Welcome!

Microservices Expo Authors: Liz McMillan, Pat Romanski, Karthick Viswanathan, Elizabeth White, Mehdi Daoudi

Related Topics: Java IoT, Industrial IoT, Microservices Expo, Microsoft Cloud

Java IoT: Article

ERP and the Art of Action

The importance of knowledge transfer and alignment in ERP implementations

In his book The Art of Action (2011), Stephen Bungay identifies three gaps that frustrate the ability of organizations to translate plans into actions that lead to desired outcomes. He calls them the knowledge, alignment and effects gaps. Here, I wish to reflect on Bungay’s perspective by reviewing these gaps in terms of the selection and implementation of enterprise resource planning (ERP) software.

ERP software exerts a significant influence over the way an organization manages and monitors its performance. In large organizations, ERP software can touch hundreds, even thousands of people given that today’s ERP software may have a significant organizational footprint encompassing accounting, supply-chain, manufacturing, human resources (HR), customer relationship management (CRM), environmental, social and governance (ESG) and performance management activities. ERP software is at the heart of organizational management in the world’s leading businesses.

However, most organizations approach the selection and implementation of ERP software with some trepidation. The stories of failure are legion. There are well- documented examples of businesses brought to their knees by poor selections and out- of-control implementations. Spiraling budgets, burnt-out implementation teams and legal actions between buyers and sellers are a fact of life in the world of ERP.

Often, much of this spiralling cost, team stress and organizational risk is a direct result of the uncertainty and friction generated from Bungay’s three gaps. I’ll begin by introducing a typical ERP selection and implementation process and then discuss Bungay’s gaps in the context of ERP selection and implementation

The ERP Selection and Implementation Process
Figure 1 outlines a typical ERP software selection process. At the end of this process, buyers know very little about exactly how the ERP solution they are buying will meet their business needs, because the knowledge transfer from vendor to customer is of the order of just a few days of demos and customer reference checks. Therefore it’s hardly surprising that significant knowledge and alignment gaps exist even before any implementation process begins.

Fig. 1 – Typical ERP Software Selection Process (condensed)

Selection process

Figure 2 outlines a typical ERP ‘pre go-live’ implementation process. Knowledge and alignment gaps can surface at any stage of this process. And these gaps may be wide enough to have the potential to derail the project timeline or cost or cause some customers to consider switching their implementation partner. The Effects gap generally comes into play after implementation and during the initial pre go-live phase.

Fig. 2 – Typical ERP Implementation Process (condensed)

Consequently most ERP implementation projects, especially those informed by project management methodologies such as PRINCE2, are particularly concerned with managing risk. Unfortunately many project managers are not focused on actively mitigating risks caused by knowledge and alignment gaps and this is because many project managers either don’t recognise these gaps or don’t know how to mitigate them if they do. So let’s examine Bungay’s three gaps in more detail.

The Knowledge Gap
Bungay defines the Knowledge gap (p.45) as, ‘the difference between what we would like to know and what we actually know’ and a situation that prompts the ‘collection of more data’. In this context, the knowledge gap frustrates the ability of organizations to plan for an on-time, on-budget and on-benefit ERP implementation project.

Today’s ERP systems from market leaders such as SAP, Oracle and Microsoft (AX) are both broad and deep in terms of their functions and features. Much of the challenge in implementing these systems lies in figuring out how to configure the system to get the functionality you want with the minimum impact on operational (in- use) complexity. Gaining the knowledge required to design and build a fit-for-purpose solution is the key challenge for implementation partner, while communicating the information needed to enable this is the key challenge for an implementation customer.

Fig. 3 - The ERP Knowledge Gap

 

The ERP knowledge gap involves both parties, and has a significant role to play as a key project risk. Your implementation partner knows about the software and the best practices for configuring and using it. You know about your business processes and operational roles and responsibilities. Clearly, this is a gap that exists and needs to be crossed in every implementation. But at the same time, both parties are subject to what they mutually don’t know.

Implementation partners may have never configured the package to suit a specific business process or may uncover hidden software bugs in doing so. You may have never thought about managing a business process in the way that the system enforces or about adapting roles and responsibilities to suit new ways of doing things. So what neither of you know is an ever-present wild-card that can widen the knowledge gap, and in reality there’s no quick fix to this gap.

The Alignment Gap
Bungay defines the Alignment gap as, ‘the difference between what we want people to do and what they actually do’ and a situation that is indicated by ‘top-level frustration and lower-level confusion’. The Alignment gap also frustrates the ability of organizations to execute an on-time, on-budget and on-benefit ERP implementation.

