The Seven Deadly Sins of ERP Selection and How to Avoid Them

The Seven Deadly Sins have been used as guidelines to caution humanity against its inclination to do wrong. Unfortunately, the same guidelines seem non-existent when organizations experience the stress of selecting and implementing a new ERP solution.

How can an organization avoid ‘committing ERP sins’? Companies can utilize these guidelines to avoid common pitfalls and to ensure success:

  • Lust & Envy – desiring what other companies have. A common question company executives ask when selecting an ERP is, “What are leading companies using?” While this information can be used to help short-list alternatives, it should not drive the final answer. Many E&P companies jumped on the SAP R3 (now ECC) band-wagon, following what the major integrated oil and gas companies implemented. Eight of ten mid-sized E&P companies surveyed regretted the decision. SAP ECC is designed for large, complex organizations. Other cost effective fit-for-purpose solutions could have been selected and implemented to support critical requirements. These organizations paid the price for falling under the spell of Lust & Envy.
  • Gluttony & Greed – wanting the ERP to do too much. ERP systems have been developed to provide functionality supporting a broad range of processes. Companies can get distracted with non-business critical functionality during the evaluation process. ERP vendors often demonstrate intricate dashboards with flashy bar charts of non-relevant KPI’s. The time used to display colorful charts should have been invested demonstrating how the system supports business critical needs. Companies should spend more time focusing on what is important as opposed to the ‘glitz and glamor’ of the ERP solution. Companies lose site of the critical objectives because of Gluttony & Greed.
  • Sloth – lacking participation. Invariably following selection, someone declares, “Wait, what about my requirements?!” Successful organizations ensure participation by communicating project objectives and expectations upfront. Surveys show that ERP teams who communicate beyond the ‘what’ and share ‘why’ the company is going through ERP selection garner 80% more engagement from stakeholders. By empowering the organization’s staff to define the company’s future state, the company encourages stakeholders to view the ERP as an opportunity for improvement as opposed to a burden. Involvement and engagement take the place of Sloth.
  • Wrath & Pride – resisting change. Companies are often eager to share a laundry list of pain points with the current system, yet cling to the same system to avoid change. Over the years, employees invent complex manual work-around processes, and often become stubborn and prideful when asked to change behaviors and consider alternatives. Successful ERP project teams understand the importance of change management in achieving project objectives. They bridge the gap between current and future state and effectively drive change to ensure ERP success.

Trenegy helps companies successfully select the right ERP by avoiding the common pitfalls of ERP selection. For more information on how to prepare for ERP implementation read “Preparing for ERP Implementation…. Reducing the Pain!”

Hosted Solutions: Looking to the Cloud

“There is an app for that!” is heard countless times on television, radio and in everyday conversation. The cell phone has evolved from a communication device to a personal assistant revolutionizing the way we perform our day-to-day tasks in the past decade. The same can be said about cloud-based or hosted solutions for business. Similar to mobile applications, cloud-based solutions allow for more streamlined and highly efficient business processes such as budgeting and forecasting, AP, JIB procession, and CRM. Organizations can use hosted solutions to increase efficiency and decrease TCO in comparison to an installed software.

Cloud-based hosted solutions allow organizations to give their employees instantaneous access via a secure internet connection and a user-friendly interface rather than confining data to a hard drive or an internal network. A hosted solution also requires a significant workload shift. Installation of software updates, backups, and hardware maintenance responsibilities are taken on by a 3rd party service provider rather than an in-house IT Department. This allows the IT department to shift their focus to supporting a company’s day-to-day revenue generating activities.

Smart phones revolutionized the way humans operate on a day-to-day basis and hosted solutions are revolutionizing the way organizations approach their day-to-day business processes. Yet there are still misperceptions about application security, cost and ability to customize in a hosted environment. Hosting companies have addressed each of these.

Security

The number one fear that organizations face when contemplating switching to a cloud-based hosted solution is security. Unless an organization has a full time IT staff dedicated to maintaining and backing up their data a hosted solution can provide more security than an installed software. This is because vendors have more resources to invest in highly secure servers, facilities, and a full-time staff dedicated to ensuring all data is encrypted. It is also important to note that risk decreases significantly when servers are not housed on-site because critical data can be accessed anywhere with a secure internet connection despite server damage or data loss. Whereas data may take up to months to recover when using an installed software.

