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ERP implementations are usually complex undertakings that often run into problems and occasionally result in outright failure.
There's typically finger-pointing between the parties involved in the implementation -- the organization, the ERP vendor and the implementation partner, if used -- that can result in costly litigation. However, there are many culprits when an ERP implementation goes south, and an organization needs to understand a number of factors before embarking on an ERP implementation project in order to have the best conditions for success, according to Claus Jepsen, CTO of Unit4.
Unit4, based in Utrecht, Netherlands, focuses on cloud ERP platforms for midsize organizations in four people-centric industries: professional services, public sector, higher education and nonprofits.
In this Q&A, Jepsen discusses the reasons why some ERP implementations risk failure and what organizations can do to avoid the risks. Ultimately, Jepsen argues that the main culprit in an ERP implementation failure is rarely the technology itself.
Editor's note: This Q&A has been edited for clarity and conciseness.
ERP implementations have changed substantially in the cloud ERP era. What are some of the common challenges today?
Claus Jepsen: One main challenge is with the flexibility of the technology. It's changing, but there's still this idea from the past that when you implemented ERP, some executives said there's too much resistance [from users]. They're not going to change the way they work, so we have to make the software fit with the way we work. That's the sure way to an implementation disaster.
Jepsen: Many ERP systems have been constructed with making [the software adapt to the company's processes] in mind, which means they are highly flexible. Through configuration, customization and other means, you can morph traditional ERP into whatever you want it to be. But the unique selling point for a company is not their internal processes -- for most companies, that's not what makes them more competitive or more interesting for their customers. It's not even necessarily how the processes work. And how many ways can you improve a time sheet or invoice anyway? It's basically the same thing.
What's an example of how that can complicate ERP implementations?
Jepsen: Higher education [institutions] operate like independent small companies, and they usually have subsystems of the ERP that are very different, even if it's essentially the same ERP. Smaller commercial companies want standards -- they don't want the ERP to be different. But higher education and public sector organizations still drive toward specificity. They don't seem to be willing to engage in a constructive debate about how we can make it easier for them and take the best practices from elsewhere, because they all think that they're unique. That's typically where we see the biggest implementation projects fail.
Many ERP implementations happen because the organization is moving from an outdated system to a modern cloud ERP. What do organizations need to do to avoid or mitigate cloud ERP implementation failures?
Claus JepsenCTO, Unit4
Jepsen: If you are implementing an ERP, you should not think that all you need to do is put it in the new system and the rest will all work out. You need to think about how you want your business processes to work. The best way to start is by defining your business processes. You need to map them out and understand how your processes work, and then you need to cast your view on your whole IT landscape.
It's not just the ERP that's involved -- it's everything else as well, because there are different subsystems in there. So you need to understand that, and when you understand how your processes work, take those artifacts and look at the new system to see if they match. If you don't do that, you'll end up with more of the same. You need to be open to not just changing the ERP itself, but you have to change everything around it.
Is that a challenge for organizations that have run processes in the same way for many years?
Jepsen: Yes, this approach, to rethink everything, is a revelation for a lot of companies. Because companies that are a certain age -- maybe 20 years or older -- have a lot of stuff sitting around that has been glued on or made to fit, and they don't really understand how the processes work. That's where I would start.
How important is change management for the employees who have used those processes and now must move to a new system that might have changed processes?
Jepsen: The next thing you need to address is the people and how you're going to get them onto this journey. As part of this journey, they must realize that some of the things they're doing are kind of stupid and counterproductive, but you get to address these [flaws] by rethinking everything. We're seeing a new type of users coming in, a new generation who are more willing to change if it makes their working day easier. People used to think that if you changed things, it would mean more work -- now people think that it's great if you can remove some steps [in a process].
Is finding an ERP system that fits an organization's industry focus a key to avoiding implementation failure?
Jepsen: First, ask where you are vertically, and then find a vendor. Then, when you look at your vendors, try to find one with vertical experience in your area. There are a lot of advantages there. For example, Unit4 is focused on services-oriented organizations. Because we have a long experience [in industries like higher education and public sector], we've seen lots of customers, and we know how they operate and how we can formulate standard configurations for their narrow functionality. This means the customer can get faster ROI. Don't buy a project-based application from a manufacturing ERP vendor and don't buy a manufacturing ERP from us because it doesn't gel well.
How much of an ERP implementation failure is due to the technology itself?
Jepsen: People tend to think technology should be the knee-jerk reaction to a problem, but the technology is usually not the issue in an ERP failure. There's always the inclination to apply technology to a problem you didn't know you had, but you have to be careful with that.
Jim O'Donnell is a senior news writer who covers ERP and other enterprise applications for TechTarget Editorial.