Executive decision-makers have a compelling reason to think about ERP. They may be thinking about buying a new ERP system because the existing one is not working; or is not working well enough; or will eventually no longer support the way the organisation is evolving.
There may be a technical reason: for example, the current ERP system may be obsolete, going to become obsolete, or on the verge of failure. There may be an organisational reason: such as a new business venture or an existing business unit splitting off from a larger corporation, and the decision-maker needs to think about the ERP system that the new entity will use.
Even if buying a new ERP system is not relevant, the decision-maker may be faced with the implementation of a previously acquired system or re-implementation of a new version of the same system.
Fundamental
On the global front, ERP solutions are no longer considered a competitive advantage; in fact, it is a competitive disadvantage if an organisation's ERP system does not operate efficiently and effectively.
However, to optimise the potential of an ERP system, the organisation's executive decision-maker needs to set a clear strategy and direction as well as quantifiable benefits and deliverables.
I believe this above approach is vital: despite their vital contribution to business performance, ERP solutions do not have a good track record. According to the researcher CS Yu, one of many researchers reaching similar conclusions, 40% of all ERP implementations or extensions perform below expectations, and 20% are scrapped as complete failures. Depending on the definition of 'failures', the latter figure could be as high as 50%.
In my experience, the problem tends to lie in unrealistic expectations.
Often, business executives are unable to answer a fundamental question: What is the business trying to achieve with ERP and why does the company want to do it? Before investing in ERP, the executive decision-maker needs to define what strategic business objective will be served, what ERP will contribute to the objective, how to go about the implementation and how to operate the system once it is live.
Unless the executive knows the 'what' and 'why' of the organisation's ERP journey, they are likely to wander down an inappropriate road of selecting, implementing and operating ERP.
Clear as glass
These hurdles can be overcome by unambiguously defining the business objective upfront, deciding on the approach to be used, assembling the resources and establishing measures for determining success or failure.
Although ERP is strategic by nature, organisations tend to have some difficulty quantifying the benefits. For example, there are a number of non-quantifiable benefits, including: improved alignment of business operations with the business strategy; reduced business risk; improved financial management and corporate governance; and increased visibility of information.
Consequently, it is imperative that the determination of the value to be derived from ERP comes from an authoritative individual who determines the 'why' of ERP on behalf of the organisation.
It is imperative that the determination of the value to be derived from ERP comes from an authoritative individual who determines the 'why' of ERP on behalf of the organisation.
Meryl Malcomess is marketing director of Syspro.
It is recommended that the executive decision-maker focus on clarifying the business benefits of ERP for the organisation in a formal, unambiguous manner by listing them in a signed-off document. This describes what the proposed change in the ERP landscape entails, why the organisation is going to make this change and what it is expected to cost.
I firmly believe this is the task of the executive decision-maker and should not be delegated, subcontracted or outsourced.
I would like to recommend that the executive decision-maker thinks through and documents the following:
* Which specific business objective or objectives is the business pursuing with ERP?
* Can the contribution that ERP will make to achieve the above business objective be quantified?
* Will it be impossible or significantly more difficult to achieve this objective without ERP?
* Does ERP have to work perfectly to achieve the business objective or is there a 'good enough' level? What would such a level be?
* Can it be quantified how many more business benefits will be achieved for every increase in how well ERP works for the business?
* Is there a time-critical aspect?
The answers to these questions drive the strategy for buying, implementing and operating ERP successfully.
* Meryl Malcomess is marketing director of Syspro.
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