“Using our pre-configured industry best practices and off-the-shelf software, you can implement our software in no time,” says the confident ERP sales rep. “Our ERP software is hosted in the cloud, meaning that you don’t need to spend time defining business processes or workflows. Better yet, don’t worry about your business processes – our software will tell you how to run your business, meaning you can implement our software quickly.” Or how about this: “Some of our customers have implemented our software in less than 90 days.”
Does this refrain and sales hype remind you of what you heard during your ERP evaluation and selection process? Unfortunately, we’ve encountered more than our share of these statements throughout our years of experience helping clients select their ERP software solutions. However, and as we’ve found via our ERP implementation and expert witness experience, one of the most common root causes of ERP failure is misaligned expectations at the start of an implementation. When an executive team has unrealistic expectations, it often acts as the first domino to fall during the slow, painful string of events that lead to failure. In addition, these risks are not relevant just to SAP, Oracle, Microsoft Dynamics, or other Tier I implementations – they are also important if you’re implementing Epicor, Infor, or any other ERP system for that matter.
Let’s look at a play-by-play from a recent ERP lawsuit, where legal counsel from one of the parties in the case hired us to serve as an independent expert witness. In this particular failure, the large, multi-billion dollar organization was sold a bill of goods that included ERP software licenses and an implementation across more than 20 different sites. Th party was told by their ERP vendor and systems integrator that by using industry pre-configurations, they could easily get their entire order to cash and procure to pay operations running on the new software in 18 months.
Side note: without knowing anything about the company other than what I shared above, I can tell you that 18 months is extremely aggressive, unlikely and fraught with risk, so it was not appropriate for any systems integrator to be suggesting otherwise. However, telling the client what they wanted to hear helped the sales rep to close the deal.
So how did their implementation pan out? As the project got underway, the implementing organization and its systems integrator quickly found that not 100-percent of its business requirements were addressed by this “off-the-shelf” solution. In fact, not only did a majority of the business processes and needs require re-configuration of the pre-configuration, but the system itself also required customization, two activities that were not accounted for in the original project plan. So less than a month or two into the project, it was already badly behind schedule.
Next, the systems integrator didn’t realize how significant the organizational change management needs were. It was a multi-site, multi-national organization with different operations, cultures, and business processes, so organizational change management would have been essential to the success of the project. However, the system integrator simply planned for a few employee newsletters and some end-user training a few weeks before each go live, which was woefully inadequate for a company of that size and magnitude.
As the project wore on, milestones and expectations were missed, leading the executive steering committee to fire multiple project managers and team members. They put more pressure on the new team to get it done on time and they couldn’t succeed either. In the end, the company was only able to get one single pilot location live in close to three years, or 50-percent longer than expected, and that was without touching any of the other 20 or so locations. The business processes were so broken and employees were so poorly prepared for the rollout that the organization eventually abandoned the implementation and reverted back to its legacy system.
The lesson here is that ERP failures are typically caused by a number of factors and they usually don’t happen overnight. However, unrealistic implementation expectations lead to a host of other problems. For example, our ERP research shows that the average implementation for mid-size organizations is 14 months, but we typically see ERP vendors and system integrators suggest 9 or even six months. Objective and independent data points to longer implementation times, but overly zealous sales reps will typically set duration expectations closer to half of what they actually end up taking.
So how can companies determine the most appropriate duration for their ERP implementations? Here are three tips to help develop a realistic estimate for your organization:
1. Benchmark to other organizations like yours. Sales reps are notorious for giving anecdotal examples of the one in a hundred customers that implement in a short period of time, but those examples are rarely relevant to your organization. More importantly, this approach only provides one data point out of thousands of ERP implementations each year, hardly the type of statistically significant data you would want to bet your entire ERP investment (and career) on. When we help our clients develop implementation plans, we use raw data from our benchmarks and research of thousands of implementations across the globe as a starting point. So when we work with a $1 billion multi-national manufacturer of consumer products, we’re looking at data from similar companies rather than providing anecdotal evidence.
2. Understand the variables that drive ERP implementation durations up or down. Even if you find statistically relevant data pertaining to industries or companies like yours, you still have to understand the variables that increase or decrease implementation durations. And by the way, here’s a hint: actual implementation durations have very little to do with pre-configurations, best practices, SaaS vs. on-premise, or anything else to do with the software itself. Our consulting teams use a proprietary implementation estimation model based on a number of criteria related to your business, such as supply chain complexity, level of standardization, use of organizational change management, and several other variables to develop realistic implementation durations. We also use this same model to develop an implementation budget that is more realistic than what most ERP vendors, consultants, and system integrators provide.
3. Develop an ERP implementation project plan. This may sound like a no-brainer, but most system integrators and consultants estimate implementation durations without a project plan. And of the ones that do have a project plan, they are incomplete , technically-focused project plans that do not take into account critical activities like organizational change management, business process design, multiple iterations of conference room pilots, and the many other non-software activities that a software vendor may not care about, but you as the implementing organization do. Without a realistic and complete implementation project plan in place, it is impossible to accurately predict how long your ERP implementation will take.
These three tips will help get your implementation planning activities on the right foot. Realistic expectations grounded in a complete implementation plan based on industry benchmarks, but tailored to fit your unique situation, will ensure that you don’t cut corners trying to meet unattainable implementation expectations.