Keep your project team on track.
Craig Zampa, VP of Technology Solutions for TNG Worldwide, a supplier of beauty products to spas and salons, probably cursed his luck when I ended up sitting next to him at breakfast at the Midmarket CIO Forum in November. Like many folks, I've heard my share of ERP implementation horror stories. Just the night before I met Zampa, another executive at the event had shared a real doozy with me. So when I learned Zampa had implemented an SAP ERP system in eight months, I couldn't resist pumping him with many questions about his project. His coffee got cold as he patiently answered each one.
Also at the table were several folks from EntryPoint Consulting, Zampa's partner in the deployment, who told me for every ERP horror story there were many, many less-publicized successes. I got all of them to agree to a later interview with me so I could learn more about ERP success factors.
Look for a system that addresses as many of your business processes and workflows as possible. This should cut down on the amount of customization you need.
Choose a system with an open architecture, one that can often be modified with relatively simple configuration changes rather than code rewrites.
Look for a system that is popular with developers, so you'll have plenty of choices if/when customization that can't be done in-house is required. In switching from a proprietary tier-2 ERP to SAP, Zampa said the bidding process for development work became much more competitive, yielding some $650,000 in savings in the first year.
Take the opportunity to closely evaluate your processes. You may find many of them are unique-but don't need to be. A goal of TNG Worldwide's ERP deployment was realigning its business processes into a best practices model. "... We wanted to look at a best practice workflow and figuring out how closely we could mirror it, determining whether some of our processes were actually creating competitive advantage or just built as conveniences over the years," Zampa said.
Despite the obvious advantages of keeping customization to a minimum, more companies are customizing their ERP systems. As Eric Kimberling writes on the Panorama Consulting Group blog, the company's survey of nearly 200 ERP implementations across the globe shows the number of companies that adopted "vanilla" ERP software with no customization fell from 28 percent in 2009 to 15 percent in 2010.
Unrealistic expectations. He writes: "... Every CIO wants to hear that their ERP vendor will allow them to implement with ease, at a low cost, and with minimal risk. However, companies are overly optimistic about their ability to do this, which leads to problems later on." It's worth noting that many sales pitches downplay the need for customization. When I wrote about Waste Management's $100 million lawsuit against SAP, I mentioned SAP's alleged promise that the system in question was "an out-of-the-box solution that would meet Waste Management's needs without any customization or enhancements." I'm no fan of deception, but sales people are tasked with making sales. I questioned why a company that had done any kind of research on ERP would accept this statement at face value.
More complexity. Writes Kimberling: "Mergers and acquisitions are increasing, staffs are more lean, and companies are starting to grow again, all of which put pressure on the simplified vanilla ERP software model. After all, if your organization is growing and trying to outperform the competition, you probably don't want to use generic software that everyone else is using, except perhaps in non-differentiating areas such as accounting or procurement."
Kimberling urges companies not to customize their ERP systems simply because others are. But do "realize that most companies do in fact have to customize their software to some degree, even with pre-configured workflows and best practices." Enter into an ERP project with "realistic expectations" for customization and plan and budget accordingly, he advises.
Through economic necessity, the ERP buyer community has become much more savvy about the architecture and technology that underpins enterprise software. Businesses aren't defaulting to one of the Big ERP giants based on initial deployment costs or a perceived mega-spectrum of capabilities from one source. CIOs and CFOs in particular have been burned time and again by solutions that have locked them into spending millions over budget to support inevitable but unanticipated change.
Customization is the key to ERP success. Even if a company doesnt have customized processes to map to, which is rare, there is no saying that it wont in the future or that the system wont need to adapt. Many of todays ERP systems are not providing businesses with the architectural agility necessary to support change. In a survey conducted by UNIT4 and IDC, 214 executives from mid-sized and large businesses across different sectors, stated that the inability to easily modify their ERP system is disrupting their businesses by delaying product launches, slowing decision making and delaying acquisitions and other activities that ultimately cost them between $10M and $500M in lost opportunities. Companies operating in industries that are highly regulated, consolidating via M&A activity, frequently replacing leaders or making other important changes, need to adjust their ERP selection criteria appropriately when choosing new systems.