Inside ERP
7/28/15
Jeff Orloff
When an organization looks to implement an enterprise resource planning (ERP) solution such as Oracle EBS or SAP, it can’t help but shudder at some of the alarming statistics out there:
74.1 percent of ERP implementations exceed their budget.
40 percent of ERP implementations cause major operational disruptions after they go live.
21 percent of ERP implementations fail to deliver significant business benefits.
Before anyone places blame on the vendor or the product, however, it’s important to note that a good portion of ERP solutions are purchased without the buyer trying the product first. Some simply buy from the first vendor they contact without comparing or doing their research. These failures are the fault of the buyer for not taking into account important considerations when planning—and justifying—its ERP implementation.
Consideration 1: Will Your Current Infrastructure Handle the ERP Software?
It’s easy to justify a new or replacement ERP solution when you weight the purchase cost against the returns you will likely receive, but doing so paints only a portion of the picture when it comes to your implementation. Many of the cost overruns and implementation delays can be attributed to the infrastructure not being able to support the ERP software. The organization may need to purchase new servers, networking hardware and media may need to be updated, and everything must be secured. If such changes aren’t part of your initial plan, then you’re already setting your project up for failure, so make sure that your feasibility study addresses your infrastructure needs. If the numbers don’t work out, you can always consider a cloud-based solution.
Consideration 2: Are You Willing to Adequately Train Your Employees?
Training costs money; in addition to the training costs, you’re usually required to fly in a consultant from the vendor and put him or her up in a hotel while the consultant is on site. If you can’t get everyone trained at one time, which is a strong likelihood, you’ll have to bring the trainer out multiple times at your expense.
The problem when first trying to sell management on a new ERP solution like Oracle EBS or SAP is that many people feel like they won’t need to purchase training from their vendor. Maybe this is a replacement application, so the thought is that it won’t be all that different. Another common thought is that only a few people need to attend training, and then those people can teach the rest of the users. These scenarios rarely end well. From the beginning, the implementation plan should include adequate money dedicated to help your users become comfortable with the new software. Doing so not only helps eliminate disruptions but also goes a long way toward gaining support from those who will be using the software.
Consideration 3: Who Will Support and Maintain the Software?
When it comes to consumer software, most applications provide adequate support and updates for the life of that software. Enterprise solutions are a different story, however. Enterprises often purchase support in tiers. How much money you’re willing to spend determines how quickly you can get answers from the vendor. Basic plans may require you to seek help in support forums; mid-level support might require that you to fill out a ticket when you need help. It may be that unless you purchase the top tier, you won’t ever be able to get someone on the phone.
When justifying the costs of your ERP project, take support costs into consideration. If you have adequate resources on staff, you might be able to spend less. If you don’t have the skills on hand to deal with the myriad problems that can arise, help your project be more successful and add those costs into your budget.
ERP software provides businesses of any size tremendous benefits, but if the justification to spend this kind of money on a software package isn’t entirely truthful, your implementation is destined to suffer any number of failures.