Cohere Consulting - Perspectives #ERP

Measuring Success of An ERP Implementation

Tue, 05 Apr 2016 04:39:51 +0000

ERP implementations involve high investments in terms of funds and effort though in recent times we see a number of ways ERP vendors attempting to reduce both. Having incurred large sums of money, businesses would like to know whether the implementation can be termed a success and if so what have been the returns of the investments. There can be a number of methods to assess the impact of the implementation. We may look at whether there has been better control of inventory or if there is more conversion of sales enquiries to order. Here is a set of 10, completely different kind of measures, though off-beat, provide a good indication that the effort has indeed been rewarding. An advantage of these measures is that they can easily be observed.

The CEO (and CXOs) conduct their operational review using reports generated from ERP

This indicates the system has been fully tested and at that level, the leadership has faith in the system. Rest of the organization would be expected to follow suit.

People in Finance function leave on closing hours and don’t come on weekends

In islands of systems, finance function takes the entire load of integrating the data as Finance is the destination system. In an integrated system like ERP, the finance would get all the transactions by design. Hence, finance function may suddenly find they have lesser load.

Users find ERP functionality not adequate

When users get the benefit of the system to support their regular issues, they normally find the functionality inadequate because they tend to solve more work problems than the system is configured for.

Users don’t argue over correctness of data

A poorly implemented system would result in data integrity issues leading to unnecessary effort in reconciling data and inevitable blame game on who have lost the control on data.

XL no longer used as parallel recording / reporting system

The affinity to XL for those who are familiar with it does not go off easily. If users perceive some gaps, they would try to fill that using XL – these could be in the form of some additional transactions, calculations or reports.

IT folks learn more from the users than the other way

Due to continuous usage, users pick up more knowledge about the product than the IT follks who may not have seen all scenarios.

Review meeting has more of business representation and less of IT folks

When there is no confidence in the system, the business review meetings would tend to have IT folks who understand the system for just in case situations – where IT folks would try quick fixing problems that get reported.

ERP vendor frequently asks for referral visits

There is no better marketing tool than sharing user experience. If users feel comfortable they may be flooded with requests for referral visits / calls from the ERP vendors.

There is no loaded truck waiting at the out-gate due to system issues

A common occurrence of a problem system is during despatch, a truck would be physically loaded with goods for transportation, but the transaction would not be completed - invoice cannot be generated or the system would show wrong goods – delaying the departure of the goods.

CIO spends most of his/her time with business than with IT

An indication of good implementation would be less of fire-fighting on maintenance and upkeep issues. A CIO spending his/her time more for business would mean less of maintenance issues and more focus on planning.

A Benefit Oriented Approach for ERP Implementations at SMBs - Part II

Mon, 17 Mar 2014 11:12:13 +0000

In this second part of the blog, we will discuss the process to be followed in a benefit oriented approach to implementing ERP at SMBs. Appointing a Benefit Realization Manager (BRM), the role we discussed in Part I, and following the process recommended in this edition can help SMBs realize better returns to their investments in ERP.

Generally, ERPs will be expected to bring in a more disciplined approach to conducting the business with their ‘single source of truth’ premise and integration features. However, these benefits may not necessarily result in business value measured in terms of revenues, costs or customer service that commensurate with the high investments of such initiatives. Hence,SMBs, embarking on these programs, need to ensure that their efforts,significant in most cases, are influenced by business outcomes than technology gains right from the planning stage through the succeeding stages.

Planning Stage - Preparation of Business Case

Companies would typically require a strong business case to proceed with ERP investments. The document would include inter alia the need analysis, investments and the benefits expected. However, in most cases the benefits stated tend to be more qualitative like improve operations or achieve data integrity. However, in our approach, the Benefit Realization Manager (BRM) would need to document the benefits with reference to the outcomes and measures. Such outcomes and measures should be aligned to company’s business goals and agreed with the management.

Let us consider a company which is seeking revenue growth and operational efficiency. The benefits expected and the related measures could be illustrated in the following way:

This could be further detailed out along additional business goals and made specific to business units or regions if required. The business case document would then serve as the baseline requirements document during the implementation stage.

The BRM may need to document the current performance of the company against the listed measures to facilitate a pre and post ERP evaluation. Additionally, functional areas that need re-orientation in terms of process simplification or delegation in decision making could be marked at this stage and taken up for specific considerations during the implementation stage.

Post Implementation Stage - Benefit Realization Reviews and Course Corrections

After the system stabilizes with continued usage which may be for a period of 6 months, the BRM needs to conduct a comprehensive review of the system against the intended outcomes and measures.The review could cover the four areas indicated in Part I of the blog; business outcomes, process simplification, people empowerment and IT Costs. The measures can be compared against those taken earlier to see possible improvements. The review should ideally be repeated after another 6 months where the ERP would have processed a year’s transaction and results compared with the earlier ones.Changes should be analysed for course corrections if any. Such corrections may require additional functionality to be built or further simplification of the processes.

