Integrating an enterprise solution: Budgeting, planning and execution
According to a study by IDG reported on by developpez.com, 50% of application development projects end in failure. The report notes that either the project was never launched, was launched but never completed, or was completed but failed to meet the needs expressed by users.
When it comes to integrated management systems (IMS), also known as enterprise resource planning (ERP) systems, the findings are even more troubling. According to analysts, 75% of implementation projects fail.
Despite the odds, do you have a project in mind, and are you counting on being among the 25% that succeed? It’s entirely possible, provided you:
• Adopt sound practices
• Base your project on comparable ones that have been successful
• Define what “success” means to you from the get-go
• Choose an experienced team to guide you
The combination of these factors will save you from unpleasant surprises and help ensure a soft landing for your project.
In 2018, Panorama Consulting Group published a highly instructive report analyzing the results of some 300 ERP system integration projects carried out in North America. Here is an overview of its findings.
Safeguards for a successful integration
• Local server or cloud?
There’s no point in reinventing the wheel. Cloud-based software-as-a-service (SaaS), infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) deployments of ERP systems such as S/4HANA (SAP), Oracle Cloud and Microsoft Dynamics 365 earned a score of 85%, versus 15% for on-premise deployments.
• Your current needs aren’t your future needs
Cloud computing allows you to rent your entire IT infrastructure (servers, databases, software, application containers, VPN gateway, etc.) through a monthly or annual subscription, whichever you prefer. As a result, cloud deployment may initially appear to be less expensive than a deployment on your server. However, once it’s completed and you begin using it, the solution may prove more costly as your needs evolve. For example, you should keep in mind that increasing the number of users and time-consuming operations will have a direct impact on licensing and maintenance costs.
• Don’t hesitate to get a second opinion
If, based on a somewhat biased assessment, a vendor tells you that your entire IT infrastructure is “ill” and needs open-heart surgery, 5 bypasses and a pacemaker, you should consult another specialist. Perhaps you have simply been given bad advice.
• Budget for everything and properly assess the risks
Investing in an ERP system is a major financial commitment. The authors of the report noted that 3% to 5% of the organizations’ sales were earmarked for the deployment of an ERP system. Deployment costs generally include the actual implementation, upgrades to your hardware and application infrastructure, conversion and migration of your data, as well as licensing fees and employee training. These costs must be carefully budgeted before any decision to purchase, and the risks and their potential impacts must be evaluated.
• Take the system’s lifespan into account
Regardless of whether it is local or cloud-based, an ERP will not last forever. It has a life cycle: adoption, acquisition, implementation, operation, updates, maintenance and replacement. If fail to budget for these various stages in your opportunity study, you can be sure the vendor won’t forget. “Vendors often update their products to add or remove capabilities. (…) Choosing a product that has the longest shelf life will help ensure you get the most out of your investment.” Making the right choice will give your business major momentum; making the wrong one will be a costly hindrance that could even end up stopping it cold.
• Take the time you need and make sure you have a plan B
The common preconception that it’s faster to deploy a solution on the cloud and adopt it than to deploy it on a local server is a myth. Depending on the size of your organization and the complexity and scope of the implementation, it can take a few months to a year to fully integrate an ERP solution. You will need a few additional months before reaping the benefits. That’s why you should have a plan B in case you exceed your budget or your timeline. As in most situations, the best game plan is always to expect the unexpected. That’s the way life is.
• Be pragmatic
ERP systems affect various aspects of an organization: operations, management, processes, procedures, etc. While they can have real benefits, the difficulties that must be overcome in order to enjoy them can be discouraging: “Once burned, many entrepreneurs hold off on needed hardware or software investments and end up depriving themselves of the systems they need to compete.” The moral of the story? Investing in a business solution is more complex and requires more thought, communication and preparation than buying a car. This type of strategic investment calls for pragmatism. An integrated management system is not “an extension of your aura.” Your ERP solution will not turn heads, regardless of whether it runs on diesel or gas, or is electric or a hybrid.
• Have realistic expectations
While most organizations are satisfied with their system, 42% are dissatisfied with its implementation. Difficulties in its adoption and unrealistic expectations could be at the root of their disillusionment. If your system is designed to produce round tires, don’t ask it to produce square ones. It may sound silly, but it’s a common phenomenon. By wanting to over-customize a system, you will not only compromise its operation and performance, but those of the software it interacts with as well. In addition, a customized system will make you dependent on the developer, which can disrupt your business continuity, particularly if their business closes or contractual allegiances change. The Phoenix pay system fiasco is an example of unbridled customization. “Development of Phoenix began in December 2012 and was implemented in two waves.”: some 7 years, 2 waves and hundreds of millions of dollars in customizations later, integration of the system has become a never-ending nightmare and continues to have major impacts on the lives of its users.
• Take care of your supply chain
There are myriad examples of ERP implementation failures. Target’s experience is a textbook case. Arriving in Canada in 2011 after acquiring the Zellers retail chain, the company closed up shop in 2015, shuttering 133 stores and laying off 17,600 employees. Although the causes of this failure have been abundantly documented, the main one was that the system chosen to supply the company’s stores did not meet the conditions of sound supply chain management: data integrity, an information system that communicated between stores and clearly defined processes.
• You’re not the only one involved
Integration of an ERP system cannot be planned in two hours around a table. It entails issues affecting all of your organization’s business functions. It therefore impacts all stakeholders—clients, suppliers, partners, contractors, government agencies, etc. —to varying degrees. In other words, implementing such a system does not happen in isolation. It involves many layers—internal, external and in other organizations.
• Think about processes and change management
Unsurprisingly, the main factor in a successful integration is not related to technology, but to the organization. Implementing an ERP system must follow or coincide with end-to-end modelling of your processes, including their partial or complete overhaul, and a solid change management program.
Regardless of your field, a business solution must enable you to be more efficient in your work, plain and simple. Think of it as an electronic spreadsheet: a highly sophisticated spreadsheet, but not much more. Once you have understood that, it will be easier to budget, assess your needs and make an informed decision. And you’ll feel much more confident about signing a contract.
Have a project in mind? Let’s talk about it.