Business Software

Enterprise Resource Planning

White
Paper
Critical
success factors for
an
ERP-implementation

Barbara De Vos

White Paper - Critical success factors for an ERP Implementation

Introduction

To become and remain a successful organization in our

fast-changing and competitive marketplace, companies
have to continue investing in software that fits in closely
with their corporate objectives.

Very often, ERP software (Enterprise Resource Planning)

forms the backbone of such investments. ERP systems not
only support business processes, but they also harmonize
them. Implementing an ERP package generally has a tangible
impact on the entire organization and should not be
underestimated in terms of investment budget. Which is why
it is vitally important that the implementation of an ERP
system runs successfully and supports the objectives it is
intended to.
There are usually various reasons for a company to
implement an ERP solution. Figure 1 shows the main
benefits of an ERP investment. It demonstrates that an ERP
solution leads in the first place to better availability of
information, higher productivity, greater interaction between
departments, improved availability of data and a reduction
in double data-entry.

Figure 1

Benefits gained

No benefits gained

Lower IT costs
Shorter throughput times

Better interaction with the client

Lower operating costs

Better interaction with the
supplier
Control over compliance
with procedures and rules
Better-supported decisions
Less duplicated work

Greater reliability of data

More interaction
Increased productivity

Availability of information

White Paper - Critical success factors for an ERP Implementation

In an ideal world, businesses should recoup their

investments in ERP through a rise in productivity and
efficiency, enhanced customer service and, in a number of
cases, a reduction in the number of FTEs (Full-Time
Equivalents).

Yet it appears that a great many companies are still failing to

earn back their investments sufficiently investments that
often run higher than originally expected. At least as many
companies are unable to confirm whether or not they have
been successful in their set-up because they do not have a
business case to compare their actual results achieved with.
Various surveys, conducted with organizations such as Value
Chain, Aberdeen Group and Panorama Consulting, show that
ERP implementations often do not achieve the required
results, because their business processes are not sufficiently
well supported and the scheduled implementation time and
proposed budget are significantly exceeded.

Figure 2

Overall satisfaction with

ERP implementations

Overall implementation
experience

Acceptance by staff
Implementation costs
Quantity of customization
required
Ability to gear with
business requirements

Very happy
Happy
Neutral
Not so happy

Unhappy

Ease of use
Implementation service
from the third
party
Implementation service from
the software provider
Overall functionality of
the software
Flexibility in adapting the
software

Source: Panorama Consulting

White Paper - Critical success factors for an ERP Implementation

In reality, only three-quarters of companies are able to

report measurable results from their ERP implementation.
Of these, 60% say that more than half of the expected
results were in fact achieved.
Only one-quarter were of the opinion that the ERP solution
met half or more of their expectations.

Figure 2 outlines the picture of overall satisfaction with

ERP implementations.

It shows that one ERP implementation differs from another

and that the additional costs and time taken by many
implementations made an insufficient contribution to a
better end result.

This white paper contains the latest insights into the critical
success factors resulting in a successful and satisfactory ERP
implementation. In other words: an implementation that
comes in within the planned time frame and budget, is
totally in line with your organization's expectations, and for
which the complexity before, during and after is reduced to
the absolute minimum.

White Paper - Critical success factors for an ERP Implementation

Success factors for a successful

ERP implementation

Make the impact that the project has on

your corporate aims clear and measurable

The aim of a successful ERP implementation is to support

corporate objectives seamlessly. This means that it is
extremely important to define these objectives from the
outset and to set KPIs (Key Performance Indicators) that
make these aims measurable.

An implementation also often consists of a number of partprocesses. Having a clear understanding of the impact that
these part-processes will have on your corporate objectives
will help in setting strategic priorities. Good insight into
what processes have an impact on which corporate
objectives, and setting the KPIs that measure success give
you an objective picture of the success of your project.

That may sound obvious, but its not so clear-cut for many
companies. Again, research shows that the overall level of
satisfaction with an ERP implementation varies sharply and is
often based on subjective evaluation criteria. The relief felt at
the time of going live is often so great that the feeling of
satisfaction that reigns at that particular moment is actually
not based on objective evaluation criteria. Companies that
did not set measurable criteria beforehand are usually unable
to test the actual results of the project against anything.
Recent research from Panorama Consulting (2013 ERP
Report) shows that an average of 30% of respondents
actually have a clear view of the results.