Not all 3rd party cloud providers have the same security policies so it is critical to ask questions in order to understand the policy:

  1. How much access do you have to my data?
  2. What risk do I assume in choosing you as my service provider?
  3. How well is my data protected?

It is important to remember that vendors handle data with extra precaution because their reputation is on the line once a contract is signed.

Cost

Purchasing a hosted solution requires an upfront fee and a monthly (or annual) fee. The fee is often a factor of the number of users an organization has and the amount of data they are storing in the system. The initial start-up fee is significantly lower than an installed software.

Cloud-based hosted solutions do not require a substantial initial investment because organizations are no longer required to integrate additional hardware to support software deployment, or purchase additional storage space to house their servers. Maintenance is virtually eliminated as all is taken care of on an external network through a 3rd party provider, allowing the IT staff to focus on revenue generating projects within the organization.

Using a hosted solution does not require organizations to purchase hardware, hire a dedicated experienced IT staff for support, or purchase and configure software onto individual computers. Therefore, hosted solution integrations require weeks compared to years that organizations require for installed software implementations. This yields a greater ROI over the lifetime of the application.

Customization

There is not a single application in which smartphone users can manage finances, access social media, check e-mail, and listen to music. Similarly, organizations aren’t restricted to a single application to meet all of their business needs. The possibilities are endless and hosted solutions are able to integrate with virtually any software with API tools.

Although cloud-based hosted solutions may not be customized to an organization’s every specification, one of the primary concerns for hosted solution vendors is ensuring their client is comfortable with the application interface with training, help boards, and 24/7 support. Clients import and export data using a common data interface, lending to familiarity with the solution.

Another benefit to choosing a hosted solution is that they are flexible enough to meet an organization’s changing business demands. For example, adding and removing users is as simple as a click of a button.

To Host or Not to Host?

Cloud-based hosted solutions provide several benefits including decreased TCO when compared to an installed software, increased accessibility, and scalability to meet business demands. Organizations still need to examine critical success factors like integration and alignment with current software to determine whether it will meet their current and future state needs. It is also important to conduct a rigorous package selection to determine what vendor most closely aligns with their needs.

Trenegy helps companies determine how to properly leverage the cloud to reduce complexity within IT. We help our clients get value out of their investments quickly and painlessly. For more information about IT solutions see Dispelling IT Outsourcing Myths… Do You Love IT?

The Secret Sauce for ERP Selection

Selecting the main dish is an important initial decision made when entertaining guests for a dinner party. A carefully chosen entrée prepared to perfection determines the ambience of the evening and permeates conversations for days. More important than the selection of the dish, are the careful selection of the ingredients, recipe and dinner guests. A proven recipe, fresh ingredients and enjoyable dinner guests ultimately turn spaghetti night into an impressive soiree.

Companies undergoing ERP selections must also focus on selecting the right ingredients to prepare for implementation. Selecting the optimal ERP are table stakes. The selection process should really focus on equipping the organization for the change that accompanies implementation. Sufficient implementation preparation during ERP selection increases the chances of a successful ERP roll out.

In addition to selecting the ERP software, the ERP selection process must include a recipe for the future, the right ingredients and inviting the best people:

  • Follow a Recipe. A system selection serves as an opportunity to receive input from employees to formulate a recipe for the future. Encouraging feedback during selection prepares employees for the future state organization and gives them a stake in the decision making process. Collectively developing an overall process improvement vision gives people visibility into the future process. Agreed upon future business processes can be a framework for scripted case demonstrations. The scripted use cases allow the key people in the organization to visualize the future. As processes are documented during selection, they can then be followed during implementation as test scenarios.
  • Pick the Ingredients. Outlining a robust plan for the ERP project during selection allows the organization to develop a realistic Total Cost of Ownership (TCO) budget and a timeline for the ERP system implementation. The potential system integrators (consultants) should be included in the budgeting discussions to produce an accurate implementation budget. Open discussion ensures that all ingredients are accounted for in every area of the organization including travel, team space, training, internal resources, change management, hardware and software.
  • Invite the Best People. System integration requires a team of internal employees to help design the system to fit the company’s needs. The selection process gives insight to those most excited about the new solution. This helps leadership identify the best internal people to steer the implementation. Asking for employee involvement in producing the future state vision and selecting the ERP solution will result in greater acceptance throughout the organization.

