ERP implementations have caused financial problems for their clients

In recent times, taxpayers and shareholders alike will have learned with disbelief of the sums necessary to plough into ERP systems by public and private sector bodies alike on top of the money already spent to procure and implement those systems.

In 2018, after seven years and 500 million euros, German retail giant Lidl decided to cancel their SAP project and revert to their legacy system. Three years previously,  Deutsche Post – DHL incurred a similar cost from their failed SAP implementation.

Revlon (2018) experienced problems and increased costs resulting from their new SAP software,  , Ranpak and National Grid (2022), although implemented, found their SAP results not quite what they expected.

In the UK, some local councils have hit financial troubles with their own projects:

Birmingham City Council have a dilemma with their Oracle Fusion (set to be five times over budget)
and a rescue plan is being considered even while they are looking at cutting public services. Councils at Lancaster, Leeds and Camden are reported to have experienced budgetary or delay problems.

What is it about these mammoth projects that even the most well-resourced organisations cannot control? I asked top tech specialist Ana Lucia Soler Villanueva to give some background to these situations and their causes.

Tech expert Ana Lucia Soler Villanueva suggests some causes of these problems

ALSV:

“Corporate environments jump into ERP system deployments without taking the time or the due diligence to evaluate their comprehensive organisational dynamics.

Often this is triggered by some external event like an audit  that exposes gross inadequacies and negligence in their current operations and systems. It is a dynamic contribution of current ways of working, current processes, organisational operating models, and the systems in place to govern it all.

With the pressure of an audit, however, the apparently quickest and easiest thing to fix is the system and this is further incentivised by conversations with software vendors whose sales teams engage and bewitch the customer. They tout their systems as a panacea that can solve all the customers’ woes. This is a fallacy, but with skills in persuasion and value propositioning through product demonstrations, combined with the urgency from the fallout of the triggering event, organisations easily find themselves signing a seven-figure deal over three years to subscribe to and deploy a new ERP, which in all probability functions in much the same way their old ERP solution did.

The decision is rushed, pressurised, and often results in a succession of events that have been highlighted in many articles as lessons in What Not to Do.

As we acknowledge that hindsight is 20-20, what can organisations do in the first place to avoid finding themselves in a similar situation?

Ana Lucia gave 12 key considerations:

1. Take a Pause. When the pressure from the triggering event comes crashing down, leaders need to have the strength of character and courage to say “Whoa, stop the bus”. If there are severe issues that have now been exposed and marked Urgent, it’s clear that they have been years in the making. Rushing to conclusions about how they are going to be resolved quickly by replacing one ERP system for another, is a knee-jerk reaction. To fix the issues and ensure longevity in the resolution, you need time. Insist on having that time and use it to advantage.
2. Align with Peers. There is power in numbers, but not if the top leaders within the organisation are in-fighting and each trying to stake a claim. If the pressure is coming from the board and C-suite, or governing bodies in the case of the public sector, then the smartest thing an HR, IT or Operational leader tasked with taking action can do, is to get together with their peer group.  The whole business will be impacted by any change in system and processes; working closely together and agreeing as much as possible requires early effort, diplomacy, and collaboration. Egos must be put aside in the interest of cohesion . One leader is not going to succeed alone, even if it is IT that has been tasked with the project; it takes unity to create and embed successful change.
3. Assess available Resources. Any activity will require people in the business to be  assigned to a programme of work. Before doing this, as leaders ask yourself the following; who are right the people in the business to take on the transformation work? Do they have the skills and competencies necessary? The digital acumen? Assigning  people that run your business with the task of transforming it is a flawed approach, as  operational ‘business as usual’ teams are not always the best suited to do project work. Be strategic and comprehensive with putting together a project team. External providers may be needed, but first, take a deep look into the organisation and determine if there are any change agents that would be strong players to represent your business.
4. Seek Advice from Others. There are many organisations who have gone the same route and either succeeded or failed. The wisest leaders know they are not the first to have to go through a transformation and will seek out advice from those who have already been there. Consult not only with similar organisations in your sector but also in different industries to get a broader perspective of what success looks like and what pitfalls to avoid.
5. Prepare a Detailed Business Plan. Before committing to any new technology with  suppliers and timelines, take the time to prepare a plan. This may mean having to push back on time pressures from within the organisation. Without a clear picture of current wastage vs the cost implications of a successful transformation, decisions are made in a vacuum. Document the cost; if unsure of the approach or if resources are insufficient to  conduct this activity, consider engaging an external party, who is neutral and not connected to any ERP solution to do the work for you.
6. Be Realistic in your Plan. As it almost certainly took years to deploy and embed the systems and processes that are in place, so it should be recognised that the solution to many problems will need time. This means defining SMART (Specific, Measurable, Achievable, Relevant and Timebound)  goals for which big ticket items need to be solved urgently and which will be prioritised at some later point.  Assuming an entire ERP deployment and organisation transformation can be undertaken in 12-18 months for an enterprise-sized company is unrealistic
7. Evaluate your Operating Model. Aside from the technology and system change, has your organisation evolved as a business from when you last implemented an ERP? If not, why not and could this be the reason there are so many issues facing your business ?If yes, then how have you evolved and is it reflected in your processes ?  A lot of  understanding of how you operate needs to take place before jumping into the technology that you will require going forward. If you have to change your operating model or update your processes, consider this as work that must be done in advance of any technological deployment.
8. Plan at a High Level. Start up a conversation about what a realistic program would look like. How long will it take? Create a strategic roadmap and map it to your calendar or fiscal year and determine key events in the business that will slow down or speed up the achievement of goals. Document the plan and discuss and review with peers and colleagues. Take the time to get everyone aligned so that detailed level planning will make sense.
9. Plan at a Detailed Level. Once the high-level plan has been agreed, make sure you have documented details of all the work that needs to take place. What budgets are you looking at ?What time and resources required? How will these map realistically against your high-level plan and business case? Carefully consider all possible scenarios and contingencies so as not to start a programme of work unprepared to respond to any unforeseeable circumstances. Being prepared is not a waste of time, it is smart planning.
10. When dealing with vendors, ask to talk to their product team. A new ERP system will be presented by the vendors’ sales teams. These are teams skilled at convincing you to buy their product that is what they do. However, what if what they are selling is not what is available? Probe deeper and ask the relevant questions to make sure that their product qualifies.
11. Prioritise Change Management. All businesses are operated by people. People in different functions, divisions, departments possibly globally or in multiple locations with differences in practices and perspectives. These are the people that will be impacted by an ERP transformation and therefore these groups need to be kept informed and engaged. They may have different jobs or tasks that happen because of the change, and this may cause resistance. The importance of a dedicated change management strategy and the right people to deploy all the necessary interventions and activities cannot be understated; this is crucial to make or break the programme.
12. Pick the Right Partner. For any enterprise transformation, the work cannot be done alone. The businesses up for transformation are probably too far entrenched in their ways of working to effectively push through the effort needed to transform. Working with a consultancy will be crucial to the success of the programme. However, picking the right partner to work with is key. Often it is assumed that the list of procurement-approved vendors is sufficient, but what if it isn’t ? Don’t let a procurement control keep you from putting the right partnership in place. How do you know it is the right partner? If they challenge you in your way of thinking, you’re off to a good start.

Could API-enabled best-of-breed software be an alternative solution to ERPs?

We won’t have heard the last of these large-scale horror stories, and for sure we’re probably not hearing about some for a variety of face-saving reasons.

In these times of Application Programming Interfaces (APIs) becoming standard on newer technology, and AI being deployed to write and update them, we now see a solid case emerging for Best in Breed, where differing vendors and software can be connected to work together. In this way existing modules can be joined to new ones, without having the ‘Big Bang’ effect that seems to drain time and resources to make ERPs work together effectively.

Big begins to look less Beautiful as time passes.