By establishing the expected impact of the part-projects in

advance and making them measurable, management is able
to gain the necessary insight that enables it to assess the
ERP project objectively and make adjustments if necessary in
good time.

White Paper - Critical success factors for an ERP Implementation

Opt for a best-practice solution tailored to

what your company does

From the success factor first mentioned for a successful ERP

implementation, it can be seen that every ERP project must
provide seamless support for your corporate objectives. This
means that it is essential to know which processes have an
effect on what corporate aims. If the business-critical
processes are defined, you will also know where the
organization has to place its focus.

Many ERP consultants traditionally start from the proverbial

blank sheet of paper. They start with analyses of the current
as is situation and come up with the ideal to be situation
for the future. This process often requires a significant
investment in time and consequently also both an internal
and external budget.
This new to be situation then has to be translated into
technology and so companies go looking for a package that
fits in with that vision as closely as possible. In most cases,
the provider develops a solution that is based on a significant
amount of customization over and above the standard
package.

It has to be said that customization usually gives the

impression that a solution is being created that entirely
meets the requirements of your organization. However, it is
also a good deal more expensive than a standard package,
both in the short and the long term. The reasons for this are
the specific analyses and development costs, as well as the
support needed in the long term. Then, when the technology
evolves, the customization also has to migrate to new
versions. Also, post-handover support costs far more,
because your provider has to maintain the knowledge of your
specific customization.

A survey by Panorama Consulting shows that only half of

respondents are happy with the standard software
functionality. So a great deal of customization is often
needed to achieve a solution that provides satisfaction. But
a high level of customization again leads to dissatisfied
customers.

White Paper - Critical success factors for an ERP Implementation

Under 30% say that they are unhappy to very unhappy with
it, especially on account of the cost involved.

However, the majority of the processes that support the

business in your organization are not so very different from
the ones in other companies that have a similar business.
Consequently, for these types of uniform processes, you are
probably better off opting for the tried-and-tested best
practices within your sector, rather than trying to reinvent
the wheel yourself. This is guaranteed to save you lots of
internal as is and to be analysis time.
You can then map out where your organization wants to be
genuinely unique. It is only these gaps that result in specific
customization for your organization. The question that you
have to keep asking yourself is whether best-practice
processes need to be adapted to your requirements which
itself boils down to customization or whether of you would
do better to adjust your own way of working based on the
industry standard.

According to Panorama Consulting, there is in fact a

growing trend towards standardization. Hence some of the
major drivers for investing in an ERP solution lie in
Figure 3
Reasons for investing
in ERP

optimizing and standardizing operating processes and

performance.

To improve operating performance

To replace an old ERP or legacy system

To integrate systems better across various locations

To prepare the company for growth

To serve customers better

To ensure uniform reporting of/compliance with processes and rules

To simplify the task of employees

To standardize overall company operations

To reduce working capital

Because other companies have ERP

Source: Panorama Consulting

Other

White Paper - Critical success factors for an ERP Implementation

The Aberdeen Group also supports the message that

operational excellence is an important business driver for
investing in ERP software. This is the case both in terms of
the standard processes for the sector and for the level of
flexibility needed to adjust processes to new market needs
and trends.

So the thing to do is go looking for a software solution that

features best-practice processes and which provides added,
forward-looking value to your business activity. Within your
sector there are undoubtedly ERP providers that have already
often assisted companies facing similar challenges to yours.
If they have a number of references in your sector, they
most probably have the best-practice experience you are
looking for. Some of them may even have developed best
practices themselves in conjunction with industry specialists
or a client steering group. If they have also been translated
into market-specific solutions, this is a sound platform to
start from.

White Paper - Critical success factors for an ERP Implementation

Invest in a solution focused on the future

These days, the one constant is change. A survey conducted

by the Aberdeen Group in September 2012 showed that the
major ERP investment drivers lie not only in the lack of
required functionality, but also in the difficulty of adapting the
ERP solution to changing trends in business and technology.
However, in an economy like ours, which is evolving so
quickly, is it vitally important for your ERP solution to be
capable of growing in line with these developments. So make
sure that your provider is able to offer a solution that allows
you to evolve along with the latest trends.

