Risks and Rewards of Strategic Transformation Projects

Terry Wynn is a co-author of this blog.

ISG research shows that implementation of enterprise resource planning (ERP) systems and other large transformation projects usually fall dramatically short of client and contract expectations. Many organizations report that their ERP projects run late and over budget. And while some organizations might tolerate cost overruns if they actually achieved benefits, the anticipated benefits from ERP implementations routinely fail to live up to business case projections.

As organizations increasingly look to implement shared services and integrate business units, they think of ERP solutions as the key enabler. The following Top 5 lessons will mitigate the technology, people, financial and change-related risks inherent in large transformation projects:

1. Focus on finding the ERP product with a track record and tailored functionality for your industry. Core ERP functionality is mature and available in software products that range from small-to-mid-market commercial offerings to large, complex and flexible solutions. ERP solutions can be operated on-premises, on outsourced platforms, or in IaaS and SaaS offerings.

2. Commit to organizational change management throughout the system implementation program. Program governance must be inclusive, efficient and responsive. Measure and reinforce communications and training programs. Measure business case benefits and tie them to incentive programs.

3. Ensure quality management, security and controls. Enforce and measure compliance; refresh controls as needed. Apply to project activities performance management methods that are used in managed services, including service level agreements and key personnel and issue resolution.

4. Do not underestimate systems integration and data conversion requirements. Design and build data transformation programs centrally. Manage third parties to perform the resource-intensive, manual legacy data cleansing efforts, and validate all data loads and systems interfaces.

5. Ensure project responsibilities are clear. Internal staff, systems integration personnel and third parties must work together in integrated teams. Relationships will be varied and complex. It is imperative to clearly define responsibilities in the agreement.

ISG has advised on more than 180 ERP-dedicated engagements across both public and private sectors. Our expertise and real-world experience enable success in even the most challenging and risky transformation projects. Contact us to find out more.

About the author

Bob Krohn is a Partner and Healthcare Practice Lead at ISG. He has an extensive background in business process optimization, organizational design and execution including the direct oversight of numerous outsourcing contract negotiations. His background also includes the design, implementation and subsequent management of operations of ERP solutions and the management of large Information Technology infrastructure organizations.