Personally Attacking Those Who Critique ERP Failures

Executive Summary

  • Pro-ERP consultants personally attack ERP critics and point the finger away from the software products when discussing ERP failures.
  • Pro-ERP consultants and ERP software vendors motivated to sell products, silence ERP critics, and create a narrative that project management teams are to blame for ERP failures.
  • Lawsuits, which are often revealed due to public disclosure laws, show that many companies are unable to implement ERP products successfully.

Introduction

ERP implementations have a long money trail behind them. It has come to my attention that there is a strong network of pro-ERP consultants that spend at least some of their time attempting to promote a very strongly pro-ERP overlay or interpretation onto ERP failures. Those who disagree with the “ERP friendly” post-mortem analyses of ERP failures are singled out for personal attacks.

In this article, we will review a textbook case of this type of personal attack.

A Standard Pro ERP Comment

The following is a share on a LinkedIn post by Eric Kimberling, who published the statistics of ERP implementations. The following is the slide that Eric shared.

Now notice the response from a pro-ERP commenter regarding this analysis.

Hi Eric Kimberling your assessment is cruel but dare to say you are right especially with 80% of mediocrity.

That is “awesome” that with 30 years of ERP on the market and so many beautiful methods, tools, and certifications we still can see poor picture with many hysteric voices around ERP. Of course, even these mediocrities are not really so bad (as it somehow works) but bad things are much louder than good.

After all, here is definitely a lot of things to do. My take is we tend to much focus on material things and toys are drawing our attention away from the main area of ERP – these solutions are still for people not for robots or AI!

Studying loud failures, I found all these started very shiny with sound reasonable vision. They drifted astray. The cause of poor picture is that ERP project management lack at persistence with this vision.”

Let us review the assumptions within this comment.

Non-Pro ERP Voices are Hysterical?

The commenter states the following:

“many hysterical voices around ERP.”

This implies that if a person critiques ERP implementation failures, then that voice is hysterical. However, I review ERP sales material, and on the frenzied scale, the arguments made to promote ERP systems appear far less rational than those that critique ERP implementation failures. In the article What Was the Real Story with the Revlon S/4HANA Failure?, we found that the ERP system implementation undermined Revlon’s ability to function. Revlon was not told anything about how this ERP system was not ready to be implemented.

Conversely, one would naturally assume those that cover up ERP failures or defend them or point to the customer being responsible are level-headed and rational (not hysterical).

This sets up the debate under the artificial construct between sane people (defenders of ERP failures) and those that are insane (those that critique ERP failures). What a convenient way to move away from addressing the points of your opposition.

Many Beautiful Methods, Tools, and Certifications?

The commenter states that:

“so many beautiful methods, tools, and certifications we still can see poor picture.”

But how true is this contention?

I have reviewed many of these methods in the article, The Real Story on SAP Implementation Methodologies, from SAP and many consultancies.  My conclusion is that these methodologies are primarily written by marketing and sales entities, and they don’t have much of an impact on projects. Having reviewed so many of them, I have no idea what this commenter finds so impressive. Some methodologies, which have been backward engineered to sell more services, do not address the primary risk factor.

How do I know this?

Well, first, it is clear from reading them. Many readers of these methodologies are not even aware that a methodology is not what they think it is, as I cover in Why Methodology Does Not Mean What You Think it Does.

Secondly, when I worked on Deloitte’s methodology for SAP, I was told to adjust it so that it could incorporate as many of Deloitte’s services as possible. Therefore it was less of an implementation method than it was a sales document. Deloitte presented hirees all of their various services as part of a “proven approach” to improving the project. The statements had no foundation in research, and the only thing they were proven to do is meet a quota for a partner. I have spent many hours with partners at these consulting companies, and none of them care about their customers. They care about money. They are all under heavy quota pressure and cannot afford to put their customer’s interests first. These are the institutional incentives within these companies.

Reviewing the History of Implementation Methodologies (for SAP)

If we look at SAP for a moment, for over 20 years the company has introduced an array of methods that were ostensibly designed to speed implementations, such as ASAP (which we cover in Did ASAP Ever Reduce SAP Implementation Timelines?) and the Rapid Deployment Solution or RDS (which we cover in How to Best Understand the Faux SAP RDS).

I have never seen one of these methodologies make one bit of difference in any SAP project. They aren’t even designed or primarily designed by implementors, but instead by partners and marketing resources — people without an authentic understanding of the reality around implementations.

SAP’s ASAP was introduced with great fanfare, but did anyone go back and check if it did what it said it would do?

Of course not.

Let us say that a consulting partner did, and the method did nothing. How would they publish these results and expect to keep on good terms with SAP? Experienced implementers (like myself, I say, implementers that do the work, not PMs that are associated with management and do not touch SAP) say that these methodologies are to romance the executives.

The ERP consulting space does not question the intent of these “methodologies.” Perhaps they are never intended to improve implementations, but instead intended to do what they look like, which is to improve the consulting company’s ability to close sales.

The Result of All of These “Beautiful Methodologies?”

Now, after all of this, how long do SAP implementations take? Well, our research shows that SAP implementations are lengthening, not shortening.

Why?

