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Selecting and implementing an ERP solution THE ADVISORY SERIES see the wider view

Selecting and implementing an ERP solution

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Page 1: Selecting and implementing an ERP solution

Selecting and implementing an ERP solution

THE ADVISORY SERIESsee the wider view

Page 2: Selecting and implementing an ERP solution

THE ADVISORY SERIES

Selecting and implementing an ERP solution

ContentsWelcome 4

Identifyingyourcompellingneeds 5

Predictingyourreturnoninvestment(ROI) 6

YourbusinessintheERPlandscape 8

Definingtheselectionprocess 10

Takingreferences 11

Understandingthesupplier’smethodology 12

Analysingthesupplier’sbehaviour 14

Organisingforsuccess 16

Managingtheimplementationproject 17

Consideringsoftwaremodifications 18

Reviewingtheimplementationprojectresults 20

Remember–goingliveisonlythebeginning 21

About The Advisory Series Lakeview’sERPsoftwareandtechnologysolutionsunlocktheproductivityofyourbusiness.Aspartofourcommitmenttobestpracticeandknowledgesharing,wepresentTheAdvisorySeries.Thesehelpfulguidesofferadviceandinsightonthekeyissuesandchallengesfacingbusinessesintoday’smarketplace.Wehopeyoufindthemuseful.

Selecting and implementing an ERP solution

ThisguideprovidesadviceandtipsonhowbesttoselectandimplementanERPsolutionwithinyourbusiness.Evenifyouhavetravelledthispathbefore,youshouldstillfindsomeusefulinsights.

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Selecting and implementing an ERP solution

Identifying your compelling needsThefirstessentialstepintheERPselectionprocessistolookinternally,clearlydeterminethebusinessissuesyouaretryingtoresolveandconsiderwhatbenefityouwillderivefromtheinvestmentinIT.

Don’tbuyITforIT’ssake...ortokeepupwithacompetitor’ssystem...oroutofshorttermunhappinesswithyourcurrentprovider.Allthesearenotinthemselvesgoodenoughreasonstogotothemarket.Businessbenefitiseverything.

Itmaybepossibletoaddresstheissuesyouhaveidentifiedthroughadditionaltrainingonyourexistingsolution,orbyopeningupbettercommunicationchannelswithyourITvendor.Askyourself:“Havewespokentoourexistingsupplieraboutourcurrentsystemsissues?”Ifyouhaven’t,youmayfindyourproblemscouldberesolvedwithasimplephonecall.

Ifyoudecidetopressaheadwiththeprocess,thenextstepistosetoutthebusiness-criticalissuetobesolved.Again,ifyoucan’tdescribethebusinesscasewithfinancialfigurestosupportit,thechancesareyoushouldnotbemakingthatinvestment.

Welcome Foranycompany,theneedtomeasureandensureabusinessreturnonaninvestmentinITisessential–andyet,paradoxically,suchreturnsrarelymaterialiseinreality.Forasmall-to-medium-sizedenterprise(SME)thisisespeciallycritical,asbudgetsaretypicallytight.Atthesametime,theneedforITtodriveoperationalefficiencies,increaserevenuesandimprovecustomerserviceisstrongerthanever–ifyouaretocompeteeffectivelywithlargercounterpartsinevermoreglobalmarkets.

Abusinessmanagementsoftwaresolutionforenterpriseresourceplanning(ERP)isoneofthemostsignificantITinvestmentsacompanywillmake.ChoosingtherightERPsolutionisasmuchaboutengagingwiththemostsuitablesupplierasitisaboutchoosinganappropriatetechnology,userinterfaceorfeatureset.Inmanyways,theseaspectsareallinextricablylinked.

So,youwanttodeterminethebestoverallsolutionandservicepackagetodeliverfinancialreturnsandcustomerserviceimprovements.Howdoyoudeterminewhatkindofcompanyandsoftwareproductislikelytoprovidethebestfit?Andhowcanyoubesurethattheimplementationwillrunassmoothlyaspossible–anddelivertheanticipatedbusinessbenefits?