A productive selection process is less about choosing the right system and more about preparing for implementation. Trenegy helps our clients get the value they deserve from their ERP systems. Read how to properly manage selection process in: Preparing for an ERP Implementation…Reducing the Pain!

Finding Your Porcelain…….Where Industry Leaders Get a Competitive Edge

Drive on any of the major interstates in Texas and you will see a billboard with a cartooned Beaver stating “Fabulous Restrooms! – BUC-EE’s 150 Miles.” This message guarantees interstate travelers will pass all gas stations and wait 150 miles before the next restroom break. Travelers are rewarded for their patience with signs every few miles: “Got Porcelain? – 100 Miles” “Almost There, You can Hold It! – 50 Miles” “Get a Gift… Leave a Gift – 25 Miles”. Finally, “BUC-EE’s, Next Exit – breathe a sigh of relief!”

The carload of passengers arrive to 50 gasoline pumps, immaculate restrooms and unlimited snacks. The smiling beaver guarantees a minimum $150 in spending and thanks the departing traveler via a “Thanks for visiting! Next stop 200 Miles” billboard. Conversation immediately starts about how to make it to the next BUC-EE’s without stopping.

How do organizations attract new customers and gain the same loyalty as the travelers leaving BUC-EE’s? The most successful companies use the following techniques:

  • Finding Your Porcelain: It is unusual for a company to deliver the best products in a market across all of its product offerings. However, successful companies must excel in at least one area to draw in customers the way BUC-EE’s does. These companies then focus on expanding the customers’ footprint by making it easy and cost effective to buy other items and services. After ‘finding their porcelain’ the companies are able to focus on delivering superior service.
  • Delivering Superior Service: Providing the lowest price or highest quality product is not enough to create the same level of loyalty as BUC-EE’s. Bad customer service will lead to low customer retention and the best companies focus on providing better service than the competition. Better customer service not only guarantees more loyalty but studies have shown that people will often spend more if they receive higher levels of customer service.
  • Managing Add-On Products and Services: BUC-EE’s is great at getting travelers to part with their money as they walk out of the bathroom. Travelers invariably purchase more than needed and work hard to add to the items strapped to the roof of their vehicles. Managing add-on products and services is a bit more difficult for most companies. Sales teams are not properly informed and mismanage the opportunities for add-on services. To successfully sell add-on products an organization’s salesforce must be knowledgeable and continuously updated about add-on products.
  • Following up After the Sale: BUC-EE’S provides first-class service from the time customers walk in the door and thanks customers after leaving with billboards saying: “Aren’t you glad you stopped…….see y’all soon.” In addition to attracting new customers and providing great service, an industry leader must retain existing customers to keep its competitive edge. Most companies do a poor job of training the sales force to follow up after products or services are delivered. A simple e-mail or hand written note will often result in loyalty and another sale.

Increasing sales by just five percent will have an immediate impact on a company’s bottom line and must start with aligning the organization to focus on its core competencies. ‘Getting in the door’ with core products, providing the best customer service, effectively selling add-on products, and following up after the sale are all keys to success. Trenegy helps companies align their organization to find their porcelain and gain a competitive edge. Read how to become an industry leader in our blog: Bringing people Together: Competitive Advantage in the Oil and Gas Industry

Like a Kid in a Candy Store…. Selecting the Right ERP!

Letting a five year old child loose in a candy store produces surprising results. The five year old quickly becomes overwhelmed by the choices. After wandering through the store the child will randomly choose candy on the way out. This candy will not be completely eaten and will most likely be described as “yucky”.

It is common for companies to select their ERP in a similar manner. Without control, the initial excitement of identifying a large number of options quickly turns into an overwhelming chore. After countless meetings and vendor demonstrations the vendor who presented last is selected. The implementation starts off a little rocky and gets worse later in the project when the team is surprised with critical requirements that were over looked during the selection. The wrong ERP solution was selected. Yucky!

