ERP
Implementation
-
The
Traps.
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Neville Turbit - Project Perfect
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ERP implementations are littered with tales of lost millions
and withdrawals after implementation. Many of the most experienced IT organisations
have failed. So what are the secrets? What are the traps? This question could
produce at least a book, and probably a sequel. Here are a few things the
Vendor is not going to tell you about. They are by no means the most important,
but they are missed in many implementations.

ERP
Systems
Most organisations do not understand the costs associated
with an ERP system when they first commence the implementation. The benefits
are usually well understood. The Vendor will make sure of this. The costs
do not surface until well into the implementation - and why should the
Vendor talk to an organisation about the costs and difficulties when they
are trying to make a sale? |
On the surface, there are very attractive reasons for going ERP. Benefits
include:
- A single system to support rather than several small and different systems
- A single applications architecture with limited interfaces
- Access to management information unavailable across a mix of applications
- Access to best practice systems and procedures
- More integration hence lower costs
- More "automation" of tasks Generic Costs and Impacts
The costs and impacts are understandably not played up by the Vendors. Some
of those are:
- Implementation effort will be bigger then ever talked about or even imagined.
We are yet to hear from an organisation who have implemented ahead of schedule
and under budget.
- Because of the richness of functionality, the "toy box effect" can
take over. Users see all the functionality available and suddenly
they want it now. The scope can grow out of control.
- The existing environmental mix between what is done manually and what
is done by the system will swing dramatically after implementation. Many
more tasks will be automated. Automation will significantly reduce the flexibility
of how you operate as a business.
- Users need to become more computer literate. Many see this as personally
challenging - even beyond their ability - and will not cope, or leave the
company.
- The word "Enterprise" in ERP means that whatever happens in one area
has a ripple effect in other areas. Understanding the implications of actions
of one area, on other areas of the company, is not something that happens
overnight. Training tends to focus on how do I do my job. It should also
focus on what are the impacts of my job, in other areas.
-
Near
enough
is
no
longer
good
enough.
Data
integrity
becomes
critical.
The
computer
cannot
make
human
judgments.
If
stock
is
moved,
it
is
no
good
somebody
remembering
where
they
put
it.
The
information
needs
to
be
put
into
the
system
or
there
will
be
a
domino
effect.
E.g.
Stock
is
moved
from
location
A
to
location
B
and
the
information
is
not
put
into
the
system.
The
system
will
tell
someone
to
get
the
material
from
A
and
when
it
is
not
there,
they
have
to
go
looking.
At
the
same
time
it
is
telling
someone
else
to
put
new
material
in
B,
but
B
is
full.
The
first
person
finds
the
original
material
in
B
and
logs
it
into
the
system.
We
now
have
double
the
quantity
in
the
system
again
and
it
doesn't
reorder.
And
so
it
goes
on
and
everyone
is
blaming
the
system.
- ERP systems tend to replace old systems. As such it is a quantum leap
for all areas of the company. It is replacing the trusty Ford with a high
performance Ferrari. This happens at a Technical level as well as a Business
Level. New ways need to be learnt in a very short space of time.
- Things have to be done consistently. No longer are we able to do something
one way in one branch and another way in another branch. The system is going
to determine how we do things in all locations. Even within one location,
special treatment may not be possible any more without changing the configuration
of the system. If the system says you can either have 0, 15, 30 or 60 day
credit terms, you can no longer offer 45 day terms without changing configuration.
If consistency can be implemented, there is good potential for cost savings
as well as getting rid of special arrangements that reduce profit.
Corporate
Culture
All the points above contain technical issues or business issues which can
be managed if they are identified soon enough. Training can show people the
impact of their actions in other areas. QA programs can focus on quality of
data. What most managers who have been through an ERP implementation, will
tell you, is the biggest impact is on "Corporate Culture". It is always underestimated
and never overestimated.
Corporate Culture is a combination of two things.
- The type of people who are employed by a company. Their personal values,
skills, habits etc.
-
The
way
the
organisation
works.
The
focus,
decision
making
process,
attitude
to
staff,
stability,
etc.
Both feed off one another. Job applicants who feel aligned with the way
the organisation works and comfortable with the style of person who interviews
them, will likely get the job, and perpetuate the Culture.
To successfully take on an ERP system, an organisation needs to change it's
"Corporate Culture". · It may need to change from being highly flexible and
not paying a lot of attention to consistency or accuracy, to one of being
almost obsessed with detail. · Of being prepared to have Business Practices
that are actually adhered to rather than just being documented and forgotten.
· People need to change from focusing on turnover to focusing on profit. ERP
makes profit far more measurable down to Department, Customer and Material
level. ·
Staff
need
to
change
their
focus
from
their
own
job,
to
the
whole
organisation.
What
they
do
in
their
area
has
impacts
in
places
they
may
never
have
envisaged.
None
of
this
is
easy,
and
in
many
cases
will
be
unachievable.
Some
people
will
not
be
prepared
to
make
the
change
and
will
either
leave
of
their
own
volition
or
be
asked
to
leave.
This
is
the
cost
of
ERP.
Another dimension to "Cultural Change" is the timeframe in which the change
is to be made. It basically needs to happen over a few days. One week you
can bend all the rules and get away with it; next week the system will not
let you. No matter how much training and preparation takes place, it cannot
prepare many people for reality. That is not to say the preparation should
not take place. The preparation will ease the pain, not take it all away.
The more preparation the less the pain. On the positive side, some people
will take to the system like the proverbial duck to water. These people tend
to be (but not all are) younger, newer employees who have had experience in
other organisations. They know the benefits of a good system and are frustrated
with the current one. They will jump at the chance to make use of the new
technology.

