COMMON ERP SELECTION MISTAKES
Software selection and implementation can be one of the most costly and time consuming projects that your company embarks on. That’s why it’s imperative your ERP selection process is done right. You need to plan for every step of this process and have complete understanding of things like your budget, time required, people involved, and resources required. Failure to evaluate these important factors could mean ditching your final ERP selection and starting the process all over again after just a few years. You need to find a system that’s strong enough to handle your business for many years, while also dynamic enough to grow as your company grows.
It doesn’t matter if you’re a multi-billion dollar organization with locations spread out globally, or if you’re a smaller company with only a handful of employees, your ERP system needs to provide functionality for all of your business processes – from financials and HR to distribution and your supply chain. A good ERP system should streamline all of these processes and more from one single database. But be careful, because many solutions that call themselves ERP, really aren’t.
Since ERP systems entered the marketplace around 1990, there have been myriad software providers. Some create powerful, full-scale ERP systems, but others bill their solution as an ERP when, in reality, they’re only a small part or extension of a full system. For a business going through the ERP selection process, this can make things very complicated. And even when you do find a system with full ERP functionality, it still might not be the right fit for your industry or your company. This is why so many implementations end up being disastrous – because quick and uninformed decisions were made during the selection phase.
How many ERP implementations blow up in failure? Well, in 2001, Robbins-Gioia did a survey of 232 companies in multiple industries about the perceptions of their ERP implementation. What they found was that 51% viewed their implementations as unsuccessful. One decade later, Panorama Consulting Solutions did a similar report. But what they found was that 72% of ERP system implementations fail. So, what happened in 10 years that brought the failure rate from 51% to 72%? This could depend on several factors, but what it really boils down to is the growing need for ERP systems in businesses and a lack of qualified experts helping these companies throughout their selection and implementation processes.
When it comes to ERP selection and implementation, the same mistakes get repeated over and over. This white paper will aid in your ERP selection process, and shed light on some of the fatal mistakes that could undermine not only your final decision, but possibly your entire company. This white paper will walk you through six of the biggest mistakes you can make in your ERP decision process and show you how you can avert them.
DON’T ASSUME IT’S GOING TO BE BUSINESS AS USUAL
No matter what organization or industry you work in, your business processes and environment will change – if not a conscious transformation, then unwilled and unexpected. It’s much better to create your own change in your business, rather than have unexpected change create your business for you. The best time to re-evaluate your business processes is when you’re about to implement a new business system. Especially a system as multifaceted as ERP.
Many businesses get stuck in the “that’s the way we’ve always done it” mind-trap. They refuse to give up their old tactics. This compromises the ability of a new business system to really bolster your company. In reality, businesses should be using their ERP implementation to reassess operating processes, and address how a new system can best work with their needs. In most cases, business software is only effective if it’s backed by a strong business model. Use your ERP selection to learn what is and isn’t working at your company, because it’s much easier to make these changes now than it is when you already have a system in place.
According to the report by Lakelet Advisory Group, the top reason that ERP implementations fail is due to the inability to change processes.
DON’T AVOID PROPER PLANNING
Planning should be one of the most important steps in your ERP selection process. ERP is a very costly investment, and it takes time to implement successfully. Planning properly from the start can ensure that you’re spending less money and time on your project. More importantly, a strong plan will make sure your final ERP selection is the right fit for your business. Some factors to consider in your planning stage include:
- Establishing your budget and your ability to afford the investment. If the investment amount comes out higher than you feel comfortable with, the software provider may offer a Software as a Service (SaaS) solution that allows you to essentially “rent” access to the software in the cloud, usually on a month to month basis, decreasing your need for up-front cash.
- Assigning the selection team and who will be working on this project. Be sure to identify the executive sponsor and all critical stakeholders.
- Classifying the areas of your business you want to improve. Also note areas in which you already do well, so the solution provider can address your most important needs.
- Identifying your staff’s critical business issues and needs. The list doesn’t need to be a 200-page document with 10,000 requirements. Even a checklist can help keep your team focused on solving the problems that are important to you.
- Defining selection criteria (Request for Proposal, or RFP) for the solution and the provider partnership. Criteria such as long-term financial stability, in-depth knowledge of your industry, investment in research and development, implementation process, and technology vision are all important factors to consider.
As part of your planning phase, make sure to develop a timeframe in which you want specific tasks completed. It’s useful to document all of the evaluation activities you plan on completing during this phase, such as discovery sessions, demos, site visits, meetings, and so forth. Then, set a tentative date for the completion of each task. Planning during your ERP selection process is no different than planning for any large decision; you need to establish what your goals are and then lay a blueprint for how each goal is going to get accomplished.
DON’T CHOOSE THE WRONG TECHNOLOGY PARTNER
Would you undergo neurosurgery from a dentist? Of course not. Much like your body, a business is like a living, breathing organism composed of several individual parts that work together. A change of ERP system can be much like neurosurgery, because your ERP is the brain of your organization, managing intelligence over all of the processes that make your business function.
If you have a problem or inefficiency within your company, software can act as the cure. In this sense, a technology partner is much like a doctor. If you choose a technology partner that doesn’t understand your industry, they won’t be able to properly understand what your needs are, and they certainly won’t understand how to fit an ERP system to your business.