With products like HANA and S/4HANA being so immature, (for details, see Analysis of Steve Chaflen’s Article on S/4HANA Maturity), these implementations are restricted from completion. With SAP’s new C/4HANA, its maturity is so far out, yet still, the company already started promoting it at SAPPHIRE 2018. Bluefin Solutions published an article trying to hype customers on C/4HANA as covered in the article, How Accurate Was Bluefin Solutions on C/4HANA?  Bluefin Solutions could have told its prospects the truth about C/4HANA’s maturity in the critiqued article, but did they? Of course not. That would be bad for sales. This gets to the issue of why the consulting companies that implement solutions don’t have any interest in honestly informing their “clients” of the reality of these applications.

There is also no evidence that success rates for ERP projects have increased.

Studying ERP Failures Honestly or Through the Lens of Financial Bias?

To study failures in a way that leads to a beneficial outcome for future ERP projects means to study them honestly and not from the perspective of “what is in it for me.”

As I have observed in the past, the majority of those writing about ERP failures are riddled with financial bias, as they want ERP implementation to continue unabated. In my meta-research into all (literally all) of the academic literature on the returns from ERP systems going back to the 1980s, the research showed no ROI from ERP implementations. This is covered in the book The Real Story on ERP. This should be no great surprise as these systems are so expensive to implement. ROI is possible from ERP, but not if you choose a Deloitte or IBM to implement.

ERP Failures Are Loud?

The commenter argues that ERP failures are “loud.”

The implication is that these failures attract people’s attention and distract them from the great story of ERP.

But where is this great story?

The idea of ERP systems as some great enabler has been a fiction constructed to sell ERP systems. Furthermore, how much money goes into publishing ERP failures?

Not much.

Now, let us see how much money goes into promoting ERP as valuable items to purchase. As covered in the article, How to Best Understand the Control of SAP on IT Media. SAP funnels money to major IT media outlets for positive media coverage. Oracle and other ERP vendors with ample resources do the same. IT media sources serve as a PR/marketing function for the IT companies, and this means that anything that increases revenues and margins will be covered. When vendors interact with IT media entities, they say the following.

“Impress us, show us that our spend with you is driving our revenues and lead generation.”

And of course, the media entities do what they can to bend over backward to show them why they should spend more with them.

IDG owns 8 of the top 20 IT media brands. 

This is the page that readers of IDG IT websites don’t see; it is directed towards advertizers and those that want to publish paid placements. Notice the quotation. 

“IDG organizes our content, demand generation, and ad serving so that we can segment audiences deeper an anyone else. Our customers know they can rely on IDG to deliver the right buyer at scale exactly when they are most receptive to a marketer’s message…”

That is journalism?

They are producing rigged content designed to get the “audience” to buy. IDG is willing to republish anything vendors or consulting companies say, and the other IT media entities work the same way. You can even choose the media “brand” you would like your false information published. It is customer focused!

It should be noted that there is no overlap between what the IT media entities do and journalism. Journalism only arose under a condition where the reader, in some way, compensates the publisher for the content they consume. In every situation, when the publisher receives their income from companies exclusively, the content devolves into propaganda. This is a problem in media that cuts across the different media categories as publishing have been demonetized by the Internet and by companies like Google that take the advertising dollars for themselves choking off revenues from content creators.

Not only do vendors and consulting firms not care about what is true, but there is also an industry willing to repeat any message in return for money.

To flourish as an IT media entity, one must get advertising dollars and paid placements or e-mail addresses (in the case of TechTarget, which only exits to collect and share e-mail addresses). IT media entities compete with each other for these industry sourced dollars, and people are promoted or demoted based on how well they cater to industry income sources.

In IT media, there is no dedication to the readers, as readers (after demonetization of media brought by the Internet) do not pay for content. And in this milieu, ERP vendors are some of the largest spenders.

For companies that want to get their story out, each media entity has a dollar figure attached. Gartner is the leader because they can charge the most for access to their readers. Gartner can punish companies that don’t pay them by excluding them from various ratings. 

ERP consulting companies have great reach, and there is no mention of the actual ROI or success rate of ERP systems on any of their web pages. ERP and consulting marketing spend massive, and it’s all designed to get companies to purchase ERP systems. The argument that more corporate money supports the case against ERP (by promoting ERP failures) overhyping ERP purchases is complicated to make. Let us think for a moment:

How much money do IDG, Gartner, and others receive to criticize ERP? How much money do they get to promote ERP?

Once again, nearly all the money is on the side of promoting ERP!

*I want to apologize for using that exclamation point. That came extremely close to being “hysterical.” It’s essential to observe corruption but to be non-plussed. It is the true sign of maturity to accept corruption as entirely normal and nothing to get worked up about. People who casually accept corruption are well-balanced and perfectly adjusted members of society. People that are revulsed by corruption need counseling.

A History of False Constructs to Promote ERP

Over the decades since ERP was introduced, ERP has been promoted with a series of false constructs ranging from how they replace legacy systems (covered in How SAP Used and Abused the Term Legacy) to the idea that a significant competitive advantage could be attained through re-engineering (included in Re-engineering and its Impact on ERP Sales). We have analyzed all of the constructs behind ERP and found nearly all of them to be false.

Yet, how often has the accuracy of these constructs been challenged by vendors, consulting companies, or IT media entities? How does the money flow into these entities? ERP proponents have not been held accountable for the many things (benefits) they said that would happen with ERP, which did not occur. If the field were titled “against ERP proponents,” they would not have gotten off “Scott Free.”

The Reality of ERP Systems Versus the Fantasy

Companies that have implemented ERP systems do not have the competitive advantage vendors and consulting companies promised them. They have spent mightily and made vendors and consulting companies, but what company is today using ERP is “enthused” about the system they now have? What company that has ERP sees it as some empowering system, versus a bookkeeping system that gobbles up the IT budget?

