Enterprise Resource Planning (ERP) systems have been around since the early ‘90s with Manufacturing Resource Planning (MRP) systems having existed since the ‘60s. In theory, it is an integrated system which operates in real time to support all core business processes and applications, providing operational insights and reporting management information. They have become the backbone of most mid to large organisations, and the implementation and management of these systems have become a multi-billion dollar industry worldwide.
We have been implementing and using ERP systems for nearly 30 years, but still, there are a vast number of organisations that are dissatisfied with their system and the cost of running and sustaining it (bill of IT). At the end of the day, an ERP system is there to underpin strategy, support business activities and the associated processes. Therefore, the business principles, policies and requirements are clearly captured and approved. As such, the business must lead (sponsor, own and manage) the system implementation and be supported by the IT and technical delivery organisation.
Release cash to help fund your implementation
There are three typical approaches to implementing an ERP (as demonstrated by the model below) Given that studies have demonstrated that 60% of the benefit is process driven (system agnostic), we would always recommend an improvement (operational excellence) and redesign led implementation approach. The savings delivered by these improvements can partially fund the cost of the ERP implementation and should form part of the benefits case.
Data, data and yet more data!
As we move into the world of “cloud” and away from solutions hosted “on premise”, we have a host of other items to consider, but the main reason for delay and cost overruns in our recent experience has been surrounding data harmonisation and alignment. All organisations these days have significant volumes of data. It is imperative that we have a clear data model, governance and strategy. Legacy, mergers and acquisitions, and a historic lack of business ownership among other factors have left many organisations with legacy data issues that can be very time consuming and costly to remediate. This is typically a long lead item that needs forethought and consideration before the system journey commences. Data needs to be identified as its own workstream and addressed early to ensure that it can be incorporated into the integrated plan and linked to dependant workstreams. Cloud based solutions allow frequent and low-cost upgrades, but only work when there is no or minimal customisation.
Managing the risk – take control of your own destiny
Control, managing risk and complexity is key to ensuring that programmes are delivered in a predictable and timely manner. Setting programmes up for success is paramount and deciding on an implementation strategy that all executive sponsors align with is crucial. In less mature settings, it would be very easy to operate a single vendor approach. Eton Bridge Consulting would always recommend, and are comfortable operating in, a multi-vendor environment to ensure that there is some competitive and professional tension a well as embedded independent delivery assurance.
Learn from others’ mistakes – don’t become another statistic!
Implementing any system is hard. Implementing an ERP is no different. By ensuring the programme is set up for success and sufficient time is spent at the early stages, costs and timelines can be managed. 75% of all programmes still fail, over 20 years after that statistic was first released. This means that there are a number of people who have experienced failure and earnt the scars and experience to go with it. In our experience, most ERP programmes are either delayed or over budget due to an underestimation of the effort and skills required.
When an ERP upgrade or implementation is mentioned, there are two things that are inevitable; firstly, it is going to be expensive, secondly, it is going to be expensive. In order to be successful they don’t just require a significant cash investment, but also investment of time at all levels of the organisation.
Ensuring that the right expertise is present may seem like a costly insurance policy, but when there are millions, tens of millions or even hundreds of million pounds at stake, is it not worth the price to provide comfort over the end result?
Our consulting team are currently working with a leading international technology business on a global transformation programme which is enabled by SAP S/4 HANA. To find out more about how we can provide independent support to your organisation to deliver your transformation in an efficient and effective way, please contact Nick here:
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