On the Cover
ERP’s ups and downs
Wednesday, 23 May 2012 00:00
Written by Ilva Pieterse
While ERP implementations are increasingly completed on time and within budget, companies still struggle with change management and executive buy-in
Panorama Consulting Solutions’ recent ERP Report (2012) showed improved cost and time management during enterprise resource planning (ERP) implementations last year, compared to 2010. According to the report, in 2011, 56% of ERP implementations went over budget (compared to 74% in 2010), and 54% went over schedule (compared to 61% in 2010). Ninety-four percent of respondents indicated that they realised some business benefits from their ERP systems, and half realised benefi ts in excess of 50% (an increase of 8% from 2010).
According to Keith Fenner, VP of Sales for Africa at Softline Accpac and Sage MMD Africa, ERP solution providers are addressing the industry challenges concerning timeframe and budget expectations typically associated with ERP implementations.
Softline Accpacc, for example, is offering a solution that effectively offers the same fully functional ERP suite, but includes a predefined implementation framework that is designed for the African business, containing existing localisations for different country legislation and requirements. “The result is a feature-packed solution that is easier to use and faster to implement within the defined budget and timeframe, thus reducing the overall cost of ownership,” he says.
Jane Thomson, MD of Softworx, explains that many vendors have developed templates per industry and line of business that come with pre-packaged and pre-mapped business processes, content (such as forms, reports), and training documentation to improve the speed of implementation. “Customers are insisting on fixed price projects in order for their projects to be awarded. So vendors build this into their calculations and control the projects and scope much better than they did in the past, when and ERP implementation was an open book for spending,” she says.
In addition to providing predefined packages, Conrad Steyn, director of Barnstone, believes the improvement in management is because businesses have developed a better understanding of what is involved when implementing an ERP solution, and as such are better prepared to participate and support such endeavours. “The late adopters have benefi ted from the lessons learnt and mistakes made by the early adopters,” he says.
According to Magix Software SA MD, Hedley Hurwitz, the improvements and increased business benefits are probably driven by the current economic climate. “Currently, IT projects require stronger motivation from business, are under much more scrutiny for value-realisation, and there is much more accountability for quality of deliverables. In times of plenty, anyone can find business, but in lean times, you have a better quality provider who has to work harder for his money. Combine this with a customer who is much more cost-conscious than before, and much stricter on standards for milestone achievements (based on previous experience), and you have a ‘tightening of the screws’ resulting in better managed projects with better adoption by the business.”
Johani Marais, HansaWorld SA country manager, concurs: “Customers realise that projects go over budget when they do not commit to it themselves. In these economic times, they have to look after every cent and justify expenditure.”
However, despite mostly positive results, the Panorama report also indicated that most are still struggling with the issues of organisational change and a lack of executive involvement. It indicated that as much as 63% of companies surveyed had difficulties in addressing process or organisational change issues, and 29% claimed to have no top-level management commitment whatsoever.
According to Steyn, the success of change management is hugely influenced by the phase of business an organisation finds itself in. “If it’s an established organisation, change management may be easier than, for example, at a start-up company where the focus is still heavily on ‘survival’.”
Marais believes companies can overcome organisational change challenges during ERP implementations by being adequately prepared before implementing an ERP solution. “They should realise there is going to be a need for change management and should therefore not cut back on it, but rather to see it as an opportunity to save within the budget. Although most ERP systems today are technologically advanced and include great functionalities, a system is only as good as the people using it.”
Thomson believes that by having executive involvement, by taking the tough decisions, and by making sure users are committed and deliver quality input, much of the change management challenges can be circumvented.
However, ERP projects still lack adequate commitment from top-level management, she says, and the repercussions for this are widespread. “This means that key decisions about business improvements are not made, and the users and consultants make the system look like the old one, so that the benefits that motivated the project spend are not realised.”
Steyn agrees that unfortunately, a lack of executive involvement seems to be a prevalent scenario across industries. As an executive advisory service business, Steyn explains that Barnstone focuses heavily on obtaining buy-in from top-level management right from project commencement, and tries to retain and cultivate the relationships throughout the project implementation and beyond, to ensure adoption by top management. “We have, however, also found it works well when the implementation partner has an influential project sponsor within the client organisation who can keep top management informed and supportive.”
In many cases, says Marais, executive involvement is still a problem, and the result is unhappy top management. “They usually blame the system for being inadequate, or the vendor/support company not meeting their expectations, but the real problem starts during the analysis phase, when the project team on the customer side does not disclose all system requirements.”
Fenner, however, says he has been seeing more and more top level executives getting involved in the ERP implementation process. “These days, it is a prerequisite for the steering committee overseeing the ERP implementation to have top-level management buy-in in place prior to the project kicking off. This is largely due to the improved success rate of having top executive support, in addition to ERP’s role in providing real-time information for improved and decisive decision-making that forms a core part of their function,” he explains.
2012 AND BEYOND
Given how the industry is currently evolving and how new trends are emerging, what lies in store for ERP over the next year?
“Many companies that implemented prior to Y2K are now considering technology replacements and refresh,” says Thomson. “All serious ERP vendors have simplification strategies to make their systems truly easier to use. Most have tablet/smartphone and mobility strategies that are being rolled out and the successful vendors have great simple, easy-to-use integration tools that deliver without creating a life of their own from an expensive project point of view.”
Fenner highlights the advent of connected services as one of the trends currently impacting ERP solutions. “One example of this would be a connected BEE scorecarding service that reports directly into a company’s ERP solution. This specific example helps a great deal with the procurement process, ensuring that all the information and data is available for quick and easy reference and reporting.”
Steyn believes, however, that it seems more companies – whether they already have an ERP system or are implementing one – are moving towards a “back to basics” philosophy, which he says can have tremendous benefits, including a more immediate workable ERP solution under less stressful conditions.
Marais sees ERP becoming more mobile and accessible to users outside the office. He has also noticed the creation of applications for mobile devices and platforms other than Microsoft and Linux, such as Android, IOS and so forth.
Fenner says there has been a significant increase in the uptake of cloud services in South Africa for a number of reasons. “The cloud uptake could be as a result of savings that can be made on capital expenditure or even the vast improvement that we have seen in South Africa’s broadband capability and affordability. It makes a great deal of sense in our current economic climate to pay for what you use, which makes it adaptable and agile to your business requirements, and creates the perfect platform for an ERP solution that is available in real time, from any mobile location or device.”
Marais points out how cloud computing is making ERP systems more accessible to smaller businesses because it is affordable to pay per usage, per user, per functionality. “Cloud computing involves monthly subscription fees instead of huge capital outlays. Back-ups are also taken care of properly and the cost for this service is included in the monthly fee.
“I think cloud and mobile computing, particularly tablets, are dominating all the think-tanks and marketing departments around the world,” Hurwitz concludes.
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