Risk happens. Especially when a manufacturing or distribution company has the goal of selecting and implementing a new ERP system — likely one of the most complex and resource-intensive initiatives a company will ever face.
Project teams can improve ERP implementation outcomes by carefully assessing and managing the most pervasive risks that typically cause failed implementations, cost overruns, project delays and other issues. The problem is that most Project Teams don’t have extensive experience in assessing these risks and therefore, find themselves reacting to risks and issues after they surface which leads to problems in achieving expectations.
My first blog post in this series outlined a key set of ERP risk categories to help ERP project teams take the steps to address potential issues.
This post summarizes a second set of ERP risk categories that organizations can’t afford to ignore.
Why devote careful analysis to the many categories of risk that come with enterprise software implementation? Gaining an awareness of ERP risk categories will help teams take steps to address potential issues.
ERP Risk Categories
(The following set of ERP risk categories are continued from previous blog post.)
- Quality of Deliverables and Activities: This set of ERP risk categories considers the quality or completeness of deliverables or activities within the scope of the project. For instance, are deliverables being fully completed such that there is no rework required or questions to clarify content? Are deliverables being completed on or before the promise dates? Are activities and meetings proving to accomplish the expectation or is more follow-on activities required to get through the objective? These are just some of the key questions that should be addressed in assessing quality oriented risks.
- Vendor Relationship and Services: Proactively assessing risk related to vendor capabilities and third-party services involved in the ERP project makes a big difference to the success or failure of an ERP implementation. Fostering a solid relationship with the various vendors providing software and services is a vital component to project success. Many vendor related risks needlessly spin out of control when relationships are not appropriately established and escalation channels are not defined. Clearly, ERP Implementation projects have multiple vendor/contract resources that are necessary to obtain the critical expertise for the project. Some of these resources remain consistent throughout the course of the project and some are brought in only as needed. With so many moving parts, effective management and assessment of the resource competencies along with coordination and scheduling of these resources are critical success factors that must be managed. Last, but not least, having predefined escalation channels to ensure appropriate attention and priority is a must when risks start heating up. Ensuring you have the necessary leverage through effective vendor relationships to get the attention you deserve when the going gets tough is key to ensure smooth resolution of risks and issues when they arise.
- Software Capability and Functional Design: Determining the right enabling software and technology tools to be implemented is an obviously critical decision. Risks associated with the capabilities and functional design of the selected enterprise technology can significantly affect a project. Software that is not selected according to a company’s future state expectations is bound to bog down long term aspirations or require significant customization and investment. Additionally, consideration of the technology roadmap is just as important to ensure that the software will keep pace with the ever changing landscape of business needs and technology evolution.
- Technology Integrations, Interfaces and Extensions: Looking at ERP risk categories, this group considers the interactions and extensibility of the solution to other systems and databases along with other external technology offerings such as web services, 3rd party logistics providers, and even currency exchange rate systems. Applications of concern could involve ecommerce, payroll, the company’s website, or even devices such as barcode scanners. Appropriate understanding of these interfaces, how to manage them, and maintain high-availability support is key to mitigating these forms of risk.
- Technology Infrastructure and Architecture: As with most technology-related ERP risk categories, here the focus is on a proactive analysis of how an organization’s technology infrastructure (WAN/LAN/Wi-Fi networks, servers, client devices) will be impacted by an ERP implementation. Ensuing high-availability of these technology services including disaster recovery/failover capability is a necessary component to ensuring a resilient solution that will satisfy the uptime demands of your business.
- Information Management and Data Integrity: Managing the flow of information (such as workflow approvals, interfaces between systems, or separation of duties) or maintaining data integrity of master files or transactional/dynamic data is another in a list of significant ERP risk categories. Maintaining confidence and accuracy of dashboard metrics, reports, and forms that will integrate with the new system, if vital to get a true picture of how the business is operating and where improvement may be necessary. Lack of information integrity, confidence, and just plain bad data can lead to serious business risk in the form of inaccurate or slow decision making as well as significant inefficiencies of overall business operations,
ERP Risk Categories – Next Steps
Proactively knowing where to look when identifying ERP risk categories is an important part of risk management best practices.
A company is well-served to leverage the experience and discipline of independent council coupled with the tools and techniques that these people bring as they proactively identify, plan for, and mitigate risks throughout the implementation process.
The most successful project teams turn to a specialized partner trained in managing and mitigating these types of risks – a compelling reason to consider the independent ERP selection consultant team fromUltra for your enterprise change initiatives.
Contact the Ultra team to leverage the necessary insight to anticipate and identify risks and to apply the appropriate mitigation actions to keep your project moving forward and your business running smoothly.