Organizations that concentrate on the technological aspects of ERP and ignore the "softer" components of implementation often fail. ERP is about people, not just technology, and organizations that ignore the people side run a significant risk of project failure.
WHAT YOU NEED TO KNOW
ERP is a business project, not an IT exercise. Enterprises that do not understand this are likely to experience ERP project failure. ERP implementations are inherently risky; however, some of these risks can be minimized by defining implementation strategies appropriate for the organization's unique circumstances. By taking into account the outlined guidelines for success when planning their implementation strategies, organizations can mitigate many of the risks encountered during ERP projects. Paying close attention to the people aspects of an ERP project is as important as the technical aspects to the project's success. Above all, expect difficulties and be patient – ERP is more than a project, it's a lifestyle.
ANALYSIS
ERP implementations are risky and complex; however, when properly managed and executed, they can be highly successful. Many large enterprises will need to migrate to newer technologies being offered by major ERP vendors such as SAP and Oracle. For many of these companies, the ERP implementation has been performed, but the integration of the applications is only partially complete, and the migration to emerging service-oriented architectures is just beginning.
The integration and migration phases will produce projects that need to be properly managed to avoid the pitfalls outlined in this research. In addition, in some areas of the world, many enterprises haven't yet started their ERP deployments. By addressing five critical success factors for implementations, an enterprise can successfully mitigate some of the risks.
Avoid Modifications
As part of the selection process, an enterprise must clearly understand its business requirements and where the ERP system fails to meet those requirements. Where there is a gap between the enterprise's requirements and the ERP solution's capabilities, the enterprise must decide how to close that gap – by altering the established or proposed process to meet the ERP system's processes, developing a workaround or customizing the ERP solution.
Although many ERP projects have a stated direction of "vanilla" implementation, users often find reasons to deviate from that direction. Modifications increase the risk of failure because they usually increase project time and cost, often by enshrining bad practices, reducing the potential benefits of the new system and increasing the complexity of future upgrades. These results will lead to a higher total cost of ownership.
Action Items: Study other ERP implementations within your vertical industry segment, and review what modifications were required to meet industry-specific requirements, as well as local market requirements, and consider similar modifications. Perform a thorough gap analysis, analyze the business value associated with each gap, prioritize the gaps and determine how best to close each gap. Set clear expectations regarding modifications from the project's outset, and develop and follow firm guidelines.
As with all implementations, a business case should be developed for the ERP solution as a whole and then revisited periodically throughout the ERP's life cycle. In addition, when the user community identifies modifications, a business case for building and maintaining the required modifications should be created. This ensures that the modifications are necessary and not simply a matter of "we've always done it this way" functionality.
Executive Management Commitment
Businesses should not lose sight of the fact that an ERP system fundamentally affects the way they operate. As a result, IT should not have sole responsibility for the project. Executive business management buy-in or sponsorship of the project reinforces its importance to middle management and staff. Executive management leadership and direction is a recurrent theme in companies that have successfully implemented ERP.
In some cases, executive management leadership is not enough. In large organizations, it's important to ensure that senior management at the business unit level is also committed to the project, because it's difficult for senior management teams in large companies to mandate major change without the support of the business unit managers.
Action Items: Top management support must be obtained, sustained and visible throughout the life of the project. Involve senior management in project sponsorship, project steering committees, quality reviews, and issue and conflict resolution. Involvement in these governance mechanisms helps sustain management support by keeping them informed of the project's progress.
Change Management
Change management skills are paramount in a successful ERP project, and a robust change management program should be instituted at the project's outset. ERP projects bring with them substantial business process and organizational changes. After an ERP implementation, almost all enterprises state that, during future implementations, they would increase employee participation earlier in the implementation process, make greater investments in end-user training programs and focus more on change management.
Change management skills are not normally found within traditional IT departments and may not exist within the enterprise. Implementers can bring these skills to the project, or the enterprise can create its own change management team by sourcing individuals independently. Ongoing communication – through such mechanisms as project Web sites, newsletters and "road shows" regarding the project's direction, changes, progress, accomplishments and benefits – is vital to a project's success.
