Backblog | | Enterprise Resource Planning (ERP)

For anyone that has seen an episode of the television series “House of Lies,” it paints a disturbing (yet at times entertaining) picture of the consulting industry. One episode allegedly explores the concept of shady ERP consulting practices, which is obviously of interest to Panorama since we are an ERP consulting firm. Although it may sound a bit far-fetched and the show strives for a strong shock-factor, it does underscore the potential risks of ethically questionable practices when hiring consultants to help with your ERP systems initiatives.

I want to lay something on the line here, right from the outset: an ERP implementation is not an IT initiative. When an organization believes that it is, and tasks the IT department with everything from software selection to implementation to training to internal communication, it is setting itself up for ERP failure.

As we have pointed out in previous blogs and industry presentations, creating a business blueprint is critical to a successful ERP implementation. While most ERP software vendors, consultants, and system integrators claim to focus on business processes, most don’t do it well.

When our mid- to large-size clients ask us to help them choose an ERP vendor, they often also ask us to help them find the best system integrator or partner to help with their ERP implementation. In some cases, our clients will choose their ERP software at least partially based on the competencies of the implementation partner that they are considering.

ERP implementations are a lot like the “Hunger Games” for CIOs, CFOs and other executives tasked with making their ERP projects successful. For those that aren’t familiar with the novel or movie, Hunger Games is predicated on a story where two children from each “district” of a futuristic United States are expected literally to fight to death. The children are selected at random, coached, mentored and dressed for the Hunger Games, but only one remains in the end. The home district of the surviving child is then bathed in riches and attention from the central government, making them the envy of the other districts.

As a follow-up to our recent post, Avoiding Bankruptcy From an ERP Implementation: Three Dirty Secrets, we’d like to take it to the next level and discuss how an organization actually can recover from being driven into bankruptcy by an ERP failure. Indeed, it’s a worst-case scenario, but also one we’ve seen too many times to ignore.

We often write and present about the challenges and pitfalls of ERP implementations, as well as some of the best practices associated with making an ERP system work for organizations. Our clients look to us to provide the expertise, methodology, and toolset to make their ERP implementations succeed. While there are a host of things that can contribute to an ERP failure, troubled deployments often boil down to a vitamin C deficiency – lack of cash, controls and change.

Anyone who follows ERP industry news knows that ERP implementations fail at high rates in both the private, commercial sector and the public, government sector.

It’s long overdue, but the relationship among enterprise integration, ERP, and productivity enhancements is finally attracting mainstream attention.

A recent article published by Tien Tzuo on the CIO Network blog on Forbes’ website suggests that ERP is dead. While it was a well-written article and isn’t necessarily inconsistent with what many other analysts have stated over the last three to five years, I’m still not buying it and still don’t see ERP software going anywhere anytime soon.

Purchasing ERP software has become easier and more flexible over the last several years. The advent of public and private clouds, SaaS ERP software, on-demand offerings, and hybrid deployments all provide more options to executives looking to deploy new ERP systems in their organizations. This is good news to most CIOs and CFOs.

It doesn’t matter how fancy your ERP system is. It doesn’t matter how closely the system’s capabilities match your company’s needs. It doesn’t matter that the ERP system is SaaS, comes with the latest flavors of business intelligence, or can be used by mobile workforces on their smartphones. No, none of this matters if the system isn’t implemented correctly.

Unfortunately, ERP implementations still aren’t any easier than they were 15 years ago when I started in the ERP world. Despite the enterprise software industry’s best intentions to mitigate risk with cloud ERP systems, implementation accelerators, and other tools, ERP failure rates are still high and most projects still take more time and money than expected. For example, our 2012 ERP Report, which will be released next week, shows that nearly half (44-percent) of all ERP implementations fail to deliver at least half of their expected business benefits.

One of the common themes we discussed in last week’s ERP Boot Camp is the ways that companies typically outgrow their ERP systems over time. Organizations change, enter new markets, respond to customer demands, and maybe even acquire other companies, leaving their more static ERP systems misaligned with business operations. In addition, companies also are often guilty of implementing software that is not aligned with business needs at the point of go-live, often because the company’s needs change during the course of the implementation or because the software was not implemented well in the first place. Simply stated, an ERP system that may have been a good fit 10-12 years ago is typically not well aligned from a business perspective later in the organization’s life.

Sometimes I think the ERP software market is a sham. After over 15 years consulting in the industry, I still see far too many overzealous system integrators and VARs hell bent on mismanaging customer expectations in order to close a sale. Worse yet, most that I run to in the industry fail to recognize perhaps the most important fact of ERP implementations: they have very little to do with the software itself. Sure, a good software solution is a prerequisite to a successful ERP transformation, but the reality is the business and organizational issues are hands down the most important things to adequately address when deploying successful ERP systems. Key among those business and organizational issues is user adoption.

