Panorama Consulting Group Launches Online ERP Database to Assist in ERP Selection Projects

Panorama Consulting Group, an independent ERP consulting firm, today announced the release of an online ERP database. This newly released ERP directory assists website visitors in reviewing potential ERP vendors and helps internal project teams make educated decisions at the conclusion of their ERP selection projects.

The new ERP database provides information on the enterprise software industry and lists over 140 software vendors with groupings for the various tier I, II, and III segments. Each ERP vendor has a detailed profile that includes a list of their product offering, an overview of their target market and industry experience, contact information, and recent news or press releases. In addition to the basic profile information, the vendor listings provide an opportunity for website visitors and ERP users to rate their existing software supplier based on a variety of criteria such as presales activity, technical support, functionality, and obtainment of ROI.

“We feel this ERP database and the vendor scorecard is imperative for educating our website visitors and for providing them with an unbiased and unaltered view of ERP vendors and their software offering,” said Eric Kimberling, president of Panorama Consulting Group. “The large poll of ERP vendors and list of ERP software packages can appear overwhelming to even the most astute of ERP selection teams. We are attempting to help alleviate potential confusion and help companies make better decisions, regardless of whether or not our trained ERP consultants assist in the ERP selection process.”

The ERP database launch is a phased deployment and the Panorama team is working hard at rolling out the next phase of this information portal. Phase two will provide ERP vendors an opportunity to review and augment their respective profiles by providing updates, as well as information on their social media communities, literature, white papers, and any images or supplemental content that will help provide the most informative profile possible.

The ERP database is available for review: http://panorama-consulting.com/resource-center/erp-database/

Panorama Consulting Group Releases 2010 ERP Report

Panorama Consulting Group, an independent ERP consulting firm, today released the 2010 ERP Report. The Report includes data on a wide variety of traditional and SaaS ERP software solutions.

While the average cost of an ERP implementation has decreased from $8.5 million in 2008 to $6.2 million in 2010, companies are realizing significantly less business benefits from the technology, according to the 2010 ERP Report issued today by Panorama Consulting Group, an independent ERP consulting firm in Denver. The report reveals that two out of five (41%) of participants failed to achieve at least half of the business benefits they expected. This figure is nearly double the finding in the 2008 ERP Report (21%).

“While it is promising to see the costs of ERP implementations decrease, we are concerned that it is at the expense of organizational change management and other key activities required to make enterprise software initiatives successful,” said Eric Kimberling, President of Panorama Consulting Group. “Companies that cut costs in these areas suffer lower levels of satisfaction, user buy-in, and return on investment.”

The 2010 Report provides further data on the importance of balancing a company’s high expectations of ERP systems with comprehensive organizational change management initiatives. While 69% of companies expect that a new system will improve business performance and 39% expect it will make employees’ jobs easier, more than half (53%) of respondents assess their company’s ability to deal with change as fairly poor or very poor. Nearly half (47%) indicate communication between management and employees is poor. In addition, more than two out of five (41%) of respondents have experienced significant changes to their business (e.g., a new CEO, new locations, mergers and acquisitions, and layoffs) during the implementation process.

“Turbulence in business operations is magnified by the stress of an ERP implementation,” said Kimberling. “Management must allocate proper time and realistic spending to ensure that employees are aware of the benefits of the process and ready to accept and work through the challenges of a system changeover. In addition to hiring third-party consultants to help with software selection and implementation, smart companies are looking for outside assistanceto manage the user-side processes that are so critical to project success.”

To offer further analysis of the study results, Kimberling will present the free webcast “Overview of Panorama’s 2010 ERP Report,” on Wednesday, February 17, 2010. Register for the webinar at http://www.panorama-consulting.com/erp-webinars/.

About the 2010 ERP Report
The 2010 ERP Report is based on research by Panorama Consulting Group via online polling and was supplemented with qualitative data gathered from focus group interviews with a sample of survey respondents. Information was collected from December 2005 to December 2009. The 1,600 participants represent global organizations that have implemented ERP within the last four years. The 2010 ERP Report can be accessed at: http://panorama-consulting.com/resource-center/2010-erp-report/.

About Panorama Consulting Group
Founded in 2005, Panorama Consulting Group is a niche consulting firm specializing in the enterprise resource planning (ERP) software market for mid-sized companies across the globe. Independent of affiliation, Panorama helps firms evaluate and select ERP software, manages the implementation of the software, and facilitates all related organizational changes to assure that each of its clients realize the full business benefits of their ERP implementation. More information can be found on its web site, www.panorama-consulting.com.

Panorama Consulting Group Announces Record Growth in 2009

Panorama Consulting Group, an independent ERP consulting firm, today announced record growth for the year ended December 31, 2009.

Panorama’s service revenue increased 68% in 2009 from the previous year ended December 31, 2008. This revenue spike supported a corresponding increase in profits of 233%. In addition to the record revenue and profits, Panorama was able to increase overall headcount by over 100%.

“Our strong 2009 results are attributed to particular growth and strength in our ERP implementation and organizational change management practice areas. While we grew across many sectors and industries, collaborations with mid-size clients contributed to most of our growth,” states Eric Kimberling, Founder and President of Panorama. “Strong growth in a weak economy is a testament to the value and objectivity we bring to our clients. More than ever, clients are turning to us to help them manage business risk, control costs, and optimize business benefits of their investments in ERP and enterprise software. In many cases, companies with challenged ERP implementations are turning to Panorama to get their initiatives back on track. ”

Panorama’s growth was facilitated by the addition of a number of new clients. These new client engagements included Champion Window, Maxon Lift Corporation, dpiX, Bioness, and Penworthy for ERP software selection and Nufarm and Focus on the Family for ERP implementation. In addition to the ERP selection and implementation projects, Panorama also led Focus on the Family through an organizational change management project and Alliance Laundry Systems through an organizational readiness assessment.

Panorama’s sales pipeline is strong, and Kimberling expects growth to continue throughout the 2010 fiscal year. It is estimated that 2010 will bring an additional year-to-year growth of 135%, and there is the potential for this figure to increase even further.

Panorama Consulting Group’s service offering includes independent ERP software selection, ERP implementation and execution, and organizational change management consulting.

For additional information on Panorama’s ERP selection services, please visit Panorama’s website at http://panorama-consulting.com.

Panorama Consulting Group Announces 2010 Webinar Series

Denver, Colorado – Panorama Consulting Group, an independent ERP consulting firm, today released the schedule for their 2010 webinar series on the selection, implementation, and usage of enterprise software solutions.

The multipart webinar series will feature topics that span across software solutions, software vendors, industries, functional areas, and geographical locations. Future topics will be added and announced accordingly.

2010 Enterprise Software Webinar Series

• Lessons Learned From Best-in-Class ERP Implementations on January 14, 2010
• Three Ways to Increase your Utilization and Results from JD Edwards on January 21, 2010
• Leveraging Government, Nonprofit, or Public Sector ERP Software to Transform Your Organization on January 28, 2010
• Tips For Selecting the Right ERP Software For Your Organization on February 4, 2010
• Tips to Leverage Manufacturing Software to Improve Your Operations on February 18, 2010
• Leveraging ERP To Transform Your Energy and Utilities Organization on March 4, 2010
• Tips to Leverage Distribution Software to Improve Your Operations on March 18, 2010

Webinar registration is currently open and is available on Panorama’s website in the resource center at http://panorama-consulting.com/resource-center/erp-webinars/. As an additional courtesy to registrations, webinar podcast recordings, videos, and presentations are posted to the resource center.

About Panorama Consulting Group

Founded in 2005, Panorama Consulting Group is a niche-consulting firm specializing in enterprise resource planning solutions for mid-market companies globally. Independent of affiliation, Panorama helps companies in ERP software selection, ERP implementation, and organizational change management to assure that each of its clients realize the full business benefits of their newly purchased ERP system. More information is available at http://www.panorama-consulting.com.

Panorama Releases a 2009 ERP Report Focused on the Use of ERP Software Within the Aerospace and Airline Industry

Denver, Colorado – Panorama Consulting Group, an independent ERP consulting firm, today released a new ERP report focused on ERP software usage within the aerospace and airline industry.

This portion of Panorama’s 2009 ERP Report outlines the use of ERP software at companies within the aerospace and airline industry and also includes a comparison of ERP results to other industries. This study includes metrics on ERP implementations and reviews data for average project budget, implementation timeframes, and actual project costs. The 2009 ERP Report also covers implementation variables such as the level of software customization and ERP modules deployed.

The report reveals that Oracle is the leading ERP software vendor within the airline and aerospace sector. Oracle holds 35% market share and is followed by SAP with 30%. The remaining market share is divided among various Tier II ERP vendors.

“This latest report demonstrates the breadth of enterprise software options available to companies in the aerospace industry,” states Eric Kimberling, President and Founder of Panorama Consulting Group. “Our experience in this industry vertical shows that the available ERP solutions are just as diverse as the needs of our clients in the space.”

