June 1, 2011

ERP Project - Key Sucess Factor 2: Clear Goal Setting & Budget Planning

ERP Goal Setting & Budget Planning is the task to be done before start of the ERP Project Implementation. This would help organization to set its goals & proper budget for the ERP project. The set goals & budget plan are to be properly reviewed and drafted, to ensure that there is a clear definition and understanding of the business value, that the ERP implementation project is intended to deliver. This would become the baseline benchmark for all the decisions made during the ERP Project Implementation.


ERP Goal Setting

This sounds simple, but actually requires some work. I have met top managers in many organizations, who only have a vague idea of what deliverable they want to see from their ERP implementation.

Clear goal setting increases the chances for a smooth implementation and maximizes the return on investment. Organizations should understand that there are no magic acts in ERP software to achieve the set goals like press a button to reduce / increase the inventory or a task to run.

ERP Project Road map has to be framed to meet the Present & Future business objectives of the organization. ERP Project Goals are applicable for the various levels of the organization like Management, Business & IT. These goals would be Strategic, Operational & Tactical.

Few key ERP goals are:

1. Centralized Data & Integrated Systems

2. Standardized Business Processes

3. Integrate & Streamline Operations

4. Increase Revenue

5. Customer Satisfaction

6. Reduce Cost by Improved Efficiency

7. Increase Employee Productivity

8. Collaborate well across Supply Chain

9. Manage Inventory well

10. Material Requirement Planning

In general, all the above are desirable outcomes, but there is work involved in determining exactly how an ERP can solve the problems that allow organization to achieve these specific goals. An experienced ERP implementation consultant can in a proper way, help freeze these goals and an action plan specific to the organization project.


ERP Budget Planning

Globally, more than 90% of the ERP projects have exceeded the initial budget. This is more so, when we focus on the small & mid-sized organization projects. The primary reason for this is that all the costs associated with ERP are not identified during the budgeting phase of the ERP Project. For example, organizations underestimate the costs involved in training, organizational change management, hiring temporary contractors to replace project team members, customization, etc.

Currently, many mid-sized organizations want to implement ERP, without a proper business case / ROI / budget plan. Few get convinced by the ERP vendors that the costs are not as high as they might think. Many organizations hurry the ERP evaluation & selection phase, due to difficulty in coordinating their employees across operations, and don't thoroughly draft the business requirements & project budget and this lead to ERP project cost over runs.

The high level ERP project budget plan should comprise of (among other things):

1) Initial Budget (License & Services) for the Procurement & Upgradation of

a. Resource – Resources involved between the client & vendor teams for the ERP Project (Implementation / Customization / Training)

b. Software – Primary ERP software, related software (like Business Productivity Software, OS, DB, Add-on’s)

c. Hardware – Server, PCs, Others like Firewall, Anti-Virus etc.,

d. Infrastructure – Internet Bandwidth, Remote Connectivity

2. Recurring Budget (License & Services) for the Maintenance & Support of

a. Resource – Resources involved between the client & vendor teams for the ERP project (Maintenance & Support)

b. Software – Primary ERP software, related software (like Business Productivity Software, OS, DB, Add-on’s)

c. Hardware – Server, PCs, Others like Firewall, Anti-Virus etc.,

d. Infrastructure – Internet Bandwidth, Remote Connectivity

1 comment:

  1. ERP goal setting and Budget planning are very important to ensure that there is a clear definition and understanding of the business value, that the ERP implementation project is intended to deliver. This would become the baseline benchmark for all the decisions made during the ERP Project Implementation.

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