When it comes to selecting, implementing and running ERP, there are countless ways to get it wrong. Here are a few of the most common ERP mistakes and – more important - how you can avoid making them.
Ignoring ERP Apprehension
A visit to the post office a few years back provided a stark example of the perils of ignoring users and their needs, wants and willingness during an enterprise software initiative. The U.S Postal Service had just implemented an ERP and point-of-sale (POS) system. While it appeared to provide management with everything needed in terms of coast-to-coast visibility and reporting, it actually slowed down the user and was deployed with a minimum of briefing or training. The postal staff hated it, of course.
This example highlights what Joe Langner, executive vice president and general manager, Midmarket Solutions for Sage North America, sees as one of the biggest crimes in ERP – ignoring user reluctance for new applications. Some employees may be frustrated by having to learn a new software system. They may feel they're too busy and resent making time for training. They may also be overwhelmed by all the new capabilities the system offers, and some may be uncomfortable with the realization that upper management can keep better track of their activities. Further, they may never have been consulted about what such an ERP system should or should not do.
"User understanding and buy-in of the new system are critical success factors," Langner said. "If users don't understand how the system works, they'll tend to invent their own processes using those parts of the system they know how to manipulate."
To avoid this blunder, he suggests that companies invest in change management. Companies that successfully implement ERP systems typically approach the implementation as an exercise in change management.
"To be successful, the company must obtain a sincere commitment to the change process from all functions and all levels of the organization," Langner said.
"CIOs and project managers too often underestimate the need to focus on organizational change management." said Eric Kimberling, managing partner at Panorama. "As we cited in the report, change management was the item cited most commonly as the reason for project slippages, so clearly executives and project teams need to do a better job understanding and focusing on these all-too-important critical success factors.
Underestimating Manpower Needs
Mike Atherton, product evangelist at xTuple, sees a lot of companies failing to commit key personnel in proportion to the magnitude of their project. If selected and implemented well, ERP will manage and grow a business for many years to come. His advice is to treat product evaluation and deployment with respect and assign personnel in appropriate numbers.
Kimberling's research confirms this. Many companies underestimate the time, cost and resources required to make the project successful.
"This typically leads to disappointing results when expectations are not met," said Kimberling. "In addition, this dynamic often leads to poor decisions to cut corners related to critical activities in order to try meeting the unrealistic budget and timeframe."
Setting Unrealistic Go-Live Expectations
Another of Atherton's pet peeves is setting an arbitrary go-live date without fully understanding the impact on day-to-day business. While it looks good on paper and may help convince the finance department to fund the software, the date may end up being no more real than a hallucinatory oasis in the middle of the Sahara.
"Implementations often run into trouble because the go-live date-setting decision is made before the project starts with little detailed knowledge about the application and how it can be configured and deployed," Atherton said.
Opting for Big Bang ERP
Big bang ERP implementation was considered the way to do things about a decade or so ago. But that has changed as their high risk and questionable return on investment became more apparent. As a result, more organizations now show a preference for small sprints, said Pepijn Richter, director, Microsoft Dynamics ERP Product Marketing.
"It helps to phase the project into smaller, digestible chunks and have the business determine the phasing sequence and priority," he said.
That said, doing a little at a time should not be used as an excuse to stumble along through the millennia slowly adding a bit here and a bit there. Yale Professor Richard Foster noted in his research that the average lifespan of an organization in the S&P 500 fell from 67 years in the 1920s to 15 years in the 2010s. This would mean that only 25 percent of the companies in the index in 2020 are companies in the index today.
"If the implementation of the business application takes too long to implement or change, you will face a completely different market landscape with different requirements," Richter said.
Going Too Generic
Generic one-size-fits-all ERP systems are a good idea for certain businesses – but certainly not all. Companies in many markets are better served by ERP vendors and/or systems specifically tailored to their verticals. It's really a case of doing your homework to find out what others in your field are using and why.
"Customization increases the complexity and risk of an implementation, while at the same time making it potentially more difficult to upgrade software in the future," said Christine Hansen, product marketing manager, Epicor Software. "It's better to look for vendors with a focus on your specific vertical markets and industries with industry-focused solutions and services. If you are a discrete manufacturer, for example, look at the ERP products that handle discrete manufacturing."
Hansen also suggested looking for tools with a focus on adjacent markets, verticals and geographies – so that the system can address your businesses needs as it evolves and expands.
"Most ERP projects fail at the start, not at the end," said Hansen. "If there isn't a clear vision for the outcome of the project and how to get there from the start, they will ultimately fail."
Drew Robb is a freelance writer specializing in technology and engineering. Currently living in California, he is originally from Scotland, where he received a degree in geology and geography from the University of Strathclyde. He is the author of Server Disk Management in a Windows Environment (CRC Press).