Good News / Bad News. The good news is that selecting new Enterprise Resource Planning (ERP) software can help your firm compete more effectively. The bad news is that 50% – 70% of ERP software selection projects fail to meet their objectives. Some fail altogether.
Why is the failure rate so distressingly high? Most ERP software selection projects fail to meet their objectives simply because project managers and business executives completely underestimate the time required to get it right. People decide that their current system needs to be replaced and they launch a project thinking that the decision can be made by the end of the next month.
If you decide that your current business management system needs to be replaced, you have already fallen into a deep pot-hole from which you may not recover. Sometimes it’s best to step back and start over completely. Take whatever time you need to lay the foundation for an ERP selection project that actually stands a chance of success. Time and lack of knowledge are the two underlying causes of project failure.
This article hasn’t been designed to cover the entire ERP software selection process. Our objective here is introducing you to the process and helping you understand how you can organize your preliminary discussions along the most effective lines (i.e. learn enough about the process so you can avoid going over a cliff). Once you have acquired the knowledge we will be discussing in the following sections, you can then decide whether you really need to replace your current ERP software system. If you do make this decision, you can then move forward with the knowledge necessary to carry this project to a successful conclusion.
Open a dialog with everyone who will touch or be touched by the new ERP software system.
If an ERP software selection project is going to stand any chance of complete success, everyone has to be involved in the project from the very beginning and know that their contribution is valued. It goes without saying that executives and line of business managers must become the driving force behind the project, but people who are transaction oriented (sales order entry, shipping, manufacturing planning, etc.) are the keys to your success once the new ERP software system has been fully implemented.
People who work in the trenches are the ones who actually have the day-to-day responsibility to assure all goes well. If the new ERP software system does not give them an opportunity to complete their tasks efficiently, then the efficiency of the entire business management system will be significantly compromised.
These same task oriented employees probably know more about what’s required in the new system in terms of functionality. Managers and executives must concentrate on business decision making, but the critical day-to-day business processes are what’s going to make a firm efficient. The knowledge and experience of transaction focused employees must be recognized and utilized. If these key employees do not feel as though they are important, they may not wish to contribute anything to the firm’s success, much less its ERP software success?
Identify opportunities for improvement.
Once you have come to a consensus regarding the need to replace your current ERP software system, don’t just launch a formal selection project. It’s way too early to do that.
Keep the tone of your discussions informal. All you want to do at this point in time is to address two key issues.
- What works and doesn’t work? Ask people within your organization to identify and describe software driven processes that need to be improved. Once the formal ERP software selection project has been launched, this somewhat generalized analysis will become a detailed list of functional requirements.
- What are the key success objectives for the firm itself? Where is the company going in the future? In which markets is the firm going to compete? What does the firm need to do very well in order to compete in these markets effectively? If you don’t define your business objectives, how can you possibly find ERP software that will help you achieve these objectives?
Find a partner with whom you can create an effective business relationship.
Since most people don’t fully understand how to organize and manage an ERP software selection project, nor will they understand the full set of capabilities of today’s ERP software, nor will they understand the technical requirements of today’s ERP software, you need to tap into the deep well of knowledge possessed by others.
Since we will touch on this key ERP software selection requirement in the next several sections, let me make a critical point. ERP software resellers know more about today’s ERP software than you could learn in a year. Given this, you need to find a firm that is willing to educate you so you can make the right project decisions at the right time.
A good and well respected ERP reseller doesn’t want to sell you software. You may feel that’s a strange comment, but it’s absolutely true. A well respected ERP partner’s primary objective is to teach you how to make the right decision, and then allow you to “buy” what they recommend. However, you need someone who is willing to become your full business partner, not just during the software selection project, but for as long as you utilize the product you are going to purchase from them. Analyze first a reseller’s ability to meet your business partnership requirements. If they just want to sell you software, walk away. Find a reseller who fully understands what you want.
Acquire the deep knowledge required to organize and manage an ERP software selection project.
It is highly unlikely that you will know how to effectively organize and manage an ERP software selection project. How could you possibly know what to do when you have never done this before or have not done it for five years or more?
Ask yourself one critical question. “Do I know what to do?” Be brutally honest with yourself. If you don’t know what to do (and most of you will not), educate yourself or bring someone in who possesses the knowledge you need.
Unbiased software selection consultants can give you the knowledge you need and also act as the co-chair of your selection committee. We’ve seen some well-meaning consultants, but in the long run, how can an individual consultant know the internal ins and outs of any software package. For the most part, there aren’t any unbiased consultants.
We believe the best alternate option is to find a reseller who understands the fact that you are not knowledgeable regarding software selection and will give you the knowledge you so desperately need.
