Does your favourite START-UP need an ERP to become SMART-UP?

Most start-ups start lean with big ideas but small teams. Also, since most of the successful start-ups are based on innovation and industry disruption, the focus is always on planning, execution and launching the idea instead of starting to think about keeping track of capital raised from multiple investors and reporting operating results to those investors.  Technology is THE most important enabler for a start-up today and cash management is one of the less liked functions in most techies. They normally hate to be involved in financial management and would rather spend their whole time on fine tuning the ideas, finding buyers and doing software development to launch their ideas. An ERP is not only about accounting or managing finances but for a start-up the challenges start from here. Some of the challenges related to handling of finances and accounting can be:

• Compliance with complex accounting rules
• Handling deferred sales & revenue generation
• Chronological recording of financial transactions including investments
• Potentially rogue team members stealing data from their machines
• Long-time taken by team to determine revenue for a month
• Inability to accept money from customer in case of payment through credit card

Well, this article is not only talking about F&A challenges that Start-ups face. If we start talking about the challenges, they will be much more in the areas other than F&A and will present a much stronger case of having an ERP for a Start-up organization so that they start in an organized manner and are equipped to handle larger size of operations as and when they grow. It is more about the impact an ERP can make to a start-up to make it a Smart-up as fast as possible.

I know a founder (Ashish – name changed on request) of a start-up who started their business around 18 months back and are doing pretty well till now. Having acquired initial funding for their venture, they started growing and within a year, they reached a top-line of $6.5 Million. Ashish shares with me that they took an early decision to go for a cloud based ERP (believe me there are large number of ERP products available today which are being marketed as only for start-up and GOD some of them are too good) and feel pretty good about that. Ashish told me that small businesses like them are benefitting from ERP because of its ability to manage flow of information. The decisions that they were able to take quite early in their cycle were all because of ERP they selected and implemented (unlike traditional ERPs, these new crop of ERPs for start-ups take 4-6 weeks to implement bringing lot of value).  Streamlining back-office (procurement, supply chain, inventory, finance, human resources etc.) helped them focus on sales, improving market reach and measure customer satisfaction. You will be surprised to know that they doubled their revenue this year and in last six months, they have already crossed $7 Million revenue already and Ashish gives lot of credit to the ERP they implemented.

 When I asked him what he looked in the ERP product before deciding, he gracefully shared good insights such as:

 

• Availability on public cloud – mostly software as a service rather than infrastructure as a service
• Ability of the product vendor to guarantee security of data
• Cost Effective, easy to use and good support model (24X7)
• Ability to meet industry specific needs
• Own analytics dashboards
• Extent of availability on mobile devices
• Easy licensing norms & availability of exit clauses (with data return)
• Fast implementation period
• Ability to integrate with host of other systems

This is not an exhaustive list but since it has come from a real user (Ashish also acts as the CIO for their start-up), it has lot of value.

 

It would be nice to hear more comments and voices from other start-ups and ERP evangelists on whether ERP plays a definitive role in growth of a START-UP into a SMART-UP or it is just another software which brings some value to any company, be it start-up or not. Shoot!!

ERP Implementation - What is expected from you?

Often, I have seen discussions happening between the business users, the implementation partner and the IT Team in an organization on who will do what and this becomes one of the bottlenecks in success of a project. Lately, when I was addressing a CIO Conference on the subject of transforming business with the help of ERP and advanced ERP products implementation, this question popped up again and forced me to try and document expectations from each team so that it can work as working standard for the organizations as well as IT vendors.  I will be publishing my understanding of expectations from each team in the next series of posts as I think I have the requisite experience and exposure to ERP implementations in all roles viz. Business User, IT Consultant as well as a CIO across the globe and in multiple industries. To start-with, let me try to put together the expectations (in-fact I would like to mention small activities also which the other two teams expect from the 3rd team) from the IT Team of the organization which is implementing an ERP Solution. I have divided the expectations in 3 major sections that are given below:

Pre-Implementation Expectations from IT Team:

• Finalize broad scope of work, create and float RFP to potential partners
• Select product and its fitment into existing architecture, footprint, industry and solution
• Evaluate Vendor proposals on technical competence, past experience and commercials
• Arrange executive sponsorship, drive steering committee creation in the organization
• Drive creation of core user group from all stakeholder teams in the organization
• Arrange for logistics like sitting area of core users, implementation partner team, desktops, phones etc.
• Decide on project plan, major milestones and key success factors with steering committee 
• Plan for Application Instance Strategy (Development, Test etc.)

During Implementation Expectations from IT Team:

• Organize business users and implementation partner teams interactions
• Drive sign-offs from business on requirements and other major project milestones
• Monitor project success vis-à-vis project plan
• Arrange all requisite IT infrastructure for the project
• Decide on data upload strategy (how much data, from which systems, by when etc.)
• Extract data from legacy systems and arrange cleaning by core user team
• Provide inputs on solution fitment into existing solution
• Provide inputs on key design elements
• Approve/Reject Customization(s) suggested by implementation vendor
• Freeze requirements
• Arrange business users participation during key milestones like Solution Design & Demonstration, Testing etc.
• Arrange training for core team users by implementation partners
• Ensure proper staffing of resources by implementation partner
• Arrange steering committee meetings for project health check regularly
• Ensure core team users impart training to other intended users
• Drive change management steps in the organization for faster acceptance of new application
• Plan production cutover testing and planned downtime as per application instance strategy
• Review key success factors delivery by implementation partner
• Take final sign-offs from core team for going LIVE
• Drive steering committee for GO LIVE readiness decision

Post Implementation Expectations from IT Team:

• Hand hold business users to run the new system for first month
• Set-up central help desk for post implementation related issues and queries
• Monitor and resolve any IT infrastructural related issues
• Handle change management issues with the help of steering committee
• Arrange short refresher trainings for end users to reduce mistakes in new application
• Ensure proper documentation of project is provided by implementation partner
• Ensure complete and proper knowledge transfer from implementation partner to application support team

If I can get valuable inputs from readers, I would like to add/delete/modify to these working standards do that it really becomes useful tool for the organizations and vendors alike and helps in making ERP Projects more successful for all stakeholders.

