Reducing ERP Project Risk: Why the Right Provider Matters

Reducing ERP Project Risk: Why the Right Provider Matters

Introduction

If your business is in the market for enterprise resource planning (ERP) software, there are generally two options for implementing the chosen software – working directly with a software publisher or working with a service provider and value-added reseller (VAR).

Today's ERP projects can often require collaboration with multiple parties; independent software vendors (ISVs) and other line of business application consultants, as well as with your internal resources to support detailed planning, personalization, and change management. ISVs collaborate with business process outsourcing specialists (BPOs), and referral partners — many of whom play a unique, yet non-implementation- focused role. Full-service providers, like Citrin Cooperman’s Digital Services Practice, provide the full range of services mid-market companies need to successfully implement today's more advanced cloud-based ERP systems.

Our practice and methodology were built from the ground up, with a focus on the user experience – building value for our clients and making sure their key team members can make the most of the technology they are going to use. Our fully integrated framework spans 14 stages covering engagement through input, transformation, output and ultimately value realization, to deliver fast, effective, and highly reliable solutions.

A SOMEWHAT HARMONIOUS ECOSYSTEM

Before embarking on an arduous ERP implementation, it is critical to fully understand all of the possible risks associated with such a project, and how selecting the right service provider can present impactful opportunities for your business.

For a harmonious ecosystem to exist, the ERP implementation service provider needs to work collaboratively with the ERP software publisher, the ISVs, as well as the BPO specialist to reduce project risk. The implementation service provider’s subject matter experts need to have a strong relationship and comprehensive knowledge of the software platform and it’s ecosystem of specific industry segments. This is key to our success as our Digital Services Practice and our BPO practice work closely with the various parties to ensure seamless coverage for the full lifecycle of ERP integration, implementations, and management.

A somewhat harmonious relationship exists between these players because of the unique skills and experiences that they each have. For example, an ISV may have incredible success building a unique solution for an ERP vendor that allows them to achieve a better fit within an industry. A BPO specialist may be able to position its client for expansion. A publisher may dedicate years or decades to researching, building, and refining a product and a VAR may spend decades implementing one or more solutions.

However, that same ISV may find it more lucrative to focus specifically on development rather than delivery and rely on a limited or nonexistent implementation practice. Added to this, the vendor is focused on one product and may not be as product-agnostic or focused as a VAR. Given all of these factors, selecting the right VAR to lead your ERP implementation is critical to its success while reducing risk, uncertainty and cost.

DON’T CROSS THE STREAMS

Understandably, that is why we said somewhat harmonious. Just because each of these roles has a vital part in the channel does not mean they are going to stay in their lanes. Driven by profit motive, investor pressure or return on investment (ROI) expectations, it is relatively common for some companies — often vendors and sometimes ISVs — to cross the streams and move into the implementation provider space.

It is important to fully understand the implications of working with a dedicated implementation provider instead of directly with the vendor. In the coming pages, we hope to explore the risks that come from working directly with a vendor and discuss some best practices for selecting an ERP provider who puts your business first.

Why Do ERP Projects Fail?

There are many grim statistics demonstrating the fickleness of ERP implementation — it is important to understand the pitfalls before taking on such an endeavor. According to the Standish Group, 60 to 75% of ERP implementations fail, a frightening prospect for businesses in the market.

Whether these failures result in a damaged reputation, strained professional relationships, or legal battles, the media is all too happy to highlight high-profile ERP failures. Pair this with other challenges or lowlights in the ERP space—a third of executives and workers are unsatisfied with ERP, more than half of projects exceed time and budget constraints, and a full nine in ten projects fail to deliver measurable ROI —and you may become more skeptical.

Why would a company actively pursue a project that fails more than half the time? The reason is simple — most businesses do not have a choice. Much like a heart transplant, an ERP implementation is not exactly an elective surgery — it is often initiated by necessity.

This could be due to rapid growth that is limited by the current software, the end of a legacy license, or simply a decision made to ensure future organizational growth. No matter how the decision is reached, it is not a decision that was taken lightly. So, if these failures were not the result of hasty decisions, why do so many other projects fail?

From mismatched providers to mismanaged expectations, the following are some of the most common reasons that an implementation project goes off course.

POOR SOFTWARE FIT

The most obvious of the ERP failures is poor selection. Sometimes this is a result of faulty research, other times it is the result of overzealous sales teams at unscrupulous vendors. Either way, this is a common concern for businesses looking at ERP software, as a lack of due diligence can leave you spending money on a product that does not work for your business or that will need intense customization to implement.

