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While ERP can offer tremendous business value, the potential obstacles and risks associated with executing a major ERP project can often outweigh the benefits. In fact, 65 percent of enterprise software implementations fail to meet project expectations around duration, cost and intended benefits.1 A recent report from Panorama Consulting Group cited that 61 percent of ERP projects take longer than expected, 74 percent exceed budget and 48 percent realize less than half of intended benefits.2
In most cases, ERP projects fail because companies do not budget adequate time, money, human capital or proper external consulting support. Further, they don’t properly plan for change, do not complete enough testing, nor do they offer suitable training. However, despite low success rates, an ERP implementation, when done correctly, can build the foundation for future growth, improved productivity and significant cost savings. This paper addresses five critical areas that are often overlooked or underserved, but that can make or break the success of an ERP initiative.
The ERP services market is estimated at over $10 billion. The growth can be attributed to a desire to increase revenue and find new value from current IT investments. Additionally, companies are focused on governance and transparency, which had fueled a renewed interest in ERP projects.
Workforce planning is a critical first step toward meeting ERP goals. Within the early planning stages, you should assess your team to see what resources you have in house, what you need full time and what you’ll need on a contingent basis. Planning for the people and not just the technical aspects of the project can mitigate many of the risks inherent to ERP initiatives.
The following steps can be taken to assess your organization’s short- and long-term needs for an ERP implementation:
Poor data quality is one of the biggest inhibitors to successful ERP implementations, and new ERP systems will only be as good as the data that goes into them. The Data Warehousing Institute estimates that data quality problems cost U.S. businesses more than $600 billion a year.4 Further, Larry English, author and information expert, says the cost of bad data may be 10 to 25 percent of total company revenue.5 Companies that fail to accurately assess the quality of their data are more likely to underestimate the cost of an ERP project. Even clean data may demand some overhaul to match process modifications required by the ERP implementation.
The following steps can be taken toward understanding your organization’s data quality:
Companies that fail to accurately assess the quality of their data are more likely to underestimate the cost of an ERP project.
QA and testing is another major hidden cost when it comes to ERP. No one is better equipped to conduct testing than internal business users, so leverage your internal QA group but be aware of competing priorities. You may need to supplement that team to ensure that productivity on other projects does not suffer.
The following steps can be taken toward successful QA and testing:
Training is often overlooked and underfunded. Lack of investment in end-user training and change management programs are a major reason for ERP failures. Gartner states “that companies that budget less than 13 percent of their implementation costs for training are three times more likely than companies that spend 17 percent or more to see their ERP projects run overtime and over budget.” 6
The following steps can be taken toward proper training:
Good processes can help create a smooth transition to a new ERP environment. You must maintain your critical production systems until they are ultimately replaced by a new ERP system.
The following steps can be taken toward managing legacy applications through retirement:
Lack of investment in end-user training and change management programs are a major reason for ERP failures.
ERP projects are complex initiatives that touch multiple parts of organizations. To successfully meet project milestones and reap the benefits of a successful implementation, organizations must ensure that they have accounted for the potential gaps that can cause delays, add costs and potentially cause project failure. Proper workforce planning is a critical first step toward project success. Further, cleaning and preserving data ensures that accurate information enters the new system. Sound QA and testing methodologies allow ERP systems to work correctly at launch, and end user training enables your workforce to utilize the full capabilities of the system. Finally, sunsetting legacy applications in a methodical way allows you to utilize them until they are replaced by the new ERP system. Focusing on these actions and ensuring that you have the right workforce in place to meet these critical requirements are important steps toward a successful ERP implementation.
1 “Lessons from ERP implementation failures”, Focus Research, June 10, 2010
2 “2011 ERP Report”, Panorama Consulting Group, 2011
3 “2011 ERP Report”, Panorama Consulting Group, 2011
4 “Data Quality and the Bottom Line”, The Data Warehousing Institute (TDWI), 2002
5 “Bad Data, Bad Decisions”, CoreTech Revolution, February 23, 2011
6 “ERP Support: Organizational frameworks for ERP/Business Application Training”, Gartner, November 9, 2010