Enterprise Resource Planning Software

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Enterprise resource planning
software, or ERP, doesn't live up to
its acronym. Forget about planning
—it doesn't do that—and forget
about resource, a throwaway term.
But remember the enterprise part.
his is ERP's true ambition. !t
attempts to integrate all departments
and functions across a company onto
a single computer system that can
serve all those different departments'
particular needs.
hat is a tall order, building a single
software program that serves the
needs of people in finance as well as
it does the people in human
resources and in the warehouse.
Each of those departments typically
has its own computer system, each
optimi"ed for the particular ways
that the department does its wor#.
But ERP combines them all together
into a single, integrated software
program that runs off a single
database so that the various
departments can more easily share
information and communicate with
each other.
hat integrated approach can have a
tremendous paybac# if companies
install the software correctly. a#e a
customer order, for e$ample.
ypically, when a customer places
an order, that order begins a mostly
paper%based &ourney from in%bas#et
to in%bas#et around the company,
often being #eyed and re%#eyed into
different departments' computer
Material resource planning
he practice of calculating what materials are re'uired to
build a product by analy"ing a bill of material data,
inventory data and the master production schedule.
Enterprise resource planning (ERP) is an outgrowth of
*RP.
Enterprise resource planning
he practice of consolidating an enterprise+s planning,
manufacturing, sales and mar#eting efforts into one
management system.
Enterprise relationship management
he practice of analy"ing customer data from sales,
mar#eting, service, finance and manufacturing databases
in order to relate efficiently to customers.
Enterprise resource management
he practice of providing users with efficient access to an
organi"ation+s networ# resources. ER* enables the
enterprise to control and trac# the systems and resources
that each user has access to and provides consistent
standards for creating and changing passwords.
Barry Wilderman, vice president of application delivery
strategies for the Stamford, CT based Meta Group talks
about getting the most from your E! system"
Question:
,hat benefits have been reali"ed with the use of Pro&ect
*anagement echnologies on the implementation of ERP
advertisers
systems along the way. -ll that
lounging around in in%bas#ets causes
delays and lost orders, and all the
#eying into different computer
systems invites errors. *eanwhile,
no one in the company truly #nows
what the status of the order is at any
given point because there is no way
for the finance department, for
e$ample, to get into the warehouse's
computer system to see whether the
item has been shipped. ./ou'll have
to call the warehouse,. is the
familiar refrain heard by frustrated
customers.
How can ERP improve a
company's business performance?
ERP automates the tas#s involved in
performing a business process—
such as order fulfillment, which
involves ta#ing an order from a
customer, shipping it and billing for
it. ,ith ERP, when a customer
service representative ta#es an order
from a customer, he or she has all
the information necessary to
complete the order (the customer's
credit rating and order history, the
company's inventory levels and the
shipping doc#'s truc#ing schedule).
Everyone else in the company sees
the same computer screen and has
access to the single database that
holds the customer's new order.
,hen one department finishes with
the order it is automatically routed
via the ERP system to the ne$t
department. o find out where the
systems0
Reply:
he benefits of using pro&ect management techni'ues well
on ERP systems can be dramatic, but re'uire real
discipline and s#ill in pro&ect management. he discipline
of pro&ect management (done well) re'uires clear
definitions of tas#s, individuals assigned to tas#s, and real
deliverables that mar# the end of a tas#. Emphasis should
be placed on wor# brea#down structures, using earned
value techni'ues (rather than percent complete), and time
sheet data entry with regular reevaluation of .estimates to
complete.. Pro&ect teams should include !, line of
business and outside contractors, with an empowered
leader for each team. 1one correctly, using pro&ect
management goes a long way to ensuring that ERP
pro&ects and on time, within budget and maintain scope.
Question:
!mplementing an ERP system re'uires large amounts of
time, money, and resources. o provide better access to
the data that this system now houses, does it ma#e sense
to use a corporate portal0
Reply:
! thin# it is important to be clear about a number of
overlapping technologies, all of which can add value to
the 2orporation3 2orporate Portals3 4enerally spea#ing, a
2orporate Portal is used to empower individuals in the
organi"ation to gain access to #ey information (e.g.,
current enrollment options in a 5678), as well as to ma#e
individual transactions (e.g., indirect procurement). his
can be 'uite valuable to the organi"ation, but presumes, of
course, that data is readily available, and some business
systems (e.g., on line purchasing) are in place. ERP
9ystems3 ERP systems are implemented to provide cross
functional business processes (e.g, order to cash, purchase
to pay, ma#e to demand) that are crucial to the
organi"ation. 1eveloping a corporate portal doesn't
order is at any point, one need only
log into the ERP system and trac# it
down. ,ith luc#, the order process
moves li#e a bolt of lightning
through the organi"ation, and
customers get their orders faster and
with fewer errors than before. ERP
can apply that same magic to the
other ma&or business processes, such
as employee benefits or financial
reporting.
