IT Management

An ERP (Enterprise Resource Planning) system can bring significant benefits to your organization. The integrated nature of the system reduces double entry of data, improves visibility of information throughout your organization and can speed up key processes.

ERP systems pose a significant challenge to implement though, especially in mid-size organizations which are not able to dedicate full time resources unlike the large multi-nationals.

Successful implementations typically have several characteristics in common:

1. Understand the business drivers for change.

It is very tempting to start an ERP selection or implementation without a complete understanding of why you are making the change. A lot of companies will have generic criteria that push them into starting a project – such as “our current system is too old”; then part way through the implementation when things are tough they kill the project because there is not a strong enough business case for going forward.

It is always worth exploring, documenting and quantifying the case for change. This will drive much of your design and help you keep costs under control. And, if you can’t quantify the benefits, there is a strong chance you won’t achieve them.

2. Keep the ownership of the change within the business, not just IT

There is a significant IT component to any ERP project. But you can’t  outsource the whole implementation to IT and expect to get the benefits. There will be some level of business change associated with any integrated system and only strong business ownership can push these changes through.

Make sure you have a steering committee that includes senior business leaders and ideally include the project objectives on their performance appraisals.

3. Understand the 80:20 rule to cost and complexity

Whenever you try to select a new system, you have to make some assessment of the level of fit to your organization and processes. Generally, once you have found a vendor with a reasonable fit for your industry, you will typically be able to describe the fit as somewhere near to 80%. At that point, a lot of companies make a general statement such as “we will change the process to fit the software” or “we will pay for the customization that we need” and then move on.

Take the time to understand in depth that missing 20%. It will be very easy for that 20% to end up driving 80% of your effort, angst and costs during implementation. It is particularly true of any process which touches your customer.

4. Define up-front the selection criteria for a vendor

It is important to understand the functional fit of any one particular software package. But once you are down to a short list of 2-3 vendors, functional fit may no longer be the key deciding factor in settling on one favorite vendor. Other key factors will include level of support and training; availability of user groups; technical architecture; attitudes to customization and financial stability of the vendors.

Take the time at the start of the project to define the key factors for your organization and their relative importance – don’t wait until you are already through all the demos. These factors can help you get to a short list quickly and make your selection process much more efficient.

5. Ensure strong project and vendor management

Many organizations don’t have the skills or capacity to focus on the project and vendor management that is necessary to shepherd a successful implementation. Any vendor will provide some level of project management, but those resources are only focused on the tasks that the vendor will perform.

You need to make sure that there is someone focused on advocating for your organization in project meetings with the vendor and also managing the resources internal to your organization. Make the investment to get this help externally if necessary.

6. Develop a strong scope management process before and after implementation

Finally, we have all heard about the runaway projects which either get cancelled or implemented late or way over budget. A critical factor in keeping things on track is to keep a tight rein on scope. Once you understand more about what any software package can do it will be very tempting to keep adding new processes and reports into the project scope until one day you realize that you have a much bigger project than you originally defined.

Hold tight to the business case that you developed at the start of the project – only include those items which drive the business benefits that you are striving for. Everything else can wait until later – and then needs to go through its own justification.

Sounds like a pretty straightforward question and one that many people and companies would answer “yes” or “of course” to since technology is so pervasive in all aspects of our business and personal lives. But, this term is less subjective than you might think in terms of business and has been given some specific attributes that help define whether a company is “IT Savvy” or not.

The business definition of the term is fully defined and explained in the book IT Savvy: What Top Executives Must Know to Go from Pain to Gain by Peter Weill and Jeanne W. Ross. As Weill and Ross explain in the book, being “IT Savvy refers to the planned, ongoing use of a set of interlocking business practices and competencies that collectively derive superior value from IT investments”.

For most hard core technologists this definition will seem a little too vague and consultant-ese to really apply to the day to day wok in IT but Weill and Ross go into much more detail on their definition and provide a practical framework in which to think about IT and its support of a business.

Weill and Ross go on to further highlight five characteristics of an “IT Savvy” company:

1. IT for Internal and External Communication – Intensity of electronic communications media such as e-mail, intranets, and wireless devices for internal and external communications and work practices.
2. Internet Use - Internet based architectures (i.e. open) for key functions like sales force management, employee performance measurements, training and post-sales customer support.
3. Digital Transactions – High percentage of digitized transaction executed with both suppliers and customers.
4. Company-wide IT Skills - Technical and business skills of IT people, IT skills of business people and ability to hire skilled IT people.
5. Management Involvement – The degree of senior management commitment to IT projects and the degree of business unit involvement in IT decisions.

