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INFO TECHNOLOGY

Harvesting ERP investment benefits

Over the past few years, many companies have experienced a massive increase in enterprise resource planning (ERP). Compared to the past, the additional implementation costs of hardware, networks and consultancy has climbed significantly, let alone hidden costs such as the internal resources deployed on projects.
A great number of companies, however, have not been able to benefit fully from this extensive investment in ERP. It seems that many companies have not asked themselves two simple questions - how and why should we proceed to get a return on our investment? The situation these companies find themselves in is typical: they made very large investments in ERP projects, which were very difficult to implement and left the organisations drained. This, in turn, complicated the launch of further projects. Where did these companies go wrong?

Over the past few years, many companies have experienced a massive increase in enterprise resource planning (ERP). Compared to the past, the additional implementation costs of hardware, networks and consultancy has climbed significantly, let alone hidden costs such as the internal resources deployed on projects.

A great number of companies, however, have not been able to benefit fully from this extensive investment in ERP. It seems that many companies have not asked themselves two simple questions - how and why should we proceed to get a return on our investment? The situation these companies find themselves in is typical: they made very large investments in ERP projects, which were very difficult to implement and left the organisations drained. This, in turn, complicated the launch of further projects. Where did these companies go wrong?

In order to derive a business benefit, it is necessary to implement a business change. However, it is not enough simply to change technology in support of existing business practices. It is the job of a company's entire management to make full use of existing technology, following the 3 ERP stages.

The first step is to develop an exploitation strategy, which means to identify projects that use the base infrastructure and deliver the highest possible benefits. This challenging task also includes finding people who understand the business and understand the technology. Their responsibility will also be to promptly identify a possible change and improvement in performance.

Several types of project can be used in developing these exploitation strategies, such as re-engineering existing modules, installing new modules (e.g. HR management), using 'new dimension products' from ERP suppliers, or complementary software from niche suppliers (aiming at better customer relations management, supply-chain management, or information management); and/or internet applications linked to ERP (to open up new sales channels or fundamentally change the nature of the business).

The second stage is the development of benefit-focused implementation plans. These plans are no longer an A-Z schedule of technology installation. The developing plans must respond to the benefit opportunities available, and they therefore have to demand the involvement of the business - in identifying the potential changes to be carried out, as well as developing the business requirements underpinning these changes. The key component of this phase is the development of detailed business cases.

The establishment of recognisable benefit delivery processes, which have been sadly lacking in ERP projects, is the third and final stage of the process. These benefits need to be well defined and evaluated in the first place, along with allocation of accountability for their delivery, ensuring that appropriate mechanisms are in place, such as inclusion of the expected results in budgets or performance measures. In this context, during the whole ERP process the original purpose of the project should be continuously monitored. Installing performance monitoring mechanisms also contributes to the benefit delivery.

Peter Borak is Information Risk Manager at KPMG Slovensko. His column appears monthly. Send comments or questions to pborak@kpmg.sk.

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