erp software selection lessons learned

7/30/2019 Erp Software Selection Lessons Learned

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Sof tw are Se lec t ion

Lessons Learned

Sof tw are Se lec t ion

Lessons Learned

Copyright © 2004 Technology Group InternationalCopyright © 2004 Technology Group InternationalAll Rights ReservedAll Rights Reserved



Software Selection Lessons Learned

Introduction

When engaging in a software selection project, it is a good policy to learn from the

mistakes of others. It is one of the easiest ways to prevent potential issues resultingduring the selection process. Whether you confer with seasoned IT professionals, atrusted CPA, or an outside consultant, the time invested in the research will be wellspent. This practice will not only save the team time, it will help maintain the project’sbudget and thus save money. And in addition to the potential time and cost reductions,it will help alleviate potential frustration and provide a higher level of credibility for thesoftware selection team.

The old saying “an ounce of prevention is worth a pound of cure” holds true even insearching for and purchasing new business software. Although TGI itself has notundergone the software selection search, we have worked with a large amount ofcompanies and consultants over the last thirteen years and we have witnessed manyfalter as they move forward in the selection process. So much so, that a list of 30lessons learned is easily compiled and presented in this document.

We encourage you to take a moment to read through the list of lessons learned andthen review the balance of the Software Selection Tool Kit. The collection of documentsand templates are offered to help provide the smoothest selection process possible, andeven more importantly, to help you find the best ERP software package and supplier foryour organization.

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Top Thirty Lessons Learned

1. Understand the significance of the endeavor at hand and set realistic expectationsfor the project team.

2. Meet with key decision makers at the onset of the project to ensure the teamunderstands the corporation’s strategic plans.

3. Chose an executive champion and utilize the resource wisely.

4. Chose the right project manager to lead the software selection and implementationteam.

5. Chose the best team members for the project.

6. Establish a realistic and obtainable project budget by understanding all of the systemcosts.

7. Establish realistic project expectations for the organization and remember that nosoftware package can cure a decade of corporate problems.

8. Carefully evaluate tangible and intangible project benefits. Calculate a realisticreturn on investment (ROI) based on those deliverables.

9. Prepare a solid business case which is backed by an accurate ROI analysis.

10. Understand your organization’s business processes before defining the new

system’s requirements.11. Listen to the everyday system users, regardless of their level in the organization.

12. Go through a solid and complete functional needs analysis.

13. Chose a software supplier for the right reasons.

14. Prepare and force suppliers to follow a demonstration script. Don’t be sold! Keepscore of the team’s reaction to the demonstrations.

15. Don’t buy more than you need, simply because of the vendor’s name.

16. Perform supplier reference checks.

17. Ensure the software solution is easy to maintain and enhance.

18. Understand the significance of change management to your company.

19. Communicate progress regularly to the whole organization.

20. Understand the true value of integration.





21. Look for a technical and business partner in the potential software suppliers. Lookbeyond the software package and evaluate the whole organization behind thesoftware.

22. Make a decision.

23. Utilize the software supplier’s expertise and resources.

24. Spend money on training.

25. Limit customizations and the project’s scope. Use the 80/20 rule.

26. Identify customizations at the right time, which is after training and initial testing.

27. Clean your data prior to migration.

28. Perform a system pilot, regardless of time constraints.

29. Expect a temporary reduction in employee efficiencies.

30. Understand the project is not over at the system’s go live date.





Lessons Learned In Depth

This section will briefly touch on each the thirty software selection lessons learned andtherefore software selection best practices listed in this document. Further information,

instructions, and templates are available in TGI’s Software Selection Tool Kit.

Understand the significance of the endeavor at hand and set realisticexpectations for the project team.

A successful project is one that begins with a solid foundation. If the basis for thesoftware selection project is unobtainable goals, the team and project are doomed forfailure before they even begin. The team and software cannot change the entireorganization overnight. The goal is to improve overall operations through the newsoftware, not fix every problem in existence.

