ERP implementations can be challenging. Because most ERP projects take more time, money and effort than expected, it's no wonder most CIOs and project managers are happy to just finish an implementation unscathed, much less deliver meaningful, long-term business benefits. Unfortunately, organizations that set the bar low for their ERP implementations are leaving millions of dollars of potential business benefits on the table.
Establishing an ERP center of excellence is one way to counter the challenge of maximizing the business benefits of ERP projects. Companies that institute such a mechanism are more likely to experience fewer disruptions during and after implementation and are less likely to become too dependent on outside consultants along the way. In short, it forces organizations to develop internal competencies that not only enable the company to effectively maintain their ERP systems into the future, but helps ensure that the technology supports and stays aligned with business changes as things evolve.
Here are answers to the most commonly heard questions:
What is an ERP center of excellence?
Most people are unfamiliar with the concept of an ERP center of excellence. Some organizations have other centers of excellence focused on specialties like project management and Six Sigma -- but few have applied the concept to ERP projects. An ERP center of excellence is much like the others in that it builds an internal critical mass of knowledge focused on the ERP system. Its scope is typically both operational and technological in nature, so it goes beyond the IT support that is typically dedicated to a new system. A true ERP center of excellence will focus on ensuring alignment between evolving business requirements and ERP system configuration, training of employees, managing upgrades and improvements to the ERP system, and building internal competencies related to the ERP system and related business processes.
How can an ERP center of excellence benefit your organization?
As outlined in Panorama Consulting's recently published 2014 ERP Report, 51% of organizations implementing ERP systems have some sort of material operational disruption at the time of go-live, such as not being able to ship product or close the books. On the other hand, organizations that institute an ERP center of excellence are less likely to experience these challenges.
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However, centers of excellence aren't just about minimizing implementation risk -- they are also about fostering longer-term advantages. Specifically, these organizations generally implement ERP faster and cheaper and realize higher long-term business benefits than they would otherwise. As mentioned above, internal centers of excellence reduce the over-reliance on outside consultants and long-term support costs. But the biggest benefit may be that organizations extend the useful life of their ERP systems by ensuring a closer alignment between their ERP systems and their evolving business needs over time.
How do you know if your organization needs an ERP center of excellence?
If you want to minimize the risk and maximize the return on investment of your ERP implementation, then your organization is likely to benefit from an ERP center of excellence, regardless of your organization's industry, size, or location. Strong center of excellence candidates tend to be organizations that view their ERP systems as strategic, long-term investments rather than IT commodities. Finally, and perhaps most importantly, we have found that companies that view their ERP systems as enablers of business growth, re-engineered business processes, and measurable business results are much more likely to embrace and benefit from an internal ERP center of excellence.
What are the essentials needed to establish an ERP center of excellence?
Our team at Panorama Consulting has helped a number of organizations across the globe to implement ERP centers of excellence. While every company is different, a few recommendations are common to every client who we help through the process:
- The center should include a cross-functional team of operational subject-matter experts, software experts, general IT resources and project management specialists. It is important that it not simply be a function buried within IT.
- Larger companies may find that a full-time, dedicated center of excellence is appropriate. Smaller to mid-size organizations may find it more feasible to leverage part-time resources.
- The center of excellence is more than just an idea: It should have well-defined roles, responsibilities, authority and supporting business processes.
- You may not necessarily have the required skills on staff already, so don't be afraid to hire from the outside to develop the team.
An ERP center of excellence won't take away all the challenges of ERP implementations, but it is certainly a large step in the right direction. Ultimately, organizations implement ERP systems because they want to realize an attractive return on their investment without unnecessarily increasing risk, and ERP centers of excellence are a great way to help do so.
About the author:
Eric Kimberling is managing partner Panorama Consulting Solutions, a Denver-based consultancy that helps companies with ERP software selection, ERP implementation, organizational change management and benefits realization.