How to avoid an ERP disaster

Implementing an enterprise resource planning (ERP) system is one of the biggest IT headaches many organisations will face and while the rewards of doing it right are high, the cost of failing is often disastrous.

Examples include MFI, which was thrown £46m into the red as a result of technical problems with the rollout of a SAP-based supply chain system, which led to inventory shortages and incomplete orders being sent out, and more recently chocolate manufacturer Cadbury took a £12m hit on profits as a result of a chocolate glut related to problems with the rollout of a new SAP-based ERP system.

The software itself is now rarely the cause of these kinds of problems, the root cause of which can more often be linked to the massive business and process change associated with implementing an ERP system.

Jenny Sener, director of IT at property services organisation OCS Group, speaking at a SAP customer event this week, said: "It's the change management and the process change. That's where the real challenges are. The technology works. Many organisations fundamentally underestimate the scale of process change."

Alan Harrison, CIO at Yorkshire Water, which is now saving almost £12m per year after spending £30m implementing SAP since 2000, said getting the business to change the way it works is vital to a successful project.

He said: "The business managers are leading the implementation. They are the people who can actually deliver business change."

Dale Vile, research director at analyst Freeform Dynamics, said problems with the business and process change often come when organisations hand over the implementation of the system to someone else, which leads to misunderstanding of roles and responsibilities.

He said: "The most critical imperative is to regard the implementation as your own. The biggest danger comes when organisations delegate responsibility to their implementation partner. Remain in the driving seat and don't put it in the hands of someone else."

Chris Gibbons, general manager of the internal IS consulting division at WHSmith News, is in charge of a £30m SAP rollout that has paid for itself within four years but he admitted there were difficulties in getting the business to change processes and the way it works.

He said: "There were teething problems in the first year. It is difficult to get the business to change."

Scope creep is another issue. ERP implementations often take years and businesses rarely stand still, with the result that requests for changes to the scope of the project can spiral out of control.

Yorkshire Water's Harrison said scope creep is why a lot of SAP rollouts get into trouble. "Scope creep is something you have to sit on," he said.

Vile agreed that a big pitfall is often trying to do too much in one go. "The change requests should be challenged against the business objectives - be led by the business objectives and what the software can do," he said.

The final key piece of best practice advice for a major SAP rollout is to make the system as "vanilla" as possible - that is to say using the standard off-the-shelf package with as little customisation as is feasible.

Vile said: "The golden rule is only deviate from the standard functionality in areas that really matter."

He said that once an organisation has got the core system implemented it can then look to "unlock value incrementally" and build things around the edges such as remote web interfaces and wireless working.