That at least is the !ream of ERP"
The reality is much harsher"
:et's go bac# to those inbo$es for a
minute. hat process may not have
been efficient, but it was simple.
Finance did its &ob, the warehouse
did its &ob, and if anything went
wrong outside of the department's
walls, it was somebody else's
problem. ;ot anymore. ,ith ERP,
the customer service representatives
are no longer &ust typists entering
someone's name into a computer and
hitting the return #ey. he ERP
screen ma#es them business people.
!t flic#ers with the customer's credit
rating from the finance department
and the product inventory levels
from the warehouse. ,ill the
customer pay on time0 ,ill we be
able to ship the order on time0 hese
are decisions that customer service
representatives have never had to
ma#e before and which affect the
customer and every other department
in the company. But it's not &ust the
customer service representatives
necessarily remove the re'uirement for an ERP system.
Mo!ular a!!#ons an! integration will !ominate the
ERP mar$et through %&&'"
he overall enterprise resource management (ERP)
mar#et grew 5 percent in <667, even as traditional ERP
investments (financials, human resources, production
management) dropped = percent, according to a recent
report by Boston%based -*R Research. -*R predicts
that ERP vendors will soon derive most of their revenues
from adding customer relationship management (2R*),
supply chain management (92*) and product lifecycle
management (P:*) capabilities. hese e$tensions
produced >5 billion of the ><6 billion of total vendor
revenue in <667, according to the report. By <66?, they
will ma#e up half of vendor revenues.
@,here we see the growth opportunity is in the strategic
e$tensions, big things li#e 2R* and supply chain
capabilities,A says 2olleen ;evis, vice president of
research, enterprise applications, at -*R. @he growth is
not going to be based on core ERP.A
;evis says companies that made ERP investments during
the boom of the mid%B6s are now interested in adding
small modules and tying their front%office systems to their
bac#%office systems. -lthough -*R estimates that the
total ERP mar#et will grow from >7B.C billion to >=7.5
billion in <66? at a compound annual growth rate of 76
percent, most of this will not be the result of core ERP
software sales. *ost companies have not budgeted for
such upgrades, nor will they for a long time. ;iven says
upgrade cycles that formerly ran D to E years are now
growing to 76 to 7D years. @People who bought ERP
systems in the ERP goldrush of the mid%B6s aren+t going
to be replacing those until at least <66?,A ;iven saysF
@more li#ely <676.A
who have to wa#e up. People in the
warehouse who used to #eep
inventory in their heads or on scraps
of paper now need to put that
information online. !f they don't,
customer service will see low
inventory levels on their screens and
tell customers that their re'uested
item is not in stoc#. -ccountability,
responsibility and communication
have never been tested li#e this
before.
How long will an ERP pro(ect
ta$e?
2ompanies that install ERP do not
have an easy time of it. 1on't be
fooled when ERP vendors tell you
about a three or si$ month average
implementation time. hose short
(that's right, si$ months is short)
implementations all have a catch of
one #ind or another3 the company
was small, or the implementation
was limited to a small area of the
company, or the company only used
the financial pieces of the ERP
system (in which case the ERP
system is nothing more than a very
e$pensive accounting system). o do
ERP right, the ways you do business
will need to change and the ways
people do their &obs will need to
change too. -nd that #ind of change
doesn't come without pain. Gnless,
of course, your ways of doing
business are wor#ing e$tremely well
(orders all shipped on time,
productivity higher than all your
2ompanies that didn+t invest during the boom—namely
government organi"ations and service industries—may be
ready to do so now. @!ndustries and trends where people
didn+t invest are where the opportunities are now,A ;iven
says. @9ervice industries made ERP investments in the late
C6s and early B6s. hey didn+t participate in the boom of
the mid%B6s.A
-*R predicts that core ERP will ma#e gains in the mid%
mar#ets, however. *ost activity to date has come from the
high mid%mar#et segment (><D6 million to >7 billion in
revenue), says ;iven, but the lower segment (>76 million
to >D6 million in revenue) is now showing significant
growth. Hverall, the mid%mar#et ERP segment will show
76 percent to7D percent growth over the ne$t four years.