An ERP software solution is one of the most significant IT investments that a business will make.

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THE ADVISORY SERIES

Selecting and implementing an ERP solution

Predicting your return on investment (ROI)Atthisstage,youmustbeclearandrealisticaboutwhatyoucanafford,consideringthebudgetyouhaveavailable.Thebudgetshouldberelatedtothepredictedreturnoninvestment,basedoncostreductionorincreasedrevenues.Youoftenhearstatementslike:“WithournewERPsolution,wewillbemakingourprocessessmoother,andourdataavailabletoallourpeople.”Theseareimportantoutputs–butyoudoneedtoquantifythebenefitsyouwantfromthem.Youshouldbeformulatingmeasurablegoals,suchas:

• “We will reduce our admin personnel needs by five.” • “We will reduce the cost per order by 10%.” • “We will reduce lost sales by �%.”

Typically,ItwouldberealistictoexpectareturnonyourERPbusinesssystemsinvestmentwithinthreeyears–longerthanthatandyouareindangerofslippingintoyournextreplacementcycle.

You should formulate measurable goals for ERP – such as reducing your cost per order by 10%.

Selecting and implementing an ERP solution

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Selecting and implementing an ERP solution

Talk to prospective ERP suppliers about the problems and processes to be addressed – not simply what the solution should be.

Your business in the ERP landscapeConsidercarefullywhereyouarepositionedasacompanyinyourownmarketplacebeforeconsideringERPproductsandsuppliers.Thiswillhaveabearingonhowsupplierswillseeyouandrelatetoyou.Thisisparticularlyimportantpost-sale,whenallthesalestalkistransformingintotherealityoftheERPsolution’sfitandqualityofservicefromthesupplier.

Small business ERPIfyourannualturnoverislessthan£500kandyoudonotexpectittogrowtomorethan£1mwithinthreeyears,thenyoushouldconsiderlookingatsmallerERPpackagesprovidedbyanauthorisedreseller.Ideallychoosearesellerwhoislocaltoyourbusiness,tohelpensurearesponsiveonsitepresencewhenneeded.Lookforasinglepointofsupplyandserviceforhardware,security,backupsandsoftwaresothatyoudonothavesuppliersblamingeachother.ExpectthesuppliertoprovideallyourITneeds–butdoagreeasinglepointofcontactwithinyourbusinessatmanagementandITadminlevelstomanagetherelationship.TypicalUKERPproductsatthislevelareSageandPegasus(thelatterownedbyInfor),eachwithitsownresellernetwork.

Mid-range ERPIfyourturnoverisintherange£1mto£250m,thenyoushouldbelookingatERPproductsandsuppliersthatfocusmoreonthe“M”ofSME.Theseproductswillscaleasyourbusinessgrows,intermsoffunctionality,easeofinterfaceandnumberofusers.Also,thesesupplierswillhaveemployeeswhocanconsultwithyou,andofferadviceandguidanceonbestpracticebusinessprocessesaswellassystemsandtechnology.

TypicalUKERPproductsatthislevelareSAPBusinessOne,MicrosoftDynamicsandLakeviewLM4.WhileSAPandMicrosoftareusuallysoldthroughresellers,Lakeviewhasadirectmodel–notonlyauthoringthesoftware,butalsoexclusivelyimplementingandsupportingit.

Again,inthismarketplaceyoushouldseriouslyconsideronesupplierforallyourITneeds.AkeydifferencehereistheconsiderationforemployingadedicatedITmanagerforERPinyourbusiness.Takecareinhiringthisperson,asanyonewiththeappropriateknowledgeandpersonaldrivewilltypicallyalreadybeworkingforasoftwaresupplier.ConsidercandidatesfromtheERPindustrylookingtomoveclient-side.

Enterprise ERPFrom£250mto£1billionturnover,youshouldconsiderthehigh-endSMEsuppliersofERPproducts.Thesetypicallyhaveadirectmodelwithinternationalcoverage,ratherthansellingthroughnationalresellers.ExampleshereareQAD(withitsMFgProproduct),Lawson(Movex/M3)andInfor(variousverticalproducts).

