In my experience of ERP implementations, I’ve noticed how a major ERP application, to which a company has committed significant budget and resources, starts losing its value in the organisation sometime after the system is implemented. I call this application entropy (after the thermodynamic effect that energy degrades to heat, or noise); SYSPRO calls it ‘application erosion’.
The process works like this. When an ERP project starts, people are often keen, committed and involved. But not long after implementation, those ideals and attitudes begin to diminish until a point is reached when the comments start: “ this ERP isn’t giving us value anymore, why are we still using it?” This eventually kicks off an ERP evaluation or re-implementation project, and the process begins all over again.
When executives invest similar large amounts in capital equipment, however, they are usually insistent that the equipment is used optimally and people are properly trained and kept up-to-date. When it comes to enterprise software, that drive is not applied with the same vigour. It seems that continual training on IT-related aspects is not often company policy in many businesses – people are supposed to “get it”, absorbing knowledge and expertise by osmosis, usually from others. This approach commonly leads to the growth of poor practices.
What are the solutions?
One is training – obviously. It probably needs only 1-2 days training per year per person for a typical user to keep up-to-date and proficient on a particular area of an ERP system.
Another solution is to make IT part of the executive board’s responsibility. In South Africa, The King III code of corporate governance seeks to make IT a mandatory item on the board’s agenda. King points out that IT is now essential for the modern business and the board should understand the issues and strategic importance of IT. The recommendations include that the board be responsible for:
- strategic alignment of IT with the business,
- improving the value of IT,
- optimising knowledge and IT infrastructure.
This leads to a third solution – what SYSPRO calls the “Seeker of Value”. The role of the Seeker of Value is to prevent the disconnect that occurs in the ERP system of an organisation. This person, or group of people, is identified as being responsible for bridging the gap between the ERP supplier and/or implementer, and the organisation, thereby reducing costs, optimising ROI and giving the organisation greater control over its destiny. The kind of issues that a Seeker of Value should take responsibility for are:
- having some knowledge, and keeping up-to-date with, the ERP;
- balancing and scaling the software;
- aligning the ERP with the strategy of directors and management to prevent disconnect between the high-level business processes and operational processes, and to ensure the software is meeting the strategic business requirements of the organisation;
- ensuring the board is aware of new business models that the software could accommodate;
- using the ERP system to improve or implement methodologies such as Six Sigma, Lean and Balanced Scorecards.
Getting value from an ERP system is never going to be one of those activities that can be left to proceed automatically. In order to keep entropy (or erosion) from occurring, continual intervention is required. Individuals and groups in the organisation need to make a conscious decision to ensure this happens. As Elliot Ross points out:
anything you have implemented, but have never revised is probably an obsolete silo that is sucking the life out of your organization.
Like so many IT projects, success or failure does depends more on people issues than technical ones. If your organisation managed to avoid ERP entropy, what are the policies and factors you dealt with to combat the erosion of value?
Update: I should have checked, but it has been brought to my attention that this topic has also been covered by TechnologyEvaluation.com – Application Erosion: Eating Away at Your Hard Earned Value and Application Erosion: More Causes and Cures.
Other links related to this subject: The Problem with Mature ERP Systems (ComputerWorld)
What Does a “Successful” ERP Implementation Actually Mean? (CIO.com)