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When ERP is botched, CFOs must act

Fred O'Connor | Feb. 1, 2012
Companies long have grappled with glitches in their ERP (enterprise resource planning) system implementations -- a situation that the recent botched-rollout record suggests won't get better any time soon. While ERP projects go awry for many reasons, each incident reveals its own set of troublesome repercussions, financial and otherwise.

Said Martens, "Vendors come in and promise the moon." But if you talk to other customers, seeking unbiased reviews, you can "get a sense of the product because they'll tell it straight."

After selecting a vendor and moving on to contract negotiations, avoid hourly charges for the work it does, added Gandy. "I hate the billable hour," he said. "You're not paying for seats. You're paying for results." Instead, set up a payment plan based on reaching project goals determined by the vendor and company.

That offers a "very solid timeline of what work would be done and when, and the remedies if we didn't hit these deadlines," he said. Paying by deliverables, he has seen, allows the company to have projects completed and running before cutting the vendor a check.

Competition from cloud computing, though, has forced traditional ERP sellers to offer new deployment strategies. And finance chiefs may like the new offerings, said Martens. ERP vendors introduced packages that cover all components of a deployment for a set price, a counter to software as a service and its claims of offering cheaper and easier deployments.

"They try to package something up that is the software, the services, the training and commitment to implementation and try to hit various mast ends," she said. "The idea is that everyone sits down, you map things out and there is a fixed price," she said.

Martens cautioned, however, that companies get what they pay for. When two ERP companies were pitching all-in-one deployments to her client, they both cut the contracts' cost by scaling back on services included in the implementation.

For Gandy, when weighing the benefits and drawbacks of various ERP suites, overall functionality, not cost, is the deciding factor. He will increase his budget slightly if the extra investment means a return that benefits the company years later.

"If I have to spend an extra $10,000 on a really good system," he said. "I'm going to talk my client into getting the best solution, because we're going to live with it for the next 10, 15 or 20 years."

 

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