Being proactive, engaged and ready to ask hard questions is essential to minimizing the risks that public entities might encounter when they step into the ERP arena.
ERP Public Sector- Governmental entities, no less than companies, encounter numerous risks in selecting, planning for and implementing an enterprise resource planning (ERP) software system such as Oracle, SAP, Microsoft Dynamics or similar platforms. But not all risks are equal. Indeed, for public-sector ERP clients, the public environments in which they operate can magnify the consequences of ill-considered ERP decisions. This article discusses some of the critical issues that states and municipalities should consider when embarking on these inherently risk-laden projects.
TO ERP OR NOT TO ERP?
Out of the gate, any organization considering a software upgrade must assess whether an ERP system is the appropriate software in the first place. This requires appropriately weighing the potential benefits (such as heightened efficiencies, improved business processes and the replacement of aging legacy systems) against the potential downsides (such as licensing and implementation costs, extended timelines, user acceptance, and the risks of system failure).
Public entities are often more constrained than private companies in the upgrade options available. For example, whereas some companies are able to pursue a highly customized, “home-grown” system designed and built by internal resources or a leading outside vendor, this option might not be available to governmental entities. That said, public agencies might have some advantages, such as relying on systems already in place in other agencies.
SELECTING THE SOFTWARE AND A SYSTEMS INTEGRATOR
ERP software selection should not be treated as a standard procurement exercise; in fact, it is anything but. For one thing, it is usually a two-step process, involving a software selection phase (for example, Oracle versus SAP) followed by a software integrator selection phase (for example, Accenture versus Deloitte Consulting). Beyond that, the RFP/RFI process must be formulated with an eye toward drilling down into at least four crucial areas: software customization, project team, methodology and quality assurance. A public entity’s failure to address these areas during the selection phase can have lasting legal repercussions in the event a dispute arises as a result of system defects, scheduling delays or ballooning budgets.
Software Customization/Fit — The “sales cycle” refers to the pre-contract stage when the vendor’s sales team conducts presentations touting the suitability of the software and the skills and experience of the team that will implement it. During this stage, public entities need to understand and discuss the degree of customization that might be required to obtain the needed functionality — i.e., to assess whether the software is a good “fit” for the business at issue. While most ERP implementations require some degree of customization to enable the software to run a client’s business, excessive customization can potentially lead to performance problems and higher maintenance costs. Moreover, even a reasonable amount of customization might still require consultants with a higher level of skill and experience. Accordingly, during the sales cycle, the public entity client needs to obtain specific assurances that the customization required will not undermine system performance, and that the vendor’s project team has the specialized skills necessary for properly customizing the software.