Who was the ERP system designed for? To benefit the customer, or for the vendors and consulting firms?

A Single Reason for ERP Failures: Project Management

This commenter states the following.

“I found all these started very shiny with sound reasonable vision. They drifted astray. The cause of poor picture is that ERP project management lack at persistence with this vision.”

Did all of the failures start with a reasonable vision? Let us parse that comment.

Did the management begin with a realistic understanding of what they purchased, or was inaccurate information given both in the sales process and during the implementation? I would say it’s the latter. Finally, this commenter concludes that the single reason for ERP failures is a “lack of persistence” with a “reasonable vision.”

Really?

Does every ERP implementation fail because of a lack of persistence?

This is the status quo explanation that obviates any need on the part of the vendor or the consulting company to provide accurate information to the customer. How convenient. But also, observed through its proper lens, what an intensely self-serving comment. It appears that all of the customers that fail with ERP are losers, and lack the fortitude and persistence to follow through on the vision of ERP. That is to persevere so that they can finally attain the golden chalice of a system with a negative ROI.

They are weak and soft-bellied! This falls into the category of victim shaming. We cover this in the article How to Know if You are Tough Enough for ERP?

Unfortunately, I have also been categorized as a weak soft-bellied loser who would not jump on board (aka get with the program) with the “vision” of the company being created by the head of sales for a vendor.

The man who famously said…

“I never want to hear something not existing as an excuse to not sell!”

The Illumination of ERP Industry Practices Brought by Court Cases

These public ERP failures and the lawsuits are of great concern to ERP proponents because they expose the truth of these implementations. This is the only time that the dirty underside and tricks played by vendors and consulting companies are given a public forum. And let us remember, the only reason this occurs is that the legal systems in the countries where these cases are filed require public disclosure of the complaint. Corporations do not share the truth in a public forum. If it were left to corporations, the PR and marketing departments would massage all information. However, the courts require the publication of the complaint. Court complaints are why we know of ERP failures, and they are what ERP entities seeking to defend their money train find so disagreeable.

Since ERP projects began failing, there has been a strong attempt by vendors and consultants to control the narrative in a way that is favorable to the industry. SAP has a specific way they release paid placements through major IT media entities to control the narrative to point entirely away from themselves, as covered in the article The Art of Blaming the Client When a Project Fails.

  • This article points out that Michael Krigsman (the IT failure “expert”) makes comments about project failure that have nothing to do with the facts of each of the project failures on which he comments. No matter which projects, Michael Krigsman is there with aphorisms that discuss how “training is important.”
  • Neither the IT media entity nor the sources that are compensated by SAP disclose their financial bias. One wonders why a media entity would not disclose its payments from a vendor to help point blame away from the vendor. Could there be any possible reason for leaving out such information from the reader? If anyone can figure out this intensely complex question, please comment because it is simply too complex for this author’s limited brainpan.

Lying About ERP’s Mapping to Requirements Cannot be Discussed

Deloitte/IBM/Infosys, etc.. lie to accounts before they close the account. They habitually exaggerate how much SAP will cover the requirements, as covered in the article The Overmapping of ERP Systems to Requirements. This is so well known at this point. It is outrageous to see status quo ERP defenders imply it does not exist. Deloitte/IBM/Infosys, etc.. lie to accounts during the implementation to put off the day of reckoning.

When these behaviors are brought up, the personal attacks begin from the SAP consulting defenders! Why is it virtually every time the SAP consultants, whether they work for the implementation company ceaselessly defend the consulting company and never address (i.e., quickly pivot away) from the issues with the vendor and the consulting firm? Interesting isn’t it. The response is thus…

“Its really much more complicated than that……”

Now the pivot…

“….the real issue is the lack of training, focus __________ (fill in the blank)”

Notice…” it’s much more complicated” always results in “it is the client’s fault.”

No matter how much money is wasted on ERP projects, ERP status quo defenders are always there to tell pro-reform individuals not to be negative. When provided the example of the Air Force’s $1 billion ERP failure, which was again highly based upon lying on the part of the Oracle and the consulting partner, the answer I received from the pro-status quo SAP consultant was that the project was “complex.” For these individuals, no amount of money is too large to waste on ERP!

Conclusion

Something that has not escaped my attention is that the SAP proponents, with their financial bias, never seem to call out many of the very obvious failings of the industry side of the equation. ERP proponents have a story to tell, which is to pay no attention to ERP failures or accept their biased explanations as to the “whys.” However, ERP proponents telling their story means silencing those who critique the overall industry. That is why those critics must themselves be criticized.

The Problem: A Lack of Fact-Checking of ERP Vendors

ERP vendors leave out the fact that the ERP systems they sold did not revolutionize the companies where they were sold. Most companies that have ERP systems do not see them as strategic. That is, they are not systems that should continue to absorb the percentage of the budget that they absorb.

Being Part of the Solution: What to Do About ERP Support Costs

ERP vendors want high support payments without really doing that much for the support income. ERP systems absorb the IT budgets far more than they were every forecasted to absorb and deliver less than they were promised to deliver. The constant yearly cost of ERP systems robs the IT departments of the resources they could deploy on applications that meet many open business requirements that ERP systems said they would match but only met partially.

If you need independent advice and fact-checking that is outside of the ERP vendor and ERP consulting system, reach out to us with the form below or with the messenger to the bottom right of the page.

