However, in addition to the above strengths, there are two key tradeoffs to consider when evaluating SAP as a potential option:

• SAP implementation durations have the highest degree of variability of all the solutions in our study.
• The total cost of ownership averages $16.8 million for the initial investment, or 18% of the implementing company’s annual revenue.  Both numbers are significantly higher than other solutions.

The point is not to suggest that SAP is better or inferior to other enterprise software solutions, but rather to provide one data point as part of a robust ERP software selection process.  While this provides useful information on the surface, it is also important to consider business requirements that are unique to your business, understand the key functional and technical differentiators, and assess the overall fit with your organizational and operational needs.

Learn more about how SAP stacks up to other leading ERP software solutions by viewing the below video presentation.

However, what do these vendor implementation contracts really get you? That’s where it gets a little tricky.

First of all, it is helpful to understand what is meant by “implementation.” Installing and configuring software is very different than fully implementing ERP software in a way that is going to meet your business needs. In order to manage their own costs and risk, software vendors will typically include technical implementation basics in their scopes of work but often exclude other key activities that will result in problems if not addressed.

Below are ten key gaps we watch for when helping clients negotiate their ERP software vendor implementation contracts:

1. Project management. Software vendors and VARs will typically provide a technical lead or project manager, but it is the client’s responsibility to manage the overall project. Activities such as budget and scope management, risk mitigation, and vendor oversight are not generally handled by the vendor.
2. Functional scope. Most fixed-bid contracts are very clear about what is and, more importantly, what is not in scope. It is important to have a clear understanding of which of your business requirements are going to be addressed in their scope as opposed to modules that have been excluded from scope. In addition, vendors often include a clause that states the customer will not make changes to a pre-configured solution, which may limit your flexibility to change the software as needed.
3. Business process and workflow definition. Software vendors will generally configure and, if necessary, customize the software as required. However, it is up to the customer to define the business processes and workflows so the vendor’s technical resources can configure and customize the software accordingly. Although not included in a vendor’s scope, this can be a complex and time-consuming internal process if not managed appropriately.
4. Customization. Most fixed-bid contracts assume that the customer will use the software 100% as-is. Customization is generally not included in scope and will result in additional costs.
5. Data migration. It is typically the customer’s responsibility to clean up data, define the mapping from the old to the new system, and migrate the data. We find this to be an area where clients create delays by delaying data migration until late in the project.
6. Training. Vendor contracts generally call for the vendor to train the customer’s trainers using their boilerplate training materials. it is the customer’s responsibility to tailor training to meet the company’s specific needs, workflows, and roles and responsibilities. It is also usually the customer’s responsibility to train end-users and employees on the new system.
7. Organizational change management and communications. This area is omitted from vendor contracts an overwhelming majority of the time. In order for an ERP implementation to be successful, key organizational change activities such as departmental process change discussions, process gap analysis, organizational and job design, and security/profile definition all need to be addressed.
8. Forms and reports. The vendor will generally provide a wide array of forms and reports that can be used out-of-the-box. However, it is up to the customer to define which of them will be used and modify them if needed to meet their business intelligence needs.
9. Internal controls and Sarbanes-Oxley (SOX) compliance. Vendors generally do not address any required internal controls that may be unique to your business. Although some ERP solutions protectively build SOX and regulatory controls into their software, it is up to your internal audit team to ensure that the software will address internal controls as designed.
10. ERP benefits realization. Go-live is not the finish line for a successful ERP implementation. It is often the adjustments and improvements made after go-live that ultimately determine how beneficial the enterprise software will be to your organization. Post go-live audits, process improvements, refresher training, and configuration changes are important steps to optimize your return on investment.

Although the above activities are critical to ERP success, they are generally not included in an enterprise software vendor’s implementation scope. This is not necessarily a bad thing. However, it is important to factor these activities into your overall implementation duration and budget to ensure that your ERP project is successful.

Not sure if your ERP software vendor’s implementation proposal addresses the critical needs of your implementation? Contact one of our independent ERP experts to get a second opinion.

