Key Drivers of ERP Cost, Time and Risk

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Posted by: briansittley Comments: 0 0 Post Date: May 15, 2018

A lot of companies’ ERP projects run longer and cost more than originally expected.  If you’re among them, you’re not alone.  A recent state of ERP report for 2018 from Panorama Consulting confirms with most ERP providers have long known: a few key project drivers make all the difference.  They point out that nearly two-thirds of companies spent more than budgeted on their ERP projects in 2018 nearly 80% took longer than expected (we suspect the other 20% were lying or misinformed).

The report drew five key conclusions regarding the factors that matter when it comes to mitigating time and cost overruns.  They included:

  1. Setting a clear alignment between the ERP project and the organization’s overall business strategy. They give the example of the company who stated business transformation effort was aimed at leveraging technology to surpass its competitors.  Their main goal was to improve customer service.  But their implementation was more focused on using tech to improve and streamline back office functions.  Nothing wrong with that, mind you; it’s just that you can expect a longer timeline and deeper budget when your priorities are allowed to shift in this fashion mid-project.  Keep your eyes on the prize.
  2. Establish clear expectations during planning. “When expectations aren’t aligned with reality, bad decisions with rippling effects can result,” say the authors.  Committing your team to unrealistic project possibilities in terms of time and cost will likely cause you to cut critical project activities and end up with less than satisfactory results.
  3. Stay laser-focused on the people and the organizational change management. Studies say that ignoring these is the number one reason for project delays and cost overruns.
  4. Start with effective business process management and process improvement. Systems today are so robust and flexible that you can do almost anything – and that’s a problem.  Take the time to study and prescribe your organization’s unique process requirements and workflows before you begin actual software implementation.  Plan the work, then work the plan!
  5. Maintain Strong project management, governance and controls. Panorama recommends that you clearly define your project team, governance and controls as part of your project charter. Consider hiring independent, third-party experts that manage these sorts of implementations for a living.  Make sure clear roles and responsibilities, as well as priorities, are in place and that everyone knows what’s expected of them.  It’s a team project, but it requires that someone be “in charge” when decisions need to be made quickly or roadblocks are encountered.  No surprise here: project management is key.

We agree with the assessment, and concur that if you manage these five areas above, the rest of your project can fall into place in a manner that’s congruent with the project you thought you were conducting at the outset.  Easier said than done, no doubt.  But if you want to save time and money, this is where the magic happens.

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