MISMATCHED CLIENT AND PROVIDER

While the software is one part of the equation, the team you work with is another. These are the individuals who will be guiding the process, and it is important that you are getting the right people from your provider.

For example, it is very easy to work with a provider who is way too large for you and end up with their lower-level team. It is easy to end up working with a provider who says they handle your industry, only to find out they do not understand the nuances of your business.

It is just as easy to work with a provider who is too small for you, who despite their best efforts, simply does not have the workforce to support you. Smaller, less experienced teams can save you money on a basic implementation, but start adding customization, integration, and intense configuration, and the project can begin to fall apart at the seams.

UNENTHUSED LEADERSHIP

Without an executive sponsor and a motivated leadership team, the rest of your staff will follow. Without total leadership commitment, purse strings may be tightened and leaders may be all too willing to pull the plug on a project that would otherwise put your business in a better position. ERP Focus recommends postponement over taking a gamble with the hope that leaders will come around.

POORLY ALLOCATED RESOURCES

You know your own team, and with the right research, you can fully understand your ERP implementation team. However, a lack of commitment to either could end with a lack of technical or functional skills needed to do the job. Ensure that you are ready to invest, put your top people on the job, and get the best from your provider.

In addition to this, you also need to establish a chain of command and chain of communication early in the process to establish accountability both from your own people and your provider.

BAD CULTURAL AND MANAGERIAL FIT

Your business is going to spend a lot of time on an ERP implementation, granting a lot of access to a third-party and working closely with the implementation team over the course of a project. Depending on the internal resources committed to the project and the scope of the implementation, you need to ensure that your people are going to get along with your provider. A bad cultural fit between internal and external resources can result in people butting heads, morale drains, or other unfortunate results.

LACK OF PROVIDER DEPTH EXPERIENCE

Throughout the process, your ERP provider is going to spend a lot of time migrating data, moving it around to fit into the new solution, and running cleansing and preparation in anticipation of go-live. Much like the challenge that comes from poor size fit, a lack of depth can result in your provider failing to understand the nuances of your business and their effect on the implementation.

INSUFFICIENT TRAINING AND CHANGE MANAGEMENT

ERP implementations are significant changes to your business. In fact, many of these projects can push you towards a larger business transformation if handled properly. However, if you are not investing in the larger change management aspect of the business, people will not be ready or willing to adapt as the implementation takes place. Training — both in the software and the processes — is critical and needs to be invested in.

Additionally, know what you are getting from the training process. One hundred hours of training from a knowledgeable specialist who understands your business is far better than 200 hours of training from a generalist.

When Do ERP Projects Go Awry?

With failure being so common, this topic has been well-researched, making it reasonably easy to document the challenges that companies face throughout the process that can lead to the project falling apart. From the earliest research stages to the day your new ERP goes live, the reasons mentioned above can be ironed out with the right planning and provider.

THE SELECTION PROCESS

The first and most obvious reason that ERP can fail is that you chose the wrong product for your needs. While many things can be adapted during the process, if you start with the wrong ERP, you are essentially putting diesel into your gas tank. The only difference, however, is that instead of a binary diesel vs. gasoline decision or even a selection between the different octane ratings, you have dozens of options that all sound plausible — until you start to drive.

In turn, selection process failure accounts for up to ten percent of projects. Considered the first stage of ERP implementation by independent ERP consultant Third Stage Consulting, this accounts for ten percent of projects and occurs after the software and providers are selected. However, this is about as far as the project goes, with the project starting but getting scrapped partway through. From a poor cultural fit to poorly documented needs, it is easy to back yourself into a corner and see your initiatives falter.

1

PRE-SELECTION MISTAKES

The selection process begins long before you even start talking to vendors and providers. Below are just a few of the common mistakes that occur as businesses prepare their short-list of preferred vendors and providers.

The early stages are critical to the long-term success of your business’ implementation. Executives need to be able to communicate that a decision needs to be made and will be made. End user teams or department representatives need to document the challenges they hope to address and the benefits they hope to receive. Early-stage ROI analyses needs to present the financial benefits of moving to a new system.

2

SELECTION PROCESS MISTAKES

Even if you have the internal buy-in, the teams necessary to lead the selection process, and the right communications initiatives in place, the selection process is yet another area where things can go wrong. Though interest, morale, and excitement may be high, many decision makers can fall into a trap set by unscrupulous providers or vendors that lead them into a decision that ultimately fails.