Iune D, <66< % C#$ Media
,hen 2FHs loo# at enterprise resource planning (ERP)
spending pro&ections, their eyes often get as big as silver
dollars. o reassure themselves that their math isn't
completely out of whac#, most companies want to
compare notes with someone who has already lived
through an ERP pro&ect. .otal installed cost is probably
the hottest issue in the mar#et right nowF users want to
gut%chec# with someone else,. says 2hris Iones, research
director of business applications at 4artner 4roup !nc.
Gnfortunately, a total cost number%even if you can find a
company willing to share its figures%won't necessarily
mean much. Iones notes that everyone delves into ERP
from a uni'ue situation, depending on hundreds of
variables, including the e$isting hardware and networ#
infrastructure, the number of corporate divisions and
users, the specific functions targeted for the ERP system
and the amount of process redesign. he cost of the
software itself is universally #nown to be a small slice of
competitors, customers completely
satisfied), in which case there is no
reason to even consider ERP.
he important thing is not to focus
on how long it will ta#e—real
transformational ERP efforts usually
run between one to three years, on
average—but rather to understand
why you need it and how you will
use it to improve your business.
)hat will ERP fi* in my business?
here are three ma&or reasons why
companies underta#e ERP3 o
integrate financial data. —-s the
2EH tries to understand the
company's overall performance, he
or she may find many different
versions of the truth. Finance has its
own set of revenue numbers, sales
has another version, and the different
business units may each have their
own versions of how much they
contributed to revenues. ERP creates
a single version of the truth that
cannot be 'uestioned because
everyone is using the same system.
o standardi"e manufacturing
processes. —*anufacturing
companies—especially those with an
appetite for mergers and ac'uisitions
—often find that multiple business
units across the company ma#e the
same widget using different methods
and computer systems.
9tandardi"ing those processes and
using a single, integrated computer
system can save time, increase
the total pro&ect outlay.
Hne attempt at a useful comparison is to loo# at the total
cost as a multiple of the software cost. here's no
consensus, however, on what that multiple should be.
*eta 4roup !nc.'s Barry ,ilderman, a vice president of
application delivery strategies, for e$ample, says ERP
implementation costs should fall in the range of >= to >76
per dollar spent on the software itself. 9uch a wide range
offers little predictive value, other than serving as a red
flag for users who anticipate spending >7D per software
dollar. -nd even the use of such broad numeric ranges has
s#eptics. .;ever use a rule of thumb. his nonsense about
one%to%one, two%to%one%that's e$actly what it is3 nonsense.
here is no such thing as a standard cost to implement
ERP,. says 4artner's Iones.
- different benchmar# compares the cost per user.
*onsanto 2o.'s 4ary Ban#s, ! lead for the company's
9-P implementation, says the overall price tag for ERP
can be intimidating. Jowever, his unscientific survey
indicates that while other software pro&ects typically have
a lower overall price, the cost per user is higher than with
ERP because fewer employees benefit from other #inds of
software. -gain, remember that many variables affect the
cost%per%user number. .!'m sure it could be done for less
with a more aggressive implementation,. says Ban#s,
noting that *onsanto has invested a lot of time in
choosing the processes and business models best suited
for the company.
The Hi!!en +osts of ERP
-lthough different companies will find different land
mines in the budgeting process, those who have
implemented ERP pac#ages agree that certain costs are
more commonly overloo#ed or underestimated than
others. -rmed with insights from across the business, ERP
productivity and reduce headcount.
o standardi"e JR information. —
Especially in companies with
multiple business units, JR may not
have a unified, simple method for
trac#ing employee time and
communicating with them about
benefits and services. ERP can fi$
that.
!n the race to fi$ these problems,
companies often lose sight of the
fact that ERP pac#ages are nothing
more than generic representations of
the ways a typical company does
business. ,hile most pac#ages are
e$haustively comprehensive, each
industry has its 'uir#s that ma#e it
uni'ue. *ost ERP systems were
designed to be used by discreet
manufacturing companies (who
ma#e physical things that can be
counted), which immediately left all
the process manufacturers (oil,
chemical and utility companies that
measure their products by flow
rather than individual units) out in
the cold. Each of these industries has
struggled with the different ERP
vendors to modify core ERP
programs to their needs.