One of the bigger changes a company will experience during its lifetime is the adoption and implementation of a company wide Enterprise Resource Planning (ERP) system. An ERP system cuts across functional boundaries and departments, and touches every aspect of the operations creating more of a horizontal organizational structure, causing changes in work/business processes. These changes can also have a big impact on how stakeholder groups both inside and outside the business work with each other.

The advent of mobile devices is gaining significant momentum in the consumer space, as evidenced by statistics showing that shoppers are using iPhones, tablets, and other mobile devices to conduct their holiday shopping at a rapid accelerating pace. However, the business world is also beginning to show some signs of early adoption of mobile capabilities in their evaluation, selection, and implementation of enterprise software systems.

With all of the recent marketing hype surrounding SaaS ERP, you might be surprised to learn that it only commands 7% of the 2011 global ERP market share by software sales. According to a July, 2011 report by Gartner Research, this translates to a roughly $1.7 billion (U.S.) slice of the $24.3 billion ERP software pie.

Today [November 2, 2011] we published our highly anticipated Clash of the Titans report. Last year’s report, which provided a comparison of SAP vs. Oracle based on our independent experience and research, was our most popular and most referenced research article of the year. This year, we created a new version to not just include updated research data but also add Microsoft Dynamics to the mix.

As we close out 2011, we’re seeing many companies put ERP implementation projects on their 2012 dockets. For a large subset of these companies, it means wrapping up ERP selection projects and finalizing contractual terms before the holidays kick-in. These businesses are aiming to hit the ground running with implementation when 2012 rolls around.

Why do organizations spend more and more on IT while questioning its validity at the same time?

This last year was another eventful time for the ERP software industry. Vendors continued to consolidate, the rate of ERP failures and lawsuits accelerated, and enterprise software technologies continued to evolve.

Given the uptick in recent ERP failures, executives are looking for ways to mitigate risk and hold their ERP vendors accountable for the success of their implementations. Organizations are well aware of the challenges and pitfalls of implementation cost overruns, lack of vendor accountability, and troubled implementations, so they are looking for ways to leverage the potential business benefits of their ERP systems without the risk. One mechanism commonly employed is the concept of fixed-cost or fixed-bid contracts as part of the purchase of ERP software.

Our firm developed the Milestone Deliverables ERP implementation project management methodology over a 33-year period. It is now used to deliver ERP success in more than 40 countries. This short series of articles is designed to introduce you to the key components of our methodology - the components that are necessary to drive ERP implementation success. This first article focuses on the importance of project planning, business process mapping and system testing.

Technology continues to advance at a pace that few can keep up with. Business owners can certainly have a hard time ensuring that their systems are always up-to-date to take advantage of the latest and greatest. However, despite being difficult to keep up with technological advancement, these advancements are vital to business success – particularly from a system-integration perspective.

Earlier this month [September 2011], Salesforce hosted Dreamforce, its annual conference for cloud ERP vendors. The event drew over 45,000 participants this year, underscoring the significance of the company in the ERP space, and more importantly, the significance of cloud and Software as a Service (SaaS) based ERP solutions.

Enterprise 2.0, social ERP, and other buzzwords related to enterprise software combined with social media are quickly gaining momentum in the ERP software industry. Industry analysts and research firms regularly cover the potential convergence of social applications like Twitter, Facebook, and Yammer with traditional ERP systems like SAP, Oracle, and Microsoft Dynamics. For example, last year IFS North America and Affinity Research Solutions conducted a study of manufacturing executives to determine their interest and understanding of social ERP.

There has been an abundance of gloom and doom expressed in the media since the “great recession of 2008”. The markets seem to have been irreversibly shaken and the image of the global economy irreparably tarnished. It is in these uncertain times that decision makers begin to make several grievous mistakes. In this post we will address the importance of not losing sight of what is important to business success, regardless of the state of the economy, particularly from an IT investment perspective.

The current economic climate is causing many organizations to rethink their ERP projects - whether selection, implementation or optimization. Many businesses are now hesitating because they're no longer sure that it's in their best interests to fund the projects or to divert precious human capital resources.

A few weeks ago, ComputerWorld published an article about a recent Epicor implementation failure and lawsuit. The suit alleges that Whaley Foodservice Repairs tried and failed to implement Epicor Vantage after an extended period. One of the key difficulties with the project was that Epicor’s professional services group had estimated that the implementation would cost $190,000, while the actual implementation cost ended up exceeding $1 million by the end of the project. In addition, the company alleges that its wasn’t able to use the system as expected after two years in production, requiring additional work and costs.

