Over the last two decades, the ERP market has grown from strength to strength, and the ERP system has almost become an integral part of any enterprise worth its salt. Analyst reports suggest that the ERP market is currently about $40 billion in total revenue, consistently ranks among the top IT spending priorities for enterprises, and is expected to grow to more than $50 billion by 2013.
ERP deployments with Oracle, SAP, Microsoft and others are not seen as mere IT initiatives; they are considered strategic levers to leapfrog the competition by enabling integration, standardization and improvement of business operations across the enterprise.
Yet many analysts indicate that a rising number of ERP deployments are failing to achieve their stated objectives. According to the Project Management Institute (PMI), nearly 70 percent of all ERP deployment projects fail, are late or go over-budget. Panorama Consulting, in its “2010 ERP Report,” found that 57 percent of such projects take longer than planned; 54 percent go over-budget; and 41 percent fail to realize at least half the expected business benefits.
Any ERP deployment failure hurts the enterprise deeply as these are long-gestation, high-TCO (total cost of ownership) initiatives that impact multiple stakeholders. The biggest challenge for executives heading an ERP project is to determine how to keep the deployment simple and aligned to its goals and objectives.
Challenges in ERP Deployments
Enterprise resource planning system deployments are large in scope and complex by their nature compared to any other IT program. They have budgets in the millions of dollars and typically impact nearly the entire user community. Inevitably, they touch the core business of the enterprise and typically trigger process- and operation-level changes across business divisions.
ERP applications also end up having myriad integrations with satellite applications, data warehouses and external systems, resulting in complex technology architectures and dependencies. They become further complicated by the fact that they often stretch over a long period of time. These complexities pose many new challenges and also put a strain on the enterprise’s overall budget and day-to-day business and IT operations.
These various challenges can be classified across the three broad dimensions that lead to ERP deployment complexities: Organization/Business, Technology/Product and Deployment Type/Scope.
Carrying out any ERP initiative successfully requires striking a balance among the above-mentioned dimensions. These dimensions, comprising strategic as well as tactical approaches, are not independent of each other; rather, they influence each other in almost every phase. Following are key success factors and best practices for ERP deployments, grouped around these dimensions.
Thorough and Continued Business Ownership and Stakeholder Management — ERP deployments need to be owned and sponsored by senior business leadership. Key business users, as well as managers, must be galvanized around the entire effort. This involvement at all stages of the program ensures that change is managed at all levels and percolated through the right channels and sources. The changes to business processes and operations should be clearly documented and explained.
Upfront Definition of ERP Success Criteria — It’s highly recommended that while developing the business case for the ERP program, enterprises must clearly document the ERP success criteria, the process by which those criteria are to be measured, and the applicable metrics. These criteria should be a combination of business metrics, IT and employee metrics, and they also should not be entirely internal-centric, that is, they should also “bake in” customer and supplier satisfaction. This helps the deployment team to remain focused during ERP execution.