Choosing the right software is arguably the most important consideration in any ERP project. A company that chooses software that isn't a good fit for its business or requires significant customization to support key requirements is more likely to overspend on its implementation budget. A diligent ERP software selection process minimizes the risk of choosing a solution that is a bad match for your situation.
Simply asking "yes" or "no" questions about software functionality, as is common in many RFPs, can be misleading. Different packages handle certain functionality with varying degrees of success. Companies should define business requirements as part of their ERP software selection process – and would be well advised to define their desired business processes so evaluation teams can consider potential ERP software packages in the context of company workflows.
The world of ERP is tainted by horror stories of projects gone wrong. Companies such as Shane Co. have had widely publicized complaints about ERP software vendors because of a failed implementation. In some extreme cases, these companies sue because they couldn't ship product or their entire business shut down because the software did not work correctly.
So how does one increase the likelihood of ERP success and ERP benefits realization? Many assume that success or failure is the fault of the software you purchase. In reality, though, 95% of a project's success or failure is in the hands of the company or team implementing the software, not the software vendor.
Here are a few ERP implementation critical success factors that we have seen:
1. Focus first on business processes and requirements. Too often, companies get tied up in the technical capabilities or platforms that a particular software application supports. None of this really matters. What does matter is how you want your business operations to run and what your key business requirements are. Once you have this defined, you can more easily choose the software that fits your unique business needs.
2. Focus on achieving a healthy ERP ROI (return on investment), including post-implementation performance measurement. This requires doing more than just developing a high-level business case to get approval from upper management or your board of directors. It also entails establishing key performance measures, setting baselines and targets for those measures, and tracking performance after go-live. This is the only way to truly realize the benefit potential of ERP.
3. Strong project management and resource commitment. At the end of the day, your company owns the success or failure of a large ERP project, so you should manage it accordingly. This includes ensuring that you have a strong project manager and your "A-players" from the business to support and participate in the project.
4. Commitment from company executives. Any project without support from its top management will fail. Support from a CIO or IT director is fine, but it's not enough. No matter how well-run a project is, problems arise (such as conflicting business needs), so the CEO and your entire C-level staff needs to be on board to deal with some of these.
5. Plan up front. An ERP vendor's motive is to close a deal as soon as possible. Yours should be to make sure it gets done right. Too often, companies jump right in to a project without validating the software vendor's understanding of business requirements or its project plan. The more time you spend ensuring that these things are done right at the beginning of the project, the less time you'll spend fixing problems later on.
6. Ensure adequate training and change management. ERP systems involve big change for people, and the system will not do you any good if people do not understand how to use it effectively. Therefore, spending time and money on training, change management, and job design is crucial to any ERP project.
7. Make sure you understand why you're implementing ERP. This is arguably the most important one. It's easy to see that many big companies are running SAP or Oracle and maybe you should too, but it's harder to consider that maybe you don't need an ERP system at all. Perhaps process improvement, organizational redesign, or targeted best-of-breed technology will meet your business objectives at a lower cost. By clearly understanding your business objectives and what you're trying to accomplish with an ERP system, you will be able to make a more appropriate decision on which route to take, and that may or may not involve ERP.
It is important to understand exactly what you are as an organization now and what you want to be in the future. This includes everything from understanding your strengths, weaknesses and core competencies to the areas you would like to improve. Making these decisions in the midst of an ERP implementation can be a very rushed process, and making key strategic decisions like these in a sloppy fashion will create significant pain and confusion in the future.
The key takeaway is that ERP cannot be implemented successfully without clear requirements, which are critical to ERP success. By the same token, clear requirements cannot be defined until business processes are well defined. And business processes cannot be defined until organizations establish a clear sense of strategic direction. Organizations should ensure that these areas are taken into consideration during their ERP assessment and software selection processes.