10 questions businesses must ask before choosing expensive ERP software
ERP investments often fail because software selection gets more attention than business strategy formulation. Here’s how to avoid falling into that trap.
Software that is designed to direct business operations – Enterprise Resource Planning (ERP) software – has earned a bad rap as an expensive and drawn-out exercise that often does not live up to expectations.
This is because software selection gets more attention than business strategy formulation. To counter this, here are ten questions that can help those planning to spend a significant amount of resources on new software to determine the true business purpose:
1. What is limiting your business’ growth and competitiveness?
It is all about:
- Fast, actionable information
- the business agility to act on the information across the value chain, not just within the organisation
- automation and flow through the business.
What is stopping you from achieving this?
2. What behaviours and rules gave rise to the existence of these business limitations?
- Bureaucracy designed with accountability shifting in mind, not with serving the business purpose.
- KPI’s that are not aligned with the integrated nature of ERP.
- Internally focussed thinking instead of thinking about your place and role in the entire value chain.
- Thinking in terms of efficiencies or productivity not effectiveness. For example, looking at whether staff or machines worked 8 hours a day, not at the outcomes they achieved for their effort.
3. How are you planning to overcome these business limitations with the investment in the ERP solution?
- Focussing on improving overall business effectiveness and making these the project critical success criteria.
- Really understanding what the solution should do before deciding what software to purchase and before asking the system integrator to provide a fixed price quote.
- Retaining absolute ownership of the business improvement and not shifting accountability to the system integrator or software vendor.
- Aligning strategic KPI’s to promote a project culture of company-wide business effectiveness innovation and not self-serving personal KPI chasing project conflict.
4. How up to date and accurate are the current business processes, business rules, and data models?
Enterprise software systems such as ERP are living, constantly changing systems. The documentation that describes how these systems work, are not.
When a new ERP project is kicked off, the line management, software vendor and system integrator all assume they know what the system needs to do, deadlines, budgets and expectations are set on this.
Start by really understanding how your company works by following a comprehensive collaborative approach to updating the current business processes and business rules. Use a business process modelling software solution, not word processing, presentation or diagram drawing tools.
5. What are the new rules and behaviours needed to take the business forward?
- Think effectiveness and not efficiency or productivity
- Think of your place and role in the entire value chain
- It is all about information and how you respond to customer demand
- Continuous improvement thinking
- Develop a strategic view of how you want to take your business forward and what you need of a technology platform to serve your business purpose. Requirements vs needs and wants
- Make sure this strategic business purpose is front and centre throughout the project and is used as critical success factors for the project – resist using only budget, deliverables and deadlines as primary success factors for the project
- Use business purpose to lead requirements and not what the current system does or the features of the new system. Remember, software sales people are rewarded for selling software, not for improving your business.
6. How must the new software support the new rules and behaviours?
Take care not to provide requirements that result in the new system being based on how the old system works. The design criteria of the new system must be rooted in the business purpose of the project. The new system must serve to:
- provide fast accurate, actionable information
- enable business agility to ensure that decisions are implemented fast and accurately throughout the organisation
- improve flow through your whole business not just within departments.
- Flow must be improved for your value chain and not just for your company – talk to your suppliers and customers
- Focus on benefits realisation and not only deadlines and budgets
7. Who are the most important stakeholders both inside and outside the business?
ERP in large organisations never operate in isolation, your value chain partners both upstream and down-stream are critical stakeholders in enhancing flow through the entire value chain. Internal stakeholders include internal audit, risk, legal and compliance, not only the functional business areas.
8. How will you ensure that all identified stakeholders are consulted, collaborated with, informed, involved, and empowered throughout the project?
It is important to ensuring that the entire ERP team, including staff, stakeholders, partners and vendors are working together towards the same strategic business objective.
- Consulted – Ask their advice and opinions
- Collaborated with – work with them to develop the solution
- Informed – provide accurate, unfiltered information to all stakeholders. This breeds trust and leads to higher quality results
- Involved – make them part of the team
- Empowered – stakeholders must be in a position to affect change else they are not empowered
9. What impact will the new software have on the business and its people?
ERP projects typically follow one of four paths:
Effective: where you experience returns that far outweigh the ERP investment, Improved competitiveness, limitations in the business have been diminished. All stakeholders in the business are embracing the way ahead and the Future is exciting.
Efficient: The project team claims efficiency by performing against time and budget criteria. Changes were probably within palatable boundaries. The initial scope was doubtlessly reduced at some point to accommodate time and budget constraints. There is no recognizable improvement in the business to the extent that you might as well not have done the project.
Precipice: The project reaches a Point of No Return at which juncture going back to the previous system will be more painful and expensive than making available additional funding to just get the project done.
Fail: The Project is cancelled and legal options are explored. Money, time, business opportunity and valuable staff are wasted and broken. In an absolute worst case, the company suffers irreparable destruction of its competitive positioning.
10. What have you done to determine whether the business is ready for the project?
- Endeavour to bring non-negotiables, positive and negative perceptions and the aspirations of the project stakeholders to the fore. Work to find the best possible compromises for the non-negotiables up front in order to avoid unpleasant surprises later in the project lifecycle.
- Think about developing a code of conduct for the project team – each team member signs it including contractors. Keep focus on the best interest of the company.
- Is your bureaucracy ready and aligned to ensure they are not a stumbling block but rather a motivated support team for the project?
- Scenario planning before project planning.
Projects do not exist in isolation, there are always factors both outside and within the control of the project team that affect the successful outcome of the project. The success of the project is to a large extent dependent on:
- the project management team’s ability to identify and describe the flags that will indicate that a specific scenario is playing out;
- their ability to recognize the flags when they present themselves; and
- acting correctly once the flags have indicated their message.
The scenarios applicable to the project environment along with the indicator flags must be thoroughly workshopped at the outset of the project. The project management team must then empower the project team to watch out for these flags and to report them when they appear. The project steering committee is provided with the required information on the scenarios and flags and they are empowered to act appropriately to steer the project in the desired direction.
This becomes a separate and very strategic topic on the agendas of project progress and project steering committee meetings. Project managers and executives must guard against trivializing this important component of helicopter view project monitoring.
Hein Pretorius is from Onpro Consulting