The risk of failure is overestimated.
Our long experience – backed up by the results of a client survey we commissioned – shows that more than two-thirds of ERP implementations are considered successful (defined as achieving all goals), roughly one-third are considered partially successful, a tiny, single-digit percentage are described as unsuccessful, and less than 1 in 300 are deemed complete failures.
UPSHOT: It's extremely unlikely that your implementation will fail. And it is very likely that it will achieve all or many of your goals. Which is good news for companies concerned about risk. But we also see that many organizations set the bar for "success" too low – and leave additional performance improvement opportunities and value on the table.
The most important goal is increased efficiency.
Most clients say their No. 1 goal for their ERP implementation is cost savings. Which we know is the result of achieving greater efficiency. Beyond that, the goals vary from organization to organization. But, in general, businesses focus on accelerating and optimizing core business processes and improving business performance. We've done more than 500 projects, and our expert consultants say that the first focus should be on business process efficiency.
UPSHOT: New efficiencies, lower costs and better performance offer exceptional return on investment (ROI), and make it easy to build the business case for a new ERP. It is important to set specific and quantifiable goals, which will require an evaluation of your current state (so you know your starting point) and a vision for your future state (so you know where you want to be).
Most ERP projects are completed on-budget or close to on-budget.
We manage implementation projects every day. And big budget over-runs are rare. In fact, we see that roughly 40% of projects stay on or under budget, and around 35% are completed with less than a 10% overrun (for a variety of reasons). But we've managed hundreds of implementations, and our experience helps us keep projects on-track. Your results may vary.
UPSHOT: There's no shame in admitting that your organization does not have the necessary expertise to effectively manage your ERP implementation. It may pay to utilize an outside resource to supervise your implementation teams, partners and vendors to keep them on-track, keep a close eye on costs and keep the project on-budget.
Changes are the primary cause of budget over-runs.
It's not surprising that when projects exceed their budget, it is scope creep – slow, insidious change to the parameters of the project – that is the No. 1 cause. In fact, changes of all kinds – to the organization, business strategy, technology, resources – are the top reasons for over-runs. But another top cause is simply starting with an unrealistic budget.
UPSHOT: Our implementation experts say it's critical to develop a detailed budget based on sound analysis and comprehensive project planning – one that does not cut corners and avoids wishful thinking. Rigorous planning will help virtually eliminate the need to make unanticipated technology investments and reduce the need for unexpected outside resources. And a deep understanding of your ERP software solution's capabilities is essential to avoiding unplanned-for customizations and integrations.
Management support is the No. 1 key to success.
The secret to realizing a goal-achieving ERP solution is the strong support and unwavering commitment of top executives. This is not debatable. We've seen time and time again how toplevel buy-in drives success. And we've seen how lackluster management support torpedoes implementations by sending the unintentional message that the project is not important, that the difficult changes are unnecessary, and that failure is an option. Don't be that organization.
UPSHOT: Obtaining and maintaining support from upper management can be done in several ways: An orientation session will bring them up to speed on the why and the how, a comprehensive business case will make the bottom-line benefits clear, and including them in regular briefings and updates will let them see progress.
Effective change management is No. 2 key to success.
We know from our long experience that change management is a significant factor in implementations with a positive outcome. In fact, our clients say it's second to management support as a contributor to success. Done right, change management is woven throughout the project, embedded in the methodology and infused in the project team's culture.
UPSHOT: Poor change management (or none) is perhaps the most avoidable cause of project problems (and even failure). The secret to effective change management is to communicate comprehensively and frequently about the project – and to articulate the case for change clearly and consistently. This reiteration and reinforcement helps ensure that all levels of your organization stay focused on the benefits that will come with a modern ERP – and not on the necessary disruption and often uncomfortable changes.
There are dozens of potential reasons for failure.
We often are brought in to fix troubled implementations. And this is what we commonly see: Inadequate focus (and effort) on business process improvement, poor planning and, most critically, a mis-fit between the organization and its processes and the ERP software chosen. Other significant causes include insufficient training, lack of testing, poor change management and resource issues.
UPSHOT: For ERP implementation, the devil is in the details. And there are many deadly sins that must be avoided. Most organizations have neither the in-house knowledge to choose the best software solutions nor the implementation skills required for success. Smart companies seek guidance, help and support from experts.
The average time to payback is 2.5 years.
The majority of ERP projects recoup their cost within three years, with the average at 2.5 years. Good news: Our experience shows that organizations with a focused, highly structured approach to their ERP project often can reach 100% ROI in just two years. Of course, ROI is highly variable depending on an organization's current state, implementation timeline and project cost. So, looking at ROI a different way, it's also good to know that half of companies achieve 100% ROI in their expected timeframe or sooner.
UPSHOT: Chances are your organization does not have the in-house expertise to efficiently manage your complex implementation. Which is okay. Using an implementation partner is the best way to ensure you achieve payback as quickly as possible.
ROI is found in five key areas.
An ERP generates ROI in a number of functional areas. Where do we see it? In 1) new efficiencies from the elimination of manual processes, 2) lower inventory levels, 3) shorter cycle times, 2) reduced IT costs, and 5) increased production efficiency. And, actually, a modern ERP will derive ROI from almost everywhere in the organization.
UPSHOT: It's crucial to measure and understand your current performance so you can recognize improvement and measure ROI. Return comes most directly from more efficient production and resulting reductions in operating, inventory and labor cost.
The entire organization realizes benefits.
Our experience shows that the core benefits of a modern ERP solution enable other benefits throughout the organization. For example, optimized business processes streamline ordering, which increases inventory accuracy. Improved planning capabilities enable more efficient scheduling, which improves on-time delivery. Comprehensive, real-time production data offers deeper analysis, which helps you identify opportunities for quality improvement. Better access to operational, financial and performance data offers easier reporting and new dashboards, which deliver up-to-the-minute insight and data to support critical decisions.
UPSHOT: Modern ERP solutions, implemented correctly, will help you meet your business performance goals and find improvement in virtually every phase of your operation.
We understand your business.
Ultra Consultants is an independent enterprise software consulting firm serving the manufacturing and distribution industries in North America and around the world.
Leveraging our exceptional expertise, deep industry experience, today's best practices and a rigorous, proven methodology, we help your organization realize the benefits of modern enterprise technologies – and see real, bottom-line results.
Our services are built for your industry. We understand your processes and requirements. Our solutions leverage our expertise. We help you choose software to meet your unique needs. Our results reflect our experience. We maximize benefits and minimize risk – and deliver success.
We transform your business.
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