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Without restructuring, ERP is an expensive waste


September 4, 2012
By Jonathan Gross

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If your organization is planning to implement ERP software without restructuring its operations, you can stop reading right now. In fact, you may as well take the money you’re planning to spend on the project and throw it in the bin.

 No matter how sophisticated your selected software may be, it can’t make your organization significantly better in and of itself. In a best-case scenario, your organization will become marginally better. And, you can be sure that the value of the marginal improvements won’t be anywhere near the costs of an expensive, time-consuming and resource-intensive implementation project.

I’ll even take this assertion one step further. If your organization doesn’t use its ERP project as an opportunity to restructure its business, the project is very likely to get buried in the ERP graveyard, alongside the thousands of other ERP failures.

Rather, your organization should use the project as a catalyst for change. It’s an excuse to streamline and improve the business. ERP isn’t a software project. It’s a restructuring project; an organizational change project. You should look at your ERP project according to the 80/20 rule: 80 per cent of the benefits are driven by business process improvements and 20 per cent by the software itself.

It’s important to keep these operational considerations in mind when evaluating ERP implementation proposals and service providers. If your organization is mid-sized, for example, and a service provider proposes end-to-end implementation in a couple of months’ time, warning alarms should go off. Think about it. How long has your organization known that certain sub-optimal business processes have been hurting its performance? Probably for a long time. Yet, it has likely stuck with those sub-optimal processes because changing them has seemed too daunting or complex.

So, given this context, do you really think a service provider can accomplish the following in a short two-month window: restructure the business processes, migrate data, properly train the users on the new processes AND system, implement the new processes and system and test everything thoroughly? The answer is a most probable no. Doing all of these things well takes time, skill, hard work and commitment.

All too often (seemingly more so recently), companies come to us for re-implementation or project rescue services. In many of these cases – and this is perhaps an oversimplification – the initial services provider loaded the software, migrated some data, did a bit of testing and gave basic training on what system sessions (screens) look like.
The service provider didn’t help with the restructuring – i.e. the main project component –  and didn’t ensure that the users learned the new system and processes (among many other problems we typically encounter, including testing and data migration).

What ends up happening is that these companies run systems that don’t jive with their ways of doing business and their businesses still have the same operational inefficiencies as before. The only difference is that they now have fancy, shiny software systems that spew out meaningless financial reports and operational recommendations.

The bottom line is this: there’s no magic bullet. There are no secret shortcuts. ERP implementation success is all about successfully integrating the ERP system into an optimized business environment.

I’ve given the context that ERP implementation is first and foremost an operational restructuring project, it’s very important to evaluate your ERP service provider through the lens of business expertise (among other lenses).

Jonathan Gross is vice-president of Pemeco, Inc., a consulting firm specializing in ERP selection and implementation. He can be reached at jonathang@pemeco.com. This article originally appeared on Pemeco’s website at www.pemeco.com.