ERP Failure - Is it better to replace the system, or fix it?
It’s one of my earliest childhood memories. Another batting failure at the top of the order, “Mom, I think I need a new cricket bat”. A poor craftsman is quick to blame his tools, what sage advice my parents gave me. On the contrary, a person may have the best equipment in the world but without knowledge on how to use it, the advantage is lost.
Today, blame-shifting is still very much prevalent in all walks of life, none less so than in business. My personal favourite relates to how much people love to hate whatever ERP system they are currently using. The logic is, because I don’t get what I want, the software must be really bad.
I am no Albert Einstein but even I can see the flaw in this argument. What if, just maybe the software is perfectly fine but not implemented correctly? Or, what if people haven’t been trained to use the system properly and therefore cannot make full use of its functionality?
Part of being an expert ‘craftsman’ is not only having the skills and experience required to drive excellence, but being able to tell the difference between good and bad tools.
It is very easy to challenge the performance of the current ERP when things are not working optimally, particularly in these times of rapidly changing technology. However, the massive cost of disruption that goes with an ERP change may well exceed the payback. If you are considering a change in ERP there are a number of aspects you may wish to consider before making the decision:
WHAT DOES IT COST TO CHANGE MY ERP?
FINANCIAL COSTS It is usually more expensive to buy a new system than to continue using the existing one. What one has to consider, is the capital cost of purchase, fees related to implementation and investment required for change management initiatives; compared to, the cost of making system enhancements and training staff.
DISRUPTION A new ERP implementation can create serious stress in the organisation. Every part of your business is involved in upheaval and this can take your eye away from running and growing your business. Both people and technology are key enablers in any business and it sometimes it is better to avoid the situation where one offsets the other.
PERSONNEL TURNOVER Change, particularly of this magnitude, is always frightening. The impact on staff morale can be quite significant however this risk can be mitigated by an effective change management process.
One would have to consider the propensity for change within the organisation and the availability of resources (and budget) to run an effective change management program.
WILL THE IMPLEMENTATION FAIL? It is usually more expensive to buy a new system than to continue using the existing one. What one has to consider, is the capital cost of purchase, fees related to implementation and investment required for change management initiatives; compared to, the cost of making system enhancements and training staff.
Many analyst firms including Gartner conduct periodic surveys assessing the failure rate of ERP projects. These range considerably from 30% to 75%. However, what is consistent across all surveys, is that there is greater than a 1 in 4 chance that a new implementation will fail.
WHAT IS THE ALTERNATIVE TO CHANGING MY ERP?
Business improvement is generally the motivator for change. Do you have a clear understanding of your business objectives, and what is required from your software systems to support these objectives? Too often we rely on changing our systems to solve these questions, instead of first asking the questions and then determining if we do in fact need new system.
Business process redesign can be one of the most effective ways to improve your business. A good starting point is gaining a sense of how much of the business requirements can be met by existing system(s) and followed by a ‘gap’ analyses.
It may be that the incumbent system is capable of meeting 70% of the business needs and although it may not support the longer term strategy, it could suffice for the next three (3) to five (5) years. Any gaps identified earlier could then be serviced by way of 3rd party add-on tools in order to lessen the potential impact to the business.
In terms of making good ERP decisions for your business, do you have the requisite skills and experience required to drive excellence? And are you capable of telling the difference between good and bad tools?
INDEPENDENT REVIEW Most organisations simply don’t have either the internal expertise, or the free manpower to drive such a review. A well-qualified independent source has the advantage a single minded focus on the task at hand, minimal engagement in internal politics, and elimination of internal bias.
An independent review has the potential to save you from unnecessary expenditure and disruption. It is also a very powerful tool to help you to gain clarity around your business and systems requirements and provide a road map to help deliver these.
HELPING BUSINESSES OPTIMISE ERP PERFORMANCE
Ramesys Global’s ERP Team offers independent ERP Review services with wide-ranging, unbiased systems knowledge.
The decision to change an ERP system often comes at a high cost, high effort and high potential disruption to your business. Let us be your independent voice and help you optimise the performance of your ERP system.