In my research and consulting engagements, I have worked with the largest enterprises to smaller and mid-sized manufacturers. One of the more intriguing issues I’ve seen is ERP implementation risk during solution discovery.
No matter the size of the organization, it’s not uncommon for teams to consider their previous ERP implementation a failure. In fact, Gartner has found that approximately 75 percent of all ERP projects fail, despite the industry’s focus on delivering better customer service and advanced IT systems.
Ultra’s ERP blog has examined the topic of risk in previous posts. A post entitled “Forming an ERP Risk Management Plan for Your Implementation Project” covers a lot of ground including distinguishing between risk analysis and risk management.
Another article shares the key elements of an ERP risk management plan in a post “Forming an ERP Risk Management Plan for Your Implementation Project.”
And finally, an archived post entitled “Tips for Managing Common ERP Risk Factors” summarizes how teams can be effective in reducing and mitigating common ERP risk factors.
This post continues Ultra’s in-depth look at the topic of risk, breaking down the specific risks organizations face during key phases of an ERP project.
The Solution Discovery Phase
In a typical ERP project, we refer to the “solution discovery phase” as the phase that builds the foundation for a successful implementation. The discovery phase is where the team begins the selection process, assessing their business needs and the vendor landscape for the most appropriate solutions.
During ERP discovery, external forces tend to have more impact on small businesses than they do on large businesses. In many cases, a manufacturer or distributor may adopt a technology due to the influences exerted by their business partners and/or competitors, having no relation to the technology and organization itself.
Without assistance from individuals who have previously performed an ERP implementation, a small to medium-sized company could potentially be doomed before the project is initiated.
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When considering ERP implementation risk during solution discovery, noted here are four factors that could potentially cause a project to fail before the software contract is signed.
|Types of ERP Implementation Risk During Solution Discovery|
|ERP Implementation Risk||Best Practice Approach to Mitigate Risk|
|1.||Neglecting to assign a full-time Project Manager to the project||Leverage experienced resources with IT implementation experience.|
|Use a Project Management Office (PMO) of certified resources that follow established implementation methodology.|
|2.||Lack of expert involvement||Assign resources with extensive experience in various disciplines.|
|Document the current state and future state.|
|3.||Settling for “out of the box” solutions||Focus on the right fit between ERP features and the desired future state of business processes.|
|4.||Management viewing an ERP project as an IT project||Ensure executive buy-in and support.|
|Involve all departments within an organization with a focus on Business Process Improvement.|
In some failed ERP projects I have observed, the Project Management duties have normally been assigned to the Director of IT or IT Manager. Though this individual may be competent to perform these duties, I have witnessed instances in which the project became delayed and ran over budget because the Project Manager was continually trying to balance the implementation against his or her daily duties throughout the life of the project.
In comparing this approach to successful implementations in large-enterprise environments, large organizations will have a Project Management Office (PMO) comprised of certified resources whose role is to mitigate risk throughout the implementation life cycle, act as a mentor to Project Managers, and ensure each Project Manager follows the established implementation methodology.
Thus it is key for the project to be managed by experienced resources with previous IT implementation experience, such as a team of experienced ERP selection consultants.
2 – Lack of expert involvement
During the Solution Discovery Phase, the most successful projects are led by a resource with extensive experience in various disciplines. This resource will travel to each site, review each process, and communicate with the end users regarding their “pain points” with the current process or software application. Subsequently, the resource will then document the current state and future state to include within the RFP.
Smaller to mid-sized companies often fail at this process by neglecting to bring in subject-matter experts to review current business processes. To combat the resource constraints of subject-matter experts, some SMEs will bring in any available resource from respective departments due to the fact that the subject-matter expert must perform his or her daily duties.
Though these resources will be able to discuss and document their current business processes, the process fails during the process re-engineering steps. Because these resources sometimes lack experience within the organization from an end-to-end perspective, they also lack the industry experience to propose suggested business process re-engineering directives.
Additionally, when a business process review is not conducted in the early phases, companies may find themselves performing this process in the middle of the implementation, potentially causing project schedule and budget overruns.
3 – Settling for “out of the box” solutions
During the vendor-review process and sales cycle, some organizations opt for the “out of the box” option because of the cost aspect as compared to a full ERP implementation.
Even though IT managers understand the importance of an optimal ERP solution, CFOs and Executive Management incur a knee-jerk reaction when comparing the cost of the “out of the box” verses customized solutions.
Over the last few years, vendors have taken a solution that companies have implemented and have pre-configured these applications to create a plug-and-play solution, stating that the architecture was built based on “best practices.” In many of my ERP consulting engagements, customers will ask me “what is the best practice?” Though some may disagree, I respond with the comment that there is no such thing as an industry best practice when it comes to ERP software configuration. What is more critical is to leverage systems that meet the unique needs of a particular organization. Finding the right fit between ERP systems and the specific business processes of a target organization is recognized as critical for successful ERP implementation.
In my experience, when a smaller to mid-sized organization purchases these out-of-the-box offerings, they either find themselves purchasing additional consulting time to assist them in configuring the system, or they build their business processes around the system capabilities. Unfortunately, these organizations rarely achieve the business process transformation they were seeking.
Finally, when considering ERP Implementation risk during solution discovery, it has been my experience that risk follows when management looks at an ERP project as solely an IT project.
For many organizations where the executive management has no experience with an ERP implementation, leadership might view an implementation as an IT project instead of a company-wide project.
We see time and again that the largest key to avoiding implementation failure is executive buy-in and support. Success follows when all departments within an organization are involved within the implementation, making it important to ensure the subject matter experts of each department are included throughout the life of the implementation.
Learn More About ERP implementation Risk During Solution Discovery
In all, ERP implementation risk is a significant issue and one that deserves detailed analysis.
And as I’ve noted, we have addressed this topic often. My colleague Salli Churchill looks at additional risk factors in her blog post entitled “What a Failed ERP Implementation Looks Like.”
Watch for my next blog post in this series which looks at ERP implementation risk during the planning phase of a project. If juggling ERP risks of your own, contact Ultra for insight.