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Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

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References

The negative ROI of ERP systems from academic studies is covered in the following book.

The Real Story on ERP

ERPThe Real Story Behind ERP: Separating Fiction From Reality

How This Book is Structured

This book combines a meta-analysis of all of the academic research on the benefits of ERP, coupled with on project experience.

ERP has had a remarkable impact on most companies that implemented it. Unplanned expenses for customization, failed implementations, integration, and applications to meet the business requirements that ERP could not–have added up to a higher Total Cost of Ownership for ERP were all unexpected, and account control, on the part of ERP vendors — is now a significant issue affecting IT performance.

Break the Bank for ERP?

Many companies that have broken the bank to implement ERP projects have seen their KPIs go down— but the question is why this is the case. Major consulting companies are some of the largest promoters of ERP systems, but given the massive profits they make on ERP implementations — can they be trusted to provide the real story on ERP? Probably not, however, written by the Managing Editor of SCM Focus, Shaun Snapp — an author with many years of experience with ERP system. A supply chain software expert and well known for providing authentic information on the topics he covers, you can trust this book to provide all the detail that no consulting firm will.

By reading this book you will:

  • Examine the high failure rates of ERP implementations.
  • Demystify the convincing arguments ERP vendors use to sell ERP.
  • See how ERP vendors take control of client accounts with ERP.
  • Understand why single-instance ERP is not typically feasible.
  • Calculate the total cost of ownership and return on investment for your ERP implementation.
  • Understand the alternatives to ERP.

Chapters

  • Chapter 1: Introduction to ERP Software
  • Chapter 2: The History of ERP
  • Chapter 3: Logical Fallacies and the Logics Used to Sell ERP
  • Chapter 4: The Best Practice Logic for ERP
  • Chapter 5: The Integration Benefits Logic for ERP
  • Chapter 6: Analyzing The Logic Used to Sell ERP
  • Chapter 7: The High TCO and Low ROI of ERP
  • Chapter 8: ERP and the Problem with Institutional Decision Making
  • Chapter 9: How ERP Creates Redundant Systems
  • Chapter 10: How ERP Distracts Companies from Implementing Better Functionality
  • Chapter 11: Alternatives to ERP or Adjusting the Current ERP System
  • Chapter 12: Conclusion

Is a Lack of Business Process Reengineering the Reason ERP Projects Fail?

Executive Summary

  • We cover a quotation from Panorama on ERP failure, which caused us to analyze the history of reengineering.

Introduction

We were recently reading the report by Panorama on ERP Software Report. While we overall liked the report, we came across a quotation that points in one direction regarding ERP project failure, but we think points in a different direction.

We will be evaluating in this article regarding whether BPR or business process re-engineering and organizational change management are why ERP projects fail.

The Quotation from Panorama on ERP Failure

“Project success won’t have anything to do with technical features, rather it will come down to how well you handle business process reengineering (BPR) and OCM – the most important success factors for any ERP implementation. We often hear organizations say the biggest obstacle to the success of their ERP initiative was misalignment between project management and change management. Often, people involved think they should have invested more in change management, sponsorship, and resourcing.”

Understanding the Actual History of Reengineering

To begin with, the concept of re-engineering has always been a bit of a scam. Reengineering fell out of favor in the very early 1990s as was a movement that was based on a book by Hammer and Champy that was a best-seller, but not based upon any actual evidence. ERP companies pushed reengineering, paying Michael Hammer up to $100,000 per day to speak because they saw it as a way to sell ERP software.

We covered re-engineering as a blatant falsehood that was promoted by ERP vendors (and strategy consulting companies who also could not have cared less if the basic tenants of re-engineering were true) that used it as a convenient cover to distract observers from the generic functionality they were offering customers. Nothing proposed by re-engineering came true.

  • Companies that engaged in re-engineering projects spent a lot of money on consultants who told them they needed to change their requirements.
  • A lot of strategy documentation was sold.
  • Companies ended up with poorly fitted ERP systems for their requirements that then had to be customized.

Reengineering died, but it was never appropriately critiqued for being a mindless cash grab, and a method to trick executives with poor reasoning skills into buying poorly matched software, and for imposing a massive unpredicted customization effort on these companies.

You can read about this history of re-engineering in the article Reengineering and Its Impact on ERP Sales.

The 2018 Panorama study showed a decline in several factors related to ERP satisfaction. However, this factor of BPR and OCM should have been similar in previous years.

What is True?

One proposal is that everything else stayed the same, but companies did not align their project management and change management, particularly recently. That may or may not be accurate. But I could not find anywhere in the report where it said that factor changed.

Furthermore, the statement by Panorama, while undoubtedly partially true, seems overly stated. It is impossible to see how functionality limitations cannot have been issues that lead to project failure. Many ERP projects get caught in extensive and unplanned customizations that blow the budget and the timeline and result in companies biting off more than they can chew. It is widespread for the RICEF list to grow beyond the company’s willingness to fund the list, requiring an extensive back and forth process where customizations and enhancements, reports, and integrations must be culled.

If the functionality they needed had existed, or if they had been told the truth, that would not occur. A primary reason for this is that they are misled as to the entire “best practice”/BPR construct. We can say this confidently as there is evidence from many public projects to draw on that point to other factors outside of BPR and OCM. For instance, there are many cases where the software is the culprit or consulting company is the culprit. Let us talk about two examples.