Thecorporatemarketabove£1billionturnoverisdominatedbySAPandOracle.Thereisreallyonlyastraightchoicebetweenthesetwoindustrygiantsatthislevel.

Clearly,theseareonlyguidelinesandtherearecertainly‘shadesofgrey’–particularlywhenturnoverdoesnottrulyrepresentcompanysizeorgrowth.

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Selecting and implementing an ERP solution

Defining the selection processWhenputtingtogetherashortlistofpotentialproviders,firstaskothersabouttheirERPexperiences–trustedadvisors,personalbusinesscontacts,tradingpartnersandsuppliers.

TalktoprospectiveERPsuppliersaboutthebusinessproblemsandbrokenprocessestobeaddressed–andnotsimplywhatyouthinkthesoftwaresolutionshouldbe.Aresponsibleprovidershouldnotsimplysellyouwhatyouthinkyouwant.Rather,basedonajointanalysisofyourneeds,theyshouldbehappytoadviseyounottospendmoneyonthelatestnewsoftware–ifthiswillnotrealisebusinessbenefit.AgoodERPsuppliershouldbeatrustedadvisortoyourbusinessratherthanatechnologyorsoftwarecommoditysupplier.Theiraddedvalueshouldcomefromknowledgegainedfrommanyexperiencesofworkingwithmanybusinessesinmanymarkets–toadviseonbest-practiceprocesses,technologyandsystems.

Bewaryof‘independentconsultants’whohelpyoucompileawish-listoffeatures,aninvitationtotenderorarequestforinformation.Theseconsultantsarerarelygenuinelyindependent–theywilllikelypushyoutowardoneproductthattheyknowwell,whichwillenablethemtoprovidefurtherconsultancylateron.Ifyouwishtousetheirservices,besuretotakereferencesfromcustomerswhohavefollowedtheiradvicesuccessfullyandaccruedtheagreedbusinessbenefits.

Also,theapproachofsimplycompilingfeaturelistsisverydatedandanunnecessarywasteoftimeandmoney.YoushouldconsiderERPproductstodayalmostascommodities.Withineachoftheirmarkets,thefeatures,functionalityandtechnologyadvantagesareallquitesimilar.Somewillscoreplus-pointsincertainareasbut,overall,productsinsimilarmarketswillscoreveryclosely.Lookatsupplierswhoatleastclaimtohaveaspecificsolutionforyourverticalmarket,butdon’tplacetoomuchemphasisonthis.MostERPsuppliershavesoldacrossmostmanufacturinganddistributionmarkets,anditiseasyenoughtosegmentcustomerdatabasesaftertheeventandclaimaspecialisation.

Taking referencesBesuretotakereferencesonthesupplier.Requestresultsoftheircustomersatisfactionsurveys.Iftheyaren’tforthcomingthenbewary,astheirfocusonpost-salesservicemaybelacking.Askthesupplierforcustomerreferencesandtakeupatleastone.Also,besmartandaskforacompletelistofcustomersinyourspecificverticalmarket,suchasfooddistribution,electronicmanufacturingorconsumergoodsdistribution.Pickoutcompaniesyourespectandtrustinyourmarketplaceandasktospeaktothem.Dosodirectlyandinformallyifyoucan,particularlyifyouhavepersonalcontacts.

Aswellasreferencingprospectivesuppliers’capabilitiesinimplementingthesoftware,payattentiontothequalityoftheirafter-salescare.Talktoexistingcustomersaboutthelevelofsupporttheyreceive.Whentheylogissues,howlongistheinitialresponsetimeandtheresolutiontime?Dotheyhavepeopleansweringthephoneswhoareknowledgeableabouttheproduct?Dotheypickupcallspromptlyordotheyuseadreadedvoicemailsystemwithmultiplemenusandoptions?Isthesupportlimitedtoreportingprogrambugsonly–ordotheyanswer‘howdoI’and‘whatif’questions?Beawarethatmanysupplierswillnotanswertheseopen-endedquestionsandwillinsistyoutakechargeabletrainingwheneveryouraisethem.Dotheyhavecustomerusergroups,customerforumsandanopencommunicationstyle?