)ill ERP fit the ways , !o
business?
!t's critical for companies to figure
out if their ways of doing business
will fit within a standard ERP
pac#age before the chec#s are signed
and the implementation begins. he
pros vote the following areas as most li#ely to result in
budget overrun.
-" Training
raining is the near%unanimous choice of e$perienced
ERP implementers as the most elusive budget item. !t's
not so much that this cost is completely overloo#ed as it is
consistently underestimated. raining e$penses are high
because wor#ers almost invariably have to learn a new set
of processes, not &ust a new software interface.
%" ,ntegration an! Testing
esting the lin#s between ERP pac#ages and other
corporate software lin#s that have to be built on a case%by%
case basis is another often underestimated cost. - typical
manufacturing company may have add%on applications for
logistics, ta$, production planning and bar coding. !f this
laundry list also includes customi"ation of the core ERP
pac#age, e$pect the cost of integrating, testing and
maintaining the system to s#yroc#et.
-s with training, testing ERP integration has to be done
from a process%oriented perspective. !nstead of plugging
in dummy data and moving it from one application to the
ne$t, veterans recommend running a real purchase order
through the system, from order entry through shipping and
receipt of payment%the whole order%to%cash banana%
preferably with the participation of the employees who
will eventually do those &obs.
." /ata conversion
!t costs money to move corporate information, such as
customer and supplier records, product design data and
the li#e, from old systems to new ERP homes. -lthough
few 2!Hs will admit it, most data in most legacy systems
is of little use. 2ompanies often deny their data is dirty
until they actually have to move it to the new clientKserver
setups that popular ERP pac#ages re'uire. 2onse'uently,
those companies are more li#ely to underestimate the cost
most common reason that companies
wal# away from multimillion dollar
ERP pro&ects is that they discover
that the software does not support
one of their important business
processes. -t that point there are two
things they can do3 hey can change
the business process to
accommodate the software, which
will mean deep changes in long%
established ways of doing business
(that often provide competitive
advantage) and sha#e up important
peoples' roles and responsibilities
(something that few companies have
the stomach for). Hr they can modify
the software to fit the process, which
will slow down the pro&ect,
introduce dangerous bugs into the
system and ma#e upgrading the
software to the ERP vendor's ne$t
release e$cruciatingly difficult,
because the customi"ations will need
to be torn apart and rewritten to fit
with the new version.
;eedless to say, the move to ERP is
a pro&ect of breathta#ing scope, and
the price tags on the front end are
enough to ma#e the most placid
2FH a little twitchy. !n addition to
budgeting for software costs,
financial e$ecutives should plan to
write chec#s to cover consulting,
process rewor#, integration testing
and a long laundry list of other
e$penses before the benefits of ERP
start to manifest themselves.
Gnderestimate the price of teaching
of the move. But even clean data may demand some
overhaul to match process modifications necessitated—or
inspired—by the ERP implementation.
0" /ata analysis
Hften, the data from the ERP system must be combined
with data from e$ternal systems for analysis purposes.
Gsers with heavy analysis needs should include the cost of
a data warehouse in the ERP budget—and they should
e$pect to do 'uite a bit of wor# to ma#e it run smoothly.
Gsers are in a pic#le here3 Refreshing all the ERP data in a
big corporate data warehouse daily is difficult, and ERP
systems do a poor &ob of indicating which information has
changed from day to day, ma#ing selective warehouse
updates tough. Hne e$pensive solution is custom
programming. he upshot is that the wise will chec# all
their data analysis needs before signing off on the budget.
1" +onsultants 2! ,nfinitum
,hen users fail to plan for disengagement, consulting fees
run wild. o avoid this, companies should identify
ob&ectives for which its consulting partners must aim
when training internal staff. !nclude metrics in the
consultants' contractF for e$ample, a specific number of
the user company's staff should be able to pass a pro&ect%
management leadership test—similar to what Big Five
consultants have to pass to lead an ERP engagement.