You need to ask several questions of your technology partner to make sure you’re getting the treatment you require; questions such as:
- How many of their other customers are in your industry?
- How long has the company been serving industries like yours?
- Who are the key people who will implement your software system and what is their background?
- What are their customers saying about them?
- How many of their customers have had sustaining success with their ERP software after their implementation
Make a list that defines specific attributes that are important to your company and you feel should be represented by your technology partner. This list should highlight values that will illustrate your partner’s competence working with your industry, your company size, your organizational structure, your corporate culture, and so forth.
DON’T UNDERESTIMATE IMPLEMENTATION TIME OR RESOURCES
Most companies will far underestimate the amount of time and resources that are required for implementing a new ERP system. Often, they believe their technology partner can just do the whole thing easily, without much assistance needed on the customer’s end. This is a dangerous misconception, because without the proper planning, your implementation can tie up your processes far longer than is necessary.
In order to estimate the time involved in your implementation there is a simple formula:
Divide the total cost of your ERP software by 100. For instance, if your ERP software costs $25,000, then you can expect to take about 250 man-hours or a little over six weeks to implement; assuming you’re using a certified consultant. If you plan to self-implement, which is not recommended, you can expect to double that time.
To ensure the implementation goes as smoothly and as timely as possible you need to plan your time accordingly. It’s highly recommended that you assign a dedicated project manager to your implementation. This project manager should be in charge of mapping out the implementation from start to finish, taking into account such things as budget, time required, and people involved and key contacts.
DON’T EXCLUDE EMPLOYEES FROM IMPLEMENTATION DECISIONS
Today’s world is driven by technology. The decisions surrounding what technologies your company will embrace are choices that will directly impact its success. For this reason, it’s imperative that the right people at your company are involved when deciding which ERP system to implement. You need people that are technically competent enough to understand the infrastructure of the system, people that will know what functionality is required of the system, and high level executives that have a clear vision of the company’s future.
Since ERP takes part in almost every division of your organization, it’s important to involve the head managers and decision makers from each division in the selection process. Even if your ERP is providing executive oversights to only a few top employees, many more employees will be impacted by the system, and including people such as line managers is very important to the selection process. Depending on the size of your organization, it might be difficult to include every manager or decision maker, but what’s important is including those who have the most influence over particular business processes. Here are some key people you would want to include in your ERP selection:
- A CEO, Owner, Chief Financial Officer, and other executives provide long-range vision of the company.?
- Line managers from each discipline should confirm proper functionality.?
- IT Staff, such as your CIO, can ensure you have the best technology infrastructure.
DON’T NEGLECT MAINTENANCE AND UPGRADES
Selecting and implementing your ERP system is just the first step in a larger process. After you have the system up and running, it’s obvious that you will eventually have to undergo upgrades and maintenance. When it comes to ERP, maintenance is much more than just doing repairs to the system when something goes wrong; it’s also preventative. According to a study done by the National Institute of Statistical Sciences, only about 21% of software maintenance goes toward bug fixes. The other 79% of software maintenance goes mostly toward product enhancements.
Maintenance must be able to stay informed on key issues and security alerts, be able to cost-effectively troubleshoot bugs, provide migration support, and keep up-to-date with global upgrades and changes made to the system by the developer. Do you know who will be able to handle these responsibilities?
Usually, the software reseller or original publisher assists with the maintenance of your ERP. Some companies even outsource the maintenance of their software to independent support consultants. It is rare that the IT staff or other direct employees at your company would perform the upgrades and maintenance of an enterprise business system. You will need to have a maintenance strategy in place before going forward with your ERP implementation. This way, you will know who to rely on when changes to the system need to be made.
In addition to having a strong maintenance strategy for your ERP system, you should also make sure this strategy is cost-effective in the long run. According to SSi Consulting, companies typically spend around 15-20% of their software license fees on maintenance and support every year. This makes choosing your maintenance provider almost as important as choosing your software provider. When selecting your technology partner, it’s best to pick a candidate that can provide a full 360 degree range of ERP services. By selecting a candidate that can deliver the whole package, you can greatly reduce cost and confusion, while also making sure they are fully invested with your business and ERP system.
Selecting and implementing an ERP system is no small effort. It involves plenty of time, energy, and participation from several divisions and employees at your business. Often, the time to complete the initial planning right through to the final implementation can take several months – sometimes years. But don’t let that discourage you. A properly utilized ERP system can provide a return on investment that will exceed your highest expectations.
This white paper should be just the start of your research into ERP selection methodology. The more you educate yourself, the better your chances of a successful implementation. Although internet research and white papers alone can only go so far. Eventually, you will need to lean on a technology partner or industry expert to provide you with answers to the many questions you will have along the way. Picking this partner is just as important as picking the solution itself, because your partner will guide you to ultimately make your final ERP decision.
If done correctly, a properly implemented ERP system can greatly improve your company from every angle – from efficiency, to productivity, to revenue increases. Start planning right from the start, and you will have no trouble finding an ERP system that maximizes your business.