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The 6 “Gotchas” of ERP Projects

If you are a Business Owner or Senior Executive undergoing an ERP or business software implementation, these questions may be keeping you up at night. No one wants to waste time and money. That’s why many organisations take a proactive approach to mitigating such risks early.

  • What would you do if your ERP Implementation went over budget?
  • What if it caused a major operational disruption?
  • How would you get your project back on track and make up for lost time?
  • Are your staff starting to express negativity towards the project?

The 6 “Gotchas” of ERP Projects

1.     Review your Legal and Commercial Agreements

The first “Gotcha” is not reviewing the ERP Vendor and Software Legal Agreements in sufficient detail. You must ensure that your interests are protected and that the Agreements will stand the test of time. Most Agreements consist of multiple documents (Master Services Agreement, Software Licensing Agreement, 3rd Party Agreements, Maintenance and Support Agreements) and these often cross reference each other.

Although you will have done Due Diligence, including reference checking, the contractual Agreements underpin your formal relationship with the Vendor. The key is to see what’s not there. For example, the Vendor assuming that your staff will do all of the configuration work for your new system.

A careful review of the Agreements up front will save you a lot of money and grief further down the track.

It is highly beneficial for your Legal Agreements to be reviewed by an independent and experienced ERP specialist who has the time to carefully cross check these documents against the Vendor’s proposal and the promises made, to ensure all has been included.

Once this review is completed and all feedback has been collated, ensure you seek legal advice from your own preferred legal representative.

2.     Conduct Project Stage Gate Reviews

Stage Gate Reviews ensure the quality and completeness of specified stages of the project, typically marked by end stage milestones. At the end of each project stage, the Steering Committee should determine if every deliverable for that stage is complete or in an acceptable state, before moving onto the next stage.

Some questions to consider at each stage include:

  • Are you and your team working collaboratively and effectively with the Vendor?
  • Are you addressing business aspects, such as change management adequately, or are staff showing discomfort or a lack of engagement with the project?
  • Is your Project Management Methodology working well and are the templates you are using effective?

Project Stage Gate Reviews will reduce your likelihood of needing project rescue services, which is a last resort for many organisations, but unfortunately not uncommon.

3.     Strong Project Management and Governance

Strong and effective project management will mitigate many project risks. A great project manager will engage with the Business Sponsor and senior management and will have a good understanding of the timeline, the budget and the roles and responsibilities of all project team members. They will also ensure that the Vendor’s team are effectively working to your business objectives.

They will prepare for and facilitate the Daily Stand Up Meetings, Weekly Project Meetings and Monthly Steering Committee Meetings. All meetings will be minuted with Action Items as well as Issues and Risks so that the business has a clear view of status and progress.

The right project manager instills confidence and establishes clear expectation management for staff around when and what they need to be doing for the project to succeed.

Strong client-sided project management is essential for a successful ERP implementation.

4.     Organisational and Business Process Change Management

Whilst implementing an ERP relies a lot on the technical activities, it is imperative to recognise and acknowledge the impacts of change on your staff.

  • Do you have a plan for identifying and mitigating change resistance?
  • Do you understand the impact of change on each department and individual employees?
  • Are you clear on job role changes and the staff that will be affected?
  • Are there skills required that may require the recruitment of additional staff or extra training for existing team members?
  • Do all internal and external stakeholders have the right communications to ensure they have the information they need to progress?

Your project plan should include change management activities that promote two-way communication and drive awareness of project objectives and their impacts on business goals. Communication works best when it’s structured and clearly addresses employees’ needs and concerns.

By investigating the reasons for change resistance and determining the skill sets employees may lack, you can develop a Change Management and Training Plan that addresses the entire organisation – at the department and individual level.

For every process that is improved or redesigned, change management is essential.

5.     Assess Your Data Migration Plan

Organisations that develop a comprehensive data strategy prior to implementing a new ERP system are often more successful with data migration. The process is time consuming but is absolutely necessary to ensure that operational disruption is minimised.

It is critical that you invest time defining the scope of data conversion and assessing data cleanliness. The data that is required by the new system, but which wasn’t in the old system can often be the most problematic to correctly identify.

A best practice for data migration is setting milestones and conducting multiple iterations of User Acceptance Testing of the converted data before “go-live”.

6.    Allow for Contingency in your Budget

Modifications and any changes to your ERP Project Plan can be costly, so it’s important to ensure that you have allowed for some contingency in your budget.

Great project governance will ensure that customisations are limited to critical and “must have” functionality and that there is a formal approval process for any change request. The Steering Committee should have the final say when it comes to approving any additional work.

They will decide if it’s worth the extra cost by investigating the reasons behind the change request – did it originate from employees’ resistance to process changes or is it aligned with the organisation’s competitive advantage?

CMC recommends that you allow a 20% contingency with your project budget and that a formal change request process is followed to release those funds.

And if you find some Gotchas?

It is not uncommon to find some of the above “Gotchas” in an ERP implementation project.

CMC offers Project Heath Checks for ERP implementations. If there are any areas where you think you may need help, please get in touch.

“We engaged a number of resources from CMC to assist with our ERP Implementation Project. CMC’s Project Manager, Change Manager and Financial Consultant were highly competent in their fields of expertise and delivered the value we were looking for.

CMC’s consultants focused on mentoring and coaching our internal staff and passing on their knowledge. Everyone who worked on the project benefited from CMC’s involvement.”

Ole Elsaesser, CFO – Downer EDI Mining