We continue this research, by asking website visitors to quantify their estimated or actual payback period for enterprise software investments. Take a moment to vote and then check back to review the poll’s overall results. Responses to this poll and other recent polls are available in our resource center.

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A coordinated global organizational change management initiative can help alleviate some of these risks. We have helped manage organizational change for enterprise software initiatives for numerous multi-national companies such as Samsonite, Kodak, and Nufarm. Based on this experience, below are five tips to address the organizational complexities of a global ERP implementation:

1. Business process standardization. Companies with global offices, particularly if those locations were acquired from another company, often have very non-standardized business processes. A global enterprise software implementation provides an opportunity to standardize processes across locations, but it can be very challenging to make that change happen. Organizational change management is crucial to overcoming such challenges.
2. Understanding of local needs. Standardization is important to optimize ERP benefits and achieve a positive return on investment. On the other hand, it is also important to understand local needs to ensure that the standardized operational model of the new system will accommodate local needs. Even if every local need or want is not addressed via the new system, listening to local needs goes a long way toward securing employee buy-in and support for the new system across the globe.
3. Localized delivery of employee communication and training. Not everyone speaks English or the preferred language of your corporate headquarters, so it is important to communicate and train in the language most appropriate for each location. We have worked with many multi-national companies where management and key team members in overseas locations speak perfect English, but it is not necessarily the case for lower-level employees. New ERP software takes enough time to learn without language barriers, so translation of key messages and training will typically pay dividends in the long run.
4. Rely on your change agents. Each major office should have a local representative that acts as a change agent for the project team. These change agents typically represent the local interests of their offices, validate how standardized business processes will work with their location, and communicate key process and organizational changes to their respective stakeholders. This employee representation is key to a successful implementation.
5. Leverage performance measures. Performance measures transcend language and culture in a way that everyone can understand. They should be used to quantify the results you expect to achieve from your ERP software investment and how each local office is expected to contribute to the improvements. These measures become important in identifying opportunities to improve results after go-live.

These are just a few of the many things to keep in mind when managing change in a multi-national environment. Visit our resource center to view our detailed presentation about how to handle organizational change management for global ERP software implementations.

In addition to comparing more recent data with metrics from our historic research, the current study examined areas that had not been analyzed in previous reports. For example, this year’s study captures more information about delivery models (e.g. on-premise vs. Software as a Service), more detail surrounding benefits realized, and more detailed budgetary information.

The 2010 ERP Report Highlights Five Key Findings from the Four-Year Study

1. ERP implementations take longer than expected: The average total implementation time is 18.4 months.
2. Total cost of ownership is higher than expected: $6.2 million, or 6.9% of annual revenue.
3. Most enterprise software implementations under-deliver business benefits: Only 59% realize at least half of the expected benefits.
4. Software as a Service (SaaS) implementations take less time than on-premise ERP, but deliver less benefits: 6.2% vs. 6.9% cost as a percentage of sales, and nearly 50% less likely to deliver expected business benefits.
5. Companies do not effectively manage the organizational changes of ERP: Most implementing organizations are grappling with significant organizational changes in parallel with ERP initiatives, but have a poor ability to manage this change.

While this report is the first in a series with additional detail to be published throughout 2010, it provides a summary with some interesting lessons of what to expect from enterprise software initiatives. For example, here are a few lessons from the data:

• It is no coincidence that implementation durations and budgets are declining in tandem with benefits realized. Many companies are short-cutting project activities that are critical to implementation success.
• Implementation durations are fairly stable and predictable throughout the 4-year study. While total cost of ownership decreased fairly significantly last year, the average implementation duration only decreased a small amount.
• Companies still have unrealistic expectations. SaaS, implementation accelerators, pre-configured solutions, and out-of-the-box implementations may be touted by software vendors as the silver bullet to an easy implementation, but companies are still more likely to go over budget and take longer than expected.
• Finally, and perhaps most importantly, enterprise software initiatives are not easy. Given the economic uncertainty and turbulence of the past year, companies are still finding it difficult to deliver a tangible ROI. Organizations that do deliver measurable business value are doing it right the first time and avoiding seemingly easier shortcuts.