Action Items: Initiate change management programs that support the implementation:
Develop communications mechanisms (such as a Web site with regular updates, a monthly newsletter and road shows) to channel information to the end users. Keep the lines of communication open between the project and the business, and keep the information flowing on a regular basis. Ensure that key end users are involved through active communication regarding the project's progress and the changes to the business processes and organization, as well as through participation in the project's governance mechanisms.
Conduct educational activities that assist the staff in grasping the importance of the project, its benefits and its effects on the enterprise. Perform road shows and conference room pilots to obtain buy-in.
Prepare the user community for changes from a project and a business perspective. Set realistic expectations by compiling a detailed business case that clearly states the process changes and functionalities involved in the project and ties them to specific benefits. The change management team should reset the users' expectations, when necessary, based on this document. A critical error cited by many enterprises is the scarce attention paid to the end users.
Hire an experienced, third-party, independent organization to conduct a change readiness assessment prior to the implementation to identify areas of weakness and determine your organization's ability to cope with change.
Training
Training is a key deliverable of any change management program and is a critical success factor for successful ERP implementations. Poorly trained users prevent the uptake and acceptance of the ERP, may limit the realization of benefits, and can completely derail the system and business processes. It's important to make a major commitment to training and to sustain that commitment throughout the ERP solution's life cycle. Training budgets are typically grossly underestimated – often by more than 50 percent. They usually contain some form of "train the trainer" effort, and this type of training tends to fail miserably because of poor trainer choices.
Many enterprises only perform one round of training and overlook the need for ongoing training. Ongoing training for new hires or staff-switching roles should form part of the ERP system's annual maintenance budget. Consistent, high-quality education and training is vital to project success and for the ERP's adoption by the user community. Training should be evaluated through the use of feedback questionnaires to determine its effectiveness and how the courses can be improved. Depending on the organizational structure, end-user training is the responsibility of the human resources department, individual departments or process groups. Except for the technical training of the IT staff, training is not the responsibility of IT department.
Action Items: Place a high priority on quality end-user training. Education and training programs must embrace multiple methods and delivery vehicles, such as one-on-one training, classroom training and computer-based training to meet the needs of adult learners. Enterprises often overlook the IT workforce training needs associated with ERP implementations. If the ERP solution is supported and maintained in-house, adequate investment in training, re-skilling and professional development of IT staff is important to the success of your implementation.
Project Management and Project Team
Building a strong project team should be a priority, because it is a major differentiator between success and failure. Internal project members with deep business knowledge should be assigned to the project team on a full-time basis for the life of the project and should work closely with the implementation partners. Their positions should be backfilled while they are "seconded" onto the ERP project, and the costs associated with this should be built into the project's budget and the ERP business case.
A strong internal project manager is needed to see an ERP project through to its fruition. This individual should have previous project management experience, preferably with ERP implementations, should be retained for the life of the project and should work in closely with the implementation partner's project manager. Most project managers are retained for the duration of the project. A successful implementation – on time and on budget – is as important to the ERP project manager as it is for you.
Action Items: Appoint a strong, experienced project manager from the outset of the project. Consider retention or success bonuses to provide incentives for the project manager to stay for the life of the project. Because this individual is probably not part of the enterprise, he or she will need to be recruited externally. This individual should maintain rigorous control of the project through the use of such proven methodologies as Prince II, PMBOK or software-specific methodologies. The project manager will also need to exercise effective relationship management with the implementation partner. Loss of, or poor control over, the chosen implementation partner is frequently cited as a critical error.
A team-orientated approach is important. Most enterprises cite the need for empowered implementation teams that can make final decisions regarding such issues as configuration and process change without consultation.
Physically locate the project team together, if at all possible, especially in global or geographically spread implementations. If possible, place people on the team who have been through ERP implementations before and who are motivated, enthusiastic and good team players.
Tactical Guidelines
Minimize modifications by developing firm guidelines, and build a business case for each required modification.
Obtain and maintain executive level buy-in, including business unit management where organizationally applicable.
Make change management a top priority by ensuring that a robust change management program is in place at the project's initiation.
Create a quality, ongoing training program that educates end users and IT staff.
Commit quality resources to the project team for the life of the project.