In addition to ERP market share, the study reviewed ERP implementations and ERP project variables such as implementation timeframes, cost, and module usage. “The average implementation time for aerospace and airline companies is 28 months, which is significantly greater than the average ERP implementation timeframe of 19.8 months. This extended implementation helps support the report’s data that showed the aerospace and airline industry is much more likely to exceed other industries in overall ERP spending. Our survey data shows the average cost of ERP implementations in this segment is $31.5M, which compares to $8.5M in other industries. This variance is attributed to the fact that this is a complex industry. In order to satisfy quality and regulatory needs, aerospace and airline companies need to have well-defined and tightly integrated business processes, which tends to increase implementation duration and cost,” states Kimberling.

Panorama Consulting Group offers independent ERP software selection and implementation expertise, as well as tools that help aerospace and airline companies reduce their total cost of ownership and optimize measurable business results.

For additional information on Panorama’s ERP service offering or to download the entire report, please visit Panorama’s website at http://www.panorama-consulting.com/resource-center/.

About Panorama Consulting Group

Founded in 2005, Panorama Consulting Group is a niche consulting firm specializing in enterprise resource planning solutions for mid-market companies globally. Independent of affiliation, Panorama helps companies in ERP software selection, ERP implementation, and organizational change management to assure that each of its clients realize the full business benefits of their newly purchased ERP system. More information is available at http://www.panorama-consulting.com.

Panorama Releases a 2009 ERP Report Focused on the Use of ERP Software Within the Hospitality and Entertainment Industry

Denver, Colorado – Panorama Consulting Group, an independent ERP consulting firm, today released a new ERP report focused on ERP software usage within the hospitality and entertainment industry.

This portion of Panorama’s 2009 ERP Report outlines the use of ERP software at companies within the hospitality and entertainment industry, including a comparison of ERP results to other industries. This study includes metrics on ERP implementations and includes average project budget, implementation timeframes, and actual project costs. The 2009 ERP Report also covers implementation variables such as the level of software customization and ERP modules deployed.

The report reveals that SAP is the leading ERP vendor for hospitality management and entertainment software usage. Oracle and Microsoft follow SAP, with the remaining market share divided among Tier II ERP vendors. These Tier II ERP software vendors retain a 24% market share, which is fairly comparable to Tier II ERP usage within other industries.

“As with past ERP studies, the 2009 ERP Report reveals that large Tier I ERP solutions are not the only viable software options,” says Eric Kimberling, President and Founder of Panorama Consulting Group. “There are plenty of Tier II and industry-focused ERP vendors that can meet the complex requirements of companies within the hospitality and entertainment industry.”

In addition to market share, the study also reviewed ERP implementations and ERP project variables such as implementation time-frames, cost, and module usage. “The average implementation time for hospitality and entertainment companies is two months greater than ERP implementation time-frames in other industries. This extended implementation helps support the report’s data that showed the hospitality and entertainment industry is much more likely to exceed budget estimates. Our survey data stated 67% of ERP implementations in this segment went over budget, which is 10 percentage points higher than in other industries,” says Kimberling.

“In today’s evolving business environment, the hospitality and entertainment industry is very concerned with maximizing profits and minimizing expenses. Their aggressiveness with reducing waste and controlling costs needs to transfer over to their ERP projects so they can truly obtain a rapid return on investment. If the right ERP solution is selected and implemented with experienced ERP consultants, the ERP solution will translate into more efficient and optimized day-to-day operations,” says Kimberling.

Companies such as Panorama Consulting Group offer independent ERP software selection and implementation expertise, as well as tools that help hospitality and entertainment companies reduce their total cost of ownership and optimize measurable business results.
For additional information on Panorama’s service offering or to download the entire report, please Panorama’s website at http://www.panorama-consulting.com/resource-center/.

About Panorama Consulting Group

Founded in 2005, Panorama Consulting Group is a niche consulting firm specializing in enterprise resource planning solutions for mid-market companies globally. Independent of affiliation, Panorama helps companies in ERP software selection, ERP implementation, and organizational change management to assure that each of its clients realize the full business benefits of their newly purchased ERP system. More information is available at http://www.panorama-consulting.com.

Panorama Consulting Group Issues Call for Participants in 2009 ERP Benchmark Survey

Denver, Colorado -Panorama Consulting Group, an independent enterprise resource planning (ERP) consulting firm in Denver, has announced a new survey to collect qualitative and quantitative data regarding corporate experiences with ERP implementation. Survey questions address the scope, cost, project structure, project duration and overall satisfaction of ERP implementations using Tier I, Tier II, software as a service (SaaS) and open source providers.

