Reasons e-Procurement Projects Fail to Achieve their ROI

Reasons e-Procurement Projects Fail to Achieve their ROI (and ways to overcome them)

The typical ROI projection of an ERP implementation shows break-even in about two years.  Real world experience shows that break-even usually doesn't happen until more than four years after implementation.  Many companies are forced to give up on these projects because implementation costs have run over and there was a lack of tangible results.

Sourcing strategy and technology are equally necessary in this scenario. Sourcing strategy finds and pursues the savings, while technology captures the data so that the savings can be sustained over time.  Initial aggregation of spend and negotiation of better deals with suppliers can help offset to the costs of an ERP implementation.

Equally important is a thoughtful category rollout.  It's best to go with straightforward categories first, the ones most likely to meet with success, and refrain from choosing complex categories simply because their spend volume is great.

Electronic catalog content is important for a successful ERP rollout.  If the vendors don't have adequate content in their eCatalogs, or they fail to update and cleanse their data, users cannot buy, and the ROI of the ERP is undermined.

Effectively transitioning employees onto a new ERP system so that adoption rates are high and tools are used correctly requires a consistent message from all levels of the organization that this is priority #1.  Communication needs to to be clear and consistent, training needs to be thorough and ongoing, and users need to see evidence that their efforts are paying off with feedback on savings and compliance rates.

Change management is the least expensive aspect of an e-Procurement project, and yet the lack of it is a leading cause of project failure.

From a White Paper by ICG Commerce, August 2009: http://bit.ly/dkCaXk

The Twelve Cardinal Sins of ERP Implementation

From a White Paper by Rockford Consulting

http://bit.ly/aigWub

The biggest issue in ERP use is implementation failure.  This often comes about as a result of the Twelve Cardinal Sins of ERP Implementation, which are:

1. Lack of top management commitment
2. Inadequate requirements definition
3. Poor ERP package selection
4. Inadequate resources
5. Resistance to change/lack of buy-in
6. Miscalculation of time and effort
7. Misfit of application software with business processes
8. Unrealistic expectations of benefits and ROI
9. Inadequate training and education
10. Poor project design and management
11. Poor communications
12. Ill-advised cost-cutting

There are numerous similarities of this list with the essence of John P. Kotter's book "Leading Change" (http://bit.ly/bRwhJ1).  To succeed in implementing any kind of major change in an organization there are several requirements.  It's necessary to establish a powerful guiding coalition and to assemble a group with enough power to lead the change effort.  A vision of this change must be created and communicated, others must be empowered to act on this vision so that obstacles can be removed and small victories achieved.  These improvements must then be consolidated and new approaches institutionalized.

Too often, change is dictated by executives who have little or no understanding of the processes underlying their business.  Without this understanding, there is little chance that a chosen solution will represent an improvement, and in a worst case, it could be a disaster.  Regardless of of the outcome, if the people doing the work of the business don't believe in the proposed change, it is destined to fail.  The most important part of implementing change is to get the buy-in of the workers and give them the support that they need so that they can succeed.  This means resources, training, and rewards for the extra effort required to bring about change successfully.