Alsotakereferencesontheproductintermsofthequalityandfrequencyofsoftwarereleases.Dotheyupdateandmodifythesoftwareoften?Dotheylistentocustomerrequeststoincludefeaturesinfuturereleasesandhaveevidencetosupportthis?Doestheproducthavearoadmapandwhatistheend-of-lifeandreplacementstrategyinthefuture?

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A typical ERP implementation methodology

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Selecting and implementing an ERP solution

Projectmanagement

Project execution

Quality assurance

Solution setup and validation

ClosureDefinition

Solution definition

Solution goes liveProcess andstructures

People

System

Solution training

Solution documentation and support

IT environment

Data conversion

Output documents

Solution mods and interfaces

Process enablement

Identifyrequirements

Design,build and test

Deploy the solution Go live

Understanding the supplier’s methodologyIt’simportanttoknowthatthesupplierhasadocumentedimplementationmethodologyandthatthereisevidenceitisactuallyusedonrealprojects.Thedetailislessimportant,asallsuchERPimplementationmethodologiesaresimilar.Fundamentallytherearefourkeystages(seediagrambelow):

• Identify and document the business requirements • Design, build and test the solution • Deploy the solution • Go live

SomeERPsupplierswillmakethismuchmorecomplex,breakingitintofurtherstages–ortheymaytruncateittofewerstagesusingprototypingtechniquestocombinestagesoneandtwo(oftenknownasRapidApplicationDevelopment).

Ratherthanspendingtimeanalysingmethodologies,amorepragmaticapproachistodiscoverthetruthbehindthetheorywhenyoutakecustomerreferencesanddiscussthesuccessoftheimplementation.

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Selecting and implementing an ERP solution

Throughout the ERP selection and implementation process, it’s essential to have the right team in place – you need commitment to ensure the processes and systems are implemented.

Selecting and implementing an ERP solution

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Analysing the supplier’s behaviourPayverycloseattentiontothesupplier,theirreferencesandwhatyoucanlearnabouttheirbehavior.Isthisacompanythatyouwillentrustamission-criticalpartofyourbusinessto,andthatwillbecomeavaluedadvisortoyourcompany?Areyouseeingpeoplethatyoucantrust,believeinandworkwith?Isthesalesprocessconsultativeratherthan‘hardsell’?Areyougettingaccesstothepeoplewhowilldotheimplementationandsupport?ThesearemuchmoreimportantconsiderationstodayinselectinganERPproductandsupplierthancheckingofffeaturelists.Rememberthatsoftwarecanbemorereadilyreconfiguredthanyourcompanyculture!

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Selecting and implementing an ERP solution

Organising for successThroughouttheERPselectionandimplementationprocess,fromquantifyingbusinessissuesandbenefitsthroughtogo-liveandbeyond,it’sessentialtohavetherightteaminplacewithinyourorganisation.Therolesaremostlypart-time,typicallypeakingattwotothreedaysperweek,butthepeoplefillingtheserolesshouldbeyourline-of-businessmanagersand/orbusinessexperts–thepeopleyourday-to-daybusinessdependsupon.Thisisthelevelofcommitmentyouneedtoplanfor,toensuretheprocessesandsystemsareimplementedandthatyoumaximisethebusinessbenefit.

Thekeyroleoftenoverlookedisthatof‘executivesponsor’.Thisislikelytobethebusinessowneroradirector,someonewhoisempoweredinthebusinesstoensuretheimplementationprojectisgivenahighpriority.Thisensurestheagreedplancanbemetbyallocatingkeypersonnelattherighttimes,andthatanydecisionsoutsidethecontroloftheprojectteamcanbemadebythesponsorinatimelymanner.