Change
Management
Change Management is about setting expectations that lessen the pain of change.
People involved in a change expect to go from A to B. Perhaps where they are
actually going is to C. Change Management is about getting them used to the
idea that C is the real destination.
To give an example, any new system is bound to have teething problems. If
users expect that all is not going to run smoothly on day 1, and that they
may be working back late for the first week because of problems bedding in
the new system, they are less likely to reject the system when it does go
wrong. On the other hand telling staff that this is going to be a great new
system with no problems can only lead to disappointment and rejection when
bugs appear. As such, change management is measurable.
Measuring attitudinal changes is not a complicated process. Properly managed,
we can see how people feel about the changes over a period of time, and how
they shift in their expectations. The results of money spent on change management
can be seen. Not putting in the effort before implementation, will cost an
organisation after implementation. What is the cost to an organisation of
a system that is forced upon people, and with which they feel little ownership?
They will either sink it, or ensure it never reaches it's potential. Either
way, the organisation will never get the return on investment it imagined.
Other
experiences.
A survey of organisations that have implemented ERP's was carried out recently.
It identified "10 Common Causes of Disaster".
-
Change
Management
and
Training.
This
was
mentioned
as
the
major
problem
with
implementations.
Changing
work
practices
to
fit
the
system
is
a
major
difficulty.
Also
mentioned
were
training
across
modules
and
starting
training
sooner.
-
To
BPR
or
not
to
BPR
-
It
is
difficult
to
draw
the
line
between
changing
Business
Processes
to
suit
the
system
or
retaining
Business
Processes
and
paying
the
cost,
in
dollars
and
time,
to
change
the
system.
As
time
and
cost
squeeze
the
implementation,
the
usual
path
is
to
not
modify
the
system,
but
to
change
the
way
people
work.
This
feeds
back
into
Change
Management
and
Training.
-
Poor
Planning
Planning
covers
several
areas
such
as
having
a
strong
Business
Case,
to
the
availability
of
Users
to
make
decisions
on
configuration,
to
the
investing
in
a
plan
that
captures
all
the
issues
associated
with
implementing
it.
-
Underestimating
IT
skills
As
most
people
are
upgrading
from
old
technology,
the
skills
of
the
staff
need
to
be
upgraded
as
well.
The
upgrade
is
also
going
to
place
significant
demands
on
a
team
who
are
geared
to
maintain
an
old
but
stable
environment.
Usually
this
effort
is
underestimated.
-
Poor
Project
Management
Very
few
organisations
have
the
experience
in
house
to
run
such
a
complex
project
as
implementing
a
large-scale
integrated
solution.
It
usually
requires
outside
contractors
to
come
in
and
manage
such
a
major
exercise.
It
can
be
a
fine
line
between
abdicating
responsibility
and
sharing
responsibility.
Many
consulting
firms
do
a
disservice
to
their
clients
by
not
sharing
the
responsibility.
-
Technology
Trials
The
effort
to
build
interfaces,
change
reports,
customize
the
software
and
convert
the
data
is
normally
underestimated.
To
collect
new
data,
and
clean
the
data
being
converted,
will
also
require
an
effort
that
is
beyond
what
is
normally
expected.
-
Low
Executive
Buy-in
Implementation
projects
need
Senior
Executive
involvement
to
ensure
the
right
participation
mix
of
Business
and
IT,
and
to
resolve
conflicts.
-
Underestimating
Resources
Most
common
budget
blow
outs
are
change
management
and
user
training,
integration
testing
,
process
rework,
report
customisation
and
consulting
fees.
-
Insufficient
Software
Evaluation
This
involves
the
surprises
that
come
out
after
the
software
is
purchased.
Organisations
usually
do
not
do
enough
to
understand
what,
and
how
the
product
works
before
they
sign
on
the
bottom
line.
The
Bleeding
Edge
ERP
is
so
massive
and
integrated
that
reporting
and
linking
to
other
systems
(either
your
own
or
your
customers
and
suppliers)
can
be
much
more
difficult
than
you
expect.
Companies
looking
at
ERP
need
to
examine
how
they
accept
online
feeds
from
a
customer,
or
a
customers'
customer,
and
examine
the
technological
enablers
as
well
as
the
implications
of
these
technologies
inside
of
the
Business.

Summary.
All this leads to a list of likely problems with an ERP system.
- The cost is likely to be underestimated
- The time and effort to implement is likely to be underestimated
- The resourcing from both the Business and IT is likely to be higher than
anticipated
- The level of outside expertise required will be higher than anticipated
- The changes required to Business Processes will be higher than expected.
- Scope control will be more difficult than expected
- There will never be enough training - particularly across different modules
Most important of all, and the single biggest failure point for ERP implementations,
is the need for change management. The need for change management is not likely
to be recognized until it is too late. The changes required to corporate culture
are likely to be grossly underestimated. It is going to be hard enough to
cope with the technical issues without having to address major people issues
as well.
If
you
found
this
interesting
you
might
also
find
our
white
paper
on
the
tricky
pricing
options
that
vendors
can
often
hide
away
until
you
come
to
sign
the
cheque.
See
the
White
Paper
on
Software
Pricing
For more information on Project Management visit www.projectperfect.com.au
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