  

ERP invades households for good

Location : Earth
Year : 2025


Scene 1: Suraj, who just joined “Worldwide Mart” 2 days ago, was in his way to deliver his first order to one of the customers and was apprehensive whether his details are already mapped with customer’s Unit Resource Planning (URP) system or not? He reached customer’s place and found that there is nobody at home. He tried scanning his hand on the door bell scanner and was happy to find that his finger prints matched with information in customer URP and the automatic door of delivery box fixed on the wall opened. He again scanned the ship order & invoice on the scanner in delivery box and kept the goods there. The door closed automatically once the activity was over and Suraj moved to the next customer address.

Scene 2: Krish, gets a mail (delivered on smartphone) containing dashboard from his URP. The dashboard has a set of recommendations and suggestions. The URP recommended that since there is an acute demand supply gap currently in house-keeping services, he should renegotiate the rates of house maid, baby sitter and gardener with the agency. A drilldown facility allowed him to see what the prevailing rates are for this week. The dashboard also highlighted the utility and credit card bills that are due for payment. Krish authorizes URP to pay all bills on due date using intelligent payment system which maximizes interest income in saving accounts & credit cards. The dashboard also provides suggestions for holidaying, eating out and other leisure activities as configured by Krish in his URP. His life is made easy with URP and he is far less stressed than before and family life is as smooth as silk.

 

Scene 3: Jacky, is standing at his home with his family and society caretaker and verified that nothing is missing from his house while it was tried to be ransacked by thieves last night when they were out. The Group Resource Planning (GRP) system installed by the society was subscribed by Jacky, which is integrated with the security system at his house. The security system raised an alarm upon an intrusion and in addition of the alerts that went to prescribed people/groups, information was sent to GRP too which not only closed all possible exits from society but also sent alerts to all subscribing households in society. The thieves were struck inside the house only and were captured by police red-handed.

You must be wondering what is a URP and GRP when this article is for ERP. Well, ERP, over the years have evolved and has expanded its reach from large, medium and small enterprises to households and group housing societies. For a house, it is now called as URP (Unit Resource Planning) and for a Group of units; it is called as GRP (Group Resource Planning). The clouds have taken over and there is no need for people to invest in hardware to take benefits of ERP just they do not have to build a powerhouse for drawing power to run their appliances at home.

Scene 1 showed us how automated deliveries from retail marts to houses will happen with hand/finger scanning systems installed at homes which means that an authorized person will deliver the goods and even when there is nobody at home. The orders will be placed through smart phones and all systems will be integrated to process orders and payments.

Scene2 showed us how our lives will be made comfortable with ERP/URP with an electronic personal assistant taking over and completing all important tasks either by providing recommendations or if authorized, finishing them on their own.

Security is another area (Scene 3) where ERP/GRP will act as our personal watchman which will have less than 0.2% probability of failure (Six Sigma) and people can travel to spend their vacations without worrying about the thefts etc. till the thieves come out with another novel way to intrude.

I am convinced that ERP is here to stay and will be further invading our lives in future. Only software programs like ERPs will be able to control the robots that humans are planning to use for home chores in future. In addition, ERPs also have the potential to educate our children finding their improvement areas when they record their progress in them. The potential is huge and only things like ROI, hunger for more etc. will drive its use among larger population.

ERP: To have or NOT to have?

ERP products and implementation both are expensive in terms of not just cash outflow but also considerable resources are engaged in its deployment for around an year, first for going LIVE and then a painful change management process takes away initial productivity of staff to make sure that all intended users use it as the primary application for the organization. Also, as complex a system as ERP is, the decision-making around selecting, upgrading, and changing an ERP system is even more complex. The system touches almost every aspect of planning for a manufacturing company, from budgets and reporting, to detailed inventory and production scheduling. It becomes the foundation for growth in both operational efficiency, as well as growth into new, distributed markets. As profitable growth returns in 2010 and 2011, companies are taking advantage of the cash they are sitting on to expand IT budgets and shore up their business infrastructure. Manufacturing companies are deservedly notorious for being focused on cost. But scratching the surface of company priorities provides a little more insight into changing business drivers. While cost continues to be a primary challenge for all business activities, managing growth and the customer experience are close behind. Interestingly, companies without ERP are feeling more pressure to improve the customer experience and innovate. This is derived from having a lack of systems or scattered systems that can frustrate, or at a minimum, be a drag on customer interaction.

