Forget About Technology: ERP Systems are All About Business

Purchasing and installing a new ERP software solution is a big investment. ERP systems cost a lot, take a long time to implement, and can be tricky to implement in a way that delivers measurable business value. To add insult to injury, and as outlined in our recent 2011 ERP Report, most implementations also take more time, cost more money, and deliver less return on investment than expected.

The problem experienced by most ERP implementations is that somewhere along the way, the executives in the boardroom got too caught up in the technology. With buzzwords like SaaS, cloud computing, Fusion, SOA, and other techie trends floating around the industry, ERP software can be a CIO’s dream come true and a CFO’s nightmare at the same time.

The dirty little secret of the enterprise software market is the same now as it was 15 years ago when I started in the industry: technology doesn’t matter. Pure blasphemy in some circles? Yes. But is it the painful truth and reality? Absolutely.

Here a few little fun facts to support this claim, most of which you can find in our various industry reports, research, and white papers. First, our experience and research suggests that ERP failures are just as common with all of the leading ERP vendors. So it doesn’t matter whether you’re implementing SAP, Oracle EBS, Microsoft Dynamics, Infor Syteline, or any other ERP solution – you have the like statistical likelihood as failing regardless of which software you implement. The good news is that you also have the same likelihood of succeeding, regardless of the software. The reason for these sobering statistics is simple: it’s not about the technology.

Another interesting fact that supports this thought is that there is a higher correlation between how a company implements the software and success rates than there is with the software being implemented. In other words, you’re better off drawing names out of a hat in your ERP selection process and implementing effectively than you are to choose the ideal software but implement it poorly. By “implementing effectively,” we don’t mean hiring experts that know the software the best. Instead, we mean addressing the business and organizational aspects of your ERP project, such as organizational change management, effective project management, and process design. Again, it has very little to do with the software itself.

So what are the key “business aspects” of an effective ERP implementation? Here are four things to think about during your ERP implementation.

Four Key Business Aspects of an Effective ERP Implementation

Business process design, blueprint, and architecture. Business process design should start well before you start implementing your ERP software. In fact, we often start the business blueprint phase of a project before we have even recommended an ERP solution, because, at the risk of sounding like a broken record, we know that the success of the project will be largely driven by how well we design and structure the business.

Merger and acquisitions. Most of our clients are on an aggressive growth path and expect to engage in merger and acquisition activity in the next 3-5 years. These client executives want their business to have a clear blueprint and structure for future acquisitions to roll into, another reason why the business blueprint and process design stage of an ERP implementation is so important.

Organizational change management. Regardless of how efficient or effective your chosen ERP software may be, it is going to entail fairly massive changes for your employees and other stakeholders. Train them on how to use the system all you want, but you will simply create mass chaos if you do not address the variety of organizational facets that need to be addressed. An effective organizational change management plan should include six key workstreams (learn more about our organizational change management services).

Benefits realization and return on investment. If you’re not implementing a new system to achieve measurable business benefits that are outlined in a business case, then you might as well pack it up and go home. Simply “needing” a new system is woefully inadequate. Instead, successful ERP implementations have clearly quantified and tangible business benefits as part of a comprehensive business case. After all this is a big investment and should be treated just like any other large capital investment. I have never seen a CEO embark on a big acquisition of another company or open another office without first defining the return on investment.

If you have already thought through and addressed these four business aspects of your ERP implementation, then you are probably off to a good start. If not, you may want to address all four immediately, as they will have a bigger impact on the success of your investment than anything else. So forget about user interfaces, architecture, and integration, because at the end of the day, it’s your business that really matters.

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