As summer draws to an end, people across the country are sending their kids back to school and getting ready for autumn. In addition, CIOs and other executives are finalizing their Q4 budgets and preparing for other end of year activities. For many customers of SAP and Oracle, these winds of change can also signal consideration of switching from one of the two Tier I ERP systems to another.

Our recent ERP benchmark study (soon-to-be-released) points out the obvious relationship between ERP selection success and ERP implementation success, that is: a failed selection project inevitably results in a failed implementation project.

ERP systems come in all types of varieties, shapes, and sizes, ranging from the massive Tier I packages like SAP and Oracle, to the smaller, more focused nice point solutions like Salesforce and Workday.

Using computers to facilitate brainstorming sessions has been (occassionally) talked about in academic and management fields for the last two decades, but I have never heard of it actually implemented in a real-life scenario. Back in 2008, I blogged about the potential and problems of electronic brainstorming, but I haven't encountered the topic subsequently.

In our previous ERP planning tip, we discussed routings, the final data set-up requirement for making an item. In this tip, I dig deep into another critical data requirement – the need to maintain timely and accurate inventory counts and movements.

As kids across the country begin heading their way back to school for the new academic year, CIOs and their respective organizations appear to still be getting schooled on the harsh realities of ERP implementations. In the last week, two fairly high-profile lawsuits made their way into the technology media: one involving a case against ERP software vendor Epicor and the other against Infor.

Many of our clients hire us when they know they need help selecting and implementation a new ERP system. Often times, these clients know the general direction they want to go with their enterprise initiatives and simply need help navigating the options and implementing their chosen solution. This tends to be the sweet spot of our client base.

In our previous ERP planning tip, we discussed the bill of materials (BOM), which discussion answered the following questions: which and how many components are needed to produce an item. This tip deals with routings, the final data set-up requirement.

Cloud ERP is clearly the talk of the ERP software industry. The marketing engine supporting cloud options such as software as a service (SaaS) and hosted ERP systems is very strong, even reaching into the consumer-facing side of things with Microsoft’s push into the cloud with Windows-based products.

In our previous ERP planning tip, we covered time and quantity order-based modifiers to back-schedule supply requirements from demand. This previous tip dealt with the “when” and “how much” questions of planning. In this week’s tip, we cover the “what” questions of planning, which is represented by the bill of materials, or BOM (there is also an element of “how much” in BOMs).

As we’ve covered in great detail in this blog over the last several years, ERP implementations can be a grind. It’s tough to finish on time and on budget while at the same time delivering expected business benefits. Whether you are working for a commercial company or are in the public sector, it’s no secret the the odds are stacked against you when it comes to ERP systems.

In our previous ERP planning tip, we discussed the importance of feeding an MRP system - or a planning engine - accurate and timely data. In this tip, we start to dig a bit deeper into the types of data that a planning engine needs to make meaningful recommendations.

Most of the clients we work with grow at least to some degree via mergers and acquisitions of other companies. Either they want to branch into new markets, acquire new customers, and/or leverage operational competencies of other companies. Regardless of the drivers of these M&A activities, there are a number of operational and strategic risks and pain points that unfortunately often aren’t adequately addressed by organizations.

The credit crunch and recovery have exposed manufacturers to volatile demand. The earthquake in Japan has exposed manufacturers to volatile supply. The key to effective management of supply and demand lies in a manufacturer's planning activities.

Organizations typically implement ERP systems to help improve business operations, whether it be to increase efficiencies, streamline business processes, or increase revenues. However, our research shows that a full 54-percent of companies have a high level of business risk at the time of going live with their new ERP software.

If the last few years have taught us anything about business, it’s that the successful companies adapt to tempestuous market shifts.

This is the time of year when our clients are either in the midst of ramping up their ERP implementations or are on the verge of selecting an ERP system to implement later in the year. While the ERP selection process is critical to the success of an enterprise software initiative, even the most perfectly aligned software won’t make a bit of difference if it’s not implemented effectively. Since most organizations don’t have the in-house capabilities to handle the associated complexities and risks, they often choose to leverage the expertise of an outside ERP implementation consultant.

Many companies running Infor Baan ERP software are reaching a crucial juncture. Do they upgrade to Infor's ERP LN software, stick with their current software or expand the search to include other vendors.

Sourcing considerations in ERP environments are not that dissimilar from those of traditional Application Development & Maintenance (ADM) environments in many ways. Yet there are also unique challenges and nuances that are especially applicable when sourcing ERP service providers.

ERP implementation failure is a pretty easy topic to write about – fresh material is delivered to my door almost daily. Consider, for example, the California County of Marin’s recent $30 million lawsuit against Deloitte Consulting LLP.