Purchasing and successfully implementing an ERP system is one of the costliest, labour intensive, stressful and business critical undertakings any business can embark upon.
There are many ways that this process can be troublesome, costly and frustrating, but by trying to adhere to some ground rules the whole process can be pushed in the general direction of success.
The following steps have been the product of years of learning by different customer approaches and implementation methodologies and should be considered before, during and after any ERP implementation. These steps do not purport to be a definitive list or the exact recipe for success, but by reading and acting on only a few of the suggestions here will ensure your implementation goes smoother than it otherwise would have done.
1. Understand your incumbent system
The decision to purchase a new ERP system has been made, but why? There are many reasons a new ERP system will be sourced, but it is important to understand that the implementation of a new ERP system will not simply create a return on investment or solve the issues of the business. These come from the process improvements; the ERP system is a tool and improving the way a business uses the tool can reap benefits.
The process of implementation does not start with the initial inviting of suppliers to fill invitations to tender, it is when the company define the goals that the new ERP system will set out to achieve. It is the goals that are critical, and should be referred back to during and after the implementation process to ensure focus is retained. If there is no clear goal, the process of selecting a product and vendor will be a futile process, whilst the overall situation may have improved this will bear no resemblance to the investment of time and money made, and in many cases the business would have been better off not changing.
Setting and defining these goals can be driven by the current system. The business may have outgrown the system, or the system may be non-compliant or non-supported, but whatever the reasons the system and the processes inside and outside of the system must be understood. Many businesses want to see X% improvement in Production efficiency, Y% reduction in stock holding or a Z% customer service level, but without understanding the processes behind the current figures there is little benefit in moving forward with these targets because the new system will be implemented using the old processes and produce the same end results.
Without understanding what is causing the current figures, improvements cannot be made. Additionally these figures need to be recorded over a period of time in the old system and then compared to a similar timescale in the new system after a period of stabilisation to try and prove any improvements; many businesses never record these figures and can never go back and justify an actual improvement even if one exists.
The success of your future implementation lies in the process and data of your current system. Study your current system at length and learn from it to take forward the elements you do well, change the ones you do not do well and enable you to statistically prove the success of the new system compared to the old one.
2. Homework & Collaboration
Once a business has come up with clear defined goals that the new ERP system must achieve and defined some tangible metrics to judge success then the next step is to find the right product and the right vendor.
There may be industry verticals supplying specific software to meet the needs of your business, or a tailorable ERP system may meet the needs of the business, but the key is to investigate, find out what your competitors, vendors and customers are using. Many businesses send out invitation to tenders listing hundreds of questions filled in by potential vendors based upon an assumed set of answers to open questions. Whilst these may assist in narrowing the choice down, the choice of software alone cannot be based upon these.
It maybe that the software choice can be narrowed down, if it cannot get businesses in to present the benefits of the software they supply. Once you can decide on the software to meet the needs of the business you need to choose the correct vendor, not simply the vendor who helped you define the software choice.
Does the vendor have the ability to transform the business to help achieve the set goals? If they cannot the likelihood is they are not the correct vendor. However there are other methods that can be employed to judge the suitability of the vendor. References must be taken, preferably with site visits and face to face contact. Can the customers acting on behalf of the vendor stand in front of you and tell you why you should choose the product and the vendor?
This endorsement will show how the vendor and customer act in a relationship, and this is a key concept to understand if you wish to purchase from the vendor, because if you do you will soon be in the same position as the reference extolling the virtues of the supplier. Ask about the implementation methodologies; what standards are used and are these industry recognised, proven and successful in the field delivering tangible results?
Any vendor seeking to develop a long standing successful relationship with you as a customer must be able to assist you in reaching your aims, and will be able to prove they have done this in the past and have the tools and resources in place to deliver a successful project.
If you cannot trust or work with the vendor then the project is very unlikely to be successful. Therefore choose the vendor very carefully.
3. Budget Control
To be able to control a budget you need as a business to identify the real costs of ERP. These costs can include hardware, training, organisational change management, developments, staff cover for project members and the software. The identification of a clearly defined budget scope is critical and difficult. The ERP supplier can provide a scope of services and a software and hardware budget, but this is not the entire budget. The first question to clarify is what is “not” included in the budget. This can traditionally be data migration, modification work and attendance contingency. These elements will be unknown at the start of the project, but should be estimated because they are critical to avoid significant budget creep.
The non-budgeted elements are difficult to define because the breath of these areas vary greatly project to project and business to business. However it can be said that almost all projects involve data migration and every project requires modification even if it is to the output documentation.
Additionally there can be third party software costs, or non-related ERP software costs, or freelance consultant costs. All of these need to be estimated and entered into the control Budget Document.
The Budget Document is an evolving document as the project progresses and the estimates are known in greater detail. Once the business has a budget, it needs to control it.
This requires constant monitoring and change control where additional work is required. It is critical to establish Project milestones, key sign off points and compare the budget at each stage and more frequently if possible, to control the budget. Active management of the budget is the only way to manage and control overruns and alterations to the project. This will include the auditing of budget expenditure from the software vendor to verify vendor invoices to consultants’ timesheets – one of the more costly elements of the project.
There are many methods to constructing a budget, but it is only as good as the information the business inputs into it, and the subsequent management and tracking of the budget. Ensuring tight control of the budget can be the difference between a successful implementation and one that whilst goes live successfully, does so at a massive overrun in costs.
4. Resources and Team
Implementing an ERP project requires an internal project manager and team. Whilst the majority of businesses try to achieve this by assigning these roles to key members of the business and making them continue to do the day-to-day work that has made them key, it is ultimately a struggle and causes issues with the project and the business.
The most successful implementation projects have at least a 100% dedicated internal project manager to ensure the project is kept on track, on budget and moving in the right direction.
The key members of the team need to take ownership for the project and to cascade this responsibility down through departments. The ownership is achieved through involvement and ensuring all areas of the business contribute to, and feel a part of the project.
The key members are critical. They have to adopt a positive attitude towards the ERP change, resistance is amplified further down the responsibility chain, and if the ERP “Champions” do not believe it will work, why should anyone else?
The key members must be influential, be able to win over resistance and promote the project within the business. To enable this they must be respected or in areas of responsibility. Whilst having the knowledge to understand the daily issues and processes they must also be considered enough to make decisions that are based upon the overall good of the business now and in the future.
The key members and the peripheral members of the team form the departmental spearheads for the ERP project and will drive the success of the project. Without the commitment of this team the project has a much higher failure rate.
All staff involved in the ERP project are a resource the business has direct control over. Priorities can be set and goals and milestones achieved. However without the backing at management and board level the project will drift and the team will concentrate on the daily workload and general work responsibilities rather than the requirements of the project.
The software partner will also provide consultants to guide the business through the implementation. This is one of the largest costs of the project and these also should be considered resources and part of the team.
The consultants can be limited to a single project, but this is expensive, and if instead there are consultants planned to be part of the project it is likely that they are assigned to multiple projects, and it cannot be assumed that they will be available at short notice, these requirements must be planned and controlled.
The consultant is also the initial knowledge holder and making them a part of the team to deliver a successful implementation is critical. The consultants should not be treated as an external isolated resource, they should be considered part of the deliverable team and if the buy-in of the consultants to the success of the project can be established along with the buy-in of the staff then the success of the project as a whole is more likely.
In the next part we'll look at the importance of training, data migration and the ongoing commitment every ERP system required.