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December 28, 2015

5 Ways to get the best ROI from your ERP System

ROI on ERP

Let’s face it-businesses spend large amounts of money and time on ERP systems. Despite this huge investment, we don’t see people in the organization talking about ROI in terms of ERP. The only thing they want is to prevent complete failure of the ERP system. You just need to understand that the ERP system implementation is more than an information technology project. These systems provide excellent opportunities to transform your business.

Companies spend millions of dollars on an ERP system, so it is not wrong to take full advantage of its potential. So what does the CIO or CFO or the project manager need to do in order to help their institutions get the best out of their investments? Here are a few things one needs to do.

Set realistic goals during ERP implementation and work to achieve it

One of the primary reasons for failure of the ERP implementation is inability of people to adapt to change. To make the ERP implementation successful, the top management needs to have a strong commitment to bring in the change in the mindsets and working habits of people in the organization.

An ERP implementation means reengineering business processes and integrating other systems into the backbone of ERP. Every key person in the organization should know that the primary objective of ERP implementation is taking business to the next level. This mentality should be applied to every aspect of the project and a proper plan should be devised to decide where to focus time and resources. The management needs to take all steps to reduce the gap between new technology and employees so that the workforce also aligns with the strategic objective of ERP implementation. The management should set realistic project goals and maintain realistic expectations throughout the implementation to help the company achieve the expected ERP benefits and good ROI.

Focus on the people not just technology

The ERP implementation should be business focused and not technology focused. During ERP implementation, ensure that people don’t get lost in the technology. No matter how good your ERP system is, nothing can happen unless the people who are the actual users, are on board.ERP implementation is not just changing technology; it also means asking people to change the processes and behaviors that they have been following until now. The two things that are important in ERP implementation are process reengineering and change management. While process engineering is more of a technical thing, change management is related to people in your organization.

Change management is more than training. It is a process in which you ensure the organization is ready and willing to adopt a new system. The process reengineering is bound to change some job specific roles and it will affect people who do the work. It is necessary to let people know how it will affect their job, why the changes are necessary and how they will be beneficial as a whole, for the person and the company. Effective communication is important in the process and you have to also consider their feedback. The management needs to ensure that everyone is on the same page to realize the real benefits of ERP for the company.

Don’t underestimate time, efforts and money factor

While it is important to remain focused on meeting the objectives of ERP implementation, factors like time, money and efforts should also be considered during ERP implementation. A couple of studies have proved that 50%or more of ERP implementations fail as the project takes more than the expected time or money. This is certainly an eye-opener fact for all organizations considering ERP implementation.

While considering ERP implementations, don’t take your ERP Vendors estimates as the final word. Instead, benchmark the ERP implementation by comparing your case with businesses of similar size or character. Get someone other than the vendor to estimate project costs and implementation time. The next thing is to prepare a project plan with clear timelines, mentioning milestones that need to be achieved during implementation. Some of the things you can do to stay on track and prevent going over the budget are:

  • Develop early estimates before proceeding to ERP system evaluation
  • Formulate a baseline schedule and budget during the planning phase
  • Clearly define the outline and benefits of the ERP system
  • Keep customizations to minimum. Customizations are time-consuming and costly, consider them after completion of the project
  • Set aside some time to review and evaluate the software
  • Plan training periods for users

Understand the finish line for implementation

The ERP system is a piece of software but not with magical abilities, so you need to stop expecting to get everything done from it. You cannot use the ERP system to run the business end to end. Many companies go into ERP implementation thinking they need to use every feature that the ERP has to offer. They completely ignore the budget and time constraints only to realize their mistakes when the implementation fails. The best policy in ERP implementation is to first understand the key features and learn how these features can be used to automate business processes, complete functions faster and meet specified business objectives. Since upgrades, customizations and enhancements are costly; you should make a list of the useful features and track usage. This knowledge should be used to train employees.

Focus of long-term alignment with business objectives

As mentioned earlier, ERP implementation is not just a project, it’s a culture incorporated in your workforce. The ERP implementation never ends – the system evolves with time. When the project implementation is complete, it’s not the end of the story. You need to have a clear support mechanism for changes to the system that will be incorporated in future. One of the ways to ensure long-term alignment is to focus on continual improvement and adjustment to market changes in an appropriate way, by keeping the ERP system aligned.

The real benefits of ERP systems and ROI can only be experienced once it goes live. The focus on ERP implementation should be on achieving key business objectives. It may take around 2-3 years for a company to achieve a good ROI provided they have chosen an ERP system that covers all enterprise.