ERP Benefits Still Falling Short?

Computerworld reported a couple of weeks ago on a recent study of the business benefits of ERP conducted by Panorama Consulting Group. Their findings were less than encouraging:

More than half of companies that implement ERP systems end up getting no more than 30% of the business benefits they expected…  Of the 1,600 organizations surveyed, 72% said they were "fairly satisfied" with their ERP package. But this can be misleading, according to the study: "Some executives are just happy to complete projects… and give little thought to whether or not the company is better off with the new software or whether or not they’re getting as much out of the system as possible." More than half (51.4%) of ERP projects went over budget, the survey found, and about 35% of the respondents said their projects took longer than expected.

Depending on whether you believe research from sources like Standish, these figures may simply be representative of broader issues with the success rate of software projects—small consolation, given the central role ERP plays in running today’s businesses.

What to do about it?  The article summarizes the report’s recommendation’s:

ERP customers can avoid surprises by taking the time to pin down a project’s real costs, which go far beyond software licenses. Three quarters of a project’s budget typically goes toward implementation, hardware upgrades, customization and other needs, according to Panorama. Customers should also "identify pockets of resistance within the company and determine the organizational change management needed to make the project successful," Panorama suggested. Altimeter Group analyst Ray Wang agreed. "People do not invest enough in change management," he said. The length of ERP projects can exacerbate dissatisfaction, he added, noting that users’ requirements might change a great deal between the time the vendor is selected and the time the system is deployed.

It’s interesting the degree to which change management continues to be identified as a major point of failure in ERP implementations. Not that I’m suggesting that change management is easy to pull off, mind you—far from it.  But the problem identified here doesn’t seem to be properly funded change management failing in the attempt. Change management has been widely and publicly discussed as a—perhaps even the—critical success factor for ERP success for at least a decade now, since the media coverage of several troubled projects in the late 90s. If there remains widespread underinvestment in it, there must surely be systematic reasons for that—reasons built into the standard ways companies select and design ERP projects. Several likely factors come to mind, but I haven’t seen a widespread, detailed study of why underinvestment continues over time. That’s some research I’d like to see.  If anyone knows of some, please let me know in the comments, I’d love to check it out.

As for the factors I think are at work, I’ll address that in a future post (or posts).

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Ed Yourdon on Death March Software Projects

If you missed Michael Krigsman’s post about it a few weeks back, you might want to check out the Ed Yourdon’s presentation on “death march” software projects (which I’ve embedded below).  Those of you who have been on a death march will feel right at home as he describes them, and you may find the advice he offers very useful the next time you find yourself stuck in one.  The presentation is full of though-provoking tidbits… I think my favorite part is the section on system dynamics modeling (slides 89-96).  It outlines why project team dynamics are so complex and so easily underestimated.  Slide 72, “Worst Practices” is also worth a look, especially if you are involved in project leadership, whether as a manager or sponsor.  From that page comes: “Don’t expect to recover from a schedule slip of more than 10% without acknowledging a disproportionately greater reduction in software functionality to be delivered."  I wince to think how often that principle is ignored.

Rome Death March Nov2009

View more documents from yourdon.

ComputerWorld: How to Make Your ERP Roll-out Succeed

If you have been around ERP implementations for a while, you can be forgiven a sense of deja vu as you read this ComputerWeekly article, which says that training and change management “can be the difference between success and failure.”  Poor change management has been recognized as a leading element in project failure for at least a decade now, ever since the high-profile teething pains experienced by SAP and other vendors in the 1990s.  Many articles were written about the challenges faced by Hershey, Whirlpool, and other companies that struggled with their new systems because of primarily organizational challenges, and both ERP vendors and their implementation partners responded by improving their ability to prepare people for the changes a new system introduces. 

The real news then, isn’t that good change management is a critical part of making your multi-million dollar ERP investment.  It’s that ten years later, it remains such an impediment to ERP success:

Will Change Resistors Change?

Craig Brown at Better Projects:

Here's an idea that was suggested to me today; People who resist change will still change.  They just change slower than others.  Why?  The idea is that resistors are really trying to hold the status quo.  If your early adopters and the middle packs move on to the new way of thinking and doing business the status quo eventually changes.  After a while your change resistors have adopted the new status quo.

I think this idea is partly true: some change resisters are indeed likely to come around and accept a new “future state”, given time.  But I would suggest two caveats to keep in mind when considering this.

First, it assumes the planned change actually happens, and is sufficiently successful that you eventually reach the “new status quo” you intended to reach.  That’s by no means a foregone conclusion.  Indeed, that this so often fails to happen is one driver behind the rise of organizational change management as a discipline.  Resistance to change can be so disruptive that it derails a change initiative completely or worse, results in a future state that the organization did not intend, and that leaves it worse off than it was in the beginning.  If you are attempting to implement a major system or process change, and the new status quo turns out to be that you can no longer fulfill orders or respond to customer inquiries, the question of whether change resisters will eventually adapt to this state of affairs is suddenly the least of your problems.  Indeed, you may discover the change resisters were trying to tell you something important.

Second, it’s not universally true.  People resist change for a lot of different reasons, some of them perfectly rational, others less so.  Whether a given person comes to accept the new status quo, and how long it takes, will depend in part on the person and in part on their motivation.  When change is managed well, and stakeholder perspectives given proper attention, some people will be won over before the change, some will be won over in time, and realistically, some will never accept the change, and will eventually leave the organization one way or another.  In the end, even people who are willing to be “won over” will be more or less persuaded depending on how the change is presented, and how they are treated over the course of change.  That’s one reason why a good change management plan will seek to anticipate sources of change resistance—both the resisters and their motivations—and develop appropriate approaches for responding to each.

Speaking of Web 2.0… What is it, Exactly?

I mentioned Web 2.0 in yesterday’s post in the context of learning technology… but what is it, exactly?  It’s a buzzword that’s been tossed around in tech-savvy circles for a while, but like many buzzwords, it’s ill-defined.

Last year, Michael Wesch, a cultural anthropologist at the Kansas State University, put together a five-minute film which is the most elegant explanation I’ve seen, as well as a rather beautiful expression of what Web 2.0 may mean to the evolution of human communication.  It’s been out there on YouTube since early 2007, but if you haven’t seen it, especially if you’re interested in the evolution of the Web, it’s very much worth a look: