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Blaming ERP

Once again, problematic ERP installations are making headlines. It's time to ask, How much of the problem is really the software?

Number two. Understand the implications of customizing the software. However tempting it may be to preserve specific business processes by altering the software code, customization almost always means trouble. “Modify the code as a last resort,” suggests SAP America’s CEO, Kevin McKay. “You don’t want to go there, because it hurts performance” — particularly when companies seek to upgrade their systems. When ERP vendors add new functionalities to their product, they usually involve changes to the database and to the data-entry screens. Any new data or fields that have been added to the software code could be wiped out or altered by upgrades. The testing and retesting of customized elements can provide expensive headaches for years to come. “Don’t change the code,” says ADC’s Switz. Change the business process instead.

Number three. Develop performance measures for the system. Many senior executives have been dismayed at the apparent lack of cost savings they achieve by implementing ERP systems. It takes work, says Dan Spaulding, the former director of management reporting at energy services company Halliburton, in Dallas.

“We thought the benefits [of the ERP system] would just naturally happen, but they don’t,” he says. Spaulding developed 28 key performance indicators (kpi), including inventory turns and accounts receivable days outstanding, as well as 100 secondary indicators, to help assess the effectiveness of the R/3 implementation at Halliburton. He and other members of a “value delivery group” — separate from the R/3 project team — monitored these indicators and focused on improving them.

Number four. Control your consultant. Everyone needs consulting help for an ERP implementation. It’s a question of how much. Switz suggests that, before hearing the sales pitches of consultants, senior executives should be clear about what their own IT staff can do, and what they need from consultants. Then interview the staff proposed for the project and draft a contract that spells out which individual consultant will spend what percentage of his or her time on the project, and how any staff changes will be handled. Switz, for example, conducted reference checks to identify and book the top SAP consultant at CSC Consulting before signing a deal. He also negotiated a pay-for-performance scheme that would pay CSC from 85 percent to 115 percent of its compensation based on the meeting of specific milestones.

Switz ended up happily paying more than 100 percent of the fee. The alignment of consultants’ interests with the client’s is the best way to get the help needed and get the consultants out. “You’ve got to set a date for saying good-bye,” says Switz.

Number Five. Control your internal politics. Consultants can’t deal with the turmoil involved in ERP implementations by themselves. Department heads are sure to present excellent reasons why the new system won’t work on their turf. Their resistance to change can stall projects cold. Switz argues that ERP implementations are every bit as complicated as new plant constructions, and should be managed as such, with as much buy-in from the top. CEOs and CFOs have to visibly support and monitor the progress of the project.

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