“Our 2008 survey showed that corporations often rated ERP implementations with Tier I and Tier II software unsatisfactory for reasons such as extended time-frames, budget overages and problems with organizational changes,” says Eric Kimberling, president of Panorama Consulting Group. “Over the past year, however, the market has shifted. Not only are companies looking for better results for less money and with less staff but SaaS and open source software are being heavily promoted as cost-effective alternatives to traditional ERP packages. As third-party consultants who help companies evaluate the risks and rewards of various ERP options, we are very interested to see if this new climate and these new offerings actually bring about a higher percentage of successful ERP implementations.”

Participants will receive a free copy of the study’s results and analysis when it is released in early 2010. The 2008 survey results and analysis are available at http://panorama-consulting.com/resource-center/.

About Panorama Consulting Group

Founded in 2005, Panorama Consulting Group is a niche consulting firm specializing in the enterprise resource planning (ERP) market for mid-sized companies in North America and Europe. Independent of affiliation, Panorama helps firms evaluate and select ERP software, manages the implementation of the software, and facilitates all related organizational changes to assure that each of its clients realize the full business benefits of their ERP implementation. More information can be found on its website at www.panorama-consulting.com.

Do Small Businesses Need ERP?

Ever since the early 1990s, Fortune 500 companies across the world have been on the ERP bandwagon. With millions of dollars required to implement and well-publicized coverage of ERP failures, many wonder if ERP is worth the cost and risk to small businesses.

The topic of small businesses and ERP has been of interest to me, especially lately. Approximately 75% of our new clients and prospects interested in having us conduct an ERP assessment and vendor selection are companies with annual revenues under $100 million. In fact, one of our recent contract signings for this type of work is for a company with annual revenue of $15 million. Ten years ago, this type of small business interest in ERP was very uncommon.

The key things driving small businesses to ERP seems to be 1) growth of the small business sector, and 2) more focus on the small business market from ERP software vendors. Most of our small business clients are considering or implementing ERP because of their rapid growth and the corresponding strain it puts on their legacy systems. In addition, large ERP vendors that typically focused solely on the Fortune 500 market are now developing lower-cost solutions with more appropriate functionality for smaller businesses.

A third and final possible reason is because many niche ERP players have entered the marketplace to provide functional solutions for specific industries. Open technologies such as .net have reduced barriers to entry into the ERP market, so many smaller, industry-specific niche players are able to fill the voids left by the big ERP companies at a lower cost.

Although this increasing focus on small business is good for companies with limited capital budgets, it also poses additional risks. Now, there are more choices than ever, and some vendors' products are much more proven than others. So small businesses should be especially thorough when evaluating and selecting an ERP software package. They should engage in a vendor selection process that ensures they choose a solid software package that provides a strong ROI to the company.

Fixing a Failed ERP Implementation

Most of my entries in this blog have focused on proactive measures that can be taken to ensure ERP or IT success. However, what happens if you're already in the middle of a failed ERP implementation?

The good news is that troubled IT implementations can be fixed, even if they are way over budget, behind schedule, and creating great organizational strain. In these types of instances, I often advise clients to reposition their projects as business improvement projects rather than IT projects.

At this point, you have forget about ERP. During or after a failed implementation, the software is likely creating huge difficulties. Just the mere mention of the letters E, R, and P probably cause employees to cringe, so it's important to focus less on ERP per se and more on how you are going to fix your business operations. With this change in mindset, you use ERP only as necessary to make business improvements to get your organization back on track.

Here is an approach I suggest to get a failed implementation moving in the right direction again:

1) Assess each area and department of the business that ERP is affecting. What are your key performance measures (order fill rate, time to close books, order accuracy, etc.)? Where are your biggest operational pain points? This will require you to reach out to key business stakeholders to get them involved, if they aren't already.

2) Develop two-tiers of potential solutions: stop-gap / "quick fix" solutions and long-term solutions. Determine the costs and time required to implement each of the options.

3) Prioritize your problem and solution combinations to arrive at the top 5-10 areas where you will realize the most immediate business impact at the lowest cost (low hanging fruit). Many of these solutions may or may not involve ERP functionality. It may require more training of the system, configuring the system to support new solutions. My experience has shown that business
processes and organizational change management are the most common problem areas in failed ERP projects, so many of your solutions may not even involve changing the system or implementing new functionality.

4) Begin implementing these low-hanging fruit solutions. The goal should be to build organizational momentum and confidence with these "quick wins."

5) Once you get some quick wins in place with the shorter-term solutions, begin prioritizing and implementing your long-term, more permanent fixes the same way you did with your short-term problems.

6) Begin implementing long-term solutions as time and resources allow.

By following this approach, you will better position your organization to make your troubled implementation a success and optimize the business benefits of ERP.

To-Be or Not To-Be: When and How to Design Business Processes for your IT or ERP Project

One of the most contentious issues in the world of ERP and IT is how much attention to give to as-is and to-be business processes.

Opinions on the issue run the whole spectrum on how this should be addressed; some people feel that companies should let their ERP systems dictate what new processes will be, while others feel that as-is and to-be processes should be documented and analyzed in detail before selecting IT software. Many people, including myself, feel that the approach should fall somewhere in between.

It is helpful to break down the issues and look at each individual aspect of business processes to decide which approach is best for your company and your IT or ERP implementation.

As-Is Processes
This is one of the more controversial aspects of ERP projects. In my experiences with clients implementing ERP, IT, or any other large business change initiative, there needs to be a decent amount of attention devoted to defining current business reasons. The benefits of doing so are three-fold:

1) It helps get alignment and understanding among various business units and geographies on how things currently operate. More often than not, especially in very large organizations, many managers and key stakeholders do not have a big-picture view of what other parts of the organization are doing. Documenting as-is business processes helps develop clarity on what is working well and what is broken with the current business processes.

2) It helps define how employees are doing their work now, which will help define the gaps between the current and future states. This is critical when it comes to organizational change management and training initiatives later on in the project.

3) It helps determine the key operational pain points, and therefore the to-be processes and business requirements during the software selection process.

This is not to say, however, that companies should spend an excessive amount of time documenting or over-analyzing current processes. At a minimum, organizations should develop level 1 detail around their current processes.

To-Be Processes
This area is very important as well. In order to develop the appropriate business requirements and select the software that is most effective for your business, you need to understand how you want your business processes to look in the future. Doing so provides four key benefits:

1) It helps you define your future operational model and business processes independent of software. This allows you to think out of the box and look for opportunities to score big wins by leveraging IT as a tool to enable measurable business improvements. If you skip this step, you are more likely to be influenced by sales messages instead of functional fit.

2) In conjunction with the as-is processes, it helps you identify the gaps between the current and future jobs, roles, and responsibilities. This is critical from an organizational change management perspective.

3) It helps define key performance indicators to help drive business improvements and accountability. With new processes come new responsibilities and opportunities for improvement, so you need performance measures to enable this.

4) It helps prioritize customization, integration, and report-writing needs after the software is selected. Without this understanding of where you want your organization to go from an operational perspective, it is very difficult to determine where customization and additional development is appropriate.

In short, I have found it helpful to view the business process aspects of your IT projects independent of the software itself. Your future strategic direction and business processes should drive the IT project, not the other way around.

Read more blog entries in our corporate ERP blog on our website.

Planning for IT and ERP Success

Ensuring a smooth ERP migration is complex, and every implementation entails a certain level of business and technical risk. There are a number of factors that affect an implementation's level of risk, including the number of sites that you are going live with, how many legacy systems are being replaced, and how many users will be affected.

In general, the variables that are most likely to reduce the business risk of your migration include:

1) Phased instead "big bang" approach to migration - cutting over your systems all at once generally increases your risk, particularly on large projects across multiple geographies/countries.
2) Sufficient Training - the better training you provide users, the less problems you will see.
3) Legacy System Planning - what are you going to do with your systems after go-live? Will you run them in parallel for a short-period until you know the new ERP system is functional? If so, have you budgeted these costs in your ROI? Failure to answer these questions before go-live will create significant problems at cutover.
4) Thorough Testing - Unit and integration testing is very important; you significantly reduce your implementation risk if you have thoroughly tested the solution with real data and real user profiles before go-live.
5) Provide Plenty of IT Support - expect more support center call volume and staff accordingly during go-live. You will also want to make sure you have clearly defined escalation procedures in place for ERP issues that your support staff isn't able to handle.
6) Develop a Contingency Plan - what will you do if your system does go down? Do you have manual processes you can revert to if needed? By expecting the worst case scenario, even though it is unlikely, you will reduce the risk of a massive business failure.

It all boils down to ERP risk mitigation, and the addressing the above issues will help minimize the level of risk exposed to your business. It is important to ensure that your project plan, budget, and staffing all consider these items.

Aligning ERP & IT with Your Overall Business Strategy

One of our recent blog entries discussed how to define to-be processes as part of a successful IT implementation. Based on this entry, one reader questioned whether or not this is feasible if the IT project is not aligned with overall business strategy.

This reader is absolutely right: aligning an ERP implementation with a company's overall business strategy is a difficult and often overlooked component of a successful project. I think the main thing needed is to take a top-down approach to defining business processes and then ultimately arriving at an ERP solution that fits the overall business.

