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ERP pitfalls and other gotchas

There are many ways that ERP projects can go wrong. Learn some common ERP software selection mistakes - and how SMBs can avoid them.

How many ways are there to mess up an ERP project? Lots of them. Here are 10 pitfalls that every SMB should bear...

in mind.

1. Not being open to change. Most SMBs have come to depend on highly customized legacy applications or combinations of desktop solutions (spreadsheets, databases, etc.). The problem is that these applications fit the process owner very well -- too well -- and are often difficult to reproduce in packaged ERP systems. As a result, the organization must realize that business process re-engineering will probably be necessary, and application modification may be required to install any major ERP system.

Translation? You may have to change the way you do things or change the way the application works. "Expecting, planning for and preparing participants for this process, both in cost and time, during implementation is important for setting expectation and acceptance of the application," said Karen Patterson, senior consultant with Revolution Group, a consulting company in Westerville, Ohio, which helps SMBs deploy ERP software.

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2. Snap decisions are bad decisions. There's no substitute for really doing your homework. Because you'll have to live with an ERP system for a long time, it is critical to "invest the time to really understand the organizational requirements, prepare a thorough demo script, and hold the software vendor to the details of the script," Patterson said. Another caveat: Never make assumptions about the capabilities of the application simply based on brand name, installed base or a flashy sales demo.

3. Don't skimp during go-live. Too many companies make a significant investment in purchasing the software but then skimp on the implementation. "Dollars 'saved' in limited training and implementation assistance resources often lead to frustrated users, incorrect assumptions and system utilization, and poor system acceptance," Patterson said. This type of thinking can also lead to significant risk during the difficult go-live period.

4. Don't create a short list too quickly. To get a competitively priced ERP solution, you need real competitors. In other words, don't just focus on the company that looks to have the best product and then, as an afterthought, add a few random companies to the RFP mix. "Vendors will recognize that for what it is," said Christian Hesterman, a research director at Gartner who focuses on the ERP midmarket. "And if they know they aren't facing real competition, you are in no position to negotiate."

5. Missing the forest for the trees. The thrill of building a new ERP application can be overwhelming, and some companies spend too much time and energy looking at the pieces -- how this element or that application will revolutionize business -- losing focus on the big picture as a result. "It is like buying an engine, some paint, some tires, and some seats instead of concentrating on buying a car," said Jesus Mantas, North American general business leader, IBM Global Business Services, who is responsible for midmarket ERP customers.

6. The "supertechie" syndrome. An ERP project (or any other large-scale IT project) takes lots of time and lots of expertise. Many SMBs with an IT department believe they'll be able to handle more of the implementation tasks than is practical for them, Mantas said. "These people already have full-time jobs," he said, "so a lot of organizations end up in trouble when they expect them to also implement an ERP system."

7. Not thinking long-term. It's hard to think long-term when there are so many other issues involved with an ERP implementation. But Mantas said it is critical that SMBs and midmarket organizations assess long-term maintenance and support costs very carefully. "They may have had a solution in place for the last 30 years that's been run by one person," he said. "But a new ERP system may have more sophisticated and costly requirements."

8. Buying more ERP system than you need. One senior manufacturing business manager for an ERP vendor said that this happens when companies don't make their existing processes more efficient before automating them. And it's further driven by fear of not "doing enough." In essence, he said, SMBs that skip this step just make mistakes faster and automate mediocre performance.

9. Not recognizing how critical process and system integration is. "SMBs must see the need for cross-system and inter-process integration," the manufacturing business manager said. The point is that no application can operate in a vacuum, and ERP is even more likely to fail if it is left isolated and detached from cross-system and cross-process inputs. For instance, an ERP system that returns reports showing reduced inventory costs without also showing increased product defects in the assembly process is not doing its job. The connection must somehow be made that the reduced inventory costs are associated with lower-cost, lower-quality supply items and that the resulting defective products result in cost increases.

10. Failing to get executive ownership. Companies get all excited about a major upgrade. They may even have everything signed, sealed and delivered. But if top management doesn't really "get it" or isn't fully committed to change, there's going to be trouble. Make sure you've got executive ownership of the program and, while you're at it, have a clear and convincing explanation of how the technology benefits everyone involved: customers, employees, suppliers and service organizations.

Alan R. Earls is a freelance writer.

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