The Oracle Air Force ERP Failure

In the $ billion Oracle Air Force debacle, the central point of failure was the lie that Oracle’s standard functionality could replace a huge number of custom military systems. Change management would not have been an issue because Oracle’s ERP does not do specialized military functions. ($ billion sounds like a lot of money until you realize its only the TCO of around 2 F-35s, which are also useless items that the Air Force purchased…so loosely translated, another day at the office for the US Air Force.)

Process Industry ERP Implementations

In another example, ERP systems are often sold into the process industry, but they lack the functionality to manage process industry manufacturing. There are very few ERP systems that have this functionality, ProcessPro being one of the few. But salespeople from ERP vendors will frequently misrepresent their functionality to customers as covering all industries equally well — so again, in this case, it is not BPR, because it is an extensive series of gaps in functionality.

There you go, try to BPR your way out of using a non-process industry ERP system for a process industry manufacturing environment. Talk about a “recipe” for failure. Of course, another option would be actually to select an ERP system that has process industry functionality. However, that would take a bit of work, and Deloitte and Accenture will recommend against doing this because….well, they have SAP and Oracle ERP resources that they need to bill for to maintain the lifestyles of their partners. 

Now, after this project bombs, what will Deloitte and Accenture say? Oh right, the real failure of the project was due to the inflexibility of the customer to do BPR. The major IT implementation companies are in agreement that companies should buy applications that are the absolute worst fit for their requirements so that they can keep a narrow set of vendor specialties in-house.

Imagine if these companies had to staff consultants for many different vendors? It would be absolute pandemonium!

How IT Media Funding dictates the Coverage of IT Failures from Software Vendors and Consulting Companies

The vendors and consulting companies provide most of the funding to the IT media entities. Therefore IT media has taken the position that project failures are mostly the fault of customers, with a lack of BPR being a primary talking point. If customers paid them, they would switch their reporting, but they have no other source of income than the IT software and service providers. Media companies like ComputerWeekly are not real media outlets in the usual sense of the word, but are fronts for marketing automation, collecting emails from articles which are then shared as lead generation for vendors and consulting companies as we covered in the article How Computer Weekly is a Front for Marketing Automation.

How to Understand Reengineering and its Impact on ERP Sales

Different people have covered reengineering in depth from the process perspective. However, the issue is that the re-engineering was a significant trope which was used to justify ERP systems. One vendor, SAP, incorporated reengineering in a significant way to cover up limitations in its software.

In this article, we will cover the self-serving nature of re-engineering and ERP.

Reengineering and Michael Hammer & James Champy

Michael Hammer and James Champy produced the book Reengineering.

No understanding of re-engineering can be understood without understanding this book.

One quite representative quotation was the following:

“The usual methods for boosting performance—process rationalization and automation—haven’t yielded the dramatic improvements companies need. In particular, heavy investments in information technology have delivered disappointing results—largely because companies tend to use technology to mechanize old ways of doing business. They leave the existing processes intact and use computers simply to speed them up.”

Michael Hammer & James Champy Foundational Assumption Regarding IT

Hammer & Champy’s assumption was that..

  1. The present business process used by the company was inadequate and needed to be redesigned.
  2. Furthermore, the failure to do this is why IT investments have delivered disappointing results

I have to say, having worked on quite a few projects myself, I do not share this interpretation. And if I think of SAP ECC, I don’t recall anywhere that the application was pushing “the envelope.” The reason being that ERP systems contain quite generic functionality.

But the functionality that was included in the ERP systems could never meet every requirement in the business.

  • Pushing Generic Functionality: What have seen on ERP projects is the term best practices and re-engineering used to justify moving to generic functionality within SAP.
  • Removing that “Awful” Legacy: There was absolutely nothing in the functionality that was better than the functionality it was replacing in “legacy.” It was just what SAP had to offer. So, of course, it was “great.”

And because SAP and the consulting company wanted the “client” to use the system, they told the customer that the way they were doing it was wrong (not a best practice) and that they needed to change to how SAP did things.

What a surprise that the “right answer” was contained in SAP.

  • The Unpopular Reality: In reality, many processes can’t use SAP ECC or other ERP functionality.
  • Mass Customization: This is where customization and custom programming came in. For a standard system with “best practices” around 92% of SAP implementations became either highly or moderately customized. And at virtually every account, the amount of customization necessary greatly exceeded the estimate.

Over and over, SAP told companies to redesign their processes and use SAP’s standard functionality, but it simply was not feasible for the vast majority of functionality. A massive industry built up around coding in the highly inefficient SAP ABAP coding language to place these customer processes into SAP. This was covered in the article Why Did Customers Listen to SAP on ABAP and Coding Tools? 

And when SAP recently introduced a new ERP version with a new table structure which broke all the previous customizations, SAP again pushed the narrative as this being not a bad thing, but an “opportunity” to review if these customizations were necessary.

Reengineering and ERP as Natural Bedfellows

  • ERP is based upon a basic exaggeration of the degree to which the application fits with the requirements of a company.
  • During the ERP sales process, the sales team will normally try to present the idea that the application can meet any requirement the company has.

This is how you win the sale.

You make the software seem to be easier and smoother to implement than your competitor. It is challenging not to get caught up in the misrepresentation of software to prospects. As a presales consultant, you continuously work with salespeople who have a 100% focus on making sales. But there is too much competition in enterprise software to make sales by telling 100% of the truth. It is straightforward to begin focusing on the incentives of salespeople and to be sucked into oversimplifying the implementation work necessary. And if you do not provide the positive information that the salesperson desires, they will give you negative feedback if they see you interfering with making a sale.

