ERP implementation is one area that is one of the least (arguably) affected by the ongoing recession as it brings almost immediate benefits to an organization most of the times. As we know, all ERP projects are not successful and do not deliver the value to the organizations that they are supposed to deliver, I thought of listing down the most critical success factors that drive the success of an ERP Project. Let us go over them today one by one:
- Business processes and requirements are a top priority. Too often, companies get tied up in the technical capabilities or platforms that a particular software application supports which is not as important as to check how your business operations will run and what your key business requirements are. Once you have this defined, you can more easily choose the software that fits your unique business needs
- Define key metrics to measure return on investment from ERP including post-implementation performance measurement. This requires doing more than just developing a high-level business case to get approval from upper management or your board of directors. It also entails establishing key performance measures, setting baselines and targets for those measures, and tracking performance after go-live. This is the only way to truly realize the benefit potential of ERP
- Ultra strong project management and resource commitment. At the end of the day, your company owns the success or failure of a large ERP project, so you should manage it accordingly. This includes ensuring that you have a strong project manager and your "A-players" from the business to support and participate in the project
- Executive sponsorship. Any project without support from its top management will fail. Support from a CIO or IT director is fine, but it's not enough. No matter how well-run a project is, problems arise (such as conflicting business needs), so the CEO and your entire C-level staff needs to be on board to deal with some of these
- Spend 80% time in planning and 20% in execution. An ERP vendor's motive is to close a deal as soon as possible. Yours should be to make sure it gets done right. Too often, companies jump right in to a project without validating the software vendor's understanding of business requirements or its project plan. The more time you spend ensuring that these things are done right at the beginning of the project, the less time you'll spend fixing problems later on
- Handle change management well. ERP systems involve big change for people, and the system will not do you any good if people do not understand how to use it effectively. Therefore, spending time and money on training, change management, and job design is crucial to any ERP project
- Make sure you understand why you're implementing ERP. This is arguably the most important one. It's easy to see that many big companies are running SAP or Oracle and maybe you should too, but it's harder to consider that maybe you don't need an ERP system at all. Perhaps process improvement, organizational redesign, or targeted best-of-breed technology will meet your business objectives at a lower cost. By clearly understanding your business objectives and what you're trying to accomplish with an ERP system, you will be able to make a more appropriate decision on which route to take, and that may or may not involve ERP
It is important to understand exactly what you are as an organization now and what you want to be in the future. This includes everything from understanding your strengths, weaknesses and core competencies to the areas you would like to improve. Making these decisions in the midst of an ERP implementation can be a very rushed process, and making key strategic decisions like these in a sloppy fashion will create significant pain and confusion in the future.
The key takeaway is that ERP cannot be implemented successfully without clear requirements, which are critical to ERP success. By the same token, clear requirements cannot be defined until business processes are well defined. And business processes cannot be defined until organizations establish a clear sense of strategic direction. Organizations should ensure that these areas are taken into consideration during their ERP assessment and software selection processes.