In conjunction with the preceding statements is the idea that the new ERP system is abusiness system designed to run the operations for the entire organization. This is trueeven if you are planning on integrating the ERP system with an existing and externalhuman resources or payroll package. The entire company must be involved at somelevel, even if the project manager believes the department or functional area is outsidethe scope of the project. At the very least, this functional area (in this case possibly thehuman resources department) should be consulted for required interfaces andrequirements with the system.

In summary, it is important to understand the project will touch virtually every aspect ofthe organization, although it will not be able to correct every business problem inexistence. Trying to accomplish too much will bog down the team, while not involving

enough individuals will allow critical elements to be overlooked. The project definitionrequires balance of the organization.

Meet with key decision makers at the onset of the project to ensurethe team understands the corporation’s strategic plans.

For the ERP software purchase to result in a successful implementation, it is vital tostart with the executive staff of the organization. This “C level” of management includesthe decision makers and as such, they need to understand the full scope and size of theproject. These individuals are also the leaders of the company and those individualsmaking strategic decisions for future business activities. The new software package

must be able to accommodate the future plans of the executive staff and manage anyresulting business requirements.

Chose an executive champion and utilize the resource wisely.

The larger the organization’s size, the greater need for an executive champion to act asa C level advocate of the software selection project. This individual will serve as amentor and sponsor for the group. He or she will also be an invaluable resource in theevent the team struggles with difficult departments or managers.





Chose the right project manager to lead the software selection projectand implementation team.

Many times a company will default the program manager to the IT manager or director.

Although this individual may be knowledgeable in the system’s technical requirements,he may struggle when it comes to functional requirements. The organization mustdecide the best overall individual to lead the team based on a number of factors.

Another problem many companies run into is the longevity of the IT personnel and theirpredisposed opinions to new technology. Many new ERP systems involve moving theorganization to a new technology platform. This is very difficult for a seasoned ITperson who has experience with only one technology or programming language. Eventhe most open IT person can be hesitant to leave his comfort zone to quickly adapt tothe newest technology or industry buzzwords.

Finally, the project manager must be able to multitask and interact well with people. Hewill be forced to interview various department heads, potential suppliers, and conductmeeting upon meeting. If these tasks are not among the new project managers forte,possibly the wrong leader was chosen.

Chose the best team members for the project.

The better the project team members, the better the project’s results. Havingknowledgeable, team oriented people on the project will be invaluable for success.

Remember the following criteria for selecting team members:

¾ Chose Members Based on Knowledge and not Tenure

¾ Keep the Group Size Between Five and Ten People

¾ Identify Not Only the Team Members, but Departmental Back UpRepresentatives

¾ Chose Members That Can Dedicate the Time Required for Project Participation

¾ Chose Members that are Well Liked, Well Known, Considered Knowledgeable,and Respected within the Organization

¾ Chose Positive Individuals Who Welcome Change

Establish a realistic and obtainable project budget by understandingall of the system related costs.

To obtain project approval, a business plan is needed. To create a business plan, youmust perform an ROI analysis and an anticipated payback period. A critical element ofthese calculations is the IT budget. Thus it is difficult to go very far in the project withouta complete project budget.

The budget must be well prepared and accurate. Most CEO’s will consider the project afailure if the team comes in over budget or fails to obtain the projected ROI. Don’t allow





yourself to rush through this step to get “something” on paper. Make sure you have allthe elements necessary to select, implement, and run the new software and system.Take a moment to review the Budget Worksheet in the Software Selection Tool Kit toensure your team is capturing all aspects of the IT project.

Establish realistic project expectations for the organization andremember that no software package can cure a decade of corporateproblems.

All too often, companies view an ERP system as a cure all for an organization. Evenmore often, those organizational pains that need curing have taken over a decade tocreate. The best ERP system cannot cure all the ailments of an organization overnight.It doesn’t matter how good the package and supplier are, they just cannot accomplishmiracles. If this misconception is the basis for the selection project, the project will bedeemed a failure. It is important to maintain realistic objectives and project these

expectations to the organization prior to the supplier selection, during theimplementation, and into the post-live environment.