We are glad to see ERP implementation durations and budgets on the decline. However, it is discouraging to see companies struggling more to achieve business benefits. Let’s hope that 2010 is the year that implementing organizations find a way to get the best of both worlds.

Want to read more from our study? Read the first installment of our 2010 ERP Report here.

So what is the best way to find the right supply chain management software for your organization? Below are four areas to consider when evaluating potential supply chain management or enterprise software solutions:

1. Robust demand planning and forecasting. You may have the most effective procurement and transportation processes in the world, but it won’t matter if you aren’t forecasting the right volume and timing for the product you are purchasing. Not all ERP or enterprise software solutions can handle complex planning and forecasting without some type of third-party bolt-on, so it is important to carefully evaluate the planning capabilities of your prospective software vendors.
2. Streamlined procurement processes. Most of our clients are working with higher volumes of contract manufacturers outside of their home country, which adds to the potential complexity and transparency of procurements processes. When evaluating potential software vendors, it is important to understand the ability to automatically create purchase orders based on projections, streamline the transmittal of POs to vendors, and access the status of purchase orders in real-time.
3. Integrated transportation management and logistics. With the continuing trend toward outsourcing manufacturing to overseas countries, it can be difficult to manage lead times and keep tabs on shipments. Whether your products are in containers on the water, in transit via a domestic freight carrier, or still sitting on the dock at your vendor’s warehouse; it is important to know the status of the products to manage your supply chain effectively.
4. Advanced pick, pack, and ship warehouse management system (WMS) functionality. Once the products are in your warehouse, it is important to have efficient processes to pick, pack, and ship orders to your customers. Different software solutions handle inventory management and order processing functions very differently, so it is important to find the right fit for your warehouse management needs.

These four areas tend to be key competitive advantages for successful companies and differentiators between potential supply chain management solutions. It is important to evaluate each of these areas as part of your software selection process. Learn more about potential supply chain management software options by viewing our lists of enterprise software solutions.

This week’s poll takes the topic of annual maintenance a step further by asking for your feedback.  How much do you currently spend on your ERP software’s annual maintenance?

Take the poll and then check back to see how your answer compares to the rest of our website visitors.  Complete results of our ERP polls can be found in the resource center of our website.

Note: There is a poll embedded within this post, please visit the site to participate in this post's poll.

Our experience helping clients clean up projects they or their software vendors have failed to manage, along with our expert witness support to ERP lawsuits, has taught us quite a bit about the reasons for ERP failure. Below are five trends we see in most troubled enterprise software implementations:

1. Lack of software fit. The first stumbling block for many failed implementations is a severe misalignment between software functionality and business needs. There are hundreds of enterprise software options in the marketplace, so it is important to navigate carefully and find the product with the right fit. Too many failed implementations neglected to engage in an effective ERP software selection process.
2. Unrealistic implementation expectations. Enterprise software sales reps often understate the level of resources required to make the implementation successful, so many companies fail to budget adequate time, money, resources, and external consulting support to make the project successful. In addition, failed implementations often neglect to include key activities in their implementation project plan, such as organizational change management, business process and workflow definition, and thorough conference room pilots.
3. Lack of executive buy-in and support. Executive buy-in involves more than signing the checks and delegating the implementation to a project team. It involves defining clear implementation objectives, establishing project governance, and making tough decisions when needed. This is arguably the most important, because it directly affects the other four failure points.
4. Propensity to customize software rather than leverage standard functionality. Nearly every failed implementation I have seen suffers from this problem, and it is often because of a failure to select the right software in the first place (see #1 above). The more you customize the software, the longer it’s going to take to implement, the more it’s going to cost, and the more risk you introduce into the project. It’s typically not realistic to completely abstain from customization, but changes to the software should be devoted only to key areas of competitive advantage or differentiators. If you aren’t able to limit customization to those areas, then you should either find another ERP software solution or back up and rethink your strategy.
5. Lack of ERP software implementation expertise. Implementations are tough and a team with tested battle wounds is going to dramatically increase your likelihood of success. As we often tell our clients, the fastest and cheapest way to implement enterprise software is to do it right the first time. Failed implementations are more likely to have inexperienced team members who don’t know enough to know what they don’t know.