InfoVerto recently measured the benefits of deploying an ERP for a couple of manufacturing organizations and got few contrasting figures. Both the organizations used same ERP, were of similar industry profile and size but were operating in different geographies. Whereas, the results for first organization were:

• 22% reduction in inventory levels
• 97% inventory accuracy
• 3.4 days to close a month
• 96% manufacturing schedule compliance
• 98% complete and on-time shipments

The other organization could boast of just below:

• 3% reduction in inventory levels
• 90% inventory accuracy
• 7.3 days to close a month
• 73% manufacturing schedule compliance
• 84% complete and on-time shipments

What does it tell us? Oversimplifying it will take us to a straight forward conclusion that deployment and sticking to the solution is much better for first organization. But, just to look at the other side, one of the organizations in our sample did not have an organization wide ERP but their measurements were also good, as below:

• 90% inventory accuracy
• 7% operating margin growth YoY
• 5.3 days to close a month
• 87% manufacturing schedule compliance
• 89% complete and on-time shipments

These were much better than the 2nd organization with ERP so this question came into our mind, if ERP is required for better efficiency or we can do without it too? Well, a simple answer is that every organization’s dream is to become best in class and if we again have a look at the results of the 1st organization, we will find that they are much ahead of the rest two.

The other benefits for the organizations which implemented ERP Solution are typically:

• Streamlined and accelerated processes to improve efficiency and productivity
• Standardized business processes
• Optimized use of current capacity
• Visibility to business processes across functions and departments
• Modernized technology infrastructure and applications
• Less number (& cost, pain etc.) of disparate enterprise applications in organization
• Linked global operations to improve interoperability and collaboration
• Centralized selected functions using shared services
• Integrated disparate enterprise applications

So while some of the organizations might think that having ERP is more of an issue than not to have it but it is always a case of getting ahead of competition by deploying state of art solutions. Regardless of how efficient you are, a good ERP implementation will make you more efficient. You should focus on streamlining and standardization of your business processes as a goal for your system. Selection of your ERP should be as much about defining the functions you need to grow, as well as the ease of use for the entire strata of users in your company. One critical aspect of the selection process will be the definition of ease of use. And that is something each company must define on its own. Evaluate it yourself!

What can a Best in Class ERP implementation do for you?

Last week I got the opportunity to attend a seminar on new technology trends around enterprise applications hosted by one of the leading consultancy companies. The seminar was very informative and lot of participants like me were excited about the new options that are opening up in enterprise applications field to take leverage from and further improve the efficiencies and effectiveness of teams and operations, specially supply chain and financials. I got to meet few industry leaders also who shared their viewpoints about the successes and failures they had around deployment of erp solutions and whether their expectations were met or not after this initiative. As always, the views varied but a question that almost everyone had, was how to evaluate whether they have the best of the solutions as per their industry standards and organizational needs, is it dependent on the results alone or do we have some other parameters also to check if we were successful enough or say best in class in this intiative.

To answer this, let me share some results from so called "Best in Class" implementations that I have witnessed during my career. For an organization where supply chain was their major pain area with inflated but incorrect inventory, haywire manufacturing schedule compliance etc., the results they could finally achieve were:

• 23% reduction in inventory
• 98% accuracy in inventory
• 35% improvement in perfect orders
• 94% on time delivery (up from approximately 78% - this there was no trusted means to measure it earlier)
• 93% manufacturting schedule compliance - this was most difficult to achieve for them as lot of change management was involved
• 24% reduction in item obsolescence

Having given above example, it is not that all results of an ERP implementation are tangible and if you do not get them, your initiative is a failure. NO, this is not at all the case. Process standardization, greater compliance towards regulators as well as putting controls in place to reduce revenue leakage in multiple ways and having a single source of truth are few of those non tangible benefits that you will get from a successful ERP implementation and they should also be given equal weightage while evaluating the success or failure of your project. For example, for a project based organization, one of the most important benefits will be to restrict buyers to their budgets as defined in the application so that the sanctity of budget is maintained and the management knows at all point of times, that what is the current status, how much they have to spend in the coming period etc. Also, this will ensure that people start giving accurate budgets so that they do not have to go to the route of getting it revised whenever they exceed it - and believe me getting your budget revised is not an easy task in any organization.

Then, opportunities like scalability, easy reporting, manage growth, ability to do actual costing and better calculations of profit margins, collaboration with suppliers and customers etc. are equally priceless which we tend to miss while trying to measure the value that was brought by an ERP implementation.

The list is endless and depends on what do you expect from your project - while it is ideal to say that we need to define and detail out in advance about the parameters and objectives - but in real world, it is difficult to get this done at a granular level, specially if you are implementing ERP for a first time and not moving from one to another. So, it is better to start measuring the project success after 6-9 months of going live and after checking the improvements that you could see in your operations.

Strategy: Improve business efficiencies with ERP Health Index

Business efficiencies can never reach a level that satisfies a CEO completely which simply means that we need to constantly keep on improving on it. As you will iron out one area of business processes to make them more efficient and effective, the other areas will starting popping with new inefficiencies as per the market dynamics and everytime it is not the fault of the employees but the new requirements of market force them to take their own small measures to adapt to the newer practices which might not be best practices and these continue bringing new inefficiencies. One of the measures to reduce these inefficiencies is to constantly review them and address the business issues urgently and the 2nd option, whihch we will talk here in detail, is utilizing your ERP Health Index to improve business efficiencies.

To start with, what is an ERP Health Index? Do you have one for your ERP? Well, let me start explaining the concept of ERP Health Index or EHI. Every ERP has a set of processes mapped to the technology as per the business metrics or Key performance indicators (KPIs). during the course of implemeting the ERP solution, these business metrics are identified, frozen and a processes is setup in such a way that these metrics attain their best values. Normally, what happens after some time, that due to reasons like market demands, lack of co-ordination within departments, new systems coming into place and getting integrated with ERP, new features implementation in ERP etc., the best practice processes which were put in place while solution deployement are either changed or are not best practices any more and need to be changed. Now, how do we measure this? How will we make sure that our ERP still has the best solution suited to our business? EHI helps in measuring these changes and you can achieve following:

• Know the existing state of ERP in terms of the business metrics and KPIs
• Helps to find out the desired state of ERP
• Assists in creating a roadmap for reaching the desired state in certain time frame

Normally an EHI has 2 important sections and that are: functional - which focusses on KPIs measurement, their best in class values and ways to improve those KPIs and, technical - which focusses on the technical aspects of ERP telling you about the performance of the instance, inegrations, data duplicacy and redundancy in the system etc. Both these sections have a set of configurations and scripts that will extract information from your ERP, present them as a dashboard, compare them with indutry best in class standards and recommend the actions that will help you improve your processes in ERP to ultimately improve your business efficiencies.

