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2/4/2004
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Smart Advice: Under-Promise And Over-Deliver On ERP Projects

To escape the Y2K spending hangover, IT must reverse the skepticism brought on by expensive ERP projects, The Advisory Council says. Also, look at business fundamentals before starting a CRM project, and create processes that implement and tie together local and global objectives to generate value companywide.

Editor's Note: Welcome to SmartAdvice, a weekly column by The Advisory Council (TAC), an advisory service firm. The feature answers three questions of core interest to you, ranging from career advice to enterprise strategies to how to deal with vendors. Submit questions directly to smartadvice@tacadvisory.com


Topic A: Senior management feels that we haven't gained any strategic advantage from the enterprise-application packages we purchased for Y2K. How do I overcome the Y2K spending hangover?

Our advice: There's good reason for senior management's skepticism about the return on their enterprise resource planning investments. ERP has caused grief to many organizations, including some that went bankrupt as a result. However, many organizations have benefited from its reduced costs, shortened cycle time, and increased revenue.

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To understand why this happens, let's look at this issue from a broader perspective, not only in terms of ROI, but also in terms of strategy, design and implementation.

Why has ERP's promise not always been realized? Here are some reasons:

  • Unrealistic expectations: Sometimes we show "irrational exuberance" with our projections of the benefits from big-ticket items. ERP was presented as a panacea. There's no better way to shoot oneself in the foot than to "over-promise and under-deliver"!


  • Lack of business sponsorship: Business sponsorship and active participation is critical to the success of all major IT initiatives.


  • Ankle-deep analysis: We overlook key aspects of IT investments:
    • How much will we make or save, i.e. what is the ROI?


    • How does this affect the organization? Training, change management, etc., are critical to success.


    • How does this provide strategic advantage?
      • If our competitors have the same package, where's our competitive differentiation?


      • If our processes have to fit the package, where's the benefit in reengineering?


      • If the package has to be customized to fit the reengineered processes, where's the cost, risk, and timing advantage from buying off the shelf?

  • Lack of monitoring and control: Very little effort is put into designing the process and metrics used to measure results. Consequently, bad implementations continue far beyond their cut-off points.


  • Big-bang implementations: ERP implementation in a running organization can be like changing engines on an airplane--mid-flight! Needless to say, change is best accomplished one step at a time.


  • Overdependence on consultants: Lack of internal expertise leads to mega-dollar consulting deals that don't produce results for the clients.
    • Is the fox guarding the henhouse? If a partner in the consultant's "package A" practice is leading the charge on package selection, then is it a surprise that, no matter what the question, the answer is always, "Package A"?


    • It takes an army to do the work of a "tiger team"--consultants bill by the hour; the more the better!


    • In consulting parlance, leverage is when a team has one expert leading a hundred recent college graduates. The client, in effect, pays for on-the-job training!

Ways To Avoid Mistakes
Here are some ways to avoid these mistakes:

  • Insist on business sponsorship: Forge long-term relationships with the business. Design processes that cross the business/IT boundary, from strategy to implementation and beyond.


  • Cancel your membership in the "flavor of the month" club: IT exists to enable business results. If there's no direct correlation between the latest, greatest technology and your business model, leave the technology alone.


  • Use a portfolio-based approach: Like personal investments, IT investments are best managed as a portfolio.


  • Implement iteratively: There are always unknowns--do and learn in steps and cycles.


  • Monitor and correct: Measure results and, when appropriate, change course. Note the key milestones along the way. When you reach them, reconfirm the "go/no go" decision.


  • Choose your partners wisely:
    • Choose consulting firms based on their capability and integrity.


    • Divide the work to avoid conflict of interest " never hire the same firm as strategist, package selector, and implementer.


    • Use gain-sharing to inspire everyone on the project to be honest, eager, and hungry to succeed.

In short, to regain senior management's trust in ERP: under-promise and over-deliver!

-- Sourabh Hajela

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