How can an organization select the right ERP? It is all about quickly short listing options, focusing on critical functionality, involving the right people in demonstrations and using a simple scoring method:

    • Quickly Short list the Options. There are a large number of ERP and ERP-like systems available in the market. For most organizations, the safest strategy is to limit the selection to solutions provided by known vendors including Microsoft, Oracle and SAP. At time, industry specific ERP solutions may be considered. Trenegy has developed an online survey tool to identify a short list of ERP solutions for any organization. Click here to access the tool.
    • Request Use Case-based Demonstrations. Most established ERP solutions provide similar functionality; therefore, it is important to focus on how the alternatives support critical business process requirements. Detailed use cases with supporting documents need to be developed and given to the software vendors. The demonstrations should focus on ease of use, support for critical business needs and reporting. “Add-ons” or “bolt-ons” should not be discounted and will often be required to support specialized requirements. ERP solutions rarely do it all. The level of integration required for these solutions needs to be carefully considered.
    • Involve the Right People. Hearing “I was not involved in the ERP selection….you should have picked the other solution…” from a key stakeholder in an implementation project meeting is deflating. The ERP selection process should be considered as the starting point for critical change management activities. Getting the right people involved early and often creates demand for the new system and increases support for the project as a whole. Expanded team involvement can often help plug holes in the use cases and can validate whether the new system will support the business requirements.
    • Use a Simple Scoring Method. A new ERP is a significant investment typically requiring approval by senior management and the board. A simple scoring approach consisting of total cost of ownership, support for critical functionality, technical fit and a subjective ranking can be four simple criteria used to select the right option. Many companies use complicated scoring methods. However, the final selection usually boils down to how the team “felt” about the ERP options.

    Trenegy helps companies successfully select the right ERP using a simple approach supported by proprietary tools. We help our clients get value of out their new system quickly and relatively painlessly. Read how to properly prepare for implementing the ERP in: Preparing for an ERP Implementation… Reducing the Pain!

The Slap Game… Working Capital Management

The “slap game” is a popular tradition for middle school kids looking for ways to fill the monotony between classes. Opponents face each other and attempt to slap the other’s hands as quickly as possible. It is a great test of reflexes; however, both opponents eventually end up with red welts on their hands. Nobody wins this totally pointless game.

Companies are playing the “slap game” with each other when managing working capital. Procurement departments slap vendors into 60 or 90 day payment contracts. Meanwhile the same company’s sales organization is getting slapped by their customer’s procurement departments. Not too long ago, 30 days was the standard terms for a vendor contract. Today, procurement and supplier contract organizations are pushing the envelope to 60 and even 90 days. This is completely ridiculous!

Companies extending each other’s payment terms is unadulterated working capital gamesmanship. There is no winner and most organizations are actually slapping themselves with additional headcount costs, poor pricing and quality issues.

Slap #1 Headcount – To perpetuate the working capital gamesmanship, organizations create and staff contracts and sourcing functions to pressure vendors into submission. These functions delay contract agreements while adding administrative overhead. According to surveys, an average $1 billion organization has double the necessary contract and sourcing staff. This staff costs an average of $2 million per year while only saving $1 million per year in working capital gains for 30 days DPO. What is the point?

Slap #2 Pricing – Savvy sales organizations have become less lenient with pricing concessions on slower paying customers. A recent survey of pricing scenarios is eye opening. Pricing concessions on 30 day payment term customers was 2% more favorable than 60 day payment customers. This translates into $6MM per year in excess spending for a $1 Billion company. In other words organizations are spending more to spend more. Red welts are showing!

Slap #3 Quality – Organizations have a greater incentive to keep the faster paying customers happy. In a survey completed by Trenegy in 2013, faster paying customers tended to get priority for shipping, service response time and overall quality. Poor vendor quality can cost more than the savings in working capital. The red welts are now hurting!

Working capital management is typically the window dressing on the balance sheet and should be properly managed. Unfortunately, organizations tend to take the path of least resistance. It is easier to beat up a vendor than to push back on customer payment terms for fear of a lost sale. Losing a sale over payment terms does not happen. Organizations should spend less time fighting the vendor contract terms and more time focused on getting the customer contracts right. This is where the true value is and the slaps end.

Trenegy helps companies develop processes to manage working capital without succumbing to the ‘slap game’. For more information about how to interact with customers correctly early in the process and help a company better manage working capital read “Demystifying the Oil Field Services Bid to Bill Process…. Back to Basics”.