Standard packages evolve very quickly. This means you will

have to upgrade virtually every 2 years to be able to use
features that support the latest trends. Many ERP providers
start from standard packages that are then configured to suit
your sector. They often supplement the package with addons for items that are sector-specific, but which dont come
with the standard package. Make sure that you feel
comfortable about migrating without having to keep making
significant investments to make your specific situation fit in
with the latest technological version and the latest features.

Figure 4
Why is your current
ERP solution being
replaced?

Lack of functionality

Out-of-date basic technology or infrastructure

of the ERP system
Difficulty in adapting the ERP solution to suit
changes in the business
Costs for maintenance and support
Lack of support from the ERP provider

58%

52%

27%
20%

14%
Source: Aberdeen Group, September 2012

White Paper - Critical success factors for an ERP Implementation

Consider a preliminary study to define the

FIT/GAP of your preferred package

An ERP implementation involves a significant investment

budget for a company, not just in terms of outgoings to an
external provider, but also in terms of workload on your
own organization.
So make sure that you make the right choice.

However, the selection process is often no easy matter.

Different providers claim to have the most suitable solution
for your organization and can reel off a whole series of
references. It is also very difficult during those limited
contact times with your provider to get a genuinely clear
picture of the solution that will ultimately be rolled out in
your organization. It often appears that there is a major
difference between your expectations as an organization and
what your provider thinks it is required to deliver.

Preliminary studies can certainly provide an answer to this.

By way of a small number of conversations, your provider
can define the size of the fit that its standard solution will
provide and approximately how much customization it
believes is required for your organization (the gaps).
The nearer your organization can stay to the standard, the
more accurately your provider will be able to assess your
project during the preliminary study. Your target should be
a minimum 80% fit.

Support from management in this area is vitally important so that

decisions can be taken based on best practices and not too much
on what the user is accustomed to.

The big advantage of the best practice approach,

compared with the blank sheet approach, is that now only
the differences have to be assessed. Because the provider
has already implemented the standard version several
times, it can submit a proven assessment that can always
be adjusted. Blank sheet assessments will certainly be just
as accurate, but are very much dependent on the
experience of the consultants.

White Paper - Critical success factors for an ERP Implementation

Even a very experienced consultant can only assess

something that is specific for one client to the best of his
ability.

A preliminary study should give you a more accurate

picture of a number of important elements in the project,
including the project price, lead time and interaction with
your organization. Your preferred provider will also have
had the opportunity to ask the necessary, crucial questions
of your organization.

In this phase, you can always decide not to go ahead with the
project, or go looking for another provider. If you decide to
get the project underway, the preliminary study can be used
to fine-tune the project analysis and often to speed it up.
So you will certainly gain by it.

Project proposals based on specifications do not offer the

option whereby the provider is required to interpret the more
limited information available to the best of its ability and
hence do its best to make an assessment. Also, potential
providers will be required to translate the to be situation
developed by your organization into technology, with all of
the disadvantages already described as a result.

White Paper - Critical success factors for an ERP Implementation

Focus on and invest in change management

Change management is an essential part of an ERP

implementation and yet often too little attention is paid to it.
It becomes even more important when departing from the
standard best-practice processes for the industry.

Key users need to be designated in the various

departments who have the authority to represent their
department. They also need to have sufficient standing in
the organization to be able to taken on a leadership role
within the department. These individuals must not only be
the first point of contact for the department during and
after implementation, but they will also need to work
proactively on end-user adoption. In the end, your own
organization will have to carry the project forward as
much as possible. There are still too many ICT projects that
are not successful because only a limited part of the
organization uses the full potential and added value that
the solution brings.

The provider will have to apply the appropriate

implementation methodology. As part of initial workshops, it
will go through the best-practice processes with the key
users. The emphasis here is more on the processes
themselves than on the applications and the program
windows. For each step in the process, it needs to be
demonstrated how things will work in the future, but the aim
in particular is to keep sight of the big picture. The
consultants will have to keep a close eye on things to ensure
that the standard is adhered to as much as possible. Only
those things that have not been provided for yet are crucial
for smooth operations and need to pointed out for
customization the so-called gaps. These gaps must then
be discussed with management. They need to be visualized
so that a clear picture can be gained of what they imply and
what the impact would be in terms of investment in the short
or longer term.

