SMBs should follow a benefit oriented approach to ensure they get the maximum returns on their ERP investments and avoid the project being dictated by technology demands. Part I of the blog discusses the role of a Benefit Realization Manager and Part II, the process to be followed for in such an approach.
ERP Systems constitute the core of the IT landscape of many businesses now. For a long time, due to the high costs, they were largely a prerogative of large companies in India. That situation may be changing now as we find a number of SMBs (small and mid size companies) opting for these solutions. There could be several factors for this shift. The important among them may be the realization at ERP vendors that they are losing out on a large market base and as a consequence rushed to occupy that space with quickly rustled up stepped-down variants of their products. These were priced lower than the original versions and came with reduced scope that seems adequate for SMBs. To some extent, the advancements in technology such as cloud and falling hardware costs have also contributed to higher adoption. Further, the expanding vendor base of ERP developers, re-sellers and implementation agencies have come together to provide meaningful choices to SMBs to select the best fit ones that suit their businesses.
SMBs that are currently evaluating or in the process of implementing ERPs would do well to learn from the market experience to avoid certain pitfalls and issues faced by their predecessors. As they normally operate in tight resource conditions, investments in projects such as ERP that involves large outlay in terms of costs and effort, need to be thoughtfully planned and executed towards aiding than testing their already constrained resources. However, for every success story we find more than one horror stories which narrate instances of costs and time overruns and disruptions to businesses leading to loss of revenue and reputation. It may seem that by and large, ERPs have not delivered value to the businesses commensurate with the investments. A number of studies have been conducted on this subject and critical success factors have been propounded to aid an effective implementation. Management oversight, scope and schedule management, data accuracy, experienced implementation team and user education and training find prominent mention among them. While these are indeed crucial for the success of the implementation and should be looked after, one of the key success contributor that does not come out as strongly as it should is an approach that is grounded on extracting the most in the form of business benefits from ERP.
A benefit oriented approach would require right decisions to be taken at every succeeding stage of the project -planning to implementation to post-implementation- that are directed by expected outcomes than technology demands. Such an approach will need an owner responsible for ensuring that the benefits are realized and a supporting process that is closely aligned to the business outlook of the organization.
The benefits that can accrue to an SMB or even for the larger organization can be classified into 4 areas:
- Business outcomes – which can be measured in quantitative terms. While the measures at a high level are simply revenues, costs or customer service, those role up to these measures need to be targeted in an ERP implementation. Metrics such as forecast accuracy, inventory holding, on-time-in-full deliveries or receivables are some.
- Process effortlessness – The benefits in these areas are related to ease of completing a task such as invoicing or finalizing the monthly accounts shortly after month closure.
- People empowerment – Due to ERP, people should have access to accurate and recent data that can enable them take proper decisions in accordance to their levels and as expected by the management. They will be expected to spend more time on analysis to improve their divisions’ performance than compiling data for decisions.
- IT Management and costs – While the investments in ERP can be high, SMBs can expect their ad-hoc IT costs and spending on repairs and reconstruction of IT applications to come down. The maintenance costs should more predictable and hence planned much in advance. The support to the users would follow a more structured process whether it is maintained internally or outsourced to a vendor.
In order to ensure the expected benefits are accrued across all these areas, the responsibility of achieving these may be vested with a ‘Benefits Realization Manager (BRM)’. The BRM role is different from a Program /Project Manager in that the latter would be more concerned about the completion of the project within agreed costs and time while the former will focus on extracting the maximum benefits from the ERP investments. One may argue that such benefit orientation should rightly be expected from the next level project team members, but in reality we may find them so immersed in trying to understand and share the process and system intricacies that they tend to lose the sight of benefits. A BRM can fill that gap and for an effective ownership, he/she should preferably be an ‘insider’, someone from the senior management who understands the organizational objectives and barriers and knows what can solve them. The BRM would form an integral part of the initiative right from the beginning, interact with various functions for inputs on expected benefits, assemble them in a coherent way, direct the project teams with right inputs and ensure they buy into the imperatives. He/she may seek additional support from a consultant if required, but needs to ensure that the consultant has a good understanding of the domain and organizational issues.
As said earlier, to achieve the desired benefits, the BRM needs to follow a structured process that with right level of interventions at each stage of the project. Such involvement would cover preparing a business case, measuring the current and deciding the target performance indicators, ensuring the solution is designed and built accordingly and later after when the stable state on the system is attained, conducting a review on the benefits accrued.
In Part II of this blog, we will discuss more on the process to be followed in the benefit oriented approach.