06 Dec ERP Software (*ROI not included)
Enterprise Resource Planning (ERP) system contracts typically include a long list of software components. Wouldn’t it be great to discover an entry for return on investment (ROI) amongst all of those three-letter acronyms? Considering the great effort organizations put forth in choosing to undertake an ERP implementation and selecting the best software, it seems like a reasonable expectation. Unfortunately, the approach taken to deploy and maintain the implementation is critical to ensure that “ERP ROI” does not become an oxymoron.
No matter the industry or size of an organization, there are common key topics when considering important success factors. Business process management, recurring investment, master data integrity, and staffing levels are four pillars upon which a strong ERP system can be built and maintained. Just as we measure various leading indicators for organizational performance, there are metrics available to ensure these factors are supporting ERP ROI. These measurements are like the gauges on your auto dashboard. Long-term ROI will be optimized when we keep them in an operationally efficient zone – not too hot and not too cold.
Business Process Management
Business process management excellence is most clearly indicated by adherence and ownership. Documentation of core and variant processes should be simple, clear, and well-maintained. The core process should be used at least 80% of the time, but an allowance for validated variations shows business creativity and customer friendliness. System users need to know when to use each process, and the user interface should make it easy for them to follow the correct process steps. Processes must evolve to support innovation and capture market opportunities. This is where clearly defined ownership is critical. Who will determine the change details, how will it be prioritized and validated, and what other processes may be affected?
Recurring investment goes beyond a budgeted capital or expense expenditure to include the mix of investments. Are all functional areas receiving some attention so we don’t perpetuate a weakest link? Vintage of technology is also a consideration. The latest technology innovations come with a steep risk and cost profile. Be confident they are the appropriate selection or allow another organization to experience the leading edge before your adoption. A good metric in this space is change management. Hundreds of system changes per month would be a high-risk situation, but a small handful may indicate a stagnant situation.
Master Data Integrity
Master data integrity has become a cliché, but it remains a cornerstone of efficient system usage. A fresh look at the measurements used for this topic may help to lighten the burden. Rather than focusing on perfection across an array of similar concepts, turn the focus upon simplicity via alignment. Do marketing, operations, and finance have separate product or customer groupings? Consolidate a single cross-functional language that can be monitored for a reasonable amount of change over time.
Staffing levels support the previous topics and can be measured in several dimensions. Retention is typically a value to maximize, but innovation and cost control support a healthy balance of experienced and growth resources. Not only leadership in each functional area but also a healthy balance between business and technology ownership is ideal. Trusted external partners can be a useful tool to overcome resource demand spikes or innovation opportunities.
Perhaps future innovations will change the narrative, but these traditional elements have remained critically important to ERP ROI. It is unfortunately not as simple as installing the software, but ongoing attention to these pillars can make the investment worthwhile. Some enjoyment can be found in the journey by knowing there is no final destination.