Handcuffing the Kraken…. Realigning for Growth

The Kraken is an imaginary sea monster that would attack a ship by wrapping its arms around the hull and capsizing it. Sailors would terrify new crew members with stories of ships that were attacked by the monster with no warning. It is common for fast growing companies to suffer the same fate as the ships attacked by the Kraken. The fast growing company Kraken is the unexpected administrative complexity of a larger organization.

Often acquisitions are abruptly added to the portfolio with little time to combine back office functions, organizations or systems. Organization roles and responsibilities are not consistent and the staff resolve issues as each group sees fit, magnifying the problem. Reporting becomes a nightmare and investors become frustrated. The complexity of the environment is paralyzing the company and bottom line growth stops.

The Kraken has been released!

How can fast growing company hand cuff the Kraken and realign for growth? It is all about putting structure in place to get the Kraken under control. The most successful companies take the following steps when realigning for growth:

    • Integrate common functions. The first step to realigning for growth is to integrate common back office functions including finance, procurement, HR, IT and billing. Integrating back office functions is not easy. Legacy owners and management would rather not give up control of their functional organizations. Legacy owners will argue every function is critical and uniquely provides a competitive advantage. This is simply not true – any non-customer facing organization can be a candidate for managing centrally. Payroll, Technology, Finance, Payables, and Procurement all fall within this category. Developing a clear definition and company alignment of roles and responsibilities will help determine the reporting structure within an organization. Once defined, employees can be reassigned to clearly understand the role and align the business for success.
    • Deploy standard processes. Fast growing companies do not have the luxury of taking time to develop standardized processes and procedures. Each manager often leverages and implements what he or she experienced with former companies. This creates conflicts between functions, product lines and geographies. Developing and deploying standardized processes makes it easier to manage common back office functions and time should be taken to standardize processes. Standardized processes improve information flow, reduce errors and will increase investor confidence in senior management’s ability to control costs.
    • Standardize Budgeting, Planning and Forecasting. Investors want timely and accurate forward looking performance information. In many cases, each acquired company is asked to provide a plan which is manually consolidated and sent to the investors for approval. The monthly process of manually tracking actuals to plan becomes a nightmare. Worse, investors become irritated and suspicious when the reports are not provided in a timely manner. Simplifying and standardizing the planning process is critical to keeping the investors happy. Variances can be more easily explained and software tools can be implemented to provide more timely information.
    • Implement a common ERP system. The last step in realigning for growth is to select and implement a common ERP platform across the acquired companies. A common ERP enables management to have real time information of sales, inventory, customer profitability and other critical information across the organization. Decisions can be made faster, standardized processes can be enforced, and portfolio companies can cross sell products. Month end close can be reduced because intercompany transactions and consolidations are automated. Investors will get their information more quickly.

Trenegy helps companies successfully realign for growth by simplifying the organizational structure, developing standardized processes and implementing new systems. We help our clients prepare for growth and change quickly and relatively painlessly. Read how to properly integrate acquisitions in our white paper: Planning for the realities of M&A Integration.

The North Wind and the Sun… Effective ERP Change Management

Aesop’s fable about the strength competition between the North Wind and the Sun is a classic metaphor characterizing the difference between persuasion and force. The challenge was to see which could make a passing traveler remove his cloak. No matter how hard the North Wind blew, the traveler only wrapped his cloak tighter. However, when the Sun shone gently, the traveler became warm and had to take his cloak off.

Unfortunately, it is common for ERP implementation teams to take the North Wind approach to change management. Mass emails are distributed, web based conference calls are held and corporate mandates are communicated. Similar to the traveler and his cloak, people continue to resist change regardless of what they are being told. The longer the web meetings and communications, the more resistance is encountered.

