Selecting and implementing an ERP solution
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Selecting and implementing an ERP solution

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Selecting and implementing an ERP solution Selecting and implementing an ERP solution Document Transcript

  • THE ADVISORY SERIES see the wider view Selecting and implementing an ERP solution
  • THE ADVISORY SERIES Selecting and implementing an ERP solution About The Advisory Series Lakeview’s ERP software and technology solutions unlock the productivity of your business. As part of our commitment to best practice and knowledge sharing, we present The Advisory Series. These helpful Contents guides offer advice and insight on the key issues and challenges facing businesses in today’s marketplace. Welcome 4 We hope you find them useful. Identifying your compelling needs 5 Predicting your return on investment (ROI) 6 Your business in the ERP landscape 8 Defining the selection process 10 Selecting and implementing Taking references 11 an ERP solution Understanding the supplier’s methodology 12 This guide provides advice and tips on Analysing the supplier’s behaviour 14 how best to select and implement an ERP solution within your business. Organising for success 16 Even if you have travelled this path before, you should still find some Managing the implementation project 17 useful insights. Considering software modifications 18 Reviewing the implementation project results 20 Remember – going live is only the beginning 21 
  • THE ADVISORY SERIES Selecting and implementing an ERP solution Welcome Identifying your compelling needs For any company, the need to measure and ensure a The first essential step in the ERP selection process is to look business return on an investment in IT is essential – and internally, clearly determine the business issues you are trying yet, paradoxically, such returns rarely materialise in reality. to resolve and consider what benefit you will derive from the For a small-to-medium-sized enterprise (SME) this is investment in IT. especially critical, as budgets are typically tight. At the same time, the need for IT to drive operational efficiencies, Don’t buy IT for IT’s sake... or to keep up with a competitor’s increase revenues and improve customer service is system... or out of short term unhappiness with your current stronger than ever – if you are to compete effectively with provider. All these are not in themselves good enough reasons larger counterparts in ever more global markets. to go to the market. Business benefit is everything. A business management software solution for enterprise It may be possible to address the issues you have identified resource planning (ERP) is one of the most significant IT through additional training on your existing solution, or by investments a company will make. Choosing the right ERP opening up better communication channels with your IT solution is as much about engaging with the most suitable vendor. Ask yourself: “Have we spoken to our existing supplier supplier as it is about choosing an appropriate technology, about our current systems issues?” If you haven’t, you may find user interface or feature set. In many ways, these aspects your problems could be resolved with a simple phone call. are all inextricably linked. If you decide to press ahead with the process, the next step So, you want to determine the best overall solution and is to set out the business-critical issue to be solved. Again, service package to deliver financial returns and customer if you can’t describe the business case with financial figures service improvements. How do you determine what kind of to support it, the chances are you should not be making that company and software product is likely to provide the best investment. fit? And how can you be sure that the implementation will run as smoothly as possible – and deliver the anticipated business benefits? An ERP software solution is one of the most significant IT investments that a business will make.   View slide
  • THE ADVISORY SERIES Selecting and implementing an ERP solution Predicting your return on investment (ROI) At this stage, you must be clear and realistic about what you can afford, considering the budget you have available. The budget should be related to the predicted return on investment, based on cost reduction or increased revenues. You often hear statements like: “With our new ERP solution, we will be making our processes smoother, and our data available to all our people.” These are important outputs – but you do need to quantify the benefits you want from them. You should be formulating measurable goals, such as: • “We will reduce our admin personnel needs by five.” • “We will reduce the cost per order by 10%.” • “We will reduce lost sales by %.” Typically, It would be realistic to expect a return on your ERP business systems investment within three years – longer than that and you are in danger of slipping into your next replacement cycle. You should formulate measurable goals for ERP – such as reducing your cost per order by 10%.   View slide
  • THE ADVISORY SERIES Selecting and implementing an ERP solution Your business in the Again, in this marketplace you should seriously consider one supplier for all your IT needs. A key difference here is ERP landscape the consideration for employing a dedicated IT manager for ERP in your business. Take care in hiring this person, as anyone with the appropriate knowledge and personal drive will Consider carefully where you are positioned as a company in typically already be working for a software supplier. Consider your own marketplace before considering ERP products and candidates from the ERP industry looking to move client-side. suppliers. This will have a bearing on how suppliers will see you and relate to you. This is particularly important post-sale, when all the sales talk is transforming into the reality of the Enterprise ERP ERP solution’s fit and quality of service from the supplier. From £250m to £1 billion turnover, you should consider the high-end SME suppliers of ERP products. These typically have a direct model with international coverage, rather than Small business ERP selling through national resellers. Examples here are QAD If your annual turnover is less than £500k and you do not (with its MFg Pro product), Lawson (Movex/M3) and Infor expect it to grow to more than £1m within three years, then (various vertical products). you should consider looking at smaller ERP packages provided by an authorised reseller. Ideally choose a reseller The corporate market above £1 billion turnover is dominated by who is local to your business, to help ensure a responsive SAP and Oracle. There is really only a straight choice between onsite presence when needed. Look for a single point of these two industry giants at this level. supply and service for hardware, security, backups and software so that you do not have suppliers blaming each Clearly, these are only guidelines and there are certainly other. Expect the supplier to provide all your IT needs – but ‘shades of grey’ – particularly when turnover does not truly do agree a single point of contact within your business at represent company size or growth. management and IT admin levels to manage the relationship. Typical UK ERP products at this level are Sage and Pegasus (the latter owned by Infor), each with its own reseller network. Mid-range ERP If your turnover is in the range £1m to £250m, then you should be looking at ERP products and suppliers that focus Talk to prospective ERP more on the “M” of SME. These products will scale as your suppliers about the problems business grows, in terms of functionality, ease of interface and number of users. Also, these suppliers will have employees and processes to be who can consult with you, and offer advice and guidance on best practice business processes as well as systems and addressed – not simply technology. what the solution should be. Typical UK ERP products at this level are SAP Business One, Microsoft Dynamics and Lakeview LM4. While SAP and Microsoft are usually sold through resellers, Lakeview has a direct model – not only authoring the software, but also exclusively implementing and supporting it.  
  • THE ADVISORY SERIES Selecting and implementing an ERP solution Defining the selection process Taking references When putting together a shortlist of potential providers, first Be sure to take references on the supplier. Request ask others about their ERP experiences – trusted advisors, results of their customer satisfaction surveys. If they aren’t personal business contacts, trading partners and suppliers. forthcoming then be wary, as their focus on post-sales service may be lacking. Ask the supplier for customer Talk to prospective ERP suppliers about the business references and take up at least one. Also, be smart and problems and broken processes to be addressed – and ask for a complete list of customers in your specific vertical not simply what you think the software solution should be. market, such as food distribution, electronic manufacturing A responsible provider should not simply sell you what you or consumer goods distribution. Pick out companies you think you want. Rather, based on a joint analysis of your respect and trust in your marketplace and ask to speak to needs, they should be happy to advise you not to spend them. Do so directly and informally if you can, particularly money on the latest new software – if this will not realise if you have personal contacts. business benefit. A good ERP supplier should be a trusted advisor to your business rather than a technology or software As well as referencing prospective suppliers’ capabilities commodity supplier. Their added value should come from in implementing the software, pay attention to the quality knowledge gained from many experiences of working with of their after-sales care. Talk to existing customers about many businesses in many markets – to advise on best- the level of support they receive. When they log issues, practice processes, technology and systems. how long is the initial response time and the resolution time? Do they have people answering the phones who Be wary of ‘independent consultants’ who help you compile are knowledgeable about the product? Do they pick up a wish-list of features, an invitation to tender or a request calls promptly or do they use a dreaded voicemail system for information. These consultants are rarely genuinely with multiple menus and options? Is the support limited to independent – they will likely push you toward one product reporting program bugs only – or do they answer ‘how do I’ that they know well, which will enable them to provide further and ‘what if’ questions? Be aware that many suppliers will consultancy later on. If you wish to use their services, be not answer these open-ended questions and will insist you sure to take references from customers who have followed take chargeable training whenever you raise them. Do they their advice successfully and accrued the agreed business have customer user groups, customer forums and an open benefits. communication style? Also, the approach of simply compiling feature lists is very Also take references on the product in terms of the quality dated and an unnecessary waste of time and money. You and frequency of software releases. Do they update and should consider ERP products today almost as commodities. modify the software often? Do they listen to customer Within each of their markets, the features, functionality and requests to include features in future releases and have technology advantages are all quite similar. Some will score evidence to support this? Does the product have a plus-points in certain areas but, overall, products in similar roadmap and what is the end-of-life and replacement markets will score very closely. Look at suppliers who at least strategy in the future? claim to have a specific solution for your vertical market, but don’t place too much emphasis on this. Most ERP suppliers have sold across most manufacturing and distribution markets, and it is easy enough to segment customer databases after the event and claim a specialisation. 10 11
