ERP Software

ERP Customization's make ROI's a futile exercise

Technology selection is rarely the cause of costly business IT project failures, according to an in-depth Nucleus Research study of thousands of IT projects in areas such as ERP software , CRM, supply chain, integration, collaboration and e-commerce. The industry analysts just published a short research note on the top five IT project planning and management mistakes that cost companies dearly, along with practical advice on avoiding them.
   

"Selecting the right solution is only the first step to achieving a positive ROI from technology," said Ian Campbell, CEO of Nucleus Research. "In analyzing the lessons learned from thousands of companies about how best to achieve project success we've found five common mistakes companies make."
Key findings in the research include the following:

Too much customization rarely increases usability but will increase both initial and ongoing costs.
Skimping on training often reduces user adoption, limiting ROI.
While initial management support of a project is important, management's enthusiastic use of a new technology is critical to achieving success after the deployment.
Keep an even tighter reign on consulting costs, which can quickly turn a project with a positive ROI towards the negative.
The end of a project is not when it's deployed but rather when it's being effectively used, which can be months or years later.

"Striking the right balance between business requirements, technology capabilities, and realistic employee adoption rates goes a long way toward ensuring the success of any IT project," said Kathy Quirk, research manager at Nucleus Research.

About the market research report

The research note, "Avoiding the Top Five IT Mistakes", provides IT and business managers objective, insightful advice on how to avoid project management and planning missteps. Nucleus analysts clearly outline how companies can drive effective adoption, rein in costs, and take advantage of additional ROI opportunities.

ERP ROI info

Selecting your ERP Partner

"Many vendors don't offer the customer a realistic perspective of what is required. Yet to get the best benefits, the customer and vendor must devote the time to selecting and implementing an ERP software solution in line with the business," said Craig Such, managing director of Access Supply Chain.

According to Craig Such, managing director of Access Supply Chain, it's when an end user has failed to define exactly what is required from a solution in order to meet the precise needs of the business -- and then expects the software to provide all the answers anyway.
A vital role any vendor should play is to demonstrate fully how a solution will fulfill business expectations. "In some cases, a vendor may underplay the amount of planning and resource necessary, just to get the order," says Such. "Unfortunately, the user will get a system that neither achieves his immediate goals, nor supports the business going forward."

Such says the biggest cost any user faces when purchasing an ERP software system is the one least likely to be mentioned: the time it takes to get it right and the potential disruption. "Many vendors don't offer the customer a realistic perspective of what is required. Yet to get the best benefits, the customer and vendor must devote the time to selecting and implementing an ERP solution in line with the business."

For Access Supply Chain, the equation for ERP software excellence is simple -- you can't get out what hasn't been put in. Here are the key elements of its blueprint for success:

Clear requirements are key to a solution. Define these for every part of the business, particularly with an eye to the future and your changing needs.

Select a solution based on product functionality and implementation resources and techniques. ERP software is not about buying software or services: it is a solution. A user must select a vendor who can demonstrate that its system can achieve clearly articulated business objectives, and that there is a clear understanding of the business and its needs.

Follow a proven implementation methodology for example, Prince2. Having selected a system, the next task is to make sure it is delivered on-time and to budget. In very few instances is this clearly defined, says Such. "Prince2 is a well recognized and respected standard, in terms both of implementation and methodology, that can be applied equally well to projects of any size. It ensures the project scope is clearly defined -- who is responsible for what, when and how -- with tight procedures built in, so the erp software project is constantly reviewed at every stage before sign-off."

Go for a fully integrated solution. Information entered in one area of the business must flow right through the organization, so there is no duplication; nor should there be any software integration  issues, which can be a common occurrence.

You'll get better support direct from a localised author. ERP software can be complex and require specialist support. Resellers that lack real expertise can sometimes offer only diluted levels of support, while products from overseas may not be in line with the latest legislative changes, such as Intrastat or waste packaging regulations.

Ensure that you are shown how the solution will address your needs. Too often, a vendor will assure a customer that its solution can fulfill all of their requirements, without actually providing the evidence. seeing is believing, so ensure it is standard software not bespoke software for the demonstration.

Be sure that quotations are broken down into detail and compare like for like. All modules involved need to be listed, such as manufacturing orders, as well as the service days and project stages. Omissions can create problems later on and prove costly to remedy. Also, users need to ensure that software upgrades are included and not charged as an extra.

Beware of solutions that claim they need very little implementation. An ERP software solution is only as good as how well it is implemented. Failure to scope an implementation adequately can mean only a 75% fit -- with the 'missing' 25% being what delivers greatest benefit to the business.

Insist on a detailed presentation of how the software can fit your business. Regardless of what people say, comparable solutions will take a similar number of implementation and training days. A detailed breakdown of what is involved is critical.

And Such adds: "Finally, you can't just run the solution -- you have to pilot and prove it, testing out all potential issues before you go live. You can't afford to skimp on training: you must invest in your users up front if you want the right payback. Implementing ERP software properly takes time, resource and good planning. But it all seems worthwhile when that vital report you need, that used to take a day and half to pull together, is now delivered at the press of a button."

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ERP Software guide

ERP implementation tips

An enterprise resource planning (ERP) software project can be daunting for first-timers or veterans handling a migration. Get started on the right foot with the top 20 ERP implementation tips from Linux users, consultants and vendors.

Planning

1. Know your goals for your ERP implementation. Choose the product that promises to meet those goals and put measurement tools and processes in place to gauge your success, advises Lance Williamson, engineer, Engenio Information Technologies, Inc., Wichita, Kan. In particular, he said, set goals for performance, response time and downtime.

2. Don't do any project without a plan, particularly an ERP project which touches almost every part of your organization, said Bernard Golden, CEO, Navica Inc., a consulting firm in San Carlos, Calif. Create process with regular milestones and participation from affected organizations. And be sure to test, test, test, all the way through. "All of these things seem like 'nice-to-haves' rather than critical elements in a project, but can make the overall project much more successful," Golden explained.

3. Involve users in your ERP project planning phase, said Andy Klee, president of Klee Associates, Inc., a consulting firm in Cedaredge, Colo. "The software is not going to do you much good if you don't have employee buy-in," he added.

4. Don't do the planning and implementation alone if you don't have the in-house skills to make it happen, said Jorg Janke, president of open source ERP vendor Compiere Inc. in Portland, Ore. "Determining which options and features to use requires experience," he said. If the in-house team doesn't have that experience, Janke advises, find a local ERP expert who is trustworthy and who collaborates well with your team.

5. Be realistic in your cost projections. Double the consulting firm's estimate, Klee said. "I hardly ever hear of these projects coming in under the estimate," he explained. Also, be realistic about training costs. "Even at the largest level, companies underestimate the training costs," he said.

6. Don't keep adding to your project. In the planning and evaluation stage, people see the capabilities of products and want to use each new one they discover. "Commit to what you want to do initially," said Jon Reed, a Klee Associates consultant. "Get your return on investment and then expand. Otherwise, you'll have a never-ending and unsuccessful project."

To host or not to host?

7. If you'd prefer the hosting model for your ERP, then scrutinize your application service provider (ASP) well, says Janke. First of all, you must be able to trust this ASP with your data. "Find out if that hosting company provides cookie cutter solutions or can customize the ERP suite to fit your needs," he advises. "Many outsourcers don't know enough about ERP to customize it. Then again, if a cookie cutter solution is okay for you, then fine, use an outsourcer and you don't have to take care of your ERP."

8. Follow the money. "Hosting should take out a lot of internal costs of labor," says Frank Prestipino, vice president of Oracle's global enterprise applications strategy.. "It should save you money…by spreading payments over a period of time. You should be paying less over a period of time for hosting than you would do it yourself." The hoster should provide this analysis. If you're not paying less, don't use an ASP, he said.

Evaluation

9. Choose an ERP package that is industry-standards based. "You don't want to find yourself out on a limb with customers who can't interact with your proprietary, out-of-standard implementation," says Oracle's Prestipino.

10. Look closely at maintenance costs. "You can pay a great purchase price and find that it costs a fortune to maintain," Prestipino said.

11. Evaluate your processes and decide if changing them to fit a particular ERP suite would be beneficial, Klee suggested. "Either you're looking for customization or going for out-of-the-box," he says. "With the latter, people have to change how they do things in order to conform to the package. That may work for a company that needs to make changes anyway. Often, however, it's better to choose a suite that can conform to your needs."

12. Discuss a vendor's stability with the vendor reps and outside experts. Find out if the company is losing market share, which might make it a candidate for a takeover or failure, Pestipino said.

13. "Whenever a company and its ERP package are acquired, it's not usually good news for the customer," Klee said. "Often, the vendor is buying the client base and is not that interested in the software itself. Instead, they'll try to get clients to move to their own platform." In this situation, customers may have to migrate without good business reasons.

ERP information from techtarget