ERP is expensive - so make sure you get the payback fast

Let’s not beat about the bush. There is a lot of evidence around. ERP projects are expensive. You really don’t want to repeat them very often. So it is imperative that you get it right when you undertake one.

But just as important, you need to make sure you get your payback a) when you expect it and b) as quickly as possible.

Now an ERP implementation is not just about using software, it is also about process change as well. Consequently there will benefits due to the process change, not just the use of the system, but those process changes will only occur when the new software is implemented. So we can conclude that the largest part of the benefits of the implementation project will only occur when the system goes live.

Therefore, the payback from the system will only start to accrue once go-live is achieved. This then leads us to conclude that the quicker you can go-live, the quicker you start to get the payback.

It is self-evident that simple projects will conclude quicker than complex ones, so thus, the extent of the scope of a project will directly affect the speed of payback of the project.

Many people will advocate that a single “Big-bang” project is most effective in the long run as all processes are considered together along with all their interactions. But as well as the time penalty there is also a complexity premium which many organisations are not able to cope with.

So my advice is to restrict the scope of the initial implementation as much as possible allowing a quick turnaround and therefore quick payback. Even if there is an element of re-work required when peripheral processes are dealt with in later phases, these will be more than compensated for by the earlier payback and quick wins of the initial implementation.

Today’s business environment is all about being agile and adaptable to changes in your marketplace. Long comprehensive projects no longer fit into this picture and ERP implementations must learn from this.