News & Views | ERP

News & Views is published monthly by 180 Systems. Our objective is to provide recent articles to our readers on business technology topics. In some cases, our blog contains a title with a hyperlink to a source article, a quote from the article and our comments. In other cases, we have provided a blog without a hyperlink for original content by 180 Systems. We encourage you to post your own comments. You can also access our blog by topic.

How do you know your implementation project is on track?

ERP, Project Management

You may be hearing that all is well from the executive sponsor and project manager but you still have heard enough horror stories to keep you awake at night. We suggest the following approach:

  • Conduct a confidential survey with staff doing the work. You may be surprised what they say.
  • Look under the covers of the project schedule. Find out whether resources are overbooked and their calendar with planned absences are included. Make sure that you get the variance between budget and actual + estimated time to complete which is not calculated but based on the estimates of the resources doing the work.
  • Review the test plan. This is where the rubber hits the road prior to go-live. You will want stats on all the test scenarios – how many completed, passed, failed or postponed. You will also want to make sure that testing includes an end-to-end test that will simulate what the system will do when you go live, and it needs to include everything – reports, integration, and controls for all processes.
  • Contact 180 Systems for an independent assessment.
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What come first – an ERP system (the chicken) or lean management (the egg)?

Business Process Analysis, ERP, Software Selection

Lean management is all about eliminating any waste by identifying each step in a business process and then revising or cutting out non-value added steps. The question is whether this should be done prior to selecting an ERP system. Proponents of doing it first assume that the implementation of an ERP system would be merely improving the automation of the existing process and better to eliminate the waste first. However, this approach (sometimes called repaving the cow paths and extending the chicken and egg analogy) is not best practice. The implementation of an ERP system is the best opportunity to implement lean processes. As well, eliminating waste can often be done efficiently with technology so why design and implement a business process that could potentially be part of an existing ERP system? ERP systems have also evolved and do incorporate lean techniques. But ERP implementers don’t always know enough about Lean to optimize business process. You need to either make sure the implementer can implement Lean methods or find yourself a Lean consultant to help with the implementation. One of our clients recently turned to Focused Improvement Consulting to make sure that lean management is applied to the implementation process.

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2017 ERP Survey

ERP, Software Selection

September 2017 from CPA Magazine – “Welcome once again to our annual vendor survey on enterprise resource planning (ERP) software. Every year we have a different theme for the article that accompanies our ERP survey results. This year we decided to look at the fine print in ERP contracts and the good, the bad and the ugly about requests for proposals (RFP) used in software selection….”

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How do you compare a SaaS annual fee to a one-time license fee?

ERP, Software Selection

We have found that on average the one-time (on premise) license fee is 3 times the annual fee based on our experience in evaluating RFP responses from vendors. One might think that the ratio between license and annual fee should be greater but that does not take into account the additional hosted services provided by the SaaS vendors including maintenance fees which are billed annually by on premise vendors at approximately 20% of the license fee. It’s still early days for SaaS and as competition heats up the license ratio:annual fee will increase as SaaS fees are reduced. We recommend that even if the SaaS costs are high that you don’t rule out SaaS vendors just on cost. They are willing to negotiate and there are other factors that should be considered in making a decision.

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ERP Customer Survey

ERP

From CPA Magazine and written by Michael Burns – “We have all heard horror stories about failed ERP implementations but we rarely hear about the ones that went well. Does ERP deserve the bad rap it gets?…”

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ERP Survey 2016

ERP

From CPA Magazine and written by Michael Burns – “Welcome to our annual vendor survey on enterprise resource planning (ERP) software. Our survey now includes 100 systems…”

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Reduce Risk of ERP Implementation Failure: Pre-Contract Business Needs Analysis

Contract Negotiations, ERP, Software Selection

You naturally want to minimize risks and avoid cost overruns before signing a long-term contract for a new ERP system. Your prospective vendor also wants to minimize risk, but is usually not in a position to do anything other than give an implementation estimate based on lots of assumptions about scope, roles and responsibilities. These assumptions could be fairly accurate, but could also be way off, which could lead to surprises and costly change orders during the implementation.  Neither you nor the vendor want this to happen.  Wrong assumptions that lead to change orders will create frustration, friction and could lead to you being an unhappy, non-referenceable client, or even worse, one who wants to abandon the project.

Everyone would prefer to avoid this.  So we encourage you to consider a pre-contract Business Needs Analysis (“BNA”).   A BNA provides the vendor with more detailed information about your environment that it can use to firm up its understanding and provide a fixed fee for the implementation. In the absence of a BNA, this work would normally be done by the vendor during the implementation, after the contract is signed.