In enterprise software sales, the presales consultant is part of the sales organization and is reviewed by salespeople. And I say this as a person with many years of SAP implementation experience and as a person who worked as a contractor (rather than an employee) and had other work I could switch to. Most presales resources do not have this, and most presales resources are full-time employees of the software vendor, so for them, it is even more challenging to resist the pull of the salesperson. They serve at the pleasure of the account executive.

This means that ERP vendors’ sales teams compete to make their offering seem like the best fit. Now this same issue applies to other software categories as well. It refers to a more extreme degree to ERP because ERP was always sold with the underlying concept of being able to cover the broadest number of requirements that the company had.

And which software vendor has the most significant interest in promoting changing or “re-engineering” your business processes?

This is the vendor with the weakest match between its software and the customer’s business requirements, of course.

 

Some Interesting Questions to Consider About Re-engineering

All of this brings up some interesting questions.

  • Question 1: ERP vendors greatly benefited from Hammer & Champy’s messaging. Did any ERP vendor pay for Hammer and Champy to speak at conferences or otherwise use their resources to magnify the reengineering message?
  • Question 2: Did the consulting companies care whether re-engineering was true, or did they ride the wave?

You can guess for yourself what the answer to these questions probably was.

The Evidence for Re-engineering Being the Elixer for IT Improvement

The problem with Hammer & Champy’s hypothesis is that they never proved it to be true.

They merely asserted it. And stating it, along with the financial incentives of those who wanted the message repeated, was enough to have it accepted as true.

However, let us pull back for a moment to look at the question re-engineering was addressing.

A lack of IT payback has always been a problem with IT implementations. I have my views as to why the payback has been disappointing. I several reasons, but if I had to bet money, my primary hypothesis would be that vendors like SAP and the large consulting companies overpromise and increase the cost of software implementation projects such that the ROI becomes quite frequently negative. I covered this in detail in the article How Vendors and Consulting Companies Parasitized the ROI of Enterprise Software. This is another explanation, and I have much more evidence for it than was ever presented by Hammer and Champy for their hypothesis. It is unclear to me why Hammer & Champy’s explanation was so compelling.

Care to guess as to why IT investments tend to be disappointing? Many people have tried, and as far as I am aware, Hammer and Champy are not considered to have solved this puzzle. So why was an unproven hypothesis carried forward to the four corners of the world? 

The most logical explanation I can think of is that it was a compelling message for ERP vendors and consulting companies, so it was the message that was paid to be repeated.

For some reason, I don’t expect to find SAP or Deloitte or Accenture paying to amplify this hypothesis.

The Reality of Post ERP Sales

Reengineering was and is a concept (although its popularity has undoubtedly declined) that help both sell the ERP system, and cover-up for the lack of coverage of requirements that eventually became apparent once the requirements had been gathered and the time came to configure the requirements into the application.

Reengineering was used by SAP in conjunction with the concept of best practices to essentially convince customers to use the software as standard as possible. And that within this “standard” contained best practices. Now there was never any evidence that these were best practices. It was merely a self-bestowed title. Much like me saying..

“I am the best dancer in Atlanta.”

It is even worse than self-proclaimed titles of being the best dancer in a particular city, as there is no competition you can enter to determine if something is a best practice. At least dancing competitions exist.

This was consistent with what SAP and other ERP vendors tended to do to dismiss whatever existed inside their customers and built up whatever they had to offer.

  1. Legacy: The term legacy, which is pejorative, was used by SAP to dismiss any system that existed inside of the customer that was not SAP. This is explained in the article How SAP Misused the Term Legacy. Existing systems are legacy by vendors trying to sell software in the same way that furniture is out of date in people’s homes by people trying to sell new furniture.
  2. Best Practices: SAP took the best of whatever process they ran into and put it into their software — well, that was the official story. But as an SAP researcher, it is also the case that SAP lies a lot. And as a long time SAP consultant, I can say I never witnessed any best practices inside of SAP’s numerous applications. But how SAP used the term best practices to gain business is covered in the article The Evidence Against SAP’s Best Practice Claims.

ERP Vendors and Consulting Companies Unite!

  • What both the ERP vendors and consulting companies wanted to do was bill hours. And you can’t bill hours by keeping things the same.
  • Therefore, the argument for change is something that software vendors and consulting companies tend to accept quite readily. Whenever something means a change, you can count the consulting companies “in.”

Who were the significant promoters of reengineering — ERP vendors and consulting companies. And who were the major beneficiaries of reengineering — ERP vendors and consulting companies.

And oh yes, this was lucrative for them as the following quotation from Thomas Davenport, someone deeply involved with the re-engineering trend attests.

“No one wants to see 25-year-old MBAs in their first year of consulting making $80,000 per year with $30,000 signing bonuses, being billed out at six times their salaries, putting the company’s veterans through their paces like they’re just another group of idiots who “can’t think out of the box.””

A feeding frenzy was underway. Major consulting firms could routinely bill clients at $1 million per month, and keep their strategists, operations experts, and system developers busy for years.

For their part, executives had to show financial benefits – especially at those consulting rates. The fastest way to show financial results was to reduce headcount.”

Thomas Davenport goes on to explain why reengineering became such a fad, and it fits with financial bias.

