It goes without saying that, despite the best planning and implementation processes, the proof of an ERP project is in the business benefits and the return on investment achieved. A well-executed project is unsuccessful if there are no benefits or benefits. This should be clear to everyone and should be the primary focus of any project, in any area.
But given the number of ‘failed’ projects – whether it means they are not being completed or are simply not up to expectations – you would be forgiven if you wonder if this overriding priority is being forgotten in many cases. The attitude that “the operation was successful but the patient died” should be avoided at all costs, and it is an attitude to be avoided throughout the project lifecycle.
Realizing the benefits of your ERP implementation is determined by the actions taken in the early planning stages of a project, as well as the result of how well the system is used once in use. Poor planning can lead to limited or even zero benefits or at worst a very negative impact on the organization. There are cases when organizations have experienced terminal effects from poor implementation.
Companies focus on the process of selecting and installing ERP software systems, but once the first project is completed, it is common for both the original team and the business focus to continue regardless of whether all original goals have been achieved. The end result is something of an instant legacy system, with no budget or plan for further training or achieving business objectives.
It cannot be emphasized enough that business benefits come after the project is completed. During the implementation phase, this is often a difficult issue to manage, because those involved have confidence in the project that the benefits will be achieved, but often see little evidence of this during the implementation itself.
A good example of this is considering changes. It is often easier for project teams to request a change to maintain the status quo and satisfy business users, rather than trying to introduce an improved process. For this reason, any change must be approved by the company manager most affected by the change and reviewed by his colleagues.
Whenever possible, the benefits should be built into operational plan budgets to ensure they are realized. This will encourage business managers who are not directly involved in the project because they know they will be measured as soon as it is in operation.
Joe Peppard et al. Referred to this in an article in MIS Quarterly Executive (now referred to as MIS1): “With the investments in information technology, most organizations focus on implementing the technology rather than achieving the expected business benefits. Consequently, the benefits are not forthcoming despite the technical success of a project. “
They go on to say, “When considering return on investment calculations, organizations are so manipulating the denominator – reducing expenditure – that they don’t focus on the numerator – how IT can deliver significant benefits. Equally worrying is the traditional investment appraisal process, which is often seen as a ritual that must be overcome before a project can begin Many benefits are exaggerated in getting the project through this process.
“No wonder few companies are involved in post-implementation assessments. They already know that many of the benefits described in the business case are unlikely to be achieved.”
As cynical as this last judgment may be, it contains some truth. But it doesn’t have to be. There are ways to ensure – or at least maximize – the business benefits that your ERP implementation can deliver.
Peppard et al. Say in another article (MIS Quarterly Executive, March 2008 – now called MIS2): “There is an important difference between investment objectives and benefits. Objectives are general objectives or objectives of the investment, which are agreed by all relevant stakeholders. Benefits, on the other hand, are benefits to specific groups or individuals as a result of achieving the overall objectives. “
They suggest (in MIS1) that, underlying an ERP project proposal, five principles must be used to realize value through IT.
Principle # 1 is that IT has no inherent value. “Having technology alone does not bring any benefit or create value. The value of technology is not in its possession. In fact, IT spending only comes at a cost. Benefits are from the effective use of IT resources. “
Principle # 2 is that benefits arise when IT empowers people to do things differently. “Benefits only arise when individuals or groups within an organization, or its customers or suppliers fulfill their roles in more efficient or effective ways. In general, these new ways of working require that the way information is used be improved.”
Principle # 3 says that only business managers and users can release business benefits. “Benefits are a result of changes and innovations in the way of working, so only business managers, users and possibly customers and suppliers can make these changes. Therefore, IT and project staff cannot be held responsible for realizing the business benefits of IT investment. Business personnel must take this responsibility. Getting business employees to recognize this principle is an important way to ensure that they become involved in so-called IT projects. “
Principle # 4 reminds us that all IT projects have results, but not all results are benefits. “Many IT projects produce negative results, sometimes even affecting the survival of the organization. The challenges for management are to avoid such negative results and ensure that the positive results deliver explicit business benefits.
Principle # 5 says the benefits must be actively managed to be obtained. “Benefits are not results that occur automatically. In addition, benefits accumulation is delayed in implementation; there may be a time difference between the initial investment and the payout. Therefore, managing the benefits does not stop when the technical implementation is completed. Benefit management should continue until all expected benefits have been achieved, or it is clear that they will not materialize. “
To implement an ERP project based on their five principles, Peppard et al recommend that seven key questions should be asked, the answers of which are “used to develop both a robust business case for the investment and a viable change management plan to get the benefits “
These questions are:
- Why do we need to improve?
- Which improvements are necessary or possible?
- What benefits will each stakeholder achieve if the investment objectives are met?
- Who owns each benefit and is responsible for its delivery?
- What changes are needed to achieve each benefit?
- Who is responsible for making every change successful?
- How and when can the identified changes be made?
They do warn (MIS2) that “Some benefits can only be measured by an opinion or judgment. … Quantifiable benefits are those where an existing measure is in effect or relatively easy to implement. Since quantifying benefits inevitably predict the future, the challenge is to find ways to do this as accurately and robustly as possible. “
But an ERP system does not stand alone and the realization of benefits often depends on other, external inputs. ERP software systems are largely data-dependent and data-driven, and the key to achieving the full benefits is integration. If information is incomplete or inconsistent, it becomes very difficult to integrate reliably and the results can lead to loss of company confidence in the system and an increased non-productive workload for support personnel.
Often, the day-to-day operation of systems falls under personnel who were not involved in the initial implementation and who did not receive the same training and handover as the original team. As a result, effective system usage decreases over time.
So your approach to realizing the benefits of an ERP implementation (or any IT project) relies on a holistic approach, which means not only all participants and stakeholders, but also all input. And this also means for the whole dissemination of a project – from the very first suspicion of a suggestion or realization of a need, to the final project and, most importantly, afterwards – to the final users and how they will respond to and live with the system which is hopefully fully implemented. An implementation is only successful if the expected benefits have been achieved – largely after implementation – or if a good reason has been established why this will not be the case. The responsibility for this therefore lies with many players, at many stages.
- Clarke, P., “How to maximize your investment in ERP technology,” June 2008, IBS Australia
- Peppard, J., Ward, J., and Daniel, E., “Managing the Business Benefits of IT Investments,” March 2007, MIS Quarterly Executive
- Ward, J., Daniel, E., and Peppard, J., “Building better business cases for IT investments,” March 2008, MIS Quarterly Executive