Carefully evaluate tangible and intangible project benefits. Calculatea realistic return on investment (ROI) based on those deliverables.

Once expectations are in order, anticipated project benefits can be defined andevaluated. These benefits will be both tangible (monetary) and intangible (subjective),although only the tangible benefits easily fit into an ROI calculation.

Be careful not to underestimate or overestimate the possible benefits derived from thenew package. If you are unfamiliar with realistic improvement rates, ask your potential

suppliers what they have experienced with similar clients in the past. A good supplierwill know this information and have it available for discussion. Take a moment to reviewthe ROI Calculation Worksheet in the Software Selection Tool Kit to help your teamcalculation your potential ROI.

Prepare a solid business case which is backed by an accurate ROIanalysis.

A business case is required to communicate the project’s direction, provide high levelinformation such as the project’s objectives and deliverables, as well as communicatethe project’s budget requirements and potential ROI. It is the primary means of

obtaining executive support and funding.

Listen to the everyday system users, regardless of their level in theorganization.

Frequently a project manager will meet with the department head to determine thesystem’s functional requirements. Although this is a good start, it is not the end of thisdiscovery stage of the project. The best manager will never know every minuet task hisindividual employees perform throughout the day. If he has surrounded himself with





good employees, he really doesn’t need to know all of their daily tasks. For this reason,the department head is incapable of providing all requirements for his functional area.Time and thus formal interviews must take place with the lowest level employees to gaininsight on their day to day activities. A “super user” for each department should be able

to provide an overall view of critical must have features in the software, as well as, awish list of desired features for operation improvements.

Complete a thorough functional needs analysis and create a hotbutton check list of must have requirements.

The requirements definition portion of the selection process is crucial to successfullypurchasing, implementing, and utilizing the new software. Supplier demonstrations canonly be effectively reviewed if the team understands the requirements going into thedemonstration and literally sees the supplier demonstrate those requirements within thepotential software package.

Many companies enter into software selection projects, without fully knowing the trueneeds of the organization’s users. These companies will inevitably fail, because theproject’s goals were never clearly or properly defined.

TGI offers a 1,100 plus Functional Requirements Template within the SoftwareSelection Took Kit to help define and communicate they requirements to your potentialsuppliers.

Understand your organization’s business processes before definingthe new system’s requirements.

Before the project team can document the requirements analysis, it must have a basicunderstanding of how the varying departments interact and how the basic businessoperations flow. Without fully grasping the depth of the company’s processes, the teamis certain to skip critical and must have requirements. By taking the time to review theoverall business operations, the team will also have an opportunity to evaluate anddefine needed operational changes for ongoing process improvement.

Chose a software supplier for the right reasons.

Choosing the best software supplier and package is a career making decision for manyproject managers. The due diligence involved in it must outweigh everything else in theprocess. A savvy project manager will not be misled by a software supplier’s name

recognition, smooth sales representative, or glitzy sales presentation. A knowledgeproject manager will compile a list of deliverables for the suppliers and objectively weighthe suppliers’ individual scores to select the top supplier and package for theorganization’s needs.





Prepare and force suppliers to follow a demonstration script, so theteam can score each supplier’s presentation.

Don’t be sold! You can only be sold if you allow the supplier to run the demonstration

their way. If the supplier presentation follows a concise demonstration script,evaluating the suppliers should prove relatively easy. The team will be able to reviewthe supplied script and judge how well the supplier addressed each key element of thescript. At the end of each on-site demonstration, have the individual team membersreview the supplier’s handling of the demonstration script by answering a list of criticalquestions.

To assist in this state of the process, TGI offers a Demonstration Script and ScoringSheet in the Software Selection Tool Kit.

Don’t buy more than you need, simply because of the vendor’s name.