One of the most important lessons to learn is that a strong implementation is going to do a much more than an overzealous research process — but only if you diligently work to get effective results. The selection process requires you to walk a tightrope with your resources. Momentum matters and if you are spending months in meetings, you are wasting productivity and losing momentum.

3 THE IMPLEMENTATION PROCESS

Much like the selection process, the implementation process is critical and often can be risky without the right provider to get you there. An ERP implementation takes significant time and resources and requires incredible focus with open lines of communication.

Your project team, your executive leadership, and the provider you choose to work with all need to be on the same page regarding responsibilities, expectations, and plans of execution.

Why Directly Working with Vendors Is a Strategy Bound for Failure

Now that the risks are well-known, what does this have to do with crossing streams and why does it pay to work with providers instead of vendors? That is simple — nearly everything mentioned above is much more likely to take place when you work directly with the company who makes the product.

It may sound counterintuitive — after all, they built the product, so they should be the best equipped for the job, right? Surprisingly, no. Nearly every problem listed above is exacerbated when you work directly with a vendor. Here’s why.

ONE PROVIDER – ONE SOLUTION

You have probably heard the idiom, “If all you have is a hammer, everything looks like a nail.” For the sales staff at an ERP vendor, all they have available to sell are hammers.

FINE FOR HITTING THE NAIL ON THE HEAD — BUT MAYBE NOT FOR EVERYTHING

Do you work in a niche industry that has never exactly had specific functionality designed for it? Still just a nail for the salesperson with the hammer. Do you have a unique business process that would not exactly fit into the product? Same hammer and nail.

What is the best way to end up with a poor software fit? Rely on a company who only sells one product. Salespeople are trained to understand that the hammer is not just the best tool, it is the only tool. Not only could this result in a bit of an exaggeration in the sales process, but it could also result in promises that a vendor’s engineers cannot keep. Normally, this would not be a major problem — there are a few ERP providers who have done quite well with one product or niche. But as we discuss below, it is not just a hammer and nail problem, it’s a ‘carpentry’ problem too.

THE IMPLEMENTATION PROVIDER ADVANTAGE

For many implementation providers, reputation is key, and word travels fast. One failure often results in a missed opportunity from some other end. While it is much easier for a vendor-side implementation failure to get buried in non-disclosure agreements (NDAs) and settlements, a provider puts their reputation on the line any time they take on a project.

If you are about to set aside money for a five- or sixfigure project, you need to know that you can rely on that provider to get the job done correctly. The right provider will put significant effort into getting to know your business before they even touch your software. Their goal is to know whether they will be a good fit before the project starts, and many will back out or recommend a product that represents a better fit.

A DISCONNECTED SALES AND IMPLEMENTATION PROCESS

ERP is pitched as a solution that allows you to connect disjointed processes. Unfortunately, ERP vendors do not exactly have the same connection between their sales teams and engineers as a reseller.

If a reseller’s implementation team misses the mark set by the sales staff, they are still going to have to interact with that person. If the salesperson makes an unattainable promise, you can be certain that issue will come up in a meeting.

However, with a vendor, the sales staff and implementation teams exist in separate bubbles. Less accountability means less feedback, less feedback means more unattainable goals.

THE VENDOR’S JOB IS DEVELOPMENT, NOT IMPLEMENTATION

Vendors are great at development. They put a lot of money into research and development (R&D), hire the best developers to create products, and continue to improve the product at least twice a year. However, more often than not, they are not skilled in implementation. While software vendors develop great software, believe it or not, they don’t always know the nuances of implementing the technology nor do they truly understand if the software is the right fit for the buyer.

Citrin Cooperman’s Digital Services Practice is highly skilled in implementing ERP software, and in our years of experience, we have become adept at identifying the warning signs and the steps to address and correct red flags before they derail the process.

What Goes into Selecting the Right Provider?

As previously mentioned, vendors make incredible software but may be limited in the skills necessary for successful implementation. If your business is in the market for an ERP product, you will be preparing to install a product that affects nearly all of your employees and nearly every aspect of your business.

ERP is such an important part of your company’s management structure — the implementation and use of the system has to be done right. The right provider can help you get through the selection process, prepare your business for the implementation, train your employees, and support you for years to come. Your business’ success is their success, and if you are looking for a company who can put you in a position to succeed, here are some important considerations.

1

ARE THEY HONEST? THE IMPORTANCE OF MANAGED EXPECTATIONS

With the risks of standing still nearly as painful as the risks of hastily jumping to a solution and provider, it is important to be practical, pragmatic, and prepared. One of the many reasons that ERP implementations fail is due to poorly managed expectations.

