ERP Systems: How Hard Can It Be to Select One?

SCENARIO A $500 million distributor has a 15-year-old ERP system nearing the end of its usefulness. While last year’s recession tabled plans to replace it, senior business leaders have now resurrected the idea. They’ve asked the CIO to find an ERP system that can be implemented “quickly and cost-effectively.” What steps should this CIO take to ensure success?

Paul Bergamo

Those two little words—“ERP replacement”—are enough to make many CIOs want to pick up and move on. Many of us have experienced firsthand the difficulties of successfully implementing ERP. But it can be done well if you cover a few critical bases.

First, the CIO needs to make sure others don’t see this as a simple “lift and load” system replacement. (It never is.) If senior business leaders don’t weigh in on all significant aspects of the implementation, the CIO will end up with misaligned expectations and skewed priorities.

Next, be sure senior management is on board and driving the effort—not IT. Your business colleagues must be clear on what they expect of the new ERP system so you can actively manage those expectations throughout the project. Finally, select a vendor you can partner closely with to ensure delivery as promised. You know going in that integration with your current environment will be tougher than advertised, and user comfort levels will drop. Managing all this change takes a lot of communication and engagement by everyone involved.

When I implemented an ERP system for a large insurer, my mantra was: “Plan. Minimize customizations. Socialize the plan. Communicate constantly.” Actively think through all the contingencies, so when problems arise, you have answers instead of accusations. If you establish a strong plan, gain senior management support, set the right expectations and foster organizationwide engagement, you’ll find ERP success.

Paul Bergamo, former CTO of Liberty Mutual, is a general partner at NewVantage Partners. Reach him at pbergamo@newvantage.com.

Jesus Arriaga

First and foremost in any ERP success is an effective plan. The CIO should avoid the trap of moving too fast and cutting corners, which creates potential disaster. I have taken over several clients’ failing ERP projects where the initial thinking was: “How difficult can selecting and installing an ERP system be?”

My advice is to spend some time planning the best selection process. This involves gathering detailed requirements from key business leaders, then mapping those needs against systems being evaluated. Chances are the business units will say “Oh, just use our current system as a basis.” Bad idea. Everyone should be mindful of how important this new system is to company growth, and business executives must think more specifically about their goals and what functionality they need to accomplish them. Time spent in this early planning phase saves a great deal of time and money later.

Secondly, since speed and cost are paramount concerns, the CIO should explore software-as-a-service or hosted ERP models along with on-premise solutions. There are increasingly mature SaaS models on the market now, and many are cost-effective and quick to implement. Lastly, the CIO should promote a business process re-engineering effort so that software customizations are only pursued if absolutely necessary. Change the business process first to accommodate the software selected. Apply my 80/20 rule: Find software that fits 80 percent of your functionality needs and limit customizations to 20 percent or less.

Jesus Arriaga, former CIO of Keystone Automotive, is president of CIO Strategic Solutions. Reach him at Jesus.Arriaga@CIOStrategicSolutions.com