The more analysis done in the BNA, the lower the risk. 180 Systems’ approach to the BNA is to identify the requirements that are the most challenging and/or unique and make sure they are clearly understood by the vendors so they can figure out how to handle them in detail before the contract is finalized. Although the vendors charge for their time to complete the BNA process, it is time they would be charging during the implementation anyway, and by doing the work upfront, the risky parts of the implementation can be built into the implementation contract and therefore reduce the likelihood of surprises.

A BNA should include

  • Implementation scope linked to requirements in the RFP
  • Conceptual design with agreed upon design decisions
  • Functional specifications for any requirement requiring customization
  • Statement of Work

The vendors may resist as they would rather just close the deal or are reluctant to assign resources to a client that may not sign a long-term contract. But if the risks are high, both the vendor and the client are protected using the BNA approach.

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Statement of Work (SOW) Stoppers

Contract Negotiations, ERP, Software Selection

The SOW is a key document from your vendor that can make or break the implementation. The vendors will do their best to reduce their risk by limiting scope to a high level list, assuming that you will follow best practices, and making a lot of other assumptions about you doing work that you don’t know or understand the effort to complete. 

As the vendor risks go down, the customer risks go up.  We recommend the following:

  • Scope is tied to the requirements in the RFP which need to be specific
  • Best practices should only be applied to processes that are considered basic.  It should not be tied to ones that allow a company to differentiate themselves from the competition or address critical success factors (what an organization must do well in order to be successful strategically). You should limit the best practices to a few basic processes such as accounts receivable and accounts payable.
  • Ensure you understand what is involved in your roles and responsibilities. Many organizations don’t have the experience or qualifications to do some of the tasks that may be assigned to them without a lot of help from the vendors. An example of this is developing to-be business process documentation.  If you don’t have a resource on your team with the skill set to do this, you may be setting yourself up for a vendor change order.

A good way to limit scope for both the vendor and the customer is by arranging a “paid-for” business needs analysis (BNA) or discovery process prior to signing any long-term contracts. This should not delay the implementation process as it is work that would need to be done anyway. It should also not be a full-blown design phase by the vendors. It should be enough work for the vendors to define scope clearly and provide a fixed or not-to-exceed fee to do the implementation. It will also involve deciding what to do with all the requirements that are not met out-of-the-box by the vendors which include customization or custom reports, 3rd party modules, changing the process and workarounds.

The vendors would rather close the deal without doing the discovery if possible but we think this is short-sighted. In the end, the vendors don’t want unhappy customers and taking this extra step will help reduce the risks of unexpected and costly surprises during the implementation.

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So the project has gone belly-up, what now?

ERP, Project Management

December 3, 2015 from LinkedIn – “…Most SMEs and many larger companies are not experienced in running projects. It is just not something they need to do on a regular basis and certainly not with this much at stake.  An investment in the services of a skilled internal Project Manager is rarely a waste of money. It will often cost you more to skimp in this area and then have to recover afterwards…”

180 View – The author, a business development manager for Pronto Software, makes a number of really good comments on why implementation projects fail and what to do about it. I have acted as an ERP expert witness and have seen just how bad things can get. It is far better to find a solution to the problems than to fight it out in court.

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Demonstration Scripts

ERP, Project Management

A demonstration script is critical to the selection process but there are huge differences on how to do this. Rather than criticize the techniques we have read, I will share our methodology with you:

  1. Two demonstrations – You don’t want to go too deep on the first demonstration unless you are positive that the vendor will not waste your time (or their time)
  2. 1st demonstration – We base it on a small subset of the most important requirements in the RFP and limit the time to about 3 hours. We allocate a certain amount of time to each requirement and then total the amount of time for each section. We provide an agenda that includes the agenda time for each section as well as the scripted time and try to leave a buffer in certain sections.  There are usually 4 vendors invited for this demonstration.
  3. 2nd demonstration – We base it on the AS-IS business process and include sample documents. We ask the vendors to prepare a prototype of the suggested TO-BE business process and to include a certain number of the requirements from the RFP. We are evaluating vendors not just on the strengths of the system but also on their ability to improve business process. There are usually 2 vendors invited for this demonstration which often lasts for a day for each vendor.
  4. Access to clients – The vendors have access to our clients before each of the demonstrations. We want them to have every opportunity to do a great demonstration.
  5. Evaluations - Our clients are asked to note the major strengths, weaknesses and follow-up items by section as well as scoring each section. We do a detailed evaluation which includes notes on each requirement demonstrated as well as an assessment whether it is a strength or a weakness.

Our process is always evolving based on the feedback we get. Recent changes include:

  • Reducing the number of requirements
  • Using Survey Monkey for the evaluations done by our client
  • Adding more buffer time so vendors can make the presentation flow better and let them show off some of the features in the system that may not be included in the script but which they believe are very useful
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