As more and more top level ERP supplier venture down to the small business market,small business owners are reaping the benefits. Okay they reap the benefits for a briefmoment.

These larger software suppliers are reducing their software license fees to make theirproduct offering more reachable for small businesses. The downside to this policy isthe purchaser is forced to endure long implementations and pay exorbitant fees forservices they really don’t need. This is because the packages are bundled with muchmore functionality that is needed and because the package itself is not meant for thesmall business environment. This may appear like an opinion, but it is certainly ageneral opinion in the marketplace. Surf the internet for a few minutes and you will find

story after story of companies over buying with software and overpaying forimplementations.

Perform supplier reference checks.

Although it is difficult to view everything you would like to see in one day, an on-sitereference check will be worth the time spent. In the end it should either validate theteam’s decision or provide enough questionable information to force the team to rethinkits top supplier choice. Regardless, the on-site reference check is invaluable andshould be utilized in calculating the supplier’s overall score.

Ensure the software solution is easy to maintain and enhance.

Not only must the software be functional, your IT department must be able to maintainthe software and manage future upgrades. As companies venture into new technology,a comfort ability factor becomes very important for the IT staff. Purchasing a largesystem that is unmanageable for the IT department will quickly introduce a chaotic officeenvironment. When choosing the new software package, the IT staff needs a minimumlevel of comfort with the system and technology. If the technology is new, the existingIT staff needs to be able to obtain training on the newly purchased technology. The





system’s architecture must be supported by a widely used programming language. Acommon programming language will allow the IT department to easily obtain continuededucation and training outside the software supplier’s service offering.

If you chose to outsource the system maintenance, you need to ensure the generalmanagement team is comfortable with the software developer or VAR. Remember thatthese individuals will be the ones you will turn to for modifications, upgrades, oremergency assistance should disaster strike. You need to be comfortable with both theproduct and the people behind the product.

Understand the significance of change management to yourcompany.

Moving forward with new software without recognizing the major organizational changeswhich must occur will certainly result in an unsuccessful project. Implementing a newERP system represents a huge change for the organization. Forgetting to manage thischange is the downfall of many well intentioned project managers.

How can you manage the change effectively? By building a solid business case,obtaining executive support, engaging middle management, instilling middlemanagement’s ownership in the process, and communicating the project’s goals andprocess to the organization.

Communicate progress regularly to the whole organization.

As mentioned earlier, communication is an important element in gaining organizationalsupport and backing for the project. Employees can only engage in the project if theyknow what the project entails, how the project will affect them personally, and at whatstatus the project resides. Communication can be effective in as simple of forum as acorporate e-mail. What is important is that the organization receives informative andpositive communication throughout the process.

Understand the true value of integration.

ERP systems are about integration. Achieving the most “bang for your buck” in an ERPproject requires a focus on maintaining integration throughout the company’soperational processes. This is true even for offline business processes that are manytimes overlooked or ignored. If the business process is an ongoing procedure that willcontinue to go on in the future, it is worth considering integration.

Many ignore integration as a cost savings in the project. Unfortunately, the errors thatresult due to human intervention tend to more costing than the cost to integrate.





Look for a technical and business partner in potential softwaresuppliers.

As the project manager, you need to look beyond the software package and evaluate

the whole organization behind the software. Do you like the management team? Areyou comfortable with their implementation plan? Do you feel the supplier possess theknowledge to help your organization reengineer bad business processes? Do you feelcomfortable with the supplier’s maintenance and upgrade policy? Are you comfortablewith the organization’s future technology plans?

The software supplier will be a long-term business partner and needs to be evaluatedas such prior to selecting a software package. Look past the fancy sales presentationsto look at the people and how they fit with your organization’s environment.

Make a decision.

There are a small number of companies who spend a great deal of time and moneyreviewing potential software packages, only to decide to do nothing. A few years passand these same companies perform the same process over again with the same result.They chose to do absolutely nothing.

