Time and money

EARLIER THIS YEAR, ERP consulting firm Panorama Consulting Group wrote a report surveying the current state of ERP worldwide. Most of the respondents are from North America (31%) and Asia Pacific (31%). However, Africa represented 8%.

Keith Fenner, VP of sales for Softline Accpac, agrees. "Not realising the anticipated return on investment, extending the implementation schedule and go-live date far beyond planned, going over budget by a large amount, interrupting the organisation so much that business suffers, stopping production and/or not delivering products to customers are major issues."

TICK TOCK

The study found an average of 35.5% ERP implementations take longer than expected, and 51.4% of ERP projects exceed their budgets.

Swati Desai, country manager for HansaWorld SA, says in her experience, this is accurate. "Simply put, resellers lie," she says. "They are always tempted to under-quote on both time and cost just to get the deal." However, she says, customers usually expect this.

Another reason for behind-schedule ERP implementations is that often, estimating the time the implementation will take is difficult. "In the sales process, there is insufficient time and details available to determine the actual work involved in the implementation."

Other reasons she gives for implementations exceeding time and budget is a lack of a strong project manager from the customer side and a poor project plan. Lack of internal IT resources at the customer site and poor communication are also reasons for a project not going smoothly.

Kevin Pentecost, Epicor territory manager for Africa, says the Panorama statistics are similar to his experience as well. "In fact, they may even be slightly higher due to the competitiveness of the market."

He elaborates: "ERP vendors in SA in general are cutting costs to remain competitive and win deals, having a negative effect on implementation times. Successful implementation projects are built on a strong partnership between vendor and customer. That partnership must be especially strong at an operational level, where day-to-day decisions, execution and communication directly affect the project budget and timeline. If this partnership is endangered by the vendor trying to cut corners during the implementation due to underestimating or under-quoting for the time needed, the chances of failure are much higher." Jaco Stoltz, CEO of Strategix, says these escalations in time and money for a project "can be traced directly to managing customer expectations and a lack of understanding of product capability." Strategix, he says, has come across many organisations that over-promise and under-deliver.

He also says many companies go over budget due to scope creep. Companies initially decide on certain services, then decide they`d like more.

Marketos says, in his experience, the average duration of an implementation is three months, and costs about R400 000.

KA-CHING

Pentecost says it takes approximately one to two years for a company to see full return on investment (ROI) for its ERP implementation. "It`s important to stress that getting the right ROI should be part of the project from the beginning, not just an afterthought. Once the ROI measurements are in place, a company can also better plan for the next phases of its growth. Deploying a business intelligence tool that allows you to monitor the measures and key performance indicators is also critical to ROI success."

Marketos agrees that ROI shouldn`t take longer than two years to realise. "The only reason one invests in a new system is to get a quick ROI. Otherwise, what`s the point? It`s a lot of hard work to put a new ERP system in, and unless you get a return fairly quickly, it`s not really worth the effort. Then you might as well spend the money in other places in the business."

He says anything between six months and two years is normal. "The ROI comes in different ways. Often, it allows companies to grow without taking on additional staff, or to have better customer service and, therefore, more repeat business. There are lots of areas where they can get return on investment especially by moving from multiple fragmented systems, which a lot of growing companies end up with, to a single integrated ERP solution."

SOLUTIONS

"The shared benefits programme fosters a co-operative relationship because it builds a common purpose into the engagement by creating incentives for both parties. Upon project completion, if the project is under budget, the savings are shared 50/50. Conversely, if the project runs over budget, the customer is billed only 50% of the contracted professional services rates for all over-budget costs. It`s a simple, but effective solution," he concludes.

Fenner says one way to make sure your project meets expectations is to understand the factors that can interfere with the project, and which can lead to success.

"Knowing the common reasons ERP implementations fall short and how to avoid them can save you valuable time and money and help make your project a success."

Two pitfalls Fenner mentions are not knowing the purpose of an ERP system and a lack of commitment from top management. "Many companies go through ERP implementations without a step-by-step roadmap, making it difficult to achieve continuous improvement. It is also a mistake not to analyse existing business processes and identify opportunities for organisational improvement, expecting the software to cover up weaknesses."

Fenner also says there is a high likelihood of failure if the company executives are not committed to the system, or actively participate. He says top management must view the ERP implementation as a transformation of the way the company does business.

Other reasons projects fail are: poor selection of software, poor project management, inaccurate data, ignoring user reluctance for new applications, IT staff implementation issues and unrealistic expectations.

"By being aware of the reasons implementations fail and knowing what best practices can be employed to help ensure success, companies can save valuable time and money and achieve a higher return on investment," he says.

Marketos believes the key to a successful implementation is the right partner. "Most ERP solutions have been around for a long time, and a good partner can make any of those work," he states. He says it`s critical to find a partner with the right skills but also with a culture fit.

Ownership of the system is also an issue, says Marketos. "To me, the biggest red flag is when a client talks about `your system`. You have to look at it as a partnership, and you have to take ownership."

Pentecost adds that an often-overlooked problem is user education. "End-user adoption is critical to a successful software implementation and its ongoing use. Without proficient users, the software will be perceived as unusable, too complex and ultimately, the wrong solution... With only a little planning and preparation, this can be completely avoided."

Desai says a mistake companies often make is to put all their faith in best practices. "Slavish belief in them will often lead you down the wrong path." As a solution, she suggests best practices based on the company`s specific software, rather than general best practices that may not always apply "There are many ways to do things correctly, but each software feature that offers one method should be a software-based best practice."

According to Stoltz, one important thing to remember about ERP systems is to focus on people. "Companies excel when they empower their people to drive the business forward. Strategies, organisation, motivation, and leadership all set the stage for business success. But to see results, you also have to give your people the right tools, information, and opportunities - because success ultimately comes down to your people."