Hire an experienced, professional project manager who has successfully implemented ERP in a similar environment.
WHAT YOU NEED TO KNOW
ERP is a business project, not an IT exercise. Enterprises that do not understand this are likely to experience ERP project failure. ERP implementations are inherently risky; however, some of these risks can be minimized by defining implementation strategies appropriate for the organization's unique circumstances. By taking into account the outlined guidelines for success when planning their implementation strategies, organizations can mitigate many of the risks encountered during ERP projects. Paying close attention to the people aspects of an ERP project is as important as the technical aspects to the project's success. Above all, expect difficulties and be patient – ERP is more than a project, it's a lifestyle.
ANALYSIS
ERP implementations are risky and complex; however, when properly managed and executed, they can be highly successful. Many large enterprises will need to migrate to newer technologies being offered by major ERP vendors such as SAP and Oracle. For many of these companies, the ERP implementation has been performed, but the integration of the applications is only partially complete, and the migration to emerging service-oriented architectures is just beginning.
The integration and migration phases will produce projects that need to be properly managed to avoid the pitfalls outlined in this research. In addition, in some areas of the world, many enterprises haven't yet started their ERP deployments. By addressing five critical success factors for implementations, an enterprise can successfully mitigate some of the risks.
Avoid Modifications
As part of the selection process, an enterprise must clearly understand its business requirements and where the ERP system fails to meet those requirements. Where there is a gap between the enterprise's requirements and the ERP solution's capabilities, the enterprise must decide how to close that gap – by altering the established or proposed process to meet the ERP system's processes, developing a workaround or customizing the ERP solution.
Although many ERP projects have a stated direction of "vanilla" implementation, users often find reasons to deviate from that direction. Modifications increase the risk of failure because they usually increase project time and cost, often by enshrining bad practices, reducing the potential benefits of the new system and increasing the complexity of future upgrades. These results will lead to a higher total cost of ownership.
Action Items: Study other ERP implementations within your vertical industry segment, and review what modifications were required to meet industry-specific requirements, as well as local market requirements, and consider similar modifications. Perform a thorough gap analysis, analyze the business value associated with each gap, prioritize the gaps and determine how best to close each gap. Set clear expectations regarding modifications from the project's outset, and develop and follow firm guidelines.
As with all implementations, a business case should be developed for the ERP solution as a whole and then revisited periodically throughout the ERP's life cycle. In addition, when the user community identifies modifications, a business case for building and maintaining the required modifications should be created. This ensures that the modifications are necessary and not simply a matter of "we've always done it this way" functionality.
Executive Management Commitment
Businesses should not lose sight of the fact that an ERP system fundamentally affects the way they operate. As a result, IT should not have sole responsibility for the project. Executive business management buy-in or sponsorship of the project reinforces its importance to middle management and staff. Executive management leadership and direction is a recurrent theme in companies that have successfully implemented ERP.
In some cases, executive management leadership is not enough. In large organizations, it's important to ensure that senior management at the business unit level is also committed to the project, because it's difficult for senior management teams in large companies to mandate major change without the support of the business unit managers.
Action Items: Top management support must be obtained, sustained and visible throughout the life of the project. Involve senior management in project sponsorship, project steering committees, quality reviews, and issue and conflict resolution. Involvement in these governance mechanisms helps sustain management support by keeping them informed of the project's progress.
Change Management
Change management skills are paramount in a successful ERP project, and a robust change management program should be instituted at the project's outset. ERP projects bring with them substantial business process and organizational changes. After an ERP implementation, almost all enterprises state that, during future implementations, they would increase employee participation earlier in the implementation process, make greater investments in end-user training programs and focus more on change management.
Change management skills are not normally found within traditional IT departments and may not exist within the enterprise. Implementers can bring these skills to the project, or the enterprise can create its own change management team by sourcing individuals independently. Ongoing communication – through such mechanisms as project Web sites, newsletters and "road shows" regarding the project's direction, changes, progress, accomplishments and benefits – is vital to a project's success.