In an ERP implementation, the alignment gap is all about methodology and expectations. If the implementation partner’s implementation methodology is not clearly communicated to and understood by the customer, alignment will suffer. Equally, if the customer’s implementation constraints are not clearly communicated and understood by the partner, alignment is impacted.

As Figure 4 shows, the ERP alignment gap is another key project risk that is created by misguided expectations created by poor communication and understanding between the two parties. Vendor methodologies must be adaptable to suit the organization size, operational style (e.g. methodical vs. agile) and team-resources of the customer. Otherwise an alignment gap will exist from the start and is likely to grow over time. And like the knowledge gap, there is a further ‘gotcha’ that may come into play in the form of unexpected events triggering timeline/people constraints (among others) that inevitably occur in implementation projects that can take many months or even years.

Fig. 4 – The ERP Alignment Gap

The Effects Gap
Bungay defines the Effects gap as, ‘the difference between what we expect our actions to achieve and what they actually achieve’ and a situation that is responded to by ‘an increase in control’ typically via the collection of more metrics. Here, the Effects gap frustrates the ability of organizations to fully realize the benefits from their ERP investment.

The total cost of ownership (TCO) of ERP solutions can easily run into millions of dollars of licensing and implementation fees, plus on-going maintenance and upgrade costs. So naturally the company boards or investors that authorize this level of expenditure expect significant benefit realization from their investment. Realization of these benefits depends on is a clear understanding of exactly what benefits are expected, communication of those expectations internally, and regular check-pointing of progress towards those benefits.

Implementation project managers are rightly focused on delivering projects on-time and on-budget. But the third deliverable, on-benefit, is often neglected or forgotten entirely. The reason is usually that benefits were never clearly defined and communicated in the first place and even if they are, it’s all too easy to forget the destination whilst dealing with the hazards of the journey.

As Figure 5 shows, unlike the previous gaps, the effects gaps is less about distance between the implementation partner and the customer and more about distance between an organization’s internal executive and operational management and the impact of ‘change strain’ on the ability of the organization to realize the expected benefits.

Fig. 5 – The Effects Gap

Closing the Gaps
Bungay claims (p.47) that the usual reactions to these three gaps are:

  • Knowledge: more detailed information
  • Alignment: more detailed instructions
  • Effects: more detailed controls

In other words, many project managers' dream: More complexity.

In terms of ERP selection and implementation, I believe one way of tackling the gaps that threaten to derail implementation projects specifically is to do more due diligence at the selection stage: that is to do more and take more time about doing it.

Many selections are hasty, with companies rushing headlong into implementation like a train that is already in danger of running off the tracks. The selection is considered a necessary evil and an unwanted cost. But money spent here will almost always lead to money being saved during the implementation process, where mistakes can be so much more costly. So here are some recommendations:

  • Start the selection with a clear definition and communication to the project team of executive management's expected benefits so that these can be revisited and adjusted regularly during selection, pre go-live implementation and post go-live operations. Formally build-in the checkpoint and review meetings, especially in the first year after go-live.
  • Consider sending your key functional ‘leads' (e.g. finance, supply chain and manufacturing) on a training course in your preferred ERP system BEFORE you decide to buy, rather than leave this until after the pilot phase of the implementation. These people should be smart enough to figure out if the package is likely to be a good fit from this ‘early-visibility' training and act as an early warning system for potential issues and problems to come.
  • Pay attention to both the functional and technical complexity of the solution you propose to buy. Businesses with limited resources or who have outsourced key IT infrastructure and lack available internal IT resources will inevitably struggle with ERP solutions that have complex technical requirements to setup and maintain. And unless you are buying a solution specifically designed to operate in a hosted environment, implementing ERP as a hosted application may introduce it's own challenges as many leading ERP solutions were simply not designed to be run in a hosted environment and in practice, many hosting companies have limited experience running ERP in software-as-a-service (SaaS) mode.
  • Make sure that you fully understand your implementation partner's methodology before you choose them. These methodologies can be complex - whole books have been written about Microsoft's Sure Step methodology for example - so spend the time to understand how the methodology works or put your team on a methodology training course well before any implementation process is started.
  • Try to achieve a close-fit alignment between you and your needs and your implementation partner's capabilities and resource constraints early on otherwise this will come back to haunt you time and again later in the implementation process.
  • Front-load the project with analysis activities that aim to close the knowledge gap well before any design/delivery/deploy activities (to use Microsoft Sure Step terms) take place. You simply can't paper over knowledge gaps. Lack of knowledge will always cause issues later - especially with today's ERP systems that depend on significant configuration effort that is costly to ‘roll- back' if you get it wrong due to inadequate knowledge of your business processes.
  • Focus your implementation project on meaningful rather than more data. So that as well as regular management of implementation tasks/actions, change requests and risks, make sure you also log and monitor business process and product configuration decisions made, and questions/issues/suggestions raised, as these are useful to refer back to when someone asks the inevitable question: ‘so why did we do it that way?'

