Why do organizations struggle to get their ERP & CRM systems to deliver the results they desired?
A quick Google search on “ERP failure” yields numerous Top 10 lists and thoughtful articles on the subject. Culprits like badly-run projects, lack of vision and executive support, poor communication, badly-defined requirements, weak buy-in and commitment, no business case, wrong choice of technology and inadequate resources are usually cited among the top reasons for failure.
Here’s what I find surprising: virtually all of the discussion on ERP failure deal with what I call implementation failure and almost nobody talks about what I call failure to achieve benefits. ERP projects are complex, risky, and disruptive, and they require organizations to literally transform the way they do business from the inside out. Many ERP projects fail to meet their objects, go way over schedule and budget, and fail to engage stakeholders in a meaningful way. Entire ERP systems can easily become stigmatized by poorly executed projects making them impossible to stabilize. We have clients who had to introduce an entirely new software platform and start again simply because users’ experience of the implementation project resulted in negative perceptions of the software itself. In most of these case, the software was functionally rich and easily capable of meeting the organization’s needs.
Badly run ERP implementations can have a huge impact on organizational performance during the implementation. This article from PC World on the “10 Biggest ERP Software Failures of 2011” is revealing. Many ERP vendors and consultants have been sued by their customers over spiraling implementation costs and fiscal losses incurred as a result of business slowdowns during a badly-run implementation. The same goes for CRM systems, possibly on a slightly smaller scale.
My point is this: our seeming obsession with stories about implementation failure obscures a more likely, more risky, and ultimately more important failing: not realizing benefits after a successful conversion. I contend that in reality, most ERP projects do result is a successful conversion to the new system and that many organizations struggle to make their ERP system really hum and work for them. The drama associated with implementation failure accounts for why it garners the lion’s share of press attention.
So why do ERP successfully implemented ERP systems fail to deliver benefits and more importantly why do organizations have such a hard time supporting their implementations? Change management is, of course, a critical factor and well covered in other blogs and articles. ZDNet’s post “ERP Change Management: The Silent Killer” makes a compelling argument:
“Beyond communication…is the underlying need to foster engagement, understanding, and cooperation of those impacted by ERP-driven changes. Even small and mid-sized organizations find change management difficult. In late 2010, Lumber Liquidators, a retailer with $650 million in revenue and 225 locations, reported a net income drop of 45 percent due to “reduced productivity” associated with its ERP implementation.”
Change management is more dark art than methodology or science and my perspective is that ERP consultants focus too heavily on system conversion goals over long-term benefits realization. Clients are complicit as well.
Eric Kimberling, CEO of Panorama Consulting points out that companies frequently resist change management, ERP training, and communications.
“Most companies view these activities as optional, nice-to-have activities. However, as many companies realize the hard way, these are critical necessities.”
I offer an additional perspective on the failure to achieve benefits: Many organizations are ill-prepared to support their ERP & CRM implementations after conversion. It’s a huge factor in midsized organizations where the IT department may include only one or two generalists, usually tasked with hardware and network maintenance, end-user and desktop support, and procurement. On the functional side expertise is similarly limited. In-house expertise with the new ERP system is generally a function of the investment in training. At best, training prepares end-users to work with the new system but only years of experience can prepare people to get full benefit of system capabilities.
A core challenge is that realizing benefits with ERP & CRM systems requires adaptation to new capabilities, evolution of business process infrastructure, and at the most basic level, the ability to respond to the myriad of technology-related hiccups and issues that arise on a weekly basis. As the organization begins to embrace the new system, new requirements quickly emerge, and new capabilities or modules are desired, and the vision evolves. On the technology side, the pain of the initial implementation may diminish the desire to upgrade the software as new versions are released but keeping pace with technology and staying within the supported version range is critical.
What is the best way for medium sized organizations to support their ERP & CRM implementations? Our experience has been that clients depend on our support even more after a conversion or go-live. Not just in the initial stabilization period, but for years after. Our consultants are kept busy with a continual onslaught of requests for support. Requests include:
- Issue resolution
- How do I questions
- Process improvements
- Software bug reporting and tracking
- Vendor Management
- New Employee Training
- Refresher Training
- New Release/New Feature Training
- Upgrade assessments, planning and advisory
- Version upgrade services to keep system current
- Scoping and analysis for new customizations and integration
- Reports and ad hoc consulting
We’re happy to oblige these support requests. Benefits realization depends on our clients having ready access to the consultants familiar with their business and implementation. Being responsive and available isn’t enough in my opinion. ERP & CRM application support needs to be packaged into a managed customer experience with a pricing model that decouples service delivery from traditional hourly billing. The traditional consulting model only incents organizations to pick up the phone when internal troubleshooting efforts have failed, and to limit the interaction when they do.
We’re taking this dilemma seriously and listening to our customers. In Q4 we’ll roll out a completely new managed service for ERP & CRM customers that bundles unlimited support for benefits realization and service level commitments into a fixed month pricing framework based on the ERP and CRM system profile. Clients who subscribe to our managed ERP and CRM support will also benefit from preferred pricing on software and consulting services. We’re thinking of it as a Benefits Realization Club, and like the familiar slogan goes, membership will have its privileges.
Implementation success is simply not enough. When a client goes live with a new ERP or CRM system they are deeply invested and need every possible advantage, particularly access to ongoing support and help, to realize the benefits and drive their organization to perform at its best.