Workingcloselywiththesponsorwillbetheprojectmanager–thepersonwithinyourbusinessassignedtotheoverallERPimplementation.Thisistheonerolethatshouldbefull-timefortheprojectduration.Donotmakethemistakeofleavingthisopenorfullyinthehandsofthesupplier.Themistakeoftenmadeistoassumethatthesupplierwillmanagetheprojectforyou.Thiswillbepartiallycorrect–butrelyonthisorganisationalassumptionatyourperil.

TheERPsupplier’sprojectmanager(ifthereisone)willberepresentingthebestinterestsoftheirbusinessratherthanyours,andthismaycompromisethequalityandtimelinessofthesolutiondelivered.Itisalsooftenthecasethattheprojectmanagerhasatechnicalbackgroundonly,andisnotaqualifiedorexperiencedprojectmanager.Takereferencesonthispersonandascertainiftheyhavetheexperienceandtrackrecordforthisimportantrole.

Managing the implementation projectTheprojectmanagers–yoursandthesupplier’s–shouldmeetonaweeklybasisandproduceastatusreport,whichfocusesondeliverablescomparedtoplan,andalsoraisesissuesandrecommendedsolutions.Asteeringcommitteemeetingshouldbeheldmonthly,whichalsoincludestheexecutivesponsorsfrombothsides.(Youshouldalsoexpectthesuppliertoappointadirector-levelsponsortoensureyourbusinesshasfocuswiththemduringtheimplementationandthereafter.)

Theotherprojectparticipantswillbeyourline-of-businessmanagersand/orbusinessexperts,whoyoutrusttodefinehowthecompanyprocessesworktoday,wheretheproblemsareandhowtheseprocessesshouldbeimprovedandlookattheendoftheproject.Typicalareastoberepresentedacrossthebusinessareaccounts,commercial/salesorderprocessing,salesandmarketing,supplychain/purchasing,logistics/distribution,ITandanycorporate/boardrequirements.

Keyprocessesshouldbeflowcharted,agreedandincludedinanoverallsolutionspecification.Thisdocumentisvitalinensuringbothpartiesunderstandandagreeonwhatistobedelivered,includingsoftware,hardware,documentation,servicesandsupport.Thesolutionspecificationshouldbeaworkingdocument,andatthetimeyousignthesupplier’scontractshouldbeatasuitablelevelofdetailforbothcompaniestoagreetotietothecontractasastatementofworktobeundertaken.Atthisstagethespecificationshouldbebusiness-process-oriented,ratherthantechnical–soline-of-businessmanagersanddirectorscanunderstandandagreeasnecessary.

Thespecificationthenbecomesmoredetailedandtechnical,astheprojectunfoldsintothedetailedanalysisandsystemdesignstages.Anychangestothebusinessprocesses,assumptionsandbenefitsmustbeflaggedbacktotheexecutivesponsorsviathesteeringcommittee.Anychangestothesolutionspecificationshouldbemadeunderformalchangecontrolandsignedoffbytheprojectmanagers.

Thesuppliershouldindicatewhereadditionalcostsareassociatedwithachangerequestsothatthiscanbeconsidered,comparedtoitsbenefitand/ornecessity,andapproved(ornot)inatimelyyetcontrolledprocess.

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Selecting and implementing an ERP solution

Considering software modificationsThedecisiontopurchaseanERPpackageispartlybaseduponthebenefitsofbeingabletoadoptnewstandardfeaturesaddedbythesupplierinnewproductreleases.Youmaywishtoaddcustommodificationstothesystemtomorecloselyfityourbusinessprocesses–butyouwillpotentiallybeaddingcomplexityandcostsinmovingtonewupgrades,andalsointhesupportforyourcustomisedversionofthepackage.

So,thisisabalancingact–keepingthemodificationstoanabsoluteminimumbasedonbusiness-criticalneed,versushavingasoftwarepackagethatdoesnotfitthebusinesswellandaddscostintermsofworkaroundsorofflinesolutionssuchasspreadsheets.

However,ifyourselectionofERPsupplierandproductwaswellmadethenyoushouldbeabletomanagethisbalancetogetherinaconsultativeway.Theimportantpointisrecognisingthatthisbalanceneedstobemaintainedfromtheoutsetoftheimplementationproject,rightthroughtotheend-of-lifeforthesoftwaresolution.