Achieving outcomes effectively is always as much an art as a science. And it's impossible to expect that you can fully close these gaps and remove all uncertainty and friction from a project such as an ERP implementation. But there are ways to narrow the gaps and mitigate the risks they pose to give your plans and actions the best chance to deliver the outcomes you want to achieve.

More Stories By Stewart McKie

Stewart McKie has 25 years of IT industry experience. His education includes a MSc in Organization Consulting and a MA in Screenwriting. I was the Technology Editor of Business Finance magazine during 1995-2000 and also wrote regular features for Intelligent Enterprise magazine. I am the author of six books on accounting software and over 50 technology white papers. My current focus is my screenwriting 2.0 app called Scenepad and my supply-chain auditing app. I have managed many ERP selections and implementations of SunSystems all over the world. Currently I am engaged as the Implementation Oversight consultant for a global AX2009 rollout for a manufacturing client and as the selection consultant for pan-European ERP solution.

@MicroservicesExpo Stories
Most of the time there is a lot of work involved to move to the cloud, and most of that isn't really related to AWS or Azure or Google Cloud. Before we talk about public cloud vendors and DevOps tools, there are usually several technical and non-technical challenges that are connected to it and that every company needs to solve to move to the cloud. In his session at 21st Cloud Expo, Stefano Bellasio, CEO and founder of Cloud Academy Inc., will discuss what the tools, disciplines, and cultural...
With the rise of DevOps, containers are at the brink of becoming a pervasive technology in Enterprise IT to accelerate application delivery for the business. When it comes to adopting containers in the enterprise, security is the highest adoption barrier. Is your organization ready to address the security risks with containers for your DevOps environment? In his session at @DevOpsSummit at 21st Cloud Expo, Chris Van Tuin, Chief Technologist, NA West at Red Hat, will discuss: The top security r...
These days, APIs have become an integral part of the digital transformation journey for all enterprises. Every digital innovation story is connected to APIs . But have you ever pondered over to know what are the source of these APIs? Let me explain - APIs sources can be varied, internal or external, solving different purposes, but mostly categorized into the following two categories. Data lakes is a term used to represent disconnected but relevant data that are used by various business units wit...
Today most companies are adopting or evaluating container technology - Docker in particular - to speed up application deployment, drive down cost, ease management and make application delivery more flexible overall. As with most new architectures, this dream takes significant work to become a reality. Even when you do get your application componentized enough and packaged properly, there are still challenges for DevOps teams to making the shift to continuous delivery and achieving that reducti...
21st International Cloud Expo, taking place October 31 - November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA, will feature technical sessions from a rock star conference faculty and the leading industry players in the world. Cloud computing is now being embraced by a majority of enterprises of all sizes. Yesterday's debate about public vs. private has transformed into the reality of hybrid cloud: a recent survey shows that 74% of enterprises have a hybrid cloud strategy. Me...
"NetApp's vision is how we help organizations manage data - delivering the right data in the right place, in the right time, to the people who need it, and doing it agnostic to what the platform is," explained Josh Atwell, Developer Advocate for NetApp, in this SYS-CON.tv interview at 20th Cloud Expo, held June 6-8, 2017, at the Javits Center in New York City, NY.
The “Digital Era” is forcing us to engage with new methods to build, operate and maintain applications. This transformation also implies an evolution to more and more intelligent applications to better engage with the customers, while creating significant market differentiators. In both cases, the cloud has become a key enabler to embrace this digital revolution. So, moving to the cloud is no longer the question; the new questions are HOW and WHEN. To make this equation even more complex, most ...
Many organizations adopt DevOps to reduce cycle times and deliver software faster; some take on DevOps to drive higher quality and better end-user experience; others look to DevOps for a clearer line-of-sight to customers to drive better business impacts. In truth, these three foundations go together. In this power panel at @DevOpsSummit 21st Cloud Expo, moderated by DevOps Conference Co-Chair Andi Mann, industry experts will discuss how leading organizations build application success from all...
‘Trend’ is a pretty common business term, but its definition tends to vary by industry. In performance monitoring, trend, or trend shift, is a key metric that is used to indicate change. Change is inevitable. Today’s websites must frequently update and change to keep up with competition and attract new users, but such changes can have a negative impact on the user experience if not managed properly. The dynamic nature of the Internet makes it necessary to constantly monitor different metrics. O...