Regardless of which knowledge source you tap into you must acquire as much ERP software selection knowledge as possible. Search for articles on the Internet. Attend seminars and conferences. Talk to people who have been through this process recently. The worst thing you can do is fail to educate yourself.
If you leave the project up to others because they know more, you will by default also leave the decision making up to others and you must never let that happen. You and you alone must make the final purchase decision and accept responsibility for the consequences of this final decision.
Understand what’s possible with today’s ERP software.
There is no comparison between today’s ERP systems and your own ERP software system with yesterday’s functionality. While you certainly don’t want to become a clone of the products you will be investigating, you do need to invest a lot of time reviewing products that “might” be of interest.
Remember this is just basic research designed to increase your knowledge regarding functional possibilities. If you don’t know what’s possible, how can you possibly identify the specific functionality you need to become more competitive?
Identify products that might be of interest. Then contact local resellers. Tell them bluntly that you are not going to make a decision today. Your objective here is education. You need to learn more about how to select ERP software and you need to understand the capabilities of the product(s) the reseller supports.
If the reseller tries to immediately launch a sales pitch, this may not be a suitable business partner. You need to learn and the reseller needs to teach before you will be in a position to buy anything.
There is one additional selection criteria you need to evaluate. If you operate in a specific industry niche, the product you purchase must offer functionality specifically designed for that industry. In addition the reseller should have some degree of expertise in that industry.
Creating an effective business relationship with a reseller is one of the keys to the success of your ERP software selection project.
- The reseller must demonstrate quite clearly that they want to help you educate yourself.
- The reseller must understand your industry and what it takes to be successful.
- The reseller must help you understand what functionality might be appropriate for you, but not try to sell you every feature their product supports.
- The product the reseller supports must meet you functional requirements without overwhelming you and your employees.
Create a solid foundation for business excellence.
If your firm is not organized for success, it really doesn’t make any difference what product you select. It’s a bit like installing a 450 horse power engine in a 1950’s vintage car. It might run very fast for one lap, but the 450 horsepower could potentially rip it apart, if it’s not designed for that much horsepower.
As you are discussing the possibility of replacing your current ERP system, ask yourself one critical question. “Do we know how to run our business efficiently and effectively”? The purchase of a new ERP software system is an ideal opportunity to figuratively take your business apart and reassemble it so that everything (software, people and processes) contributes to greater success.
You don’t have to undertake the classic (and complex) Business Process Improvement. Instead spend some meaningful time with executives and line-of-business managers discussing business improvement. Identify the key areas that need to be improved and build a picture of your “new” firm that includes improved business operations as well as improved software functionality. It really makes no sense to search for a new ERP system when you don’t know how you are going to operate in the future.
Create a blueprint for business decision making success.
Transaction oriented ERP software functionality helps people “get the work done”, but that’s just half the picture. Executives and line of business managers need information to make sound business decisions and that’s where you need to spend almost as much time as you are going to spend defining your functional requirements.
If it’s been awhile since you had any contact with today’s ERP software systems, the whole business reporting landscape has changed. Row and column reports were the norm until just a few years ago. Now the emphasis is on business intelligence (BI) and key performance indicators (KPIs).
Business Intelligence extracts complex information from your database and helps you as an example, see patterns in customer buying habits. If you can see these underlying patterns, you can become more proactive in your competitive practices.
Key Performance Indicators (KPIs) can be utilized to help firms become more proactive by presenting information in a graphical format and creating dashboards for specific decision makers. Row and column reports paint a picture of a business condition at a single point in time. That’s their nature, but this really doesn’t help you make decisions in a timely manner.
Graphical presentations of business indicators allow people to see a pattern over time (say inventory turns over the past 12 months). Now people can “see” at a glance where inventory turns have been, where it is now and even where it appears to be heading. If people can see the pattern of a key indicator, then they can be more proactive and make a decision sooner than they could have in the past.
As we discussed in the section regarding learning from resellers regarding functional possibilities, you can and should spend time with resellers so you can learn how this concept works and how it can be applied in your business to your advantage.
If you have not had any recent experience with today’s ERP software systems, this knowledge deficit may prove to be a serious hurdle to your success. Before you can even begin to launch a formal ERP software selection project, you have to increase your knowledge. Learn as much as you can about the selection process. If possible, learn from others who have gone through an ERP implementation process. Talk to people in your industry. Talk to your competition.
Most importantly talk to product resellers. They know what their products do and hopefully are willing to help you understand how to organize and control your project and how their products can help you compete more effectively. If a reseller just wants to “sell” you something, they are not good business partner candidates. Find a reseller who knows what they are doing and is willing to become your mentor now and your business partner in the future.