'" Replacing 3our 4est an! 4rightest
!t is accepted wisdom that ERP success depends on
staffing the pro&ect with the best and brightest from the
business and !9. he software is too comple$ and the
business changes too dramatic to trust the pro&ect to &ust
anyone. he bad news is, a company must be prepared to
replace many of those people when the pro&ect is over.
hough the ERP mar#et is not as hot as it once was,
consulting firms and other companies that have lost their
best people will be hounding yours with higher salaries
and bonus offers than you can afford—or that your JR
users their new &ob processes can
lead to a rude shoc# down the line,
9o can failure to consider data
warehouse integration re'uirements
and the cost of e$tra software to
duplicate the old report formats. -
few oversights in the budgeting and
planning stage can send ERP costs
spiraling out of control faster than
oversights in planning almost any
other information system
underta#ing.
)hat !oes ERP really cost?
*eta 4roup recently did a study
loo#ing at the otal 2ost of
Hwnership (2H) of ERP, including
hardware, software, professional
services, and internal staff costs. he
2H numbers include getting the
software installed and the two years
afterward, which is when the real
costs of maintaining, upgrading and
optimi"ing the system for your
business are felt. -mong the ?=
companies surveyed—including
small, medium and large companies
in a range of industries—the average
2H was >7D million (the highest
was >=66 million and lowest was
>566,666). ,hile it+s hard to draw a
solid number from that #ind of a
range of companies and ERP efforts,
*eta came up with one statistic that
proves that ERP is e$pensive no
matter what #ind of company is
using it. he 2H for a @heads%
downA user over that period was a
staggering >D=,=<6.
policies permit. Juddle with JR early on to develop a
retention bonus program and to create new salary strata
for ERP veterans. !f you let them go, you'll wind up hiring
them—or someone li#e them—bac# as consultants for
twice what you paid them in salaries.
5" ,mplementation Teams +an 6ever 7top
*ost companies intend to treat their ERP implementations
as they would any other software pro&ect. Hnce the
software is installed, they figure, the team will be scuttled
and everyone will go bac# to his or her day &ob. But after
ERP, you can't go home again. /ou're too valuable.
Because they have wor#ed intimately with ERP, they
#now more about the sales process than the salespeople do
and more about the manufacturing process than the
manufacturing people do. 2ompanies can't afford to send
their pro&ect people bac# into the business because there's
so much to do after the ERP software is installed. Iust
writing reports to pull information out of the new ERP
system will #eep the pro&ect team busy for a year at least.
-nd it is in analysis—and, one hopes, insight—that
companies ma#e their money bac# on an ERP
implementation. Gnfortunately, few !9 departments plan
for the fren"y of post%ERP installation activity, and fewer
still build it into their budgets when they start their ERP
pro&ects. *any are forced to beg for more money and staff
immediately after the go%live date, long before the ERP
pro&ect has demonstrated any benefit.
8" )aiting for R9,
Hne of the most misleading legacies of traditional
software pro&ect management is that the company e$pects
to gain value from the application as soon as it is installedF
the pro&ect team e$pects a brea#, and maybe a pat on the
bac#. ;either e$pectation applies to ERP. *ost don't
reveal their value until after companies have had them
running for some time and can concentrate on ma#ing
improvements in the business processes that are affected
by the system. -nd the pro&ect team is not going to be
)hen will , get paybac$ from
ERP:an! how much will it be?
1on+t e$pect to revolutioni"e your
business with ERP. !t is a navel
ga"ing e$ercise that focuses on
optimi"ing the way things are done
internally rather than with
customers, suppliers or partners. /et
the navel ga"ing has a pretty good
paybac# if you+re willing to wait for
it—a *eta group study of ?=
companies found that it too# eight
months after the new system was in
(=7 months total) to see any benefits.
But the median annual savings from
the new ERP system was >7.?
million per year.
Iames *22ullough remembers bac#
when he had a >D66 million !
budget and teams of !
professionals. By last year, though,
all of that was a distant memory.
*c2ullough, the former 2!H of
1elta -ir :ines, found himself
reshaping his new company's !
infrastructure without the benefit of
a large budget or staff. -s 2!H of
e2ompany9tore, an -lpharetta, 4a.%
based company that builds online
stores to fill promotional product
needs for its clientele, he had to
figure out how to deploy big%
company technology—specifically,
ERP applications—without spending
big%company money.
rewarded until their efforts pay off.
;" Post#ERP /epression
ERP systems often wrea# cause havoc in the companies
that install them. !n a recent 1eloitte 2onsulting survey of
?5 Fortune D66 companies, one in four admitted that they
suffered a drop in performance when their ERP systems
went live. he true percentage is undoubtedly much
higher. he most common reason for the performance
problems is that everything loo#s and wor#s differently
from the way it did before. ,hen people can't do their
&obs in the familiar way and haven't yet mastered the new
way, they panic, and the business goes into spasms.