Many organizations are now looking to DevOps maturity models to gauge their DevOps adoption and compare their maturity to their peers. However, as enterprise organizations rush to adopt DevOps, moving past experimentation to embrace it at scale, they are in danger of falling into the trap that they have fallen into time and time again. Unfortunately, we've seen this movie before, and we know how it ends: badly.
Agile has finally jumped the technology shark, expanding outside the software world. Enterprises are now increasingly adopting Agile practices across their organizations in order to successfully navigate the disruptive waters that threaten to drown them. In our quest for establishing change as a core competency in our organizations, this business-centric notion of Agile is an essential component of Agile Digital Transformation. In the years since the publication of the Agile Manifesto, the conn...
The last two years has seen discussions about cloud computing evolve from the public / private / hybrid split to the reality that most enterprises will be creating a complex, multi-cloud strategy. Companies are wary of committing all of their resources to a single cloud, and instead are choosing to spread the risk – and the benefits – of cloud computing across multiple providers and internal infrastructures, as they follow their business needs. Will this approach be successful? How large is the ...
Enterprises are moving to the cloud faster than most of us in security expected. CIOs are going from 0 to 100 in cloud adoption and leaving security teams in the dust. Once cloud is part of an enterprise stack, it’s unclear who has responsibility for the protection of applications, services, and data. When cloud breaches occur, whether active compromise or a publicly accessible database, the blame must fall on both service providers and users. In his session at 21st Cloud Expo, Ben Johnson, C...
The nature of the technology business is forward-thinking. It focuses on the future and what’s coming next. Innovations and creativity in our world of software development strive to improve the status quo and increase customer satisfaction through speed and increased connectivity. Yet, while it's exciting to see enterprises embrace new ways of thinking and advance their processes with cutting edge technology, it rarely happens rapidly or even simultaneously across all industries.
One of the biggest challenges with adopting a DevOps mentality is: new applications are easily adapted to cloud-native, microservice-based, or containerized architectures - they can be built for them - but old applications need complex refactoring. On the other hand, these new technologies can require relearning or adapting new, oftentimes more complex, methodologies and tools to be ready for production. In his general session at @DevOpsSummit at 20th Cloud Expo, Chris Brown, Solutions Marketi...
Leading companies, from the Global Fortune 500 to the smallest companies, are adopting hybrid cloud as the path to business advantage. Hybrid cloud depends on cloud services and on-premises infrastructure working in unison. Successful implementations require new levels of data mobility, enabled by an automated and seamless flow across on-premises and cloud resources. In his general session at 21st Cloud Expo, Greg Tevis, an IBM Storage Software Technical Strategist and Customer Solution Architec...
Today companies are looking to achieve cloud-first digital agility to reduce time-to-market, optimize utilization of resources, and rapidly deliver disruptive business solutions. However, leveraging the benefits of cloud deployments can be complicated for companies with extensive legacy computing environments. In his session at 21st Cloud Expo, Craig Sproule, founder and CEO of Metavine, will outline the challenges enterprises face in migrating legacy solutions to the cloud. He will also prese...
DevOps at Cloud Expo – being held October 31 - November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA – announces that its Call for Papers is open. Born out of proven success in agile development, cloud computing, and process automation, DevOps is a macro trend you cannot afford to miss. From showcase success stories from early adopters and web-scale businesses, DevOps is expanding to organizations of all sizes, including the world's largest enterprises – and delivering real r...
You know you need the cloud, but you’re hesitant to simply dump everything at Amazon since you know that not all workloads are suitable for cloud. You know that you want the kind of ease of use and scalability that you get with public cloud, but your applications are architected in a way that makes the public cloud a non-starter. You’re looking at private cloud solutions based on hyperconverged infrastructure, but you’re concerned with the limits inherent in those technologies.
As DevOps methodologies expand their reach across the enterprise, organizations face the daunting challenge of adapting related cloud strategies to ensure optimal alignment, from managing complexity to ensuring proper governance. How can culture, automation, legacy apps and even budget be reexamined to enable this ongoing shift within the modern software factory?