I will be happy to share more details on the modus operandi of EHI and its ingredients if anyone is interested more in this. Don't worry - the information you may want from InfoVerto is not chargeable at all.

Strategy: Leverage ERP to increase vehicles utilization

Large fleet owner organizations, whether they are 3rd party logistics companies, EPC companies or others, have sizeable costs of vehicles running during rendering services or projects for their customers. Moreover, controls on right usage of these vehicles is increasingly becoming a substantial issue with the cost control officers due to reasons such as usage of these vehicles by employees for their personal use, pilferage or leakage of fuel, reducing fuel mileage, increasing maintenance cost due to missed dates or more frequent maintenance than required, age of vehicles versus their retainability in fleet etc. There are multiple other reasons that have started forcing the organizations to keep a tab on these vehicles and define the key performance metrics for them. While agreeing on the metrics is the easier part, the difficult part is to start monitoring them because of obvious resistance from employees, manual readings, increased data entry etc.

Leveraging your ERP in recording these metrics can become a boon for you as it will not only reduce the need of manual readings as well as data entry but will also make sure that the vehicles are properly maintained as per their service needs and the cost of vehicle maintenance goes down. The technology usage such as radio frequency identification devices deployed on the vehicles, when integrated with ERP for sending required metrics helps ERP to take appropriate actions within the application and also send reminders to the maintenance engineers or department to schedule the vehicle maintenance.

ERPs can be configured as per the needs and requirements of the vehicles performance monitoring metrics and when integrated with the vehicles (and their measurement systems), can get you rid of the manual activities (and touchpoints) bringing in accuracy, automation and host of other benefits. Once the data is collected within the ERP, it can be tabulated and analyzed too for further refining of vehicle usage as well as to find out more metrics that needs monitoring (like downtime, suitability to the tasks etc.) to further reduce costs and right sizing the fleet.

Prioritize your focus areas for best benefits from your ERP

In one of the recent meetings with a group of CIOs, I heard this loud and clear from more than a handful CIOs that though they have implemented ERP and have waited for couple of years to stabilize the processes but still the expected benefits have not been able to impress them as well as the CEOs. Going into details, one common thread that came out from all of them was their extra wide focus areas. When asked about in which area, the results were far from satisfactory or which areas you were focusing on get the low hanging fruits first and then aim for the higher ones, the reply that I got is that they focused on getting all the benefits and have taken quite a good amount of initiatives to make them happen with the help of ERP. Quite a decent strategy! But then, why they are still unhappy or rather I should say less satisfied? Is it the ERP as product or their processes or the expectations or something else?

Together we tried to go deep into it and picked couple of cases from the group and the findings were enlightening. Though I will not be able to share the name of the organizations, CIO names or the exact findings but I would like to share the strategy that came out after this post mortem of their existing strategies which left them less satisfied with their ERP deployment. The clear cut strategy was multifold, but it was suggesting in more than one ways that instead of firing bullets in all directions, the focus should be on fewer directions and in phases. Say for example, a typical organization wants following benefits after ERP implementation at their end:

• Cost reduction due to process standardization, automation, improved end to end visibility etc.
• Improved working capital due to lower and accurate inventories, less obsolescence/scrap etc, better payment terms etc.
• Better customer satisfaction due to improved on-time delivery, communication/response time, perfect order fulfillment etc.
• Effective strategic decisions by executives due to crystal clear MIS, reporting etc.
• Improved compliance due to process controls, monitoring etc.
• Higher collaboration between teams, with suppliers, with customers etc. increasing efficiencies and reducing cost of operation
• Improved staff efficiencies due to smaller period closing activities, automation etc.
• Finally single source of truth for everybody to benchmark and plan accordingly

There will be many other benefits an organization can get but the objective of listing some of them above is that if we start focusing on everything from the start, there are chances that we are not able to do justice with all of them and lose steam on some of them or even all of them when our patience runs out. A larger group has always less patience and tiny but focused groups with smaller milestones will always have higher success rate.

So the strategy here should be that we need to prioritize our focus areas in such a way that we pick some of the critical ones along with the few low hanging fruits in the first phase - implement your action plans and then move on the next phase with a similar combination of focus areas. With this, I do not mean that you should take business functions or modules one by one (that is a different discussion altogether) but the intent of the strategy is to pick your result areas after implementing the ERP and keep on improving the processes, putting controls, automating it further, complementing them with BPM solutions etc. to make them ready to reap benefits and then move to the next batch. The batches can also overlap for some time looking at the available bandwidth of team.

The group of CIOs jointly took a decision to re-look at their ERP deployments and identify the areas of focus to give a new try to reap the benefits and you also might want to try out this simple but effective strategy. Best of Luck!

