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ERP implementation challenges exist under even the best of economic circumstances. ERP projects tend to be complex, costly, time-consuming and can affect critical business functions.
These challenges will only be exacerbated by the COVID-19 crisis, as businesses reassess the value of long-term IT projects. In a session at Digital Stratosphere 2020, a virtual conference sponsored by Third Stage Consulting Group, attorneys Marcus Harris and Daniel Saeedi of the Chicago law firm Taft Stettinius & Hollister LLP explored the impacts that the pandemic will have on ERP implementations and what customers can do to alleviate risk and protect their ERP investments.
Harris and Saeedi have extensive experience consulting customers, vendors and partners on ERP implementation projects. Harris focuses his practice on drafting and negotiating ERP licenses and SaaS agreements, and has litigated cases stemming from ERP implementation failures. He also served as in-house counsel for ERP vendors, including SAP and Infor. Saeedi focuses his practice on employment law and unfair competition issues.
This is the first of a two-part series discussing ERP implementation challenges in the wake of the pandemic.
3 ERP implementation challenges caused by the COVID-19 crisis
Marcus Harris: The pandemic presents itself in three different ways for an ERP implementation: It has an impact on the delivery of the cloud services that you already have; it has an impact on the ERP project that you're currently engaged in or about to; and it presents an opportunity to renegotiate or reassess your relationship with ERP vendors. If you're about to embark upon an ERP implementation project now, it's going to be more challenging than normal. Typically, any ERP project is going to take longer than you expect and is going to cost more than you expect, and these issues are exacerbated by the current environment.
Define clear goals at the start
Harris: Fundamentally, you have to define clear goals for your ERP, and if you're simply implementing technology for the sake of implementing technology because you want the latest and greatest, you're going to do yourself a disservice. You've got to have a clear understanding of what your business requirements are and what the business case is for that software. This is the time to have a clear goal and a clear understanding of what you're trying to get out of the system. You also have to have realistic implementation expectations. If you think that you're going to roll out a complicated ERP system in multiple sites around the world in a three- to six-month period, that's probably not realistic. It wasn't realistic in a pre-COVID environment, and it's certainly not going to be realistic now. You're going to roll with the punches and anticipate what some of the challenges are going to be and come up with creative workarounds to deal with that so that you can ensure that your implementation project stays on track.
Take care of the nontechnical issues
Harris: You have to address the nontechnical issues associated with implementing your ERP. It's great to have all the bells and whistles, but you have to make sure that you've done basic things. You've got to have a project charter in place, you've got to have experienced consultants that you've hired -- maybe from the outside -- be part of your internal team and manage project resources. If you don't have project governance of methodologies in place in your contracts, you're going to set yourself up for disaster. You've got to diligently manage the scope, diligently manage the cost of the implementation project.
Deal with the project disruption
Harris: Without a doubt the COVID crisis is going to cause project disruption. You have at least two choices. One option is to stop or postpone the project, but there are certain risks associated with that. There's going to be a loss of 'tribal knowledge,' and the consultants that understood your business may not be available later. There's also going to be ramp-up time and costs associated with getting new consultants on board that have an understanding of where your project has been, where it's going, and what your business requirements are. So there's a lot of risk associated with postponing your project in this current environment. A better option from a risk perspective is moving forward, but making sure that you put in place reasonable workarounds. You've got to account for the project disruption and you've got to think about things like consultants working from home.
Consider data security
Daniel Saeedi: Now, with entire sections of the workforce working from home, you have to account for the increased rate of data security risks and privacy risks. The world of data privacy is booming because there's an exponential increase in the number of devices that contain the confidential information of the project. Having a tight policy structure of how this is going to work in terms of coordinating a project with many people working remotely is essential. You also have to build in the appropriate nondisclosure provisions and account for increased risk in the contract, because if an employee or third party has sensitive product information on a home laptop, and that laptop gets hit by a cyberattack, you have a problem. So you have to account for the increased risks of compromising confidential information and trade secrets, and account for the fact that the team is going to be working remotely and is going to have to coordinate who is in charge of what information and who has possession of what information. You've got to get your ducks in a row.
Focus on project governance
Harris: Given the disruption to your project that's going to be caused by COVID, you're going to want to focus with a renewed diligence on project governance. Make sure that you get project updates on a regular basis and make sure that they provide you with meaningful information. In the past, [a lot of these reports] just have consultant speak that doesn't really tell you where it is today or where it's headed and doesn't give you the right amount of risk identification that you need.
Manage the project budget
Harris: You need to scrupulously manage the project budget because some vendors may use COVID as an excuse to overbill you. Generally, your costs for the implementation might go down, but they might be spread out further. Change orders become more important than before because now you've got this disruptive situation, and it can be an excuse to use the change order process to back-in amendments to the contract. You can say that the work-from-home scenario wasn't envisioned four weeks or six ago, so it's now appropriate to implement some heavy-duty change orders to make sure that you're capping some contingencies, accounting for budget increases that might happen, or even use it to renegotiate some of the basic assumptions in the statement of work.