How can the ERP project team avoid having people resist change? The most effective ERP change management teams use the following techniques during implementation:

  • Engage early and often.People want to be heard and treated as if they are important. Visiting with people in their environment is a clear indication the project team members are listening to concerns and care about what happens when the new ERP is implemented. People will listen to tough messages if they believe the project team cares enough to make an in-person visit. The message is not considered as an edict from faceless tyrannical headquarters staff on a conference call.
  • Share the “Why”. People want to know more than the ‘what’ and ‘how’. Everyone wants to know the ‘why’. Sharing the reason for moving to a new ERP provides people with a perspective. A District Manager once said “now that I know why we are making this change, I will follow the new policy…I want to do what is best for the company”. Dictatorial edicts for operating in the new environment often leads to people digging their heels in and ignoring the changes
  • Ask for input. People understand change is inevitable once the ERP project is announced. Most people have good ideas for how to improve operations or make day-to-day activities more efficient. Ask for the ideas and find ways to incorporate at least one or two ideas into the new process. Obtaining input from a wide variety of people allows the ERP project team to create demand for change.
  • Involve people in design confirmation and testing. It is surprising how often key people are first presented with the new processes and system during training. Until then, only the core project team has designed and tested the new environment. Involving a larger group of people in unit, integration and user acceptance testing is a low cost and easy way to involve people and increase acceptance. Participation in testing new processes and system functionality helps identify ‘show stoppers’ and creates goodwill.

Effective ERP change management involves persuasion through involvement. By enlisting help and support as opposed to demanding change, people will be more accepting of their new processes and roles in the system. Trenegy helps companies create demand for change to help ensure new ERP systems are used to support day to day activities. We help our clients get the value they deserve from their ERP system. Read how to properly manage an implementation in our blog: Boiling the Frog… How ERP Implementations go wrong.

Is it ‘Groundhog Day’ at Your Company? How to Improve Budgeting, Planning, and Forecasting

TV weatherman Phil Connors, played by Bill Murray, finds himself in a never-ending cycle of repeating the same day over and over again in the movie ‘Groundhog Day’. Phil gets to the point of anticipating events and no matter what is done, the results do not change. Phil is in a rut and many companies experience the same type of déjà vu with the budgeting and forecasting process.

It is the beginning of a New Year. The annual plan was approved by the board before the holidays, the accountants just closed the books, and it is time for the first monthly forecast for the coming year. Everything seems like all is in order but the same complex forecasting spreadsheets are being converted to a new year, stale metrics are being calculated, and lengthy instructional emails are being readied to be sent throughout the company. It looks and feels like the movie ‘Groundhog Day’! Worst yet, companies will continue to get the big surprises in results that need to be analyzed, reported, and explained to management.

Most companies will wait until the second half of the year to improve budgeting, planning and forecasting. However, this is the perfect time of year to start getting ready for a new planning process and system:

  • Improve processes while last year’s planning pain is still fresh. The planning process involves people who are too busy to make on-the-fly changes to increase process efficiency. Suggested changes to the iterative process are often overlooked because people are relieved to be done with planning and put off changes until later. A formalized process improvement discussion is the perfect forum for people to share and collaborate on ideas for the next cycle. Going through a process to improve budgeting, planning and forecasting is most effective when the wounds are fresh and the ideas are not forgotten.
  • Redefine KPI’s to make a difference for next year. The organization would benefit greatly by reducing surprises with a refreshed planning process. There is often a big disconnect between the short term and long range plans. Many KPIs do not have relevance to managing day to day business activities and the monthly forecasting schedule seems to drive business events, not the other way around. The executive team can take advantage of the process improvement discussion to link the strategic vision of the company with the tactical business plan for more predictable, timely and accurate results. Revisiting the KPI’s and communicating strategic vision will drive changes to the organizational structure and communicate new roles and responsibilities.
  • Take advantage of simple solutions. Spreadsheets are the tool of choice for most planning processes. Unfortunately, spreadsheets are prone to error and limit the level of analytic reporting that can be performed. Typically companies will consider ‘big box’ software that requires significant effort to implement and support. There are cloud based, inexpensive, and easily implementable solutions like Host Analytics which improve budgeting, planning and forecasting at companies.

Forecasting accuracy can improve with the proper blending of process improvements, organizational change and new tools. The first step is to define the process, followed by assigning roles and responsibilities and finally selecting tools. Overemphasis on any one can lead to an imbalance that can impact results.

Trenegy helps companies create demand for change to help ensure new planning processes and systems are used to support more predictable and accurate results. For more information about how to revisit your KPI’s please read “What are you hiding? Finding Metrics that Matter”.