Evaluate your sole-source versus multi-source strategy in ERP ADM

We are seeing a turbulent time in ERP ADM services wherein organizations are not clear whether they should stick to their best and trusted vendor for providing the services or look for economical and probably better service models outside. Other than this, they are also wondering if their long term strategy should change from depending on one single vendor to keep on getting the volume discounts and single window service or should look out for multiple vendor services for getting exposure to different best practices, pricing models etc. from them. The objective remains same in both the cases, which is lower costs, better service and exposure to best in class practices.

According to Bill Martorelli of Forrester, many firms are currently recasting their single-sourced, all-encompassing IT outsourcing agreements towards a multisourced scenario — in some cases carving out application services. But many application development and maintenance (ADM) service engagements grow organically, individual scope of work by individual scope of work. In cases involving multiple ADM suppliers, principal challenges include building a framework that governs the involvement of the different suppliers, as well as guidelines for awarding subsequent work to those that do the best job. The task is complicated by the often fluid nature of preferred applications services partner relationships, where the roles of respective partners can grow or shrink more than is typical in infrastructure-oriented engagements. Sourcing and vendor management professionals should compensate for these concerns with a greater emphasis on governance and transition assistance.

Certainly, multi-sourcing brings competition among your partner vendors and in quest of getting more business or to outsmart each other, there are high chances of your getting their best of sevices and focus on your requirements but having said this, we need to be congnizant of the fact that Big is Beautiful and in case you do not have a large carrot hanging for the vendors for near future, the strategy may backfire and once again, the solesource strategy will become a better choice.

We need to put our heads together to chalk out a short term and a long term strategy in going ahead with the sole source or multi source plan looking at the specific situation of our organization before we take any decisions.

Identify Risks for your ERP software deployment program & plan mitigations in time

ERP Software deployment program is not only an IT program but it is part of a larger business strategy and needs an equal (if not more) participation from business – a fact well established till now. Even if we follow the best of methodologies and frameworks as claimed by most ERP software vendors and service providers, it is highly recommended to do an independent exercise to identify the risks and plan their mitigation. There are some risks that only a customer organization can identify and no service provider will be able to find them as they all go with the standard list of risks that come in an ERP software deployment program.

It is important to come out with your own list of risks and mitigants and the framework for this need not be a state of art intelligent framework but a simple list of risks and mitigants with good meaningful content. Some factors that will help you indentify the risks are:

• ERP exposure: In case the exposure to ERP software does not exist or is limited in your organization, risks related to change management, business participation, ownership, reluctant testing, delay in timeline & low priority to program can come and there will be a need to plan mitigants like effective change management program, awareness creation strategy, building excitement about the new system and its benefits will help you
• Number of existing systems: In case you have multiple systems that are going to be replaced by ERP or some of them will still exist after ERP software deployment, then complexity risks, project delay potential as well as dependency on multiple teams and their schedules might pose as a challenge for the program
• Multiple businesses: More is the number of businesses; more will be different requirements, their priorities and business stakeholders. If this is added with the increased number of geographies and languages, then it is highly likely that activities like design finalization and testing will get impacted in terms of more time required by businesses to digest a standard business process and it might be required to plan mitigations to these risks beforehand
• Level of existing documentation: It will depend on the level of documentation for existing systems that how much time you will spend in incremental documentation. Not only this, whether the business team will have the time to work on the documentation or not is a risk that normally skips the minds of the ERP service providers. Plan these pro-actively
• Other factors: Factors like level of cleanliness of data,  data quality in whole (consistency, accuracy and completeness), expected customizations, lack of executive support, team size-quality-availability, test scenarios identification etc. demand your time to think and check whether they can pose risks to the ERP software deployment program or not

The list is nor an exhaustive list but are those which normally a customer organization themselves can identify in a much better way than an ERP software vendor or an ERP service provider. Do spend time on them for a more successful program.

Critical Success Factors for ERP Deployment

InfoVerto has long experience of executing ERP projects worldwide and from its experience, it has compiled  a small list of critical success factors for ERP Solution deployment in an organization. This list of factors is not an exhuastive list of all success factors but represent a crux of few critical ones that has the potential of being a driving factor for success or failure of an ERP program. Have a look:

• Pre-Work Quality: There is a need to create a project charter, organization and have well defined objectives before starting the project so that every stakeholder and participant is on same wavelength and know their responsibilities as well as deliverables. Pre-Work will also include readiness check in terms of processes, skill set availability, bandwidth availability, budget, executive leadership keenness etc.
• Executive Sponsorship: A clear-cut and consistent mandate and support from the top executives of the organization is THE most important success factor for you as it will ensure that the projects is getting the right visibility as well as importance and is tracked for its progress at the highest level in all the divisions
• Participation of business teams: ERP project is never an IT alone project and It teams can never pull together ERP projects without the participation of business for the simple fact that it is the business that will use the system after it goes love so not only they need to own the design of new system, they also need to project it rightly in their teams so that a positive buzz is created for the new system in the organization
• Market the project rightly: A strong feeling in employees is always there that after ERP is implemented, they will see manpower reduction and this increase their resistance to change or they want to prove that the new system will not prove beneficial for the organization or the organization is still not ready for the new system. It is important to market the project addressing the issues of employee and regular communication needs to go to them highlighting progress of the project as well as what benefits it can bring to their daily work routines
• Map the business processes to system and not vice versa: ERP system is coming to help your business grow and increase efficiency and not the other way round, so please make sure that defining business processes is given utmost importance and compromises in the processes are at the lowest level, to accommodate ERP functionality. It can increase the level of customization in your instance but there is a need to review each and every process deviation due to product-requirement mismatch before taking a decision to tweak the process
• Change Management: This is one of the biggest non technology challenges in an ERP implementation and need to be planned pro-actively. Inadequate change management can derail even the best managed project and it demands a clear cut strategy to manage change in the organization
• Address Product Gaps: There will always be some product gaps that will stop you to map the whole requirement set to the product and a customized solution will need to be put in place. (If you have selected the right ERP software then the probability of having gaps will be much lower). It is important that these requirements and their solutions are well discussed in the team and should be taken up with the ERP Vendor before starting to customize the application as it will add complexity which will result in more robust testing, bug fixing and documentation resulting into reduced bandwidth of team
• ERP deployment partner: Having a consultative, knowledgable and experienced ERP Service Provider always helps to increase your chances to have a best in class solution as well as reducing the failure potential of your project. It is imperative that sufficient research is done in this field before selecting an ERP service provider and you leverage the tools & frameworks available on web to complete your study before taking a final decision  