Weill and Ross also layout some well defined categories of IT investments and conclude that the most IT Savvy companies are investing more in the Strategic and Informational areas of IT than their competition.

1. Strategic - used to gain competitive advantage by supporting entry into new markets or by helping to develop new products services or business processes.
2. Informational - provide information for purposes such as accounting, reporting, compliance, communication, or analysis
3. Transactional – investments that are primarily used to cut costs or increase the throughput for the same cost.
4. Infrastructure - shared IT service s used by multiple applications (servers, networks, laptops, customer databases,)

Considering these high-level attributes would you consider your organization IT savvy?

Big failures can result from the best intentions. The IT product selection process is a good example. Some of the biggest mistakes in the growth of a company’s technology infrastructure occur during inadequate solution selection processes, including those that use Requests for Proposal (RFP) and competitive bidding.

We just published a major white paper – “Avoiding the Product Selection Quagmire” – that details what can go wrong with IT product selection efforts. It also describes what should be done to overcome risks and run a top-notch RFP or competitive bidding project.

In small to mid-sized companies, IT teams often get caught off guard by the unanticipated demands of the product selection process. Although competitive bidding is a well-known best practice, many organizations lack the practical experience or the tools to execute a selection process effectively. Companies who find themselves reinventing the wheel with each product selection project will likely encounter any of a number of risks:

• A lack of expertise and experience in the full competitive bidding and product selection process.
• Failure to set up product selection as a formal project.
• Inadequate handling of requirements.
• A lack of balance between business and technical emphasis.

When these pitfalls occur, the company could end up making a buying decision for a solution that won’t be adopted, isn’t aligned with the real requirements, or costs much more than a better solution.

Here are the white paper’s key recommendations:

1. Set up each product selection effort as a formal project.
2. Augment your internal expertise as needed: Partner early on with a provider of talent with experience conducting product selection projects.
3. Engage an internal or external business analyst to gather and document requirements.
4. Leverage existing tools and methodology to execute the selection project.
5. Foster a good partnership between business and IT throughout the project.
6. Choose the appropriate type of competitive bidding request, one that best suits the project objectives.
7. Adopt a component-based, reusable RFP format and structure.
8. Adopt a standard, reusable timeline for the bidding and selection process.
9. Conduct the selection using a complete decision package.
10. Prepare early for the transition to implementation.

The paper explains each of these recommendations in detail, giving IT practitioners a practical set of steps for reducing product selection risk and raising IT’s profile as a key contributor to business success through quality technology purchases.

The white paper “Avoiding the Product Selection Quagmire” is available free on our Resources page to all registered visitors to our site. Registration is free and gives you access to all of our other free white papers, articles, templates, and work samples.

There are myriad articles and other sources of information that discuss the benefits of “aligning” a company’s IT strategy to its business strategy. It sounds like a no brainer for an IT leader. Align the IT strategy to the business strategy and all is good (not easy, but good). According to a recent article in CIO magazine, “if the IT organization is discussing the need to align the IT strategy to the business strategy, they are too late.” I suppose that making this kind of statement implies that the company’s IT organization is not aligned to the business and that’s not good for the IT organization and the business, right?

Well, according to a study by Bain & Company covered in MIT Sloan Management Review titled “Avoiding the Alignment Trap in Information Technology”, alignment may not be the largest problem in an underperforming IT organization and it may not be the first place to look for answers or make adjustments. The study suggests that the first place to investigate is the effectiveness of the IT organization. Are projects being accomplished on time and on budget? Are the systems used today running smoothly? Is there unnecessary complication in applications and infrastructure? Richard F. Connell, CIO of Selective Insurance Group, said in the article, “Aligning a poorly performing IT organization to the right business objectives still won’t get the objective accomplished.”

Additionally, the study presented some very interesting numbers and drew some interesting conclusions about the correlations between the overall performance of a business and the effectiveness and alignment of its IT organization. As you may have guessed, the companies where the IT organizations were both effective and aligned were the most prosperous.

How would you rate your company’s IT effectiveness and its alignment to the business?

You can also view the full article in the MIT Sloan Management Review (subscription required for access to full article).