ERP systems don’t mean much without the right strategic framework. In fact, enterprise software can actually hurt more than help if you haven’t properly defined your overall IT and ERP strategy.
In our experience, organizations jump into purchasing new enterprise software without first ensuring that their decisions are aligned with the overall strategic direction of the company. For example, a company that views IT as a source of competitive advantage for their complex and flexible global operations shouldn’t be seriously considering SaaS ERP systems. Even though on-premise solutions are more likely to be a good fit for these organizations, they often make the misaligned decision to implement a SaaS solution instead. This is a good example of misalignment between corporate strategy and IT initiatives.
Most ERP consultants and vendors know a lot about the specific software that they specialize in, but they are not equipped to provide an objective and technology-agnostic assessment of how an enterprise solution(s) would best support their company’s overall strategy – not the ERP vendors’ strategy. This causes the entire ERP strategy exercise to lead to a challenging, biased, incomplete and misaligned result.
Here are four steps to define your ERP strategy and convert it into action:
1. Define your corporate strategy. First, you need to define the overall strategy to help your team navigate the multitude of enterprise software options. These can range from purchasing a new single system, adopting a best of breed approach or maybe even doing nothing but improve your current processes. You won’t land on the correct result without the right strategy and general direction. Our team at Panorama often uses a strategy articulation map to visually sketch out how corporate goals and objectives translate into specific IT initiatives and decisions.
2. Define your ERP and IT strategy. Once the overall corporate strategy has been clearly defined and documented, you must further define how specific IT initiatives can support that strategy. For example, a few variables that you’ll need to consider include:
- SaaS vs. cloud vs. on premise
- Standardization vs. localization
- Customization of software vs. customization of your business processes
- Centralized vs. decentralized roles and responsibilities
- Single ERP system vs. best of breed
Of course these variables must be defined in the context of your broader corporate strategy. Step #1 must be complete before moving to this stage of the project.
3. Evaluate potential alternatives and options. Once your team has a general sense of the direction to go, it is time to define the most feasible alternatives. Generally, we’ll explore no more than three primary options for our clients. Within each of these alternatives, you’ll want to consider the following:
- The pros and cons of each, since each alternative will have tradeoffs to be considered
- The high-level strategy for implementing those options
- Total cost of ownership and cost-benefit analysis for each
- Analysis of how well the alternative supports broader corporate objectives – or not
At this stage, your team must develop an objective and unbiased view of alternatives. It is important not to rely on consultants, vendors or system integrators with a vested interest in seeing you choose one option over another based on what product(s) they specialize in, as that will only bias your analysis.
4. Define the 3- to 5-year roadmap to implement your IT and ERP strategy. As you complete your analysis, you’ll want to define your team’s recommended plan of attack and implementation roadmap. In our experience, the three alternatives are quickly whittled down to one with the aid of objective and experienced outside support. In addition to the general justification for the recommendation, you’ll also want to lay out how exactly the 3- to 5-year roadmap will look, how much it will cost and what the benefits to the organization will be.
You wouldn’t build a house before having a blueprint. Why would you do that for your ERP project? You must have a plan of attack to ensure a successful ERP implementation.