It is important that you take care of all above points while planning for the ERP project for your organization and increase the succcess potential of the project.

ERP Success Tips: Link employee incentives with ERP success

As part of the Series on ERP Success Tips by InfoVerto, this time we are sharing another useful tip that will increase the chances of success of your ERP endeavor by many folds. This tip has resulted from the fact that lot of ERP programs these days are impacted by attrition of business team members and their inconsistent and uninterested participation. These business team members are part of the core team from business side for ERP solution deployment and their full fledged involvement and continuity is very important for the success of the program. Also, it is seen multiple times that business will lend only those resources for the ERP program that are either redundant or are close to redundancy to their present business function. They normally are not the best people from the business function which is a key need of an ERP program which without doubt is a strategic program for every organization. This is an issue that needs to be addressed and hence this tip.

Few companies may not see the link between the success of an initiative like ERP (or for that matter Lean or Six Sigma) with employee’s compensation but this is key component in motivating employees and is a sign of support from the executive leaders of the organization. This also sends out the signal that how important is this initiative for the organization and anybody involved in this and contributing to this, will have high visibility and growth path. Aligning compensation with performance is not a new idea but is has become a key component of the debate around excessive executive compensation. The need is to devise ways and means to compensate the ERP team members in such a way that they are:

• Motivated to join the team (infact we may see a competition between employees to join the team) and see that as an important opportunity of their career
• Keen to participate vigorously during the course of ERP program to their best of abilities
• Ready to ensure that the program is a big success and are excited to create a buzz about this in the organization
• Not digressed towards looking for a change of job midway of program as soon as they learn the intricacies
• Proud of being involved in one of the most important & visible initiatives of the organization

For all of this to achieve, it is important that the incentives that they will get as part of this program, are well distributed in such a way that they spend at least 6 months after the Solution Go Live, in the organization and spread the knowledge. There are deliverables and milestones that can be linked to their incentives and it can be made sure that one of the major concerns regarding ERP success can be mitigated pro-actively.

Time to differentiate your ERP from transformational systems

Most organizations deploy ERP to manage their transactions, keep their records & data and to provide a platform for business intelligence tools for giving information to management/business teams. Yes, there are other applications of ERP also that are used in organizations but broadly, the above mentioned three uses are the most sought after objectives for ERP deployment. The latest thought process revolves about classifying your IT systems into three major kinds, which are:

• Transactional Systems - These are the systems that form the foundation for your enterprise and manage the information necessary to run your business. These are transaction oriented and are core to financial reporting and regulatory compliance. Their pace of change is slow, with their life span measured in decades. They're most likely delivered on premises traditionally but now these are being evaluated as SaaS or even further – using clouds computing
• Differentiation Systems - These are the systems that help drive differentiation for your organization. They connect to customers and trading partners, as well as help speed time to market and overall agility. They are more collaborative in nature, and while they leverage data from transactional systems, they capture and maintain additional information also. They are relatively stable and have a life span of anywhere from three to ten years. Many of these systems will be deployed on premises, but some may be delivered as a cloud application. These applications are also called as best of breed systems popularly that flank your core transactional system and provide not only the extra features that are required to project your differentiators in market but also help in making the processes further lean
• Transformational Systems - These systems create innovation for your organization. They are often developed out of ad hoc processes and tied to specific initiatives, so they can have very short life cycles. They are driven, developed and funded out of business budgets. The transformational systems are also highly collaborative and involve both structured and unstructured data. The dynamic nature of these applications is well suited for cloud-based deployments as these systems are not always huge and carry far less amount of data as compared to transactional systems or differentiation systems

It is not that role of all three systems can not be interchanged. They can be interchanged based on the objectives they are fulfilling but saying that our ERP itself is our transformational system, might not be a right statement. Let us take an example here: A automobile company hired a consulting company to identify a strategy to launch its new model in rural and far fetched areas where it has minimal presence till now and this launch has to be a big bang launch for all its markets in a country. The consulting company suggested a strategy that required a temporary system that is needed to record preliminary data, ongoing campaign data, collaboration between multiple teams, continuous monitoring of progress of campaign etc. and the client organization got this system developed for this launch campaign. Now this system, which is quite different from your transactional system (ERP), is your transformational system and it will have a short life period equal to the launch campaign period plus some post campaign analysis etc.

We need to not shy away from development of these niche systems and keep on pressing the fact that we already have one system (ERP) which should cater to all our needs. Differentiation is very important these days and automation in your processes, new campaigns etc. will ensure that you remain ahead of your competition always.