In other words, before you can configure a system to enable your desired to-be processes, you need to define what these to-be processes look like. In order to understand your to-be processes, you need to know your operational strategy. And before defining your operational strategy, you need to define your overall corporate strategy and objectives.

So this is why the appropriate approach to ensure a successful ERP project that is aligned with the overall corporate and operational strategy is to:

1) Define your corporate strategy and objectives. I typically look at a 3-5 year horizon when helping clients through the process. I also challenge them to answer the question: "where do you want the company to be in 5 years?" Also, "what operational strategy is required to enable this higher-level corporate strategy?"

2) Once you have clearly articulated the company strategy, then you need to
define your "to-be" business processes that will enable this corporate and
operational strategy.

3) Then, establish the performance measures at the corporate, operational, and
business process levels. These measures should help you identify how
successful you have been in executing against your defined strategy. They
should also align with reports that come out of your ERP system.

4) Finally, you can begin designing, configuring, and testing the system to ensure that it is aligned with #1-3.

The unfortunate thing is that most companies start with #4 and skip steps 1-3.
By following all four, however, companies can be better prepared to ensure ERP
alignment with overall company strategy.

Does It Matter Which ERP Vendor You Choose?

If you've been following the ERP market lately, you have probably seen SAP's assertion that companies that run SAP are 32% more profitable than those that don't. On the other hand, another recent study from The Hackett Group found that there is no correlation between performance and world-class performance.

So what's the real story? In my opinion, these conflicting statistics suggest two things. First, the ERP market is competitive and cutthroat. Second, it raises the question of whether it is the ERP technology itself or other factors that increases performance.

Based on my experience, the specific ERP tool is just one piece of the business performance puzzle. How you design your business processes, how well you establish KPIs and measure performance, how you design your organization and employee roles, and how well you train employees to use the new system are just a few aspects that can have a huge impact on the success of your ERP implementation.

In addition, I question the validity of both studies mentioned above. For example, the SAP study compared SAP companies to non-SAP companies, not to companies running competing ERP systems. So perhaps a majority of the comparison companies weren't running any type of ERP package, so it would be expected that the SAP companies would perform higher. But could it be that Oracle or Microsoft customers were 40% or 50% more profitable than the others? Or, could it be that companies that are more profitable choose SAP because they have the resources available to invest in such a large project?

As for the Hackett Group study, I'm not sure what they mean by "world-class performance." It sounds great, but what does it mean? In addition, their study was focused on the performance of finance organizations within the companies studied rather than the performance of all the functional departments.

However, all of this is not to say that the ERP software itself is not important. Obviously, you want to select software that best fits your business requirements and operational model. But the key is that ERP is simply an enabler, and not the sole reason, of increased business performance.

The main conclusion here is that ERP selection is an important activity. However, it is just one component of successful ERP projects and should be combined with an ERP Business Benefits Realization program to ensure business value and ROI are achieved from the implementation.

ERP Readiness Benchmarks: Do Companies Know What They're Getting Themselves Into?

One of our recent posts highlighted the importance of assessing readiness before any ERP or large IT project. Panorama Consulting Group provides a free on-line ERP readiness assessment tool, and the preliminary results from participants so far reveal some interesting thoughts.

It should be noted that the sample size is still relatively small (38 companies so far) and the initial data analysis is not yet validated in detail, but the initial benchmarks are interesting. For example:

1. 42% of participants say that their operations are poorly integrated across office locations
2. Over 50% of participants rate their current organizations poor in all the major areas we asked about: responsiveness to customers, efficiency, effectiveness, visibility to operational data, and integration between systems
3. Over 90% of companies have experienced a significant organizational change (in addition to ERP) over the last 3 years
4. Only 20% of participants have dedicated business process, performance measurement, or organizational change management groups in their organizations
5. 55% say employees at their organizations are poor at adapting to change
6. Only 15% of those planning to embark on an ERP project have completed a business case or ROI analysis

While we can begin to draw several conclusions from some of the data we've collected so far, the most significant observation is that organizational change management will be crucial to the success of these projects. These companies will face great obstacles during their implementations, and they will find it very difficult to deliver measurable business value without solid organizational change and benefit realization plans.

More data analysis over time will continue to shed light on organizational readiness. I'll keep you posted on the results. In the meantime, feel free to visit our resource center for more ERP tools and information.

Integrating Six Sigma and ERP

I recently came across a good question on how to integrate Six Sigma with an ERP project. Using an ERP financials implementation as an example, there are three key items to keep in mind to link your Six Sigma and ERP initiatives:

First, to integrate Six Sigma with your financial management software, it will be important for you to define your business processes for key financial processes, such as period-end close, A/P, A/R, consolidation, reporting, etc. These processes should be documented in detail (at least level 2/3), along with the inputs, outputs, and employee responsible for each process.

