Whether it’s fair or not, the corporate landscape is littered with the career wreckage fallout from failed ERP implementations, like those at Hershey Food Corp., Whirlpool, Allied Waste Industries, and W.L. Gore & Associates.
That fate can be avoided. Read what the experts say about keeping the implementation on schedule and managing the expectations of the board, and the importance of knowledge transfer.
Check out last week’s installment, “Experts offer advice on successful ERP implementation,” where we examined how customers and an ineffective architecture can create a failed ERP implementation. We also covered how to avoid ERP problems by hiring a strong ERP consultant—and keeping them on board after you “go live.”
Are we there yet?
Experts’ opinions vary on the time they estimate for fully implementing an ERP system. Some conjecture that, on average, an ERP implementation is a nine-month effort from start to finish, depending on the size of the organization. A 1999 survey by the Stamford, CT-based Meta Group, however, reported that the average time it takes to implement ERP application systems is 23 months. Meta Group polled more than 60 organizations and compared the seven leading vendors in such areas as:
- · Implementation costs
- · Total cost of ownership
- · Time to benefit
According to the Meta Group study, it takes an average of two and a half years from project initiation to achieve a quantifiable return on investment for an ERP system. Ninety percent of those quantified benefits are the result of a cost reduction, according to the study.
Andrew Clark, COO of Agresso Corporation, a Vancouver, BC-based provider of business information management systems, said recovery time depends on the types and number of applications selected, as well as whether the applications are integrated. “We’ve had core financials up in a period of three or four months, and we’ve had projects that have included financial, project cost and billing, HR payroll, and logistics that could take over a year,” he said. “Anything over a year is a long project for us. Our average projects are usually six to nine months.”
Experts warn that while a relatively minor problem can result in a minimal loss of time, a major one can cost months.
“A quick migration to an ERP system without time for testing and validating the systems is not wise nor advisable,” said Dr. John T. Whiting, managing director of New Jersey-based E-Business Management Consulting.
He cites Hershey Foods Corp., which rushed a 48-month global SAP rollout into 30 months. “[Hershey’s] problems appear in good part to be an example of the consequences that can come from trying to shortcut a prudent research, design, plan, and implementation process.”
You’re in big trouble when the expectations are too high
One of the biggest problems for ERP project leaders to face comes not from the implementation itself, but from expectations of board members, senior staff, and other key stakeholders.
ERP vendors negotiate contracts with senior staff and board members, but typically those who see the implementation through on the customer side are the day-to-day operations staff. Keeping the interests of the entire team in mind presents a challenge to internal project leaders.
“They need to keep the focus on the key stakeholders and their needs but keep the day-to-day operations people happy, too. That’s what a project manager needs to keep in mind—who are my stakeholders, and am I keeping them all happy as we flesh out a solution,” said Claude Watson, president of the Enterprise Application Solutions Group of CIBER, Inc., an Englewood, CO-based IT solutions firm.
Commitment from top-level management is also imperative to the success of an ERP implementation.
“Every project needs an executive sponsor who’s going to spend 10 percent of his or her time keeping tabs on this project,” Watson said. “It’s surprising to me that when a project gets off track, it’s news to the executive level of an organization. They’ve delegated that responsibility too low in the organization.”
He added that senior staff must think of the ERP system as more than just a facet of the technology infrastructure, but more as an integral business tool. Often it’s a CIO or IT manager alone who oversees ERP implementation, when a partner from the operations or finance division is needed.
“It’s going to be a culture change for the whole company. You really need someone on the operations side of the business, not just the IT side of the business chartered with that responsibility,” Watson said. “It should be an agenda item every time the executive team gets together to talk about where that implementation is going.”
Dr. John T. Whiting of E-Business Management Consulting, said organizations are wise to choose ERP vendors that subscribe to the International Standards Organization (ISO) 9000 Standard.This set of international technical quality standards and guidelines helps to assure quality of management systems across industries.
In Watson’s experience, organizations with a dedicated project leader in place tend to have the most success with their ERP implementations.
“[They] take people out of operations and free them up 100 percent to work on the implementation. It always surprises me [that] when I go into an organization where they’re having trouble, they expect the project manager to be functioning in a part-time role while still carrying other responsibilities,” he said. “The project manager not only needs to have the authority to make business changes, but they need a dedicated team, particularly in large organizations. Too often, companies try to take shortcuts. Everyone’s a little short-staffed right now with the labor market where it is. They expect people to wear two hats. If you take that shortcut, it catches up with you.”
Above the learning curve
In the midst of the complicated process reengineering that accompanies an ERP implementation, many organizations forget the importance of retraining the employees who are expected to operate the new system. Whiting notes that a quality implementation can be derailed by poorly trained employees who do not know how to properly operate the new technology.
“The knowledge transfer to the employees…is arguably more important than the quality of the implementation,” Whiting said. “Too many companies are not paying attention to this issue, and systems integrators frequently focus most of their attention on the IT process reengineering and relatively little time on reengineering the human resource.”
Watson agrees that, all too often, companies don’t build training into the total cost of ownership.
“If you look at the total cost of the project, [training] can have the single biggest line items—not necessarily in the dollars you spend but in lost productivity,” Watson said. “Too often the focus is, ‘Here’s an order, enter it, and take it through. What they don’t plan on is the unseen things that happen. What if you enter an order and the item is out of stock? In a lot of training scenarios, they teach people how to do the basics, but they don’t teach them what to do when they run into problems.”
Knowledge transfer must begin at the first step of an ERP implementation, the experts say. And throughout the process, the ERP vendor should be teaching the client how every facet of the system works.
“If we do too much of the work, and the client’s not involved, the knowledge transfer doesn’t effectively happen, and they’re continually dependent on us,” Clark said. “The software must become a critical aspect of their business. They need to understand how it’s set up and how it works, so that as their business evolves and changes, they can change the setup of the software.”
Tell us about your ERP implementation by posting a comment below. If you have a story idea you’d like to share, please drop us a note.