Major reasons for ERP projects delay

More than 50% ERP projects worldwide, do not complete on time as scheduled originally and this is something a CEO or a CFO will not like at all. This means more cost, more resources, loss in expected benefits, delayed integration of businesses etc. and making users more suspicious about the success of ERP. If we can learn from the experience of others and identify the major reasons of ERP projects delay, then we will be able to plan the mitigants beforehand and the probability of going the “delay route” becomes minimal.

Here are the major reasons for ERP projects delay as per Infoverto’s experience:

• Inconsistent executive sponsorship: While everyone agrees and take actions to make sure that every ERP project is backed by strongest chairs in the office right from beginning but the lack of steering committee reviews and irregular sharing of progress of the project with them causes them to lose their interest gradually in the project and start focusing more on other priorities. It is seen that some or other division or department or business function gradually becomes less receptive and participative in process design, testing or other activities of project which delays the milestones
• Unrealistic timeline expectations: Due to huge cost pressures on all sides whether it is the client organization or the consulting vendor, the intention is to reduce the implementation period of the software to the minimum and in the process there is an increased probability of overlooking needs of change management, training, repeated testing and integration with other ongoing projects in the organization. Lower projected costs compels the client organizations to award the implementation project to the vendor with the shortest implementation timeline, while the expectations on benefits of ERP remains same and this makes sure that we see one or other unforeseen issue during the implementation period that forces us to delay the originally planned timeline
• Scope mismanagement: The project starts and reaches the end of design phase but the requirements keep on coming from businesses and the project leadership is unable to freeze the scope of project. This is a typical scenario in an ERP project and in some of the projects, the requirements even keep on coming till the final testing phase on one or other pretext and either they delay the project due to their sheer volume or issues the come up due to lack of proper time spent on their design and testing in new system. Lack of a scope freeze milestone is the root cause of this and leads to ERP project delay
• Decision making pace: The consulting vendor will not be able to implement the ERP on its own. They will need continuous inputs as well as approvals on process design, technical design, customizations etc. and delay in these decisions normally pushes the critical path milestones out and it impacts the whole project timeline. Lack of proper & defined communication, ownership and approval hierarchy within business teams will keep them pushing the key decisions to each other and hence more delay to the project
• Sub optimal resource mix: Resource quality, quantity and mix are one of the most important aspects of an ERP implementation and it is seen quite often that either the client organization is not able to get adequate participation from their resources or the consulting partner could not deploy resources on right time, with right skill set as promised and with improper onsite offshore mix. This causes in inconsistent bandwidth usage as well as skill set to deliverable mismatch which again, is the major reason for ERP project delays
• ERP customization: Vanilla or Greenfield ERP projects as they are called in two major ERP vendor’s language do not take much time to implement and it is the level of customization that drives the timeline of the project. More the customization, longer is the timeline and more is the probability of issues cropping up during the implementation period that again pushes the critical path of project, out. More customizations also make the other processes unstable and more system bugs come up during the project that again increase the project timeline

The amount of challenge in an ERP project is already enormous and knowing about the probable reasons of its delay in advance will always help in reducing the challenge considerably. This will also set the realistic expectations across all stakeholders and will reduce the overall project duration and cost.

ERP Trend: Integrate clouds based applications with on premise applications

Clouds are here to say as they offer quite a bounty of benefits over on-premise enterprise applications. Cash is and will remain as one of the scarce resources with the organizations in coming days and that will remain as one of the major contributory factors to encourage these organizations towards clouds based applications. While moving all the existing applications from on premise model to cloud based SaaS model might not make sense for these organizations as the investment has already been made in licenses, hardware and internal team’s development, it makes perfect sense to go for the SaaS model for the new best of breed applications or business intelligence systems. This means that now the CIOs need to take care of two architecture models separately which is not a big issue but the major pain is that these systems are not on talking terms.

The need today is to have seamless integration between the on-premise applications and the cloud based SaaS applications. While there's a noticeable increase in application deployment in the cloud, much of the integration between on-premises and cloud is done in a point-to-point manner. Some of the connections that cloud based providers like NetSuite are now making are cloud solutions (e.g., Salesforce.com, NetSuite or OpenAir products) connecting to on-premise products. That’s a bit more challenging than the old-fashioned integration of two on-premise applications together. Those static ‘interfaces’ were gold to systems integrators. Those ‘interfaces’ consumed a lot of implementation time and, once set and tested, were hoped to last the life of the application. They rarely did as one application or another would get an upgrade that changed the interface needs. So customers and their vendors need to rethink their integration strategies and remove the artificial barriers between internal integration and B2B integration, since the hybrid deployment model will be a reality for the majority of large companies.

One of the best practices is best practice is to harmonize the Information architecture of the SaaS and on-premise applications and make sure the data formats are aligned or translated properly. One might have to deploy an MDM hub. Before that, one should verify that key processes and transactions will still work, end to end, over the distributed Cloud applications. Aggregation Cloud brokers may be used to combine multiple existing services into one, taking the burden of data and process integration from the client. A broker means both a provider and a distribution technology. The broker would also take care of revenue sharing between Cloud Providers if any. For integration between multiple Clouds and on-premise applications, a clean SOA architecture simply eliminates the internal integration fur-ball spreading in the Clouds. For a single application, outsourcing to SaaS without SOA may be still all right.

Let us look at what Open Connect is doing. It is not only connecting these very dynamic cloud based apps to on-premise apps, it is also doing cloud-to-cloud connectivity. Imagine your accounting application running on one firm’s cloud environment, interacting with another cloud’s CRM solution that’s also interacting with another services automation solution on a third cloud environment. Now, to make it more complex, imagine that all three of those cloud applications are changing, simultaneously and continuously. Each system will need the awareness of the other solution’s changes. Interfaces will become fluid and very dynamic. Finally, consider that the user may be unaware that these background changes are even occurring. Now that’s a big jump in integration. That’s a jump the on-premise vendors can’t complete.

