This blog covers all aspects of information technology, with a special focus on how to use technology to increase productivity in an organisation. Frequent contributors include Managing Director, Marco Tapia; and Project Manager, Andres Pinar.
CIO’s Corner – Practical ERP Justification, Selection and Deployment.
Practical ERP justification, selection and deployment
September 2, 2011
Ashwin Ram, General Manager for Information Technology, Australand
Most companies need an ERP system to run their business, however the investment is not insignificant and mistakes can cost a lot in time, money and effort.
If the “annual CFO Software Guide” (AFR) is any indication, there are literally hundreds of ERP solutions in the market, ranking from the very small to the very large.
Selecting the correct system is a major challenge. In my view an ERP tends to stay with a company for about 10 years or more, so it is worth doing a diligent selection and implementation.
Listed on the ASX, Australand is one of Australia’s leading diversified property groups. Its General Manager for Information Technology, Ashwin Ram is heading a new project that has justified the selection and implementation of a new ERP for Australand, so Ashwin is well placed to provide practical advice on how to go about it.
With significant systems experience for large companies in Australia, Ashwin Ram has been the GM of IT at Australand for more than three years. Ashwin explains herein his unique and practical methodology to successfully select and implement a large ERP solution.
MT: How do you justify the investment on a new ERP system?
There could numerous reasons to justify such an investment, however selecting one or two key reasons are better to drive the message through the organisation. Reasons could be risk mitigation against an unstable system, scalability, the need for richer functionality, integration leading to unified and common view of data (single view of the truth), etc.
MT: What is your practical methodology for selection?
My real focus is on implementation. I would rather spend more of the company’s energy and resources implementing the solution in partnership with the selected vendor, rather than in the selection; and then be exhausted when the implementation starts.
Some companies assess multiple vendors and request huge amount of work from them, answering RFP, providing demos, prototypes, etc. Scoring these systems and options can only induce cost and confusion to the project.
Instead, my selection methodology is based on risk mitigation. To start with, I identify macro level requirements at a strategic and operational level. Then I establish a list of products with input from independent advisors, market knowledge. This list would typically consist of products that are prevalent for your company’s size, for your particular industry, both locally and globally.
The temptation is to conduct detailed product evaluation however; this is likely to lead to fairly similar rankings across 2-3 products but will lead to a polarised user community conducting the evaluation. It is better to document some top 50 mandatory requirements and run a validation against one product from the short list which has a low risk profile for your company (e.g. Management experience, commonly used in the industry, commonly used by similar sized companies, etc). If the product fails on mandatory requirements, move to the next one.
MT: How much to spend?
As a guide, the costs can be split at about 5% on validation, 15-20% on software, 5% on hardware, 70-75% on implementation. In my experience, over a 5 year period, an integrated ERP is more cost-effective and stable than a best of breed interfaced solution delivering comparable set of processes
MT: What are the key features to consider?
Vendor stability, product roadmap, availability and capability of product specialists in the country, sticking to standard solution, rule based configurable product supported by a strong development framework (to develop workarounds where standard solutions may not work), active change management, strong governance, proven project management, gaining executive support and mandate, engagement from key subject matter experts from the business, and holding internal people/steering committee accountable for success
MT: What is an appropriate implementation timeframe?
Depending on the company size and complexity it could take years, however, even in that case, modular implementation of 18 months maximum should be aimed for. On average 12 months is the ideal, depending on access to internal staff, project scope, and level of business process re-design.
MT: What project governance will you use?
We have used an Executive Committee that reports to the board. We also have a Business Process Management group that is chaired by a nominee of the Executive Committee. This group compromises of General Managers, Project Director and GM of IT. It is this group that provides the direction to the Project Director. The project team has strong representation from business subject matter experts and IT.