Sometimes these companies even fall under the disbelief that they can internally write(code) the same functionality the major packages offer and do so for much less money.It cannot happen. Major ERP packages have millions upon millions of lines of code andbeen developed over a number of years by multiple, highly skilled programmers. Itcannot be duplicated internally for less money and with less strain on the organization.

What is even more unfortunate is these same companies are significantly behind theircompetition technically speaking and fail to recognize it.

Utilize the software supplier’s expertise and resources.

When purchasing software you are spending thousands of dollars to purchase anothercompany’s expertise. Do not fall into the trap of assuming you know more than thesupplier 100% of the time. It is not the case. If the software supplier is good, the firmwill learn your business and help you become more efficient and more productivethrough their software package. Not taking advantage of this knowledge bank is awaste of your own money, as well as your time.

Spend money on training.You’ve spent money on the new software package; now spend the money to train youremployees to use it to its fullest capacity. If you don’t educate the front line users, youwill never gain the full breadth of the package and its offering. ROI is compromised,employees are frustrated, and business operations do not improve at the rate theyshould.





Train at the onset of the implementation, during the implementation, and after theimplementation. The few thousands of dollars spent on extra training will be repaid infull time and time again.

Limit customizations and the project’s scope. Use the 80/20 rule.

Another reason companies tend to encounter problems with ERP implementations isdue to an excessive level of modifications performed. Although almost all companiescustomize their newly purchased software, it is important that over customization doesnot occur. Performing unnecessary customizations tend to make projects run late andover budget.

The old 80/20 rule holds true with this part of the software implementation. In short,20% of the standard software package should accommodate 80% of the company’srequired functionality. If an out of the box version of the software doesn’t cover at least80% of the core functionality needed, you are looking at the wrong package.

Identify customizations at the right time, which is after training andinitial testing.

Many times the project team is so focused on meeting their anticipated go live date;they rush into identifying required modifications in the software. Although this mayseem harmless, it is a primary factor for organizations missing their go live date andrunning over budget.

If the team focuses heavily on how they currently perform a specific process and in turnattempt to structure the system to work exactly as they currently operate, they will bemissing potential operational advantages the new system offers. This is simplybecause they will be focusing on rewriting the software to do business in a status quotype of mode, instead of reviewing possible alternative ways of running their operations.That being said, there is a time and place for modifications. That time and place is aftertraining, when the users fully know how the system operates.

Clean your data prior to migration.

What goes in must come out. Bad data in will equal bad data out. In the world of highlyintegrated ERP systems, poor data migration quickly snowballs into a mound ofoperational errors and a literal nightmare for employees and customers. The time spentcleaning up existing data prior to migration will not only yield a much smoother

implementation, it will make the entire process much smoother for your customer base.

Perform a system pilot, regardless of time constraints.

Regardless of what your timing plan tells you, you do have time for a system pilot.Regardless of what you CEO tells you, you do have time for a system pilot.

Customers deserve to receive your products and services on time. They deserve toreceive what they’ve ordered. Failure to adequately test the system will produce a





ripple affect of errors after go live. A week of two of piloting the system is worthretaining your valuable customers.

Expect a temporary reduction in employee efficiencies.

No matter how good the new software operates and how knowledgeable youremployees are, the staff’s operational efficiencies will be hampered shortly after go live.The organization needs time to adapt to the new software and get used to the newbusiness processes. Understanding this and preparing for it, will invaluable.

Understand the project is not over at the system’s go live date.

No implementation, however smooth it has gone, is fully complete at go live. Allow theteam and users time to adjust to the new system, invite the supplier back for additionaltraining, and tweak your processes a bit more. This is continuous improvement and isthe basis for world class organizations.





Conclusion

Hopefully at this point, you feel a bit more confident about the endeavor you are

undertaking. As a member of the selection team you are researching your project priorto fully engaging and you will be rewarded for your efforts.

As stated previously, TGI offers a number of documents and templates in the SoftwareSelection Tool Kit. We encourage you to utilize this free resource in your selectionprocess.


erp software selection lessons learned

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