  • THE ADVISORY SERIES Selecting and implementing an ERP solution Understanding the supplier’s methodology It’s important to know that the supplier has a documented Some ERP suppliers will make this much more complex, implementation methodology and that there is evidence it is breaking it into further stages – or they may truncate it to fewer actually used on real projects. The detail is less important, stages using prototyping techniques to combine stages one as all such ERP implementation methodologies are similar. and two (often known as Rapid Application Development). Fundamentally there are four key stages (see diagram below): Rather than spending time analysing methodologies, a more • Identify and document the business requirements pragmatic approach is to discover the truth behind the theory • Design, build and test the solution when you take customer references and discuss the success of the implementation. • Deploy the solution • Go live A typical ERP implementation methodology Identify Design, Deploy the solution Go live requirements build and test Definition Project execution Closure Project management Quality assurance Solution definition Solution setup and validation Process and structures Solution goes live Solution training People Solution documentation and support IT environment Data conversion System Output documents Solution mods and interfaces Process enablement 12 1
  • THE ADVISORY SERIES Selecting and implementing an ERP solution Analysing the supplier’s behaviour Pay very close attention to the supplier, their references and what you can learn about their behavior. Is this a company that you will entrust a mission-critical part of your business to, and that will become a valued advisor to your company? Are you seeing people that you can trust, believe in and work with? Is the sales process consultative rather than ‘hard sell’? Are you getting access to the people who will do the implementation and support? These are much more important considerations today in selecting an ERP product and supplier than checking off feature lists. Remember that software can be more readily reconfigured than your company culture! Throughout the ERP selection and implementation process, it’s essential to have the right team in place – you need commitment to ensure the processes and systems are implemented. 1 1
  • THE ADVISORY SERIES Selecting and implementing an ERP solution Organising for success Managing the implementation project Throughout the ERP selection and implementation process, The project managers – yours and the supplier’s – should meet from quantifying business issues and benefits through to on a weekly basis and produce a status report, which focuses go-live and beyond, it’s essential to have the right team in on deliverables compared to plan, and also raises issues and place within your organisation. The roles are mostly part- recommended solutions. A steering committee meeting should time, typically peaking at two to three days per week, but be held monthly, which also includes the executive sponsors the people filling these roles should be your line-of-business from both sides. (You should also expect the supplier to managers and/or business experts – the people your day-to- appoint a director-level sponsor to ensure your business has day business depends upon. This is the level of commitment focus with them during the implementation and thereafter.) you need to plan for, to ensure the processes and systems The other project participants will be your line-of-business are implemented and that you maximise the business benefit. managers and/or business experts, who you trust to define how the company processes work today, where the problems The key role often overlooked is that of ‘executive sponsor’. are and how these processes should be improved and look at This is likely to be the business owner or a director, the end of the project. Typical areas to be represented across someone who is empowered in the business to ensure the the business are accounts, commercial/sales order processing, implementation project is given a high priority. This ensures sales and marketing, supply chain/purchasing, logistics/ the agreed plan can be met by allocating key personnel at the distribution, IT and any corporate/board requirements. right times, and that any decisions outside the control of the project team can be made by the sponsor in a timely manner. Key processes should be flowcharted, agreed and included in an overall solution specification. This document is vital in ensuring Working closely with the sponsor will be the project manager both parties understand and agree on what is to be delivered, – the person within your business assigned to the overall ERP including software, hardware, documentation, services and implementation. This is the one role that should be full-time support. The solution specification should be a working document, for the project duration. Do not make the mistake of leaving and at the time you sign the supplier’s contract should be at a this open or fully in the hands of the supplier. The mistake suitable level of detail for both companies to agree to tie to the often made is to assume that the supplier will manage the contract as a statement of work to be undertaken. At this stage project for you. This will be partially correct – but rely on this the specification should be business-process-oriented, rather than organisational assumption at your peril. technical – so line-of-business managers and directors can understand and agree as necessary. The ERP supplier’s project manager (if there is one) will be representing the best interests of their business rather than The specification then becomes more detailed and technical, yours, and this may compromise the quality and timeliness as the project unfolds into the detailed analysis and system of the solution delivered. It is also often the case that the design stages. Any changes to the business processes, project manager has a technical background only, and is not assumptions and benefits must be flagged back to the a qualified or experienced project manager. Take references executive sponsors via the steering committee. Any changes on this person and ascertain if they have the experience and to the solution specification should be made under formal track record for this important role. change control and signed off by the project managers. The supplier should indicate where additional costs are associated with a change request so that this can be considered, compared to its benefit and/or necessity, and approved (or not) in a timely yet controlled process. 1 1
  • THE ADVISORY SERIES Selecting and implementing an ERP solution Considering software modifications The decision to purchase an ERP package is partly based upon the benefits of being able to adopt new standard features added by the supplier in new product releases. You may wish to add custom modifications to the system to more closely fit your business processes – but you will potentially be adding complexity and costs in moving to new upgrades, and also in the support for your customised version of the package. So, this is a balancing act – keeping the modifications to an absolute minimum based on business-critical need, versus having a software package that does not fit the business well and adds cost in terms of workarounds or offline solutions such as spreadsheets. However, if your selection of ERP supplier and product was well made then you should be able to manage this balance together in a consultative way. The important point is recognising that this balance needs to be maintained from the outset of the implementation project, right through to the end-of-life for the software solution. The right supplier can help you determine the level of modifications to create a well-balanced ERP solution. 1 1
  • THE ADVISORY SERIES Selecting and implementing an ERP solution Reviewing the implementation Remember – going live is project results only the beginning Be sure to undertake a post-project review, both internally and Finally, it is essential to recognise that selection and with your ERP supplier, before going into production. Refer implementation of an ERP solution is not the end of the back to the original terms of reference, and in particular the process. This assumes that businesses stand still, yet for business benefits, to establish if the solution is in place to both purchaser and supplier this will almost certainly not start accruing these benefits. be the case. The ERP supplier will be keen for you to sign off at this stage, Your business is likely to grow and your needs change. so that you move from the project to the support team, and Equally, the products and services offered by ERP suppliers your annual maintenance contract (and charges) begin – will evolve in response to new market demands, new but be sure that you are satisfied before doing so. opportunities and new technologies. Apply any lessons learnt to future software projects or indeed Recognise also the ongoing need for training on the any other major investment projects where applicable. ERP product as it grows in terms of breadth and depth of functionality with new releases each year. ERP industry analysts cite lack of end-user training as the number one cause for ERP dissatisfaction with the existing provider. • % of companies instituting an ERP solution fail to implement It is essential to recognise that a comprehensive training plan selection and implementation • 2% provide no user training after the initial ERP implementation of an ERP solution is not the • Lack of end user adoption due to insufficient training is the end of the process. number one reason for failed ERP implementations Sources: Meta group Research, AMR Research It is essential to maintain an ongoing dialogue between your organisation and the ERP supplier, involving a mix of communication mechanisms. Regular account meetings should be supplemented by emails, user groups, online forums and other marketing communications relevant to your end-users. general marketing mailings of irrelevant material will only serve to irritate. By contrast, targeted communication of potentially valuable and relevant information will help 20 21
  • THE ADVISORY SERIES build and maintain trusted-advisor status for the supplier. This in turn will form the basis of a mutually beneficial, longer-term relationship. There is a common denominator here. In choosing the solution and provider most likely to offer the best long-term benefit to the business, it is clear that there is a great deal of ‘homework’ to be done. This involves drilling down to the real needs to be addressed, putting together the right teams for the initial selection process, and working with the chosen supplier throughout the life of the investment. If all the pieces are in place from the start, For more information on the outcome of your ERP venture will be all the more rewarding and successful. making ERP a success in your business – and to request further guides in The Advisory Series – please contact us on + (0)  2 or visit www.lakeview.co.uk 22 2
  • THE ADVISORY SERIES About Lakeview Lakeview’s suite of software and technology solutions unlock the productivity of your business. Our highly configurable ERP software helps you manage and run your business by giving you a fully integrated overview of finances, operations, processes and people. As a trusted long-term business advisor to our clients, we’re with you every step of the way. For more information on making ERP a success in your business, please contact us: Tel: +44 (0)845 388 3329 Email: info@lakeview.co.uk www.lakeview.co.uk Lakeview Computers Ltd Banks House Banks Lane Bexleyheath Kent DA6 7BH Copyright © 2008 Lakeview