“How did reengineering go from a decent idea in 1989 to a $51 billion industry in 1995? Chalk it up to the rise of the Reengineering Industrial Complex. Just as the concept of re-engineering wove together three previously unrelated strands, its application brought together an iron triangle of powerful interest groups: top managers at big companies, big-time management consultants, and big-league information technology vendors.”

Taking the Re-engineering Application Test

Imagine two software vendors:

  1. Software Vendor A: This vendor has a very high match between its functionality and the business requirements of a prospect.
  2. Software Vendor B: This vendor has a low match between its functionality and the business requirements of a prospect.

Now close your eyes and answer this question.

Which vendor is going to be more supportive of the prospect engaging in “re-engineering” to successfully purchase and implement their application?

Ironically, in our application risk ratings, we concluded that the highest predictive element for software success was the match between business requirements and the functionality of the application. Yet, re-engineering works against this. Re-engineering justifies purchasing applications that are a poor fit for customer requirements under the principle that the process can be re-engineered.

In this way, at least in the ERP realm, re-engineering qualifies as fool’s gold. And while re-engineering washed out, in a way, at least a similar concept has been renamed as digital transformation. Digital transformation is a curious term as it is utterly false if used to describe modern IT implementations. Why is the term reengineering not used? Terms are changed when they lose credibility.

Vendors and consultancies, get in touch with ComputerWeekly, IDG, Forbes…etc., they have a “media plan” for you. They aren’t journalists; they are your “media partners.” Forbes and IDG are owned by Chinese conglomerates that are owned by conglomerates out of a country that has never known freedom of speech laws and where honest journalism is synonymous with prison. (You go into a Chinese prison, you don’t look the same when you come out.) However, nevertheless, whatever storyline you want to push, the IT “media” entities, now deprived of any subscription revenue because of Google and the Internet are there for you to publish any falsehood that you can afford. But be careful, you have to bid against the most significant vendors and consultancies in your space. 

Industry specialists are funded by major vendors to promote the concept of the responsibility for failure being the customer. SAP has a specific strategy for allocating the blame to customers after a lawsuit breaks, which we have covered in the following article titled The Art of Blaming the Client When the Project Goes South.

The Problem with the Expectations of BPR/OCM and Cloud ERP

Now let us look at the cloud for a moment.

Multitenant cloud means no customizations. That works for simpler systems like CRM and HR, but it has been an unanswered question regarding its applicability to ERP.

But overall, this attempt to do cloud ERP may mean a stronger push not to do customizations and to do more BPR. However, the central hypothesis around not doing customizations is based on what is a false assumption that all best practices are contained in the ERP system. We analyzed and rejected SAP’s claims of its systems containing best practices in the article How Valid are SAP’s Best Practice Claims?

This concept of best practices has been proposed for decades and is both incorrect, but insulting to anyone who has exposure to ERP systems and business processes. It is something a salesperson would say who has never been on a project. Furthermore, the entire concept of best practices has already been summarily contradicted by large numbers of academic papers. Therefore the right interpretation of when a person states, “my software contains best practices” is “I am going to trick you.”

Fake Best Practices

ERP systems are not “filled with best practices.” This is a carefully conceived fallacy to get companies to accept functionality that is not a fit for customers because that is what ERP vendors have to offer. Loosely translated, your apartment may have space for a two-seated couch, but if the furniture salesperson only has three seated couches in stock, then three seated couches are “the best practice.”

Why Strategy Consultants Do Not Add Value on SAP Projects

Hypothetically it would seem that strategy consultants could add some value to SAP implementations. Often the business at the client needs assistance in developing requirements, and frequently this requires quantification of many things that the business often does not have either the time to analyze or the ability to analyze.

Strategy consultants look at the world a bit differently than software implementers. Because they don’t put their hands on much of anything, and they are trained to be expansive in their thinking, they often make projections based upon very little real-world data.

The Reality of Strategy Consulting

However, in my experience, the reality is quite different than the hypothesis. One of the problems is that most strategy consultants are not particularly practical. They primarily make their money by bringing “trends” to companies to implement. One year the trend might be “Lean,” the next year it might be something else. Because they are trained to think at such an abstract or unrealistic level, they are not very useful in helping the business drive to any realistic requirements.

Furthermore, strategy consultants generally don’t have an excellent idea of how to implement their ideas and are very infrequently called on to do this. Because they are not tasked with this, their solutions will often lose any semblance of practicality in favor of what could be called “sex appeal.” If one looks at old strategy presentations ten years after their initial creation, one will notice that many of the projections seem to have a low accuracy level. I was once on an SAP project where strategy consultants encouraged the business users to put anything that they wanted on the list, and they were encouraged to “think outside the box” and come up with anything that essentially their hearts desired. This was done even though the solution was already selected. This is an activity that should be performed before software selection, not after software selection.

What if the business comes up with things that the software cannot do (which they invariably will). Then what? This is, in essence, the problem. Strategy consultants increase the expectations for the customer but don’t do anything to meet those expectations because they just come up with ideas, ideas that are unbounded by real-world constraints.

Cultural Issues with Prima Donas

A second issue is cultural. Culturally strategy consultants are taught to have a very high level of entitlement, and part of the training that the large firms give strategy consultants is to exude arrogance, as this can be mistaken for confidence on the part of the client. Most strategy consultants see IT consultants, as “mechanics” and do not generally work with them very well, which makes it difficult for them to work successfully on SAP implementations.