+,9 # Enterprise Resource Planning Research +enter
http3KKwww.cio.comKresearchKerpK
he front page of 2!H.com's ERP Research 2enter not
only supplies the standard articles and resources. /ou will
also find ERP related metrics, LM-'s and a feature #nown
as 2!H Radio, which consist of online interviews with
industry e$perts.
ERP+entral
http3KKwww.erpcentral.comK
his portal to ERP issues lin#s to trade publication articles
as well as B<B, 2R*, ,ireless and e%Business
information.
ERP <an +lub
http3KKwww.erpfans.com
/es, ERP does have its own fan%club site on the ,eb, with
lin#s to news, vendor information and the li#e.
The ,T ,n!ustry Portal # ERP
http3KKwww.erphub.com
Even though this site is a subsection of Earth,eb, another
! industry portal, non%! e$ecutives will still find useful
.,e #new we were going to have to
go Nthe ERPO route if we were going
to become scalable,. *c2ullough
says. .,e didn't want to come bac#
in 7C months or two years and say
we can't handle NtransactionO
volume..
*c2ullough decided to e$plore a
relatively new option in enterprise
applications3 fast%trac# ERP. Fast%
trac# ERP gives smaller businesses
(with revenues between ><66
million and >D66 million) access to
functionality similar to what their
Fortune D66 counterparts have had
for years. ,hen all goes well, fast%
trac# ERP implementations are
measured in thousands of dollars
instead of millions, and months
instead of years. he vendors
promise up%front, guaranteed
agreements on schedule and price,
fully functioning applications and a
lot fewer headaches than traditional
ERP.
he fast trac# isn't without its speed
bumps, however. First, there is a
greater need to stic# to the plain
vanilla version of the pac#age, with
as little customi"ation as possible.
here are also une$pected costs that
pop up outside the scope of the
fi$ed%price contract. -lthough they
are simpler than their bigger
brethren, the systems are still at the
mercy of people—it's essential to
feature articles and case studies on topics li#e ERP
implementation strategies, infrastructure and system
performance.
,T Toolbo* # ERP
http3KKwww.erpassist.com
-t this /ahoo%style portal, e$tensive lin#s to ERP boo#s,
white papers, articles and other resources are organi"ed by
vendor and by broad topic themes.
2 Three#7tep 2ssessment
http3KKwww.darwinmag.comKreadK6B676=Kvalue.html
wo crucial elements are often missing from a solid
foundation for your investment analysis. ,e fill in the
gaps.
<in!ing the 7trategy =aps
http3KKwww.darwinmag.comKreadK6?676=Kstrategygap.html
o get from where your business is to where it wants to
go, you have to mind the missing
manage e$pectations and resistance
to change, and provide thorough
training.
*c2ullough started down the fast%
trac# ERP path with ,alldorf,
4ermany%based 9-P. Je and his
team of <6, composed of 9-P
consultants and e2ompany9tore
employees, installed the RK= system
with modules for materials
management, function planning and
finance, and an online store to
replace the Pandesic application.
hey started in mid%1ecember <666
and applied the finishing touches in
early Ianuary <667. hey did it
without spending big%company
money or time. .!'m sitting on an
engine that's capable of ta#ing our
company into the stratosphere with
the same suite of applications,.
*c2ullough says.
-s ERP implementations falter and
fail, many people thin# the answer is
more training. hey're wrong.
Gnless you've been as out%of%touch
as the *ars Polar :ander, you're
doubtlessly aware that the ERP
industry hasn't been performing li#e
the marvel it was first made out to
be.
First came the ERP vendors' pre%
/<8 plunging sales revenues and
falling stoc# values. 9econd came
the reali"ation that all that hard wor#
implementing an ERP system didn't
actually guarantee business benefits
—or even a positive paybac#. a#e
*eta 4roup's damning finding, for
instance3 he average ERP
implementation ta#es <= months, has
a total cost of ownership of >7D
million and rewards (so to spea#) the
business with an average negative
net present value of >7.D million.
-nd the news gets worse.
-n alarmingly long list of top%
drawer integrators have fallen flat on
their faces. 2ompared to these
disasters, merely spending a lot of
money on an ERP implementation
that achieves very little is a
consummation devoutly to be
wished.