As conclusion, SMBs would gain by following a benefit based approach than a technology implementation and would do well by entrusting such a responsibility to a Benefit Realization Manager - a senior professional in the organization. The BRM would need to work closely with the implementation team, communicate the benefits expected and follow a rigorous process of testing and review to ensure that the solution is indeed tuned to achieve the desired outcomes.

A Benefit Oriented Approach for ERP Implementations at SMBs – Part I

Mon, 17 Mar 2014 10:49:32 +0000

SMBs should follow a benefit oriented approach to ensure they get the maximum returns on their ERP investments and avoid the project being dictated by technology demands. Part I of the blog discusses the role of a Benefit Realization Manager and Part II, the process to be followed for in such an approach.

ERP Systems constitute the core of the IT landscape of many businesses now. For a long time, due to the high costs, they were largely a prerogative of large companies in India. That situation may be changing now as we find a number of SMBs (small and mid size companies) opting for these solutions. There could be several factors for this shift. The important among them may be the realization at ERP vendors that they are losing out on a large market base and as a consequence rushed to occupy that space with quickly rustled up stepped-down variants of their products. These were priced lower than the original versions and came with reduced scope that seems adequate for SMBs. To some extent, the advancements in technology such as cloud and falling hardware costs have also contributed to higher adoption. Further, the expanding vendor base of ERP developers, re-sellers and implementation agencies have come together to provide meaningful choices to SMBs to select the best fit ones that suit their businesses.

SMBs that are currently evaluating or in the process of implementing ERPs would do well to learn from the market experience to avoid certain pitfalls and issues faced by their predecessors. As they normally operate in tight resource conditions, investments in projects such as ERP that involves large outlay in terms of costs and effort, need to be thoughtfully planned and executed towards aiding than testing their already constrained resources. However, for every success story we find more than one horror stories which narrate instances of costs and time overruns and disruptions to businesses leading to loss of revenue and reputation. It may seem that by and large, ERPs have not delivered value to the businesses commensurate with the investments. A number of studies have been conducted on this subject and critical success factors have been propounded to aid an effective implementation. Management oversight, scope and schedule management,data accuracy, experienced implementation team and user education and training find prominent mention among them. While these are indeed crucial for the success of the implementation and should be looked after, one of the key success contributor that does not come out as strongly as it should is an approach that is grounded on extracting the most in the form of business benefits from ERP.

A benefit oriented approach would require right decisions to be taken at every succeeding stage of the project -planning to implementation to post-implementation- that are directed by expected outcomes than technology demands. Such an approach will need an owner responsible for ensuring that the benefits are realized and a supporting process that is closely aligned to the business outlook of the organization.

The benefits that can accrue to an SMB or even for the larger organization can be classified into 4 areas

Business outcomes – which can be measured in quantitative terms. While the measures at a high level are simply revenues, costs or customer service, those role up to these measures need to be targeted in an ERP implementation. Metrics such as forecast accuracy,inventory holding, on-time-in-full deliveries or receivables are some.
Process effortlessness – The benefits in these areas are related to ease of completing a task such as invoicing or finalizing the monthly accounts shortly after month closure.
People empowerment – Due to ERP, people should have access to accurate and recent data that can enable them take proper decisions in accordance to their levels and as expected by the management. They will be expected to spend more time on analysis to improve their divisions’ performance than compiling data for decisions.
IT Management and costs – While the investments in ERP can be high, SMBs can expect their adhoc IT costs and spending on repairs and reconstruction of IT applications to come down. The maintenance costs should more predictable and hence planned much in advance. The support to the users would follow a more structured process whether it is maintained internally or outsourced to a vendor.

In order to ensure the expected benefits are accrued across all these areas, the responsibility of achieving these maybe vested with a ‘Benefits Realization Manager (BRM)’. The BRM role is different from a Program /Project Manager in that the latter would be more concerned about the completion of the project within agreed costs and time while the former will focus on extracting the maximum benefits from the ERP investments. One may argue that such benefit orientation should rightly be expected from the next level project team members, but in reality we may find them so immersed in trying to understand and share the process and system intricacies that they tend to lose the sight of benefits. A BRM can fill that gap and for an effective ownership, he/she should preferably bean ‘insider’, someone from the senior management who understands the organizational objectives and barriers and knows what can solve them. The BRM would form an integral part of the initiative right from the beginning, interact with various functions for inputs on expected benefits, assemble them in a coherent way, direct the project teams with right inputs and ensure they buy into the imperatives. He/she may seek additional support from a consultant if required, but needs to ensure that the consultant has a good understanding of the domain and organizational issues.

As said earlier, to achieve the desired benefits, the BRM needs to follow a structured process that with right level of interventions at each stage of the project. Such involvement would cover preparing a business case, measuring the current and deciding the target performance indicators, ensuring the solution is designed and built accordingly and later after when the stable state on the system is attained, conducting a review on the benefits accrued.

In Part II of this blog, we will discuss more on the process to be followed in the benefit oriented approach.