If you see one or more of these patterns emerging during your implementation, then you are putting your organization at severe risk. On the other hand, If your implementation project team is able to avoid these five common pitfalls, you will be well on your way to a successful implementation.

How does your current or previous ERP implementations rate against these key failure points? Take one of our brief ERP diagnostics and surveys to benchmark your implementation to other organizations across the globe.

However, as with any enterprise software option, SaaS has its pros, cons, and tradeoffs. While software as a service vendors would have you believe that their offerings are superior to traditional ERP in all instances, there are also distinct disadvantages and challenges to consider.

For example, choosing between SaaS and traditional ERP solutions often depends on the following variables:

• Complexity of your business
• Size of company and number of employees
• Stability of your business model and processes
• Your business growth level
• Scope of your enterprise software needs
• Need or desire for flexibility to change software to accommodate your business needs
• Level of integration required with third-party enterprise software applications
• Sophistication of your internal IT skills and infrastructure
• Your need or want to control your IT systems in-house
• Sensitivity to initial capital outlays vs. ongoing operational costs

We often find that SaaS solutions are very viable for our smaller to mid-size clients (SMBs). On the other hand, our larger clients generally find that SaaS does not adequately accommodate their enterprise software needs. Moreover, the SaaS delivery model is often more suited for vanilla and narrowly defined business functions, such as customer relationship management (CRM), human resource management (HRM), or supply chain management (SCM); broader or more differentiated functions can be more difficult to accommodate.

Choosing between SaaS and traditional ERP isn’t always cut and dry. Many of the traditional software vendors are providing hybrid options that combine the best of both worlds by offering customers a single instance with the flexibility of traditional ERP, but hosting those solutions externally to accommodate the desire to outsource their ERP infrastructure.

Finally, any ERP implementation is challenging.  Whether it is SaaS, on premise, or something in between, implementing the software is the easy part.  The hard part is defining your new business processes, ensuring the system is aligned with your operations, training employees, and defining roles and responsibilities in the new system.  Even the simplest technology won’t eliminate the need to address these areas.

In short, software as a service can provide a very compelling solution for many organizations. In fact, our 2010 ERP study (to be published later this month) shows that 13% of companies under $100M in revenue are choosing SaaS options, which is a marked increase over previous years.

However, SaaS or cloud ERP software isn’t for everyone. It is important to carefully consider your spectrum of ERP software options, as there are countless possibilities. View our YouTube presentation below to better understand the tradeoffs of SaaS vs. on premise ERP software solutions.

What are your thoughts?  Give us your vote and then check back to see how the results shape up.  Complete results of our ERP polls can be found in the resource center of our website.

There are five main reasons why Panorama has been able to continue its aggressive growth in a weak economy:

1. Independence. Whether its helping select the right ERP software vendor or implementing enterprise technologies, companies are finding value in our objectivity and technology-agnostic approach.
2. Client aversion to business risk and cost. Our clients realize that leveraging our expert ERP software selection, implementation, and organizational change management services reduces cost and risk, both in the short-term and long-term.
3. We are the best in the industry. Companies are being more selective with their consultants by demanding to work with firms with strong expertise, research, and methodologies to make their ERP implementations successful. Panorama is simply the best in the industry at providing these values.
4. Strong client references. As demonstrated in our recent press release about one of our successful ERP projects, our clients are the strongest proponents of the value we bring.
5. Focus on organizational change and benefits realization. Companies are no longer looking to simply investing in technology; they are looking for real and measurable impacts on their operations and people. Panorama’s approach and value proposition helps companies do just that.

Because of these five factors, we are projecting an even stronger 2010. We will continue to grow, hire the best people in the ERP industry, and add measurable value to ERP engagements across the globe. Most importantly, we will continue to make our clients increasingly successful with their software selection and ERP implementation initiatives.

Click her for additional information on our 2009 results.

Enterprise software for the small businesses is evolving and more software options are becoming available.  This week’s poll asks which ERP vendor provides the best small business enterprise software?

This Week’s ERP Software Poll