Enterprise Resource Planning (ERP) often describes a broad set of applications that assist companies in running efficiently and effectively by helping them do everything from track orders to purchase parts to provide customer service. In the late 1990's, ERP projects received a bad reputation because many of them were extremely costly were not well thought out. One well-known company spent over $100 million on its ERP project only to have such severe problems with the software, that revenues fell by almost 20% in one quarter. Thankfully, the ideas behind ERP projects have changed and developers have learned enough from the mistakes of others to have vastly improved the way these systems are implemented today.
One of the biggest mistakes companies made with their ERP projects in the past was over-customization. Instead of finding a model that worked for a particular industry and applying that model of best practices to other companies in that industry, ERP developers wanted to often work from scratch and come up with a company-specific ERP system. While specialization is often an excellent idea in business, over-customization simply made it more likely that mistakes would be made in the finished product. This is what happened in some projects.
Today, more ERP developers are focusing on templates of best practices for certain industries. When a business wants to implement ERP, they simply use that proven-effective model without any additional bells and whistles. Of course there are drawbacks to using one template to cover every company in an industry, but overall the change has resulted in a reduction in ERP implementation problems and greater project efficiency.
Another common problem many ERP projects used to face was resistance from employees and those that would be working directly with the applications once these applications were live. Many of these people had spent five, ten, even twenty years developing their own systems for doing their job, but when ERP was introduced, they were essentially being told that their way simply wasn't good enough and that they need to adjust. This attitude created resentment and apathy among workers and often caused production and efficiency problems.
ERP implementations are large and now must include all employees; not only in the training aspects but also in preliminary discussions of how a prospective application should work. ERP specialists have come to realize that the key to getting workforces to accept these new business practices is to explain that they aren't simply different but they are better and that they will make their jobs easier in the long run.
Pricing is another pitfall that companies often fall into when implementing ERP systems. Originally, an ERP system's cost was based on how long it took for the applications to be readied and the staff to be trained. Depending on the ERP's developer, the process could last for months and the cost could skyrocket. Millions of dollars were spent of ERP projects that were not completely finished; many of those businesses simply ran out of money and couldn't continue to pay for something that was not done.
Now, however, most ERP implementations involve a contract that sets a specific price and often a specific time table for the project as well. Companies know how much they are going to have to pay upfront, so there are few surprises. Occasionally, additional costs do arise that are outside of the scope of the fixed-cost contracts, however, the price for these is minimal when compared to the costs involved before the safeguards that these contracts offered. By also setting a time line for the work, companies are able to make better plans for their business future. They won't be left hanging around and waiting while the ERP implementations goes on for months or even years.
Before implementing an ERP, company decision-makers need to talk to their workers and get their feedback about the idea in order to minimize future resistance, then they need to set a budget for the project and sign a fixed-price contact that fits that budget. But to be truly success, they must recognize that what's worked before is most likely to work again.