It’s not uncommon for organizations go down the ERP path only to realize very little ROI, and it can usually be blamed on lack of preparation, not the software itself.
Many organizations fail in their first attempt at implementing ERP software and erroneously conclude there’s little return on investment to be had from their deployment. This false realization is due in part because they didn’t take a step backward before the software selection process. They also didn’t document what they expected to achieve: What were the metrics for success?
ERP software doesn’t fail so much as it fails to meet your expectations. Before deciding your deployment was a waste of money and resources, you should consider the many reasons ERP solutions don’t have a positive impact on your business:
- Unclear motivations: If you’ve not stepped back and thought deeply about how you want to run your business differently and why change must occur, you are adopting technology for its own sake.
- Too focused on features: The people who evaluated the software were dazzled by the bells and whistles and forgot the ultimate goal was improving the organization’s overall performance.
- Lack of executive sponsorship: If you’re deploying ERP software, it should be because you want to transform your business; a successful transformation must be led from the top. Involvement from upper management must be ongoing to keep everyone on course and quell any conflicts.
- Not everyone is on board: Transforming your business means everyone must commit to achieving the end goal. If the ERP implementation is perceived as being important to a single department or just another IT initiative, it will fail; forget about it delivering any ROI.
- Unrealistic schedules: It takes time to adjust to new technology, both for business users and IT staff, but often the transition period allocated to make the move from entrenched legacy systems to new software is not long enough. If users are frustrated with the new environment, business performance will suffer.
- Poor preparation: Pre-implementation activities were either not done or not understood. This includes not being ready to embrace best practice templates that accompany the chosen solution.
- Unprepared people: Internal staff or external consultants did not have the experience necessary to deploy an ERP solution or they did not understand your business environment well enough or a combination of both.
- Bad processes, upgraded: The software was implemented to replicate and automate existing, business processes which needed to be updated well before the ERP solution was even selected.
This last point is the most critical. Bad processes automated by the best software in the world are still bad processes; if you’ve not addressed them before implementation you’ll definitely feel as though you’ve wasted your money.
Ultimately, believing that ROI comes from the software is the biggest pitfall of all. Software is a not a silver bullet; any ROI reaped from deploying an ERP solution is the result of improving business processes. Some organizations, having decided there is little to no ROI to be gained by implementing an ERP solution, opt to focus on cutting costs, reducing inventories and shortening cycle times as a means to make their business more profitable and competitive.
Ignore the benefits of ERP at your own peril. If you front-load your implementation with preparation and planning, the ROI is there and can be measured, and in the long run it will position your organization for sustained growth and profitability.
Next: Finding tangible and intangible ROI with the right metrics