Action Items: Initiate change management programs that support the implementation:
Develop communications mechanisms (such as a Web site with regular updates, a monthly newsletter and road shows) to channel information to the end users. Keep the lines of communication open between the project and the business, and keep the information flowing on a regular basis. Ensure that key end users are involved through active communication regarding the project's progress and the changes to the business processes and organization, as well as through participation in the project's governance mechanisms.
Conduct educational activities that assist the staff in grasping the importance of the project, its benefits and its effects on the enterprise. Perform road shows and conference room pilots to obtain buy-in.
Prepare the user community for changes from a project and a business perspective. Set realistic expectations by compiling a detailed business case that clearly states the process changes and functionalities involved in the project and ties them to specific benefits. The change management team should reset the users' expectations, when necessary, based on this document. A critical error cited by many enterprises is the scarce attention paid to the end users.
Hire an experienced, third-party, independent organization to conduct a change readiness assessment prior to the implementation to identify areas of weakness and determine your organization's ability to cope with change.
Training
Training is a key deliverable of any change management program and is a critical success factor for successful ERP implementations. Poorly trained users prevent the uptake and acceptance of the ERP, may limit the realization of benefits, and can completely derail the system and business processes. It's important to make a major commitment to training and to sustain that commitment throughout the ERP solution's life cycle. Training budgets are typically grossly underestimated – often by more than 50 percent. They usually contain some form of "train the trainer" effort, and this type of training tends to fail miserably because of poor trainer choices.
Many enterprises only perform one round of training and overlook the need for ongoing training. Ongoing training for new hires or staff-switching roles should form part of the ERP system's annual maintenance budget. Consistent, high-quality education and training is vital to project success and for the ERP's adoption by the user community. Training should be evaluated through the use of feedback questionnaires to determine its effectiveness and how the courses can be improved. Depending on the organizational structure, end-user training is the responsibility of the human resources department, individual departments or process groups. Except for the technical training of the IT staff, training is not the responsibility of IT department.
Action Items: Place a high priority on quality end-user training. Education and training programs must embrace multiple methods and delivery vehicles, such as one-on-one training, classroom training and computer-based training to meet the needs of adult learners. Enterprises often overlook the IT workforce training needs associated with ERP implementations. If the ERP solution is supported and maintained in-house, adequate investment in training, re-skilling and professional development of IT staff is important to the success of your implementation.
Project Management and Project Team
Building a strong project team should be a priority, because it is a major differentiator between success and failure. Internal project members with deep business knowledge should be assigned to the project team on a full-time basis for the life of the project and should work closely with the implementation partners. Their positions should be backfilled while they are "seconded" onto the ERP project, and the costs associated with this should be built into the project's budget and the ERP business case.
A strong internal project manager is needed to see an ERP project through to its fruition. This individual should have previous project management experience, preferably with ERP implementations, should be retained for the life of the project and should work in closely with the implementation partner's project manager. Most project managers are retained for the duration of the project. A successful implementation – on time and on budget – is as important to the ERP project manager as it is for you.
Action Items: Appoint a strong, experienced project manager from the outset of the project. Consider retention or success bonuses to provide incentives for the project manager to stay for the life of the project. Because this individual is probably not part of the enterprise, he or she will need to be recruited externally. This individual should maintain rigorous control of the project through the use of such proven methodologies as Prince II, PMBOK or software-specific methodologies. The project manager will also need to exercise effective relationship management with the implementation partner. Loss of, or poor control over, the chosen implementation partner is frequently cited as a critical error.
A team-orientated approach is important. Most enterprises cite the need for empowered implementation teams that can make final decisions regarding such issues as configuration and process change without consultation.
Physically locate the project team together, if at all possible, especially in global or geographically spread implementations. If possible, place people on the team who have been through ERP implementations before and who are motivated, enthusiastic and good team players.
Tactical Guidelines
Minimize modifications by developing firm guidelines, and build a business case for each required modification.
Obtain and maintain executive level buy-in, including business unit management where organizationally applicable.
Make change management a top priority by ensuring that a robust change management program is in place at the project's initiation.
Create a quality, ongoing training program that educates end users and IT staff.
Commit quality resources to the project team for the life of the project.
Hire an experienced, professional project manager who has successfully implemented ERP in a similar environment.
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