In the previous blog, we explored the first 3 critical questions that CEOs must have answers to before they commit the company’s resources to an ERP project. In this post, we will discuss about the remaining 4 questions.
Prior to ERP implementation, your company has probably had multiple line-of-business systems already in place for different functions, like accounting or sales and marketing. Should you keep those systems or replace them with ERP? After all, ERP is essentially a comprehensive suite of enterprise applications that is supposed to integrate every function and process across an entire business.
A similar question is whether you should continue to invest in new stand-alone applications instead of purchasing similar modules or bolt-ons from your ERP vendor.
For example, should you purchase the business intelligence (BI) module from your ERP vendor or use a separate solution from a dedicated BI provider like Tableau? Should you purchase the CRM module or use Salesforce?
The argument of integrated suite vs. stand-alone (best-of-breed) systems has been around for as long as there have been integrated enterprise solutions. Experts have never been able to reach a consensus on this debate, and for good reason. Each approach has its strengths and weaknesses.
Certain departments may have very focused and specific requirements that cannot be fully met by niche applications. If you have such departments, then you should go with best-of-breed systems. These specialist systems generally take less time to implement than an integrated suite does.
That said, deploying multiple stand-alone systems may not facilitate interdepartmental, end-to-end processes. Having to deal with an enterprise-wide integrated suite is definitely an advantage with respect to integration and ongoing maintenance. This approach also provides better scalability if your business is expanding, and could be a more cost-effective alternative than buying and maintaining multiple systems.
In reality, it is much more common for businesses to maintain a mix of integrated suite and best-of-breed applications. That is, for certain areas of the business, ERP is deployed in tandem with a number of specialist systems.
The rational decision is neither the “ERP only” or “best-of-breed software only” approach, but to find the right package for your business by first identifying areas that need specialist applications. The ability to integrate smoothly with these applications should be high on the priority list when selecting your ERP vendor and product.
Ultimately, ERP implementation is all about change, and people resist change for various reasons. As a CEO, you cannot afford to underestimate your employees’ fear of change. Even after implementation, how the employees embrace the new system will determine the overall success of your ERP project.
A formal plan, therefore, must be devised to manage change and deal with resistance to change. Ideally, it will be put into action early. The fundamental elements of an effective change management plan are:
- Identify who will be affected by the project.
- Communicate the needs for ERP implementation and its expected impact.
- Explain what employees should do to ensure the project’s success.
Make no mistake, anxiety about change can come from the company’s management as well. It’s not unusual for companies to decide to embark on an ERP project because their current systems are broken and causing a crisis. But when the crisis passes, and all the anger and frustration have subsided, the sense of urgency and seriousness also disappears.
You must be confident that you are capable of making the right decision. The closer you get to the final decision, the stronger the fear of failure and the tendency to back off can become. Thus, it is imperative that you, as a CEO, are truly committed to a new ERP system.
Because of the sheer complexity of ERP selection and implementation, it is improbable for many businesses to embark on an ERP project on their own and find success. Thus choosing the right implementation partner is as critical as choosing the right ERP software.
There are several options for ERP implementation partners, each with its own advantages and disadvantages.
ERP vendors: They are the companies that actually create the ERP software. You may think dealing directly with the ERP software vendor will be cheaper. However, for the most part, this is not true. Each vendor has a different level of global presence. If you are a local company, your preferred ERP vendor may not have sufficient in-country resources to help you implement the ERP project.
Additionally, large vendors—SAP, Oracle, Infor, Microsoft, etc.—prefer working with trophy clients, those with big names and big budgets.
Value-added resellers (VARs): These companies are authorised by ERP vendors to sell their products and are capable of providing additional value to customers. The added benefits usually come in the form of professional services, such as consulting, customising, integrating, training, prototyping, testing, and maintaining. With this route, customers have little contact with the vendor, except when accepting the software license agreement (SLA).
System integrators (SIs): These companies integrate various pieces of software and hardware from many vendors into one functioning system. A SI may or may not be a VAR. SIs’ customers can purchase the ERP software directly from the vendors, or SIs can represent the vendors and sell software to customers.
Consulting firms: These companies help you select and implement an ERP system among several options. They can be authorised to sell products from several different vendors. You should clarify whether they have motives to favour particular vendors or products.
Some companies may opt to hire and manage freelance ERP consultants. But unless your company has successfully managed an ERP project before, this option carries a great deal of risk.
One crucial aspect of ERP implementation is to keep the project from becoming IT-centric, in which technology is chosen for the sake of technology instead of for the purpose of transforming the business. Decisions need to be made based on clearly defined business objectives rather than on fancy technical features.
In other words, the CEO’s role is to get all key stakeholders—senior executives, the IT function, business process owners—on board. In the absence of an organisation-wide engagement, your project can easily get bogged down due to issues that cannot be resolved solely by the project team.
Business process owners’ involvement in the day-to-day activities of the implementation is essential, even though they may have insufficient knowledge in project management and IT systems, they should be empowered to make decisions regarding their process—sales, supply chain, marketing, or finance. These individuals are critically important, as they will become super-users and pass on knowledge to their staff.
Interdepartmental engagement is also crucial to collecting and defining requirements. Each department has to describe not only its information needs and process flows, but, more important, what information it is getting from other departments and what information it needs but cannot get from other departments.
For further information, please refer to another blog series: 5 must-haves to buy the best ERP software