ERP Makes for an Expensive Custom Solution
December 22, 2010 12 Comments
The Allure of Technology
Think of the possibilities! Rapid delivery of new functionality! Reduce development cost by quickly deploying prebuilt solutions! If the software does not meet your needs then use the delivered, user-friendly development tools to customize the ERP software. We have the technology to make your business more flexible and adaptable. Most customers do think about the possibilities quickly but have a hard time taking that vision and incorporating it into the realities that are involved with using ERP.
The Challenge: Customer Expectations Not Aligning with ERP Strengths
A key area that causes conflicts during an ERP implementation is the misalignment between the customer’s expectation of business software and key ERP value drivers. Consider the following illustration.
It is important to understand the customer’s business owner/user expectations of enterprise business software. If customers expect ERP to adapt to current business activities then there is an increase risk of developing a custom solution that cannot support the fundamental value drivers for ERP. When an organization makes the decision to implement ERP they are making the decision (consciously or unconsciously) to realign business processes with delivered ERP functionality. This is a significant mind shift for key business owners and end users! It’s not a “light switch” that you can turn on and customers think differently. There must be an evolutionary process to better align customer expectations with ERP strategy and direction. Let me provide a real life example to further elaborate.
The No Win Situation
I was a functional consultant for an ERP implementation to replace a customer’s legacy time reporting system. The customer’s process consisted of Microsoft Excel spreadsheets coupled together with a data load process to a custom staging table for time approval and payroll processing. When I started working with the customer to define their business requirements it was apparent that there was a difference between executive and business stakeholder expectations. The payroll manager insisted on having the exact functionality that they current have in their systems today. I knew that no matter how good our developers were we would not be able to cost-effectively build Microsoft Excel flexibility into the ERP software. It would totally invalidate the justification for going with an ERP software solution in the first place. The payroll manager was used to getting exactly what they wanted from software to the point where software replaced the need for training (ex. dummy-proofing). I did an initial gap analysis and identified over twenty (20) gaps that required changes to the ERP software. Addressing the gaps via software would require additional resources (costs) to design, develop, test, and implement software changes. In addition the customer would have to allocate resources to re-analyze their software changes against new ERP software updates. These activities will reduce the ability of rapid delivery and increase Total Cost of Ownership (TCO).
I came to the realization that if I proceeded with a traditional approach to gathering requirements that (a) I would spend a lot of wasted effort gathering non-value-add business requirements and (b) the fit/gap session would be much longer than planned, (c) and I was in a non-win situation unless I changed the game. If I provided a custom software solution then I would have a happy payroll manager but I would have disappointed executives because the ERP solution increases costs. On the other hand, if I ruled out customizations and only used delivered functionality then I would get happy executives and an upset payroll manager! The only way I could be successful was to move from a traditional requirements and implementation approach to a new approach that addresses the realities of using ERP.
The approach I took was to reset software expectations. I met with the payroll manager to discuss the reasons for selecting ERP software and the inherent advantages and disadvantages with ERP software. This was not a one-time discussion and required several additional discussions with the entire project team. In the end the payroll manager’s expectations were adapted which enabled us to accelerate our fit/gap session. We still identified a few gaps. Of the three gaps we negotiated to have only one addressed via a software change and the other gap was handled via training. Our negotiations resulted in a significant reduction of effort and were only made possible by establishing the right environment for effective negotiating. If either party has unrealistic expectations then effective negotiations will be extremely difficult.
The fundamental design of ERP is to provide a common software solution across a broad customer base. ERP is maturing to enable more custom capabilities via configuration, but the fact remains that ERP can make for an expensive custom solution. The marketplace has realized that ERP requires a different implementation approach (ex. Software Engineering Institute’s EPIC methodology). Consider the drivers for purchasing an ERP software package. What was the business justification for purchasing packaged software? Remember that ERP targets customers across multiple geographic locations and industries. Two key implied statements that executives make when they select an ERP software solution are (1) having a custom software solution is not strategic to the organization, and (2) we expect our organization to adapt to the ERP software – specifically non-competitive, non-strategic areas. Strong words I know, however, I have seen a lot of grief and anxiety created during packaged implementations because this message was not clearly articulated to the project team and the organization.
The software vendor, implementation partner (consultants) and the customer’s IT department have the opportunity to play an important advisory role to the business user community by defining the best approach to leverage technology in creating a business solution. This advisory role can be a challenge given the high technology expectations of ERP software; however it is in the best interest to our customers!