Selecting and implementing an ERP solution

The right supplier can help you determine the level of modifications to create a well-balanced ERP solution.

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Selecting and implementing an ERP solution

Reviewing the implementation project resultsBesuretoundertakeapost-projectreview,bothinternallyandwithyourERPsupplier,beforegoingintoproduction.Referbacktotheoriginaltermsofreference,andinparticularthebusinessbenefits,toestablishifthesolutionisinplacetostartaccruingthesebenefits.

TheERPsupplierwillbekeenforyoutosignoffatthisstage,sothatyoumovefromtheprojecttothesupportteam,andyourannualmaintenancecontract(andcharges)begin–butbesurethatyouaresatisfiedbeforedoingso.

Applyanylessonslearnttofuturesoftwareprojectsorindeedanyothermajorinvestmentprojectswhereapplicable.

Remember – going live is only the beginningFinally,itisessentialtorecognisethatselectionandimplementationofanERPsolutionisnottheendoftheprocess.Thisassumesthatbusinessesstandstill,yetforbothpurchaserandsupplierthiswillalmostcertainlynotbethecase.

Yourbusinessislikelytogrowandyourneedschange.Equally,theproductsandservicesofferedbyERPsupplierswillevolveinresponsetonewmarketdemands,newopportunitiesandnewtechnologies.

RecognisealsotheongoingneedfortrainingontheERPproductasitgrowsintermsofbreadthanddepthoffunctionalitywithnewreleaseseachyear.ERPindustryanalystscitelackofend-usertrainingasthenumberonecauseforERPdissatisfactionwiththeexistingprovider.

• ��% of companies instituting an ERP solution fail to implement a comprehensive training plan

• �2% provide no user training after the initial ERP implementation

• Lack of end user adoption due to insufficient training is the number one reason for failed ERP implementations

Sources:MetagroupResearch,AMRResearch

ItisessentialtomaintainanongoingdialoguebetweenyourorganisationandtheERPsupplier,involvingamixofcommunicationmechanisms.Regularaccountmeetingsshouldbesupplementedbyemails,usergroups,onlineforumsandothermarketingcommunicationsrelevanttoyourend-users.

generalmarketingmailingsofirrelevantmaterialwillonlyservetoirritate.Bycontrast,targetedcommunicationofpotentiallyvaluableandrelevantinformationwillhelp

It is essential to recognise that selection and implementation of an ERP solution is not the end of the process.

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buildandmaintaintrusted-advisorstatusforthesupplier.Thisinturnwillformthebasisofamutuallybeneficial,longer-termrelationship.

Thereisacommondenominatorhere.Inchoosingthesolutionandprovidermostlikelytoofferthebestlong-termbenefittothebusiness,itisclearthatthereisagreatdealof‘homework’tobedone.Thisinvolvesdrillingdowntotherealneedstobeaddressed,puttingtogethertherightteamsfortheinitialselectionprocess,andworkingwiththechosensupplierthroughoutthelifeoftheinvestment.Ifallthepiecesareinplacefromthestart,theoutcomeofyourERPventurewillbeallthemorerewardingandsuccessful.

For more information on making ERP a success in your business – and to request further guides in The Advisory Series – please contact us on +�� (0)��� ��� ��2� or visit www.lakeview.co.uk

THE ADVISORY SERIES

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THE ADVISORY SERIES

For more information on making ERP a success in your business, please contact us:

Tel:+44(0)8453883329Email:[email protected]

LakeviewComputersLtdBanksHouseBanksLaneBexleyheathKentDA67BH

About LakeviewLakeview’ssuiteofsoftwareandtechnologysolutionsunlocktheproductivityofyourbusiness.OurhighlyconfigurableERPsoftwarehelpsyoumanageandrunyourbusinessbygivingyouafullyintegratedoverviewoffinances,operations,processesandpeople.Asatrustedlong-termbusinessadvisortoourclients,we’rewithyoueverystepoftheway.

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