Enterprise Resource Planning Viewpoint – 10 perspectives on ERP
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The Enterprise Resource Planning (ERP) domain is an area that is under constant debate and review within many organisations. Reasons for the debate vary from pragmatic ones, such as cost and effectiveness of the solution, to more strategic considerations, such as the need to be more flexible in key processes to meet changing customer needs.
Some organisations have reached a point where ERP has become a block of concrete, where changes are expensive and extremely drawn out. What was sold as an 'easy to configure' standard solution has become almost new 'legacy'. Other organisations seem to be successful. What is it that makes the difference? And what challenges do you face?
PA Consulting Group has published ERP Viewpoint – a summary of observations and insights regarding design, implementation and use of ERP applications, seen through the eyes of experienced advisors who lead ERP programmes as a profession, or operate as a trusted advisor to management to make the choices that are right for them. The ERP Viewpoint has been written for both business and IT decision makers, describing the ERP challenge from ten different perspectives:
- Five perspectives that support 'creating the framework': business, processes, data, applications and infrastructure
- Five perspectives that support 'engaging the people': leadership, benefits, change, implementation and competencies
The combination of creating the right framework for the business and engaging people in the right manner will allow your organisation to create a successful project and capture the benefits.
Here is a snapshot of some of our observations, covered more in depth in our ERP Viewpoint:
The Business Perspective – To understand why you earn money is key before you spend it on ERP
Why do you want ERP? And what is your tactical approach towards implementing it? Do you want to standardise globally? Or do you leave local freedom? Why do you need ERP then? Would a data solution not be cheaper and more effective? Or are you fed up with all regional discussions and want to use ERP to settle it for once and for all, using ERP as the storm ram?
Often, questions are being asked and answered on a one-dimensional level. Components of a solution, like standardisation, become a goal in itself. Whilst the key question is not being answered: why do we earn money with our business and how would standardisation help us?
The Process Perspective – Process standardisation: dream or nightmare?
ERP holds the promise of standardising business processes. What would be more beautiful than having the same lean processes, worldwide? Effective in doing the right thing, efficient in the way these are executed. Many companies have tried, and found there are a few challenges. When there is no strong business leadership that is willing and able to enforce standardisation, don't go the standardisation route with your ERP project. In the best case, it will cost you a lot of money without delivering benefits, and it may even fail completely.
The Benefits Perspective – ERP benefits rarely realised
There are many reasons to implement ERP, usually reflected in a positive business case with an anticipated pay-back within 5 years. In real life, 80% of ERP projects do not achieve this, or it is not measured. This figure is historically not getting better, although you might expect that 30 years of ERP would have led to some improvements. Still millions of Euros are spent on implementing ERP, and maintaining it. So what is happening and what can we learn from that? Is reality beating plans time after time, is the plan wrong or does the business case mechanism not work? The most serious mistake you can make is to start off on an ambitious full-company standardisation project without a true understanding of the actual business and revenue model behind it, the way governance is organised, and possible changes ahead.
The Change Perspective – When you think 'change', you're too late
Is change a necessary evil that you cannot do without to cope with resistance? Or is it an opportunity to create future perspectives and energy? Do you lead or respond? When looking back at 'completed' projects, you can easily tell if change was explicitly addressed in the project. A recurring discussion amongst executives: we spent a lot of money on ERP, only to find out that we now have a replica of our old system that is both more complex and more expensive. This has to do with change and how you manage change, from very early on in the project.