Jershey, Pa.%based Jershey Foods,
for e$ample, issued two profit
warnings in as many months in the
run%up to last 2hristmas. ,hy0
*assive distribution problems
following a flawed implementation
of 9-P's RK= ERP system, which
affected shipments to stores in the
pea# Jalloween and pre%2hristmas
sales periods. !n a booming stoc#
mar#et, Jershey shares ended the
year down <E percent from its year's
high.
-nd Jershey wasn't alone in its
misery. !n ;ovember 7BBB, domestic
appliance manufacturer ,hirlpool of
Benton Jarbor, *ich., also blamed
shipping delays on difficulties
associated with its 9-P RK=
implementation. :i#e Jershey,
,hirlpool's share price dove south
on the news, falling from well over
>E6 to below >?6. ,hile these two
have (so far) been the highest%profile
implementation debacles, companies
as diverse as 9cottsdale, -ri".%based
trash processor -llied ,aste
!ndustriesF ;ewar#, 1el.%based high%
tech fabric ma#er ,.:. 4ore M
-ssociatesF and industrial supplies
distributor ,.,. 4rainger of :a#e
Forest, !ll., have all reported serious
difficulties.
-nd if .serious difficulties. sounds
bad, rest assured it can get much,
much worse. -fter 2arrollton,
e$as%based pharmaceutical
distributor Fo$*eyer 1rug actually
collapsed following an 9-P RK=
implementation, its ban#ruptcy
trustees filed a >D66 million lawsuit
in 7BBC against the 4erman ERP
giant, and another >D66 million suit
against co%implementer -ndersen
2onsulting. (Both cases were
unresolved at the time of writing.)
9o what's going on0 he good news
—if that's the right word—is that
most e$perts agree that such failures
are not systemic. .Pery rarely are
there instances when it's the ERP
system itself—the actual software—
that fails,. says Iim 9hepherd, senior
vice president of research at Boston%
based -*R Research. Public
pronouncements by both 9-P and
Jershey, he notes, have
ac#nowledged that the software does
what it is supposed to and that no
big fi$es or patches are planned.
,hat's more, he adds, the prudent
observer will differentiate between
real implementation failures and not%
so%real failures. .Blaming the failure
on a system implementation has
become a convenient e$cuse for
companies that have missed their
'uarter%end NearningsO target..
-s for blame, it is evenly spread.
9-P implementations are no more
li#ely to go down the tubes than
ERP systems from other vendors3
,.:. 4ore's system, for e$ample,
came from Pleasanton, 2alif.%based
People9oft. .,hen an ERP pro&ect
unravels, or is seen not to perform
well, one of the suppliers is usually
chosen as the culprit,. says 1avid
1uray, :ondon%based global partner
responsible for the 9-P
implementation business at
Pricewaterhouse2oopers. .!n my
e$perience, this is usually more of a
political decision than a proper
problem%source identification
e$ercise—and 9-P, over the last few
years, has been a popular target..
Furthermore, adds Roger Phillips, an
! analyst at specialist investment
ban# 4ranville in :ondon, which
trac#s the global ERP mar#et, there
is no evidence that geography is a
significant differentiator in the
success sta#es. 1isasters, he
believes, .simply go with the ERP
territory.. here are, he says, .no
cultural or managerial foibles that
ma#e -merican ERP
implementations any more
predisposed to disasters than any
other country's implementations..
9o what does lie behind ERP
disasters0 -nd behind the rather
longer list of costly%but%
underwhelming implementations
typified by that now%infamous *eta
4roup report0 !ncreasingly, e$perts
rec#on that they've found the
smo#ing gun3 poor training. ;ot the
technical training of the core team of
people who are installing the
software, but the education of the
broad user community of managers
and employees who are supposed to
actually run the business with it.
2 few things to pon!er when
planning for ERP
• ,hich processes are most
important now and why0
• 1oes this system meet our
needs or go beyond them0
• ,ho will be the change
champion(s)0
• ,ho are the sta#eholders0
• ,hat is the business culture at
our company and what are its
strengths0
• ,hat subcultures do we have
and what are their strengths0
• Jow can we apply those
strengths to business change0
• ,hat cultural attributes are
wea# or will interfere with the
change0
• ,hat will be the toughest
changes, and how will we
address them0
• ,ho will be responsible for
change management0

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