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Selecting and implementing an ERP solution
THE ADVISORY SERIESsee the wider view
THE ADVISORY SERIES
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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.
THE ADVISORY SERIES
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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?
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
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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