The questions is that when many on-premise vendors cannot even create a multi-tenant version of their product line (most can only offer hosting services), how can they deliver the level of cloud-to-cloud integration that the market will demand? This means that the next ERP solution that you are evaluating, you should check for two new features:

• The solution can do on-premise to on-premise, on-premise to cloud, and, cloud-to-cloud integration
• The solution can, independent of end-user interaction, dynamically update interfaces and system-to-system integration

Check them out for sure!

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Drivers to evaluate ERP upgrade needs

Multiple times, I get questions from corporate leaders like, why should I upgrade my ERP system if I am fine with the current version and also do not have enough cash to spend on "not so useful"  upgrade process? Can I delay the upgrade process for unlimited time? What are the factors I should consider before building a business case for an ERP upgrade? etc. Though there are separate factors or drivers for each organization that will impact the decision to upgrade the ERP version or not but yes there are some common drivers also which helps you to evaluate your organizational needs to upgrade or not. You need to build your business case based on these and can flank the other factors that are true for just your organization:

• NEW FUNCTIONALITY REQUIREMENT: Evaluate the new features needed by business vis-à-vis severity of requirement and availability of those in new version of product. Also, check how long the business can wait to get those requirements fulfilled and what are the expected benefits by bringing in those features and in how much time
• UNSTABLE CURRENT SYSTEM: Observe the nature and number of issues that have come in last 6 months to measure stability of system. If the root cause analysis brings out that the system stability is at risk due to mismatch of versions within different sections of ERP, then evaluate the amount of risk  
• COST TO UPGRADE: Calculate the cost to upgrade the version vis-à-vis immediate as well as long term benefits. this can be done with the help of a consultant too who can provide the service provider fee and the amount of bandwidth required by the business teams during the course of upgrade
• LEVEL OF EXISTING CUSTOMIZATION: Measure the level of customization in the existing instance and evaluate if upgrading the system will impact their stability. Lot of times, upgrade process become lengthy and complex if there are large number of customizations in the current version. But lot of these customizations can potentially be replaced by standard functionalities that will come as a result of upgrade. So evaluate both the factors beore taking a decision 
• PROCESS STANDARDIZATION: Check if current processes are no longer best in class and need to be re-engineered and standardized across plants, divisions and subsidiaries again and if that needs the system to be redesigned
• MERGERS & ACQUISITIONS: Check if any recent merger or acquisition demands any new functionalities or needs to be at same level of same product as of the acquired company
• SUNSETTING LEGACY APPLICATIONS: Find out if any legacy application is planned to be retired in immediate future and that requires any features to be added in existing ERP product
• VENDOR MANDATE: Check if ERP product vendor still supports general product configuration & bugs, product getting phased out or vendor charges extra cost to support current version. This will generally vary from product to product and again from customer to customer for these vendors as generally these ERP vendors negotiate different terms with different customers

All above drivers to evaluate ERP upgrade needs are generic factors that will fit in almost any of the organization but as I said earlier, there will be some more that will be specific to you organization and you need to include them also in your evaluation exercise.

Role of ERP & Data Accuracy in Mergers and Acquisitions

Mergers and Acquisitions have become an inherent part of the global enterprise strategies and looking at the pace of acquisitions, mergers and de-mergers that are happening these days, it is important that organizations come up with detailed frameworks and leverage them to speedily complete the process of acquiring, merging or separation of entities. This will not only reduce the cost of activity but will also make sue that we cover all aspects during the process with no surprises left for later stages. ERP has a large role to play in these mega activities as it is seen that lot of issues can be reduced if ERP can be leveraged correctly. Obviously ERP’s role will be governed by the consistency, accuracy and completeness of data as the data in it will be a core factor to take multiple decisions in the process.

The benchmarks for divesting a company or merging with a newly acquired company have climbed in last couple of years to 6 - 8 weeks. Along-with this, internal re-organization exercises like creation of new regional business, moving production from one plant to another or compliance related changes also are eligible to be part of M&A activities in terms of their similarity of sub activities. These also have quite stringent benchmarks these days and are possible to achieve only with the help of ERP.

To execute the above talked business objectives, a comprehensive global data strategy is critical and must be part of the overall enterprise strategy. The scope of the data strategy must be coordinated and owned by a data management team that operates as a business cross-functional team. To ensure business sustainability and growth, the ERP system needs to be able to support data process changes in a focused, fast, and flexible manner (the front end) and must include the swift re-alignment of data and data hierarchies to reflect internally or externally driven changes to the business context. Also the introduction and scale of shared services will need to be enabled and even accelerated to provide a slim, cost-efficient, and service-driven back end. Business modernization, operational efficiency, and successful mergers and acquisitions all rely on accessible, timely, high quality data.

ERP can help you to define, measure and monitor the integration of new businesses with parent business and it is important that you come out with a framework which leverage your ERP, your ETL tool and the business logic for smooth integration of data integration. One of the popular frameworks is as below:

To measure the success of mergers and acquisitions transactions, it is imperative to set up clear criteria related to the data dimension. Otherwise, the business case will be incomplete. The cultural change is critical for any merger or acquisition. A tremendous effort will be required in this area to ensure a successful change management. Therefore, introducing and executing a proven data excellence framework supported by a robust platform is a mandatory accelerator to deliver an efficient data integration and to support a business driven data governance while the organization focuses on the cultural challenge. 53PSVV3Q4S2M