Second, it is important to define what the key performance measures are for each of the sub-processes you define. For example, measures such as number of business days required to close the books, number of adjustments, A/R days outstanding, etc. will help you measure the efficiency and quality of your processes. These measures should also map and align with higher-level corporate goals and performance measures.

Finally, once you have defined the key business processes in detail along with their related performance measures, it is important to ensure your ERP reporting is aligned accordingly. If your performance measures are not easily attained from within your ERP's business intelligence software, then you may have to measure using report-writers, other systems, or manual processes. Either way, you will need to define the process for collecting performance measure data on a regular basis to measure process and performance quality.

The Hidden Costs of ERP

A common problem with many ERP implementation projects is inaccurately projecting total project costs. In order to achieve a high ROI on projects, costs need to be controlled and constantly compared to benefits. Some of the common indirect or hidden or costs of ERP projects include:

• Internal company resources to make decisions on ERP requirements, help with system design, and perform testing. Aside from a full-time core team, most ERP projects require the involvement of 3-5 part-time subject matter experts for each full-time core team member.
• Internal or external resources to manage data conversion, interface development, and report generation
• Employees to support communications, training material development, and training deployment activities
• Time that senior management is involved in decision-making and conflict resolution
• Design of business processes, particularly if the project involves a large, multi-national company with fragmented operations
• "Backfilling" project team members with contract or other employees that manage day-to-day activities while the team members are working on the implementation project
• Travel and expenses for team members, particularly if dealing with a global project. Project budgets should assume at least 15% of total consulting costs for travel, then double this amount to account for internal project team travel.

Obviously, these are not all the costs associated with an ERP project, but they are the ones that are most likely to be overlooked during the budgeting and planning process. These costs should be included in the ERP business case and budgeting process.

Assessing ERP Readiness

Determining an organization's ERP readiness for an ERP or large IT implementation is often one of the most difficult parts of moving forward with such a large undertaking. It is easy to get caught up in all the potential benefits of ERP and forget that there are some fundamental business issues to consider before proceeding. For example, to determine your organization's ERP business readiness, it is useful to ask the following questions:

• How standardized are your current business processes across the globe?
• Does your company currently have an internal organizational design, business process, and/or communications group?
• How much turmoil has your company faced in the last 3 years (e.g. layoffs, other large IT projects, management shakeups, etc.)?
• What level of executive sponsorship do you currently have in your organization?
• How many internal resources do you have committed to help with the project, including to address the business process aspects?
• Do you have a documented business case, assumptions, and ROI?
• Have you established project and business measures for success?
• Is your company culture conducive to accept such a large change initiative?
• Does your company operate as a single company across the globe, or more as a siloed group of organizations?
• Do you have a detailed budget, including line items for miscellaneous and unanticipated expenses?
• Most importantly, what is your motive for implementing ERP?

While your answers to these questions may vary, they will inevitably impact your level of project and business risk. They will also determine what additional mitigation efforts you may need to take. These are all factors that need to be considered as part of an overall ERP readiness assessment.

I am in the process of developing an ERP business readiness and risk assessment checklist. Check back here or on our web-site in the near future to take a look.

Organizational Change Management in a Global Environment

Whether trying to standardize global business operations or implementing Enterprise Resource Planning (ERP) software in multiple countries, corporate executives face the issue of managing organizational change in an international environment. For any large change initiative, organizational change management is a challenging and difficult issue to address; however, with the addition of additional variables such as differing cultures, values, and languages in the international arena, the difficulty substantially increases.

When introducing organizational changes at an international level, there are several factors to consider:

• Language Barriers. While most managerial types in countries outside the US speak English of some sort, not all front-line employees speak English or speak it well. Therefore, getting key messages across regarding organizational or process changes is a delicate and complex issue. It often involves translating messages into their native languages and reiterating the same message via different channels depending on the culture of the audience (e.g. email, phone conferences, meetings, etc.) .
• Culture and Values. Not all people in the world value or are motivated by the same things as Americans. Many western European countries value history, tradition, and work-life balance, while many developing Asian countries value hard work, entrepreneurship, and teamwork. Managing change in these very different environments requires differing approaches and messages.
• Propensity for Change. More established and developed countries have business operations that have worked well for a long time, while many developing countries have less mature operational models. Therefore, it is often common to see more resistance to change in developed countries versus those that are still emerging. For example, a small company in India that is struggling to keep up with new demand with a very limited staff and manual processes may be more welcoming of an operational improvement than a large office in the UK that has refined its operational model and implemented automated processes over a long period of time. On the other hand, the small office in India may be much less available to assist with a change effort due to a lack of employee bandwidth.
• Consideration of Local Requirements. Global changes that are pushed to the local level by corporate headquarters often do not adequately consider local needs and requirements. Each country has its own regulatory, resource, and employee constraints, so it is important to plan accordingly when implementing the changes. Obviously, completely localizing a global initiative defeats the purpose of having a single global change, but no solution is going to work for 100% of the world, no matter how well-designed it may be.
• Varying Degrees of Understanding of Best Practices. Employees in different countries have different levels of understanding of business and technical best practices and methodologies, which may affect the amount of change management required to "sell" the ideas to affected employees. Employees in eastern Europe are often less likely than Americans to understand the value and benefits of Six Sigma or business process management methodologies, which increases change management effort.
• Buy-in Is Important. This is true for even domestic change, but it is even more true for global initiatives. Involving affected employees across the globe early in the process will help identify and address some of the issues mentioned above. It also helps overcome potential pockets of resistance by ensuring that employees across the globe are involved in the decision-making and planning surrounding the particular change.

By incorporating these aspects into an overall project and organizational change management plan, executives are much more likely to ensure that their respective change initiatives are embraced across the globe. This ultimately leads to increased business performance on a global scale.

Establishing ERP and IT Performance Measures

Our last posting gave on overview of how to build and ERP or IT business case. That is one big step toward achieving a healthy Return on Investment for the millions of dollars required to implement any large system. However, to truly realize the benefits of ERP, you have to go one step further and develop performance measures at an operational level.

Most business cases develop high-level corporate performance measures that define potential areas of an IT or ERP project's business benefit. Examples include reduced inventory, reduced sales order processing time, reduced headcount, etc. The problem with these high-level measures is that the associated benefits will not transpire unless the metrics are pushed from the executive down to the operational levels of the organization. This helps drive accountability and visibility to achieve the benefits outlined in the business case.

Let's use reduced sales order processing time as an example. Perhaps it was determined that an ERP system could potentially reduce sales order processing by 30% and an annual savings of $1 million in reduced headcount company-wide. This is a tangible benefit, but it means nothing to mid-level operational managers of a global conglomerate that will need to contribute to this benefit. So if you have a Director of Sales and Marketing in charge of Western Europe, that person should be given a specific target to contribute to this $1 million savings so they are held partially accountable for the project's overall ROI. The same should be done for the directors in charge of other areas of the business until the full $1 million savings target is assigned to the appropriate people.

Obviously, this process is easier said than done. In order for this performance management approach to succeed, effective communications along the way will be crucial. Ideally, these operational managers that will ultimately be accountable for project results on the business side should be involved in helping define the business case and potential savings of an ERP system. In addition, they should also be given support to help identify root causes of anticipated benefits that are not realized. This will help ensure buy-in to the established targets.

In short, the only way to achieve the ROI defined in a business case is to cascade target improvements and accountability out of the boardroom down to lower levels of your organization.

Building an IT or ERP Business Case

One of the biggest selling points that ERP or IT software vendors use is that implementing their product can result in a short payback period with a healthy Return on Investment (ROI). While there is some truth to this possibility, such an ROI is only achieved if you develop a realistic business case.

Here are some commonly overlooked aspects of developing a solid business case that will drive measurable business results:

1. Identify Hidden Costs. Many costs associated with a large IT or ERP implementation are obvious. For example, software licenses, implementation services, and data conversion are all direct costs that make it into most business cases. However, there are others that are not so obvious, such as internal resources required to support the project team, costs to backfill the day-to-day work of project team members, process improvement, training, and organizational change management. All of these costs should be included to accurately reflect the true project costs.
2. Document the Costs of Benefits. In many cases, technology makes a company more efficient, which may ultimately result in a headcount reduction. However, there are costs associated with reducing staff, such as severance. In addition, there is usually a short-term decrease in efficiency as employees learn the new system, even though there are usually long-term benefits associated with making employees more efficient and effective. These costs should be quantified in a business case as well.
3. Track Benefits After Implementation. Developing a business case is only half the battle; tracking and realizing business benefits is the other half. Prior to go-live, it is important to develop lower-level operational measures that directly relate to the dollars identified in the business case. These measures should then be assigned "owners" within the company who will be responsible for monitoring and tracking actual results. Then, after go-live, actual business benefits should be measured and compared to the business case on a regular basis to identify areas for improvement.

Obviously, there are many other aspects to developing a business case. By avoiding these common pitfalls, however, you are much more likely to have an air-tight business case that drives measurable business results.