Thirdly, most strategy consultants are not mainly quantitative. Most of their work is based upon interviews, not on data analysis, and because they lack these interests and skills, they are not very comfortable asking for extracts from the IT department. I worked with several strategy consultants on an evaluation project, and it turns out that by the time I had arrived on site, the strategy consultants who were there had utterly alienated the IT department of the client, which would not provide them with any data. I spent time mending fences by merely showing people in the IT department standard everyday consideration and soon was able to make progress in obtaining data.

However, after I performed the analysis and presented it and in passing told the strategy consultants that they needed to work better with the client IT department, the strategy consultants said to me that they did not have to because they would “roll them over” if they pushed back. Strategy consultants only really think of engaging at the higher levels, and little interest in working at the level below this.

The Example of Poor Quality MRP Functionality in ERP Systems

If we take a foundational are of functionality as an example, I am not satisfied with how a single ERP system I have worked with performs MRP. I have been recommending performing MRP in external systems for quite some time and sending the results to ERP to perform all the commits. I can take the MRP run of any ERP system and produce better output and a better planning process with a specialized external planning system. Therefore not only is MRP not a best practice in ERP systems, but it is also functionality to be replaced.

Customization as a Necessity for ERP Systems

Even the largest ERP systems like ECC must be customized — because what you are buying in most cases is just a big batch of generic functionality, with a veneer that it will “work for anyone.” But, if companies are being sold the concept that they can’t customize because of multitenancy, and the idea is that the customer will have to “BPR their way out of every custom requirement,” then that will hurt implementations. As soon as multitenancy is broken (that is a copy of the ERP system is made that can be customized), now the solution is no longer cloudy, but hosted, and many of the benefits of cloud go out the window.

The Panorama report does not say this, but it is an interesting question about how much the cloud (no customization) ERP implementations are running into reality. We can only speak to SAP as that is our main focus area, and the only vendor we do research extensive project research on and have private data points to draw from. However, SAP is not having success with ERP cloud. The customers they do have on the cloud are tiny customers that don’t have customizations and don’t even need an ERP system (SAP consultancies, etc..)

Faking the Cloud Until You “Make” The Cloud

SAP is pretending to have cloud ERP business to keep Wall Street happy and to make it seem they are “hip and cool.” Estimates from my sources indicate that SAP is probably not making any money on cloud ERP.

Conclusion

The observation of the reason for failure could end up being inaccurate. Therefore the reason for failure on ERP projects can very merely be purposefully misidentified as BPR (the vendor and consulting company friendly conclusion). This is true when the actual problem was there was no possible way for the company to have performed BPR around the limitations of the ERP functionality due to the requirement being an absolute necessity.

This can be viewed as a desirable conclusion for the individuals filling out such a survey as it obscures their responsibility from performing a well-informed software selection.

The Necessity of Fact Checking

We ask a question that anyone working in enterprise software should ask.

Should decisions be made based on sales information from 100% financially biased parties like consulting firms, IT analysts, and vendors to companies that do not specialize in fact-checking?

If the answer is “No,” then perhaps there should be a change to the present approach to IT decision making.

In a market where inaccurate information is commonplace, our conclusion from our research is that software project problems and failures correlate to a lack of fact checking of the claims made by vendors and consulting firms. If you are worried that you don’t have the real story from your current sources, we offer the solution.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

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References

*https://www.panorama-consulting.com/five-surprising-takeaways-from-the-2018-erp-software-report/

*https://www.nytimes.com/2012/12/09/technology/air-force-stumbles-over-software-modernization-project.html

https://en.wikipedia.org/wiki/Business_process_reengineering

https://www.fastcompany.com/26310/fad-forgot-people

https://hbr.org/1990/07/reengineering-work-dont-automate-obliterate

The Real Story on ERP

ERPThe Real Story Behind ERP: Separating Fiction From Reality

How This Book is Structured

This book combines a meta-analysis of all of the academic research on the benefits of ERP, coupled with on project experience.

ERP has had a remarkable impact on most companies that implemented it. Unplanned expenses for customization, failed implementations, integration, and applications to meet the business requirements that ERP could not–have added up to a higher Total Cost of Ownership for ERP were all unexpected, and account control, on the part of ERP vendors — is now a significant issue affecting IT performance.

Break the Bank for ERP?

Many companies that have broken the bank to implement ERP projects have seen their KPIs go down— but the question is why this is the case. Major consulting companies are some of the largest promoters of ERP systems, but given the massive profits they make on ERP implementations — can they be trusted to provide the real story on ERP? Probably not, however, written by the Managing Editor of SCM Focus, Shaun Snapp — an author with many years of experience with ERP system. A supply chain software expert and well known for providing authentic information on the topics he covers, you can trust this book to provide all the detail that no consulting firm will.

By reading this book you will:

  • Examine the high failure rates of ERP implementations.
  • Demystify the convincing arguments ERP vendors use to sell ERP.
  • See how ERP vendors take control of client accounts with ERP.
  • Understand why single-instance ERP is not typically feasible.
  • Calculate the total cost of ownership and return on investment for your ERP implementation.
  • Understand the alternatives to ERP.

Chapters

  • Chapter 1: Introduction to ERP Software
  • Chapter 2: The History of ERP
  • Chapter 3: Logical Fallacies and the Logics Used to Sell ERP
  • Chapter 4: The Best Practice Logic for ERP
  • Chapter 5: The Integration Benefits Logic for ERP
  • Chapter 6: Analyzing The Logic Used