ERP implementation gotchas can lead to expensive and recriminating failures

Enterprise Resource Planning (ERP) implementation projects are demanding for most organizations. The benefits of ERP are huge but require a significant commitment from the organization’s leadership and significant effort from the organization’s staff to be achieved.

Below is a discussion of –  and ideas for avoiding – the all-to-common ERP implementation gotchas that lead to expensive and recriminating failures.

Gotcha that views the ERP project solely as an IT project

A frequent management gotcha is to consider the ERP implementation exclusively an IT project because it involves so much new application software and an upgrade to the computing infrastructure.

This misunderstanding causes management to assign the IT manager as the ERP implementation project owner. When the IT manager doesn’t object immediately and explains that a senior VP is a more appropriate project sponsor, the IT manager will be fired later for failing to deliver the ERP implementation project.

The gotcha that arises from viewing the ERP project incorrectly can be addressed by:

1. Recognizing that such a significant project can only be successfully completed when a senior VP with real organizational clout is assigned as the project sponsor.
2. Focusing on the business benefits, not the technical improvements, that will arise from the ERP implementation. These benefits typically include the following:

• • Improved business processes that enhance customer service, increase gross margins and reduce costs.
  • Capacity to handle significant growth.
  • Reduced effort for maintaining regulatory compliance.

Gotcha of insufficient functional area expertise

Misjudging the amount of business process change that ERP systems demand causes management to assign too few business experts to the project team as business analysts.

The gotcha is that consultants, IT analysts and junior business staff, without business experts, will make many small questionable choices when defining the new business processes associated with the ERP system. These questionable choices create a significant risk that the new ERP system can’t or won’t be used by the staff.

The gotcha of insufficient expertise can be remedied by:

1. Assigning business experts full-time to the project team.
2. Ensuring that business experts don’t have to jump back into their departments for firefighting by back-filling their positions.

Gotcha of ignoring ERP change management effort

Every ERP implementation introduces many business process changes to the organization. For example, the new ERP system causes:

1. Most business processes to become more automated.
2. Some business processes to be eliminated.
3. Some business processes to be reduced to simple automated steps integrated into other business processes.
4. The introduction of new business processes that were not possible before.

The gotcha occurs when these looming process changes are not recognized or downplayed as minor. Under these circumstances, the ERP project is positioned for failure.

The gotcha of ignoring change management can be avoided by:

1. Recognizing the significant business process changes the ERP system will introduce into the organization.
2. Planning for that change.
3. Budgeting effort to help staff adjust to the revised workflows that will change the content of their work.
4. Resourcing the project team with analysts to ensure the changes are carried out.

When people change management is addressed seriously, ERP implementations are often a success.

Gotcha of excessive reliance on consultants

Applying the experience of ERP implementation consultants to ensure a successful implementation is an often used and successful strategy.

The gotcha occurs when the organization hires too many consultants and turns too much control of the project over to consultants. This approach happens when the organization thinks its own staff is too busy or critical to ongoing operations to assign them to the ERP implementation project.

Too many ERP consultants will position projects for failure because:

1. Consultants will make inappropriate detail design choices due to unfamiliarity with the nuances of the organization’s business.
2. Organization staff will not acquire enough knowledge to run and sustain the new ERP system.
3. Consultants will pursue a scope that is too ambitious for the organization because it’s in their commercial interest.

The gotcha of excessive reliance on consultants can be avoided by:

1. Containing the scope of the consultant’s work to that of advisors.
2. Assigning experienced internal staff to the project and back-filling their work.
3. Ensuring an experienced project manager keeps the consultants in check.

Gotcha of ERP project schedule slippage

Many organizations underestimate the complexity and resources necessary to implement an effective ERP system. Therefore, they underestimate tasks and thereby risk stretching out the project schedule. Frequent examples include:

1. Efforts to orchestrate the transition to revised business processes.
2. Unexpected need to improve data quality.
3. Complexity of the data migration effort.
4. Higher number of interdependencies among ERP modules complicates the implementation sequence.
5. More complex interface development than expected between the ERP system and other systems.

The gotcha of schedule slippage will include:

1. Increase in the project cost beyond the contemplated budget.
2. Risk of the organization losing commitment to the project and becoming distracted by other pressing issues.

The schedule slippage gotcha can be minimized by:

1. Tightly containing the scope of the ERP implementation project.
2. Reviewing the project plan with experienced ERP implementation consultants.
3. Operating with a determined change order process that postpones most proposed change orders to a later enhancement project.

Gotcha of ERP project plan gaps

Unfortunately, ERP implementation plans are often:

1. Highly optimistic about what the organization can accomplish in a given period.
2. Missing some deliverables and related tasks due to the inexperience of the project team.
3. Built to achieve an arbitrary launch date that a senior executive proclaimed without much understanding of the work required.

The project planning gotcha creates the risk of ERP project failure when the actual effort to complete the project emerges and overwhelms the organization.

The project planning gotcha can be reduced through an ERP implementation plan that includes these features:

1. A multiple-release strategy that implements ERP modules in manageable chunks that the organization can absorb.
2. A realistic schedule that can easily exceed a year. Shorter schedules suggest a lack of realism or understanding of the project scope.
3. A core team of analysts from various business departments assigned to critical design and quality review tasks.
4. Realistic effort estimates for tasks that take project team inexperience into account.
5. Contingency tasks that only the project manager can book time against.

Yogi Schulz has over 40 years of information technology experience in various industries. Yogi works extensively in the petroleum industry. He manages projects that arise from changes in business requirements, the need to leverage technology opportunities, and mergers. His specialties include IT strategy, web strategy and project management.

For interview requests, click here.

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  Business management