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This is the third of a three-part series, How to Select an ERP Solution. You can find Parts 1 and 2 here.
By now you may have decided on your ERP vendor of choice, or maybe you’re still on the fence between two vendors. The final stage of selecting an ERP solution, the Pre-Implementation Planning phase, will help you solidify your decision.
In my career dealing with more than 200 ERP selection initiatives, I’ve seen vendors pull out all the stops to get a sale. A shocking revelation – some vendors will do the minimal amount possible to get your business. To get their foot in the door, vendors will oversell their software and underestimate the service component. In one instance, a vendor was going to sell a $50M distribution company an ERP system WITHOUT a Statement of Work! No estimate of service costs! My involvement was as a 3rd party, and instead, I outlined an implementation that was five times the effort and cost that was originally allocated.
The larger the organization the higher the risk. Enterprises that are vetting service projects from $50M up $250M need to have their ducks in a row and become VERY educated buyers! It can sometimes take years for larger organizations to come up with reasonable Statements of Work that truly represent the effort and costs needed for a successful implementation. Painstaking detail in every functional area, integration, and data conversion is essential.
What information do they need to know, how do they get to the level of detail needed, how to determine what is in scope versus out, what is phase 1, 2, 3…? Pre-implementation planning and the steps to accurately estimate the service components of an ERP project are the critical foundation of a successful project.
During pre-implementation planning, an organization needs to define the following:
Functional areas in scope
Many organizations aim to have all functional areas involved in phase 1 of the project, but that isn’t always necessary. Typically, within an organization, there are higher priority areas that need to be supported by technology. For example, production may be more important to include within the new system than Human Resources, and many manufacturing organizations have a Quality Assurance Program that is a separate, standalone application. Some of these ancillary applications may stay in place temporarily while the ERP is being implemented, or permanently. Determining what functional areas need to be included in the project is a great starting point to ensure an accurate Scope of Work estimate.
Basic versus advanced functionality
An organization must ask itself about the sophistication of its current processes. Where do we have complexity and why? Is that complexity a result of workarounds and system limitations, and is that part of our secret sauce? Historically, organizations that limit their initial implementation to basic ERP functionality may actually realize more benefits than previously anticipated. Many groups, large and small, overcomplicate their receivable and payable processes. Again, workarounds were done for years because the technology didn’t support the process or upstream processes caused complexity downstream. Standardization, and in most cases centralizing AR and AP processes, are a great opportunity to reduce cost and risk during implementation and create better business efficiencies. Where does advanced functionality come into play? Typically, advanced functionality aligns with complexity and is seen within supply chains, production, and distribution, but has a ripple effect on estimating/quoting and billing functional areas. What advanced functionality is needed and can be adopted should be outlined in the Statement of Work.
Internal resource allocation
Any organization going through an ERP implementation for the first time underestimates the true effort needed from their organization. The amount of change can be daunting and intimidating, and backfill is needed, as we can’t ask our best employees to double up on their jobs. The real work begins during implementation — simply getting to the point where an organization understands their own needs, drivers, and processes enough to tell a story to a vendor during evaluation is a large part of the process. A tremendous amount of internal resources needs to be dedicated to design and driving change within the organization. Functional leads and SMEs are key throughout the entire process and need to not only be available but also be a driving force during the project and for the new way of doing things moving forward. As groups are adding support on the back end, new positions and roles are created and filled, giving your internal experts the opportunity to expand the business and their contributions. Internal resource allocation needs to be clearly defined, and some contingency needs to be added to enable the organization to succeed in a project that helps define the future of the company.
Finally, beware: other miscellaneous items that can swing cost drastically include data conversion, integrations, and organizational change management.
The post How to Select an ERP Solution Part 3: Pre-Implementation Planning appeared first on ERP News.