The major advantages of this approach lie in particular in the

added business value, the less extensive customization
budget and the fact that the system is better geared to future
developments. However, this does not take away the fact that
the organization will need to adjust much more than is the
case with a traditional ERP implementation approach.

White Paper - Critical success factors for an ERP Implementation

This means that the involvement and commitment of

management is all the greater. The new package will be
adjusted far less to users.

Instead, users will have to adjust to the best practices for

the sector and management must get this message across
energetically and promote it actively across the whole
organization.

Change management is an ongoing process, from day one

until long after the official go live date for the project. All
too often, company managers think that interaction with
their organization is limited to the analysis and test phase
and that in between the provider carries out the
programming. Very close interaction with the key users at
each stage of the project is essential for keeping everything
within the scheduled timing and planned budget.

As with the implementation, subsequent support also needs

to be based on the processes put in place for your
organization. This gives staff more insight into the whole
chain before they take on the issue on their own. Making
these processes available in a central and easily accessible
location is highly recommended. It would also be preferable
only to include those processes that are relevant for each
user.

White Paper - Critical success factors for an ERP Implementation

Look at your ERP project as part of a total

solution for your business activity

Processes regularly stray outside the boundaries of a specific

technology skills area such as ERP. For example, they may
also need components of CRM (Customer Relationship
Management). This might include a selling process that
starts in a sales department and a CRM package and that
ends as an order in your ERP system. You also run your
business using BI tools that create a clear picture based on
information from sources including Finance, ERP and CRM.

And what about the latest developments in unstructured

data and processes? Think about all of the challenges
involved with The New Way of Working: people from
various locations who want to work on a document at the
same time while communicating about it online and possibly
also want to involve an SME (Subject Matter Expert) from
the organization in the discussions and in creating the
documents.

It is important for rapidly developing technological

capabilities to be placed in a business perspective at all
times. Matters that may mean added value for the
challenges of a specific sector should be included in a total
solution for your industry or industry blueprint.

All too often part-projects are initiated separate to one

another. For example, items such as customization are
developed in an ERP package that could be dealt with as
standard by a CRM package, or vice versa. Then, in a
subsequent project on other technological skills areas, it is
often noticed that some things would actually be better in the
other package, with overlapping investments as a result.

An industry blueprint is an integrated total solution

customized for your industry that has clearly defined which
capabilities will be included with what package and in which
the business and not the technology is central.

White Paper - Critical success factors for an ERP Implementation

However, there are few providers who develop integrated

solutions across a range of technological skills. The result of
this is often that the ultimate total solution costs much more
than if the part-projects had been started up with the total
solution in mind. So be sure to ask your provider what its
total vision is in terms of a solution for your sector and what
experience it has in that area. That way you also find out
where the possible future expertise limitations may lie for
which you may have to approach another provider over time.

White Paper - Critical success factors for an ERP Implementation

Summary

An ERP implementation changes companies and business

processes fundamentally. Consequently, its impact is
significant. The various surveys that we have quoted show
that companies tend to underestimate their approach to
these lengthy projects. Hence also the negative tone and
horror stories about costs getting out of control,
functionalities that dont work and much more of the same.

This white paper provides you with some guidelines for

taking a new approach by which your ERP project will
become far more predictable and you will be able to
achieve and evaluate your business objectives with greater
certainty.

By applying the following rules and insights, you will well on

the way to achieving a successful ERP implementation:

Map out the strategic objectives of your organization

with the processes that capitalize on them and define
KPIs that make your level of success measurable;

Start out with a best-practice solution for your

business activity. Not just those areas where you are
unique. Your organization is not much more different
from other organizations with a comparable type of
business than you might have thought in the first
instance;

Make sure that the solution you are investing in is

able to grow along with new trends; both trends
within your own business and technological trends;

Consider a preliminary study by the provider of the

package that according to your initial insights is
tailored most to your companys business before
actually initiating a project. It will give you a more
realistic and better insight into your project;

Step away from lengthy as is analysis processes to

to be. And, in particular, invest in change
management to achieve a standard for your business
activity;

White Paper - Critical success factors for an ERP Implementation

View your ERP project as part of a total solution for

your business activity. CRM, Business Intelligence and
other solutions relating to non-structured processes
will always lead to projects in your organization. Make
sure to make as few overlapping investments as
possible.

This White Paper was produced with the cooperation of

RealDolmen and To-Increase