You can have an internal team ready to lead the project, a project sponsor who can get everyone on board, and communications initiatives in place, but if your implementation provider has not given you all of the information you need, your implementation project may be progressing in the wrong direction.

There are very few ERP implementation professionals available who align with your business’ needs. The right ERP implementation provider will prepare you for the challenges that can and will arise during deployment and implementation and brief you on additional concerns that may appear during ongoing operation of a software. They will not give you false hope or lofty expectations, and will be honest about options, risks, and challenges you will need to overcome.

2

HAVE THEY HAD SUCCESS WITH SIMILAR CUSTOMERS?

One of the easiest ways to know if a project will succeed is to ask for references. The candidate provider should have a track record of successful projects similar to yours and should mention them throughout the sales process. If you do not hear any names, beware. Also listen for (and ask for) background and references for the specific consultants that will be working on your project.

3

ARE THEY GOING TO SHOW YOU THE LINEUP CARD BEFORE THE GAME STARTS?

Before any baseball game, the managers hand the lineup card to the umpire and the other team. Switches need to be documented, and any change without notice is going to result in an automatic out.

Similarly, you need to expect your provider to hand over their own lineup card before they get to work on the implementation. Unless you are dealing with a small firm (only one or a few consultants), you may meet their “star” consultants who might not be assigned to your project.

Be sure to get (in writing) a roster of consultants who will be working on your project and vet their length and diversity of experience. Meet them or conduct phone interviews just as you would with a potential employee. Does the provider firm have a “bench” of consultants that can provide back-up and assistance if needed?

4

DO THEY UNDERSTAND YOUR BUSINESS?

Something you will likely find out when you ask for references or look at the size of the firm is whether or not they have had success in your industry and are able to handle the project. A provider should have well-documented success in your industry and should be able to discuss your business no differently than if you were talking to someone from within the field.

The Right Provider for Your Business:

Citrin Cooperman’s Digital Services Practice

Despite the challenges presented during ERP implementation, finding the right provider and system can produce incredible benefits to your business.

Citrin Cooperman’s Digital Services Practice at is a leading provider of integrated business solutions and information technology products and services. For more than 25 years, our team has worked with companies to deliver the right technology solutions to propel business success. We are dedicated to helping businesses throughout the ERP selection and implementation process, providing straightforward, actionable advice through every step.

ABOUT CITRIN COOPERMAN

Citrin Cooperman is one of the nation’s largest professional services firms, helping companies and high net worth individuals find smart solutions. Whether your operations and assets are located around the corner or across the globe, we can provide new perspectives on strategies that will help you achieve your short- and longterm goals.

For decades, Citrin Cooperman has specialized in offering professional service organizations innovative, timely, and sage advice to improve operations and enhance profits. We bring our deep knowledge of the professional services industry to you, allowing you to focus on what you do best, driving strategy and growth.

ERIC J. CASAZZA

Managing Partner

Digital Services Practice

ecasazza@citrincooperman.com

Erica Casazza is Citrin Cooperman's managing partner for the Digital Services Practice and managing partner for the firm's Carlsbad office.

Eric has more than 27 years of experience leading information technology organizations and enterprise solution programs and strategy including ERP, CRM, cloud productivity, integration and business analytics.

Eric joined Citrin Cooperman through the acquisition of FMT Consultants, a leading integrated systems provider for Oracle NetSuite, Salesforce, and Microsoft in June of 2023. Prior to joining Citrin Cooperman, Eric was the CEO of FMT Consultants for 12 years, significantly growing the organization to one of the largest and most reputable system integrators focused on middle market organizations, especially in manufacturing and distribution and health and life sciences. In addition to his IT experience, Eric is a recognized professional in staffing, business process optimization, project and program management, and mergers and acquisitions.

JORY WEISSMAN Partner

jweissman@citrincooperman.com

Jory Weissman is a partner in Citrin Cooperman’s New York office. Jory is an experienced professional with over 25 years in the technology industry, consulting, designing, selling, supporting, and implementing solutions across a variety of technology platforms and applications.

Jory’s thirst for learning and his practical industry experience have given him an insider’s perspective into thousands of businesses, including manufacturers and distributors, the industrial, food and beverage, and CPG sectors, financial services firms, and countless other niche businesses and processes. Jory has been named "Top ERP Sales Professional" for four years in a row with AccountMate Corporation and is a Microsoft, Acumatica, and NetSuite Certified Sales Professional.