Clarity of management thought and single-mindedness are key ingredients for succesful ERP implementation
The installation of an ERP system can be a back-breaking task which eats up a company's time and resources and leaves managers physically and mentally drained.
Or it can be a relatively painless undertaking, conferring valuable benefits at a time of rapid and confusing change in the business environment.
The brief history of ERP is littered with plenty of examples of the former and some of the latter. Far from being the oft-touted panacea for business problems, ERP has often failed to deliver real benefits. Most companies are unhappy with the results of their ERP systems, according to PA Consulting.
But this tends in many cases to be the companies' fault, it says in a survey of European users, called Unlocking the value in ERP. They frequently fail to set clear objectives and view ERP as a necessary cost rather than a source of value. What is really needed to make it work is rigorous business analysis, retraining of employees and radically altered work procedures.
At a time of immense pressure to develop e-business operations and react to internet competitors, managers are often tempted to invest in ERP and related systems without stopping to consider fully their underlying business needs. This happened ahead of 2000 as businesses were desperate to make their operations millennium bug-free.
Companies may also disregard the vital question of how ERP can transform their businesses over the long term. Early ERP projects tended to be more concerned with IT aspects than initiating real business change.
"I strongly believe that before wading in with technology, you should have a far more articulate business case than in the past," says Mark Smith, co founder of Partners for Change, a UK-based consultancy.
"You should know what you want from ERP over a number of years. Although events are moving fast, you can then establish what the overall design principles will be and be very clear about the business benefits."
Although first developed before e-business overwhelmed the corporate world, ERP systems are now seen as the backbone for business in the internet age. Not only can they make companies more efficient by automating and linking the accountancy, manufacturing, marketing, sales and other functions, but they can also be extended into customer relationship management (CRM) systems.
"E-business is all about transparency and if you don't have a stable ERP platform, then transparency is a nightmare," says John Everett, a senior partner at Deloitte Consulting. "ERP and CRM have to live together very closely."
By linking the two, companies can use huge flows of customer information to target sales efforts more effectively. But managers need to know what they are looking for to avoid being swamped with data.
"Technology does not run the business," says Peter Brown, client services director at Pagoda Consulting. "It is a staggeringly efficient aid, but it does not run it." ERP systems are also being linked into companies' supply chains, thus providing - in theory, at least - a seamlessly integrated corporate IT network. This "end-to-end" view of the business means an ERP project cannot just be viewed as a one-off effort.
A Deloitte survey, ERP's Second Wave, found that just over half of respondents thought going live with ERP was not the end but the beginning of the process. ERP is now seen as a platform which companies can use to realise immediate efficiencies and cost cuts and then build on to transform their operations.
The ERP vendors themselves - the market leaders being SAP, Oracle, PeopleSoft and J.D. Edwards - have scrambled to adapt their packages for CRM, supply chain management and e-business. But software specialists such as Siebel, i2, Manugistics, Commerce One and Ariba have been stealing some of their thunder.
This means that companies cannot expect all their business needs to be met by one all-embracing IT system. "Why look at Rolls-Royce solutions now, which necessitate a five-to-six-year payback, when you could do something a bit less ambitious and more functional at a quarter of the cost," says Bob Townsley, senior consultant at PA Consulting.
The answer will depend on how thoroughly the company has analysed itself, says Gary Miles, a member of PA's management group. "Top management needs to look down into the organisation and ask what it wants to improve - productivity, customer service or whatever. Then it should analyse the systems, business processes and management hierarchies."
Once a company has decided to invest in a new ERP package, implementation must be kept under clear control. "You need very clear, defined procedures which have to be enforced," says Mark Willis, international project director at Intentia, the Swedish-based ERP vendor.
If local or divisional managers want special features, there has to be a mechanism for deciding on these. It is vital to identify the scope of a project, have senior management fully involved and communicate the programme to employees, he adds.
One recent big ERP project was Intentia's Pounds 4.3m contract to provide a system for the European operations of Newell Rubbermaid, the US consumer goods group, across 14 countries. This was to link the financial, manufacturing and distribution activities, while also allowing for future acquisitions.
John Avampato, head of corporate information services at Newell, says it was important to keep the project scope within the defined limits and not be side tracked by special requests. Too many "have-to-have" requests by local managers would have lengthened the project and increased its costs.
"Keep it simple" is his advice to would-be ERP implementers. Simplicity does not seem to be an obvious ERP attribute. Yet for ERP projects to succeed, clarity of management thought and single- mindedness in implementation are essential. So, too, are flexibility and a willingness to improvise. No wonder the ERP sector has an army of consultants to back up a handful of vendors.
Copyright (C) Financial Times Ltd, 2000
