Implementing an ERP system is among the most expensive, time-consuming and complicated tasks an IT department can take on. The potential for delays and unexpected expenses lurk around every corner. To help you avoid costly mistakes, CIO.com asked IT executives, ERP vendors and technology consultants to provide advice on how to avoid becoming an ERP horror story.
Costing anywhere from hundreds of thousands of dollars to millions of dollars, and requiring hundreds of man hours to implement, enterprise resource planning (ERP) systems are huge investments of money, resources and time. And while a successful ERP implementation can help your organization streamline workflow and cut costs, a poorly planned and implemented ERP rollout can severely cost organizations, in terms of lost productivity and delays.
To help ensure your ERP implementation is a success, or at least to minimize potential problems, CIO.com surveyed dozens of ERP experts (IT executives, consultants and ERP vendors), asking them to describe the most common ERP-related mistakes organizations make and how to avoid or solve them. The 13 most commonly cited ERP mistakes—and their fixes—appear below.
ERP Mistake #1: Poor planning . “Planning is absolutely necessary if you want your ERP project to succeed,” says Erik Kaas, vice president of Product Management for Mid-Market ERP products at Sage. “You simply can’t wing ERP.”
Kevin Beasley, CIO of VAI, a provider of ERP software and solutions to mid-market and enterprise-level organizations, agrees. “Many organizations do not do enough up-front planning before they begin an ERP software evaluation,” he says. “This often leads to confusion down the road because they might not fully understand their current processes and how to evolve them to maximize business benefits and efficiencies.”
To solve this problem, organizations should conduct an internal audit of all of their processes and policies before choosing an ERP system. In addition, Beasley recommends putting together an ERP evaluation team composed of stakeholders from across the business. And, if you feel you do not have the in-house capability to properly evaluate ERP systems, consider hiring an experienced third-party, vendor-neutral consultant, who has experience implementing ERP solutions at companies in your industry.
ERP Mistake #2: Not properly vetting ERP vendors. “Many of my best clients are ‘sold’ by the [vendor’s] marketing team; however once the implementation is complete they are surprised by system functionality restrictions, lack of capabilities, and the impact on existing internal best practices,” says Shawn Casemore, president, Casemore & Co., which helps clients improve their operational performance. His advice: Always ask for references. Request the names of at least three companies “who are in your business sector, who you can contact and discuss the software with, then call and discuss features, functionality, and challenges,” he says. If the vendor can’t (or won’t) provide at least three names? “Walk away,” unless you want to be a guinea pig.
ERP Mistake #3: Not understanding or using key features. “In our annual ERP survey, only 46 percent of respondents reported having a good understanding of which features they were using in their ERP system,” says John Hoebler, managing director,MorganFranklin Corp., a business consulting and technology solutions company. “This is shocking, considering the millions companies invest in [their ERP systems]. Without knowing features, companies miss opportunities to automate business processes, complete functions faster, and meet business objectives,” he says. In addition, “upgrades, enhancements, and maintenance are more costly, and less likely to succeed.”
To solve this problem, Hoebler suggests creating a master list with all features, tracking usage, and periodically reviewing the list to determine which features are being used and which are the most helpful. “This knowledge catalog can [then] be used to train new employees, write test scripts, and assist with audit, compliance, and reporting requirements,” he says.
ERP Mistake #4: Underestimating the time and resources required. “All companies grossly underestimate the time and resources required to implement a new ERP system,” argues James Mallory, marketing director,e2b teknologies. How can you calculate the necessary time involved? “The time involved can be estimated by dividing the cost of the software by 100,” he explains. “For example, $20,000 for software will take approximately 200 man-hours or five weeks to implement using a certified consultant. Double that number if you plan to self-implement with minimal professional assistance.” In addition, Mallory stresses the importance of assigning a dedicated project manager.
ERP Mistake #5: Not having the right people on the team from the start . “Often times, organizations do not bring the right people together from the very start of an ERP implementation,” says Beasley. “ERP implementation is one of the biggest projects an organization can undertake, and consequently, mistakes can be made and plans might get derailed if the right stakeholders are not involved in every aspect of the decision-making process,” he points out. For example, many organizations focus on getting executive approval, instead of gathering key participants from across the organization, from finance, operations, manufacturing, purchasing, and the warehouse, in addition to IT. The benefit: employees who are actively engaged with the ERP implementation, who have an investment in getting it right, right from the start.
ERP Mistake #6: Not setting priorities . “When implementing an ERP system, the single most important thing one can do to minimize delays and accelerate time to completion is to reduce multitasking,” says Yoav Ziv, vice president, Realization , a project management specialist. “People work much slower when they are juggling multiple tasks and constantly switching gears,” he argues. Therefore, creating a priority system should be a top priority for IT managers. “The priority system should not only indicate when to do which tasks, but should also provide managers with the issues they need to resolve, per priority,” he says. In addition, “ERP implementation managers need to implement a rigorous issue resolution process to act upon those signals and remove issues immediately in order to avoid delays.”
ERP Mistake #7: Not investing in training and change management. “A lack of proper training is one of the most common reasons that ERP projects fail, and it can also result in employees resenting the new system because they don’t understand it,” explains Kaas. “Making sure employees have a chance to become comfortable with the new system before it goes live will do wonders for your chances at ERP success.” Adds Kevin Herrig, president and CEO of GSI, an ERP software specialist with a primary focus on Oracle’s JD Edwards products: “If you don’t make training and frequent communication with users a top priority, you will end up owning a very expensive version of Excel.”
ERP Mistake #8: Underestimating the importance of accurate data. Your ERP system is only as good as the data that is in it. So, if you want your ERP implementation to succeed, “it is imperative that proper programming and procedural parameters are put in place [right from the start] to minimize the likelihood of errors,” argues Martin Levesque, director of Professional Services, iDatix , a document management and workflow solutions provider.
ERP Mistake #9: Taking the kitchen sink approach. “No matter how powerful or flexible an ERP system is, it will not be able to absorb all business logic,” explains Akan Iza, software architect, NetFoliage, a website development firm. “One of the most common mistakes made during ERP implementations is to assume that ERP can be used to run a business end to end,” he points out. “To avoid this costly mistake, companies should focus on implementing ERP to optimize value chain and to trace costs. Everything else should be a secondary goal.”
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ERP Mistake #10: Not decommissioning legacy applications.“If [organizations] do not actively work to decommission applications during the implementation, the end result is an ERP with all of the original legacy applications hanging off of it,” argues John Picciotto, principal, Application Modernization & Optimization at Accenture . “The end result is another piece of software that [you] are paying maintenance and support on, paying for hardware and upgrades, and paying for interfaces back into the core ERP,” when the point of getting an ERP system was to streamline workflow and reduce costs and waste.
ERP Mistake #11: Not having an active load testing environment . “You won’t be able to see the true results of your changes based on a couple of test users,” points out Herrig. “You must be able to simulate your user load in order to see the real-world effects of changes and avoid costly unplanned downtime.”
ERP Mistake #12: Ignoring third-party support alternatives. “Many companies insist on premium vendor support, despite the fact that maintenance rates are at an all-time high and they can get the same level of service from a third-party support provider,” says Jon Winsett, CEO of NPI, an IT spend management consultancy that works with Fortune 1000 enterprises. “Companies should explore all options for support, ranging from hybrid support providers that work directly with their vendor to deliver service, as well as providers that work independent of their vendor’s partner program,” he says. “A third-party support alternative can easily reduce support costs by 30 to 50 percent.”
ERP Mistake #13: Not having a maintenance strategy. “Customers not conducting preventative maintenance are not taking full advantage of their ERP investment and their maintenance dollars,” states Marco Valencia, vice president, Upgrade Office, North America & Latin America, SAP America, Inc. “By not applying maintenance, their systems will quickly become obsolete (from a technical perspective) as will their business processes.” Moreover, he says, it is important to “keep the kernel up-to-date, with the right legal changes applied to prevent potential problems,” and with improvements in installation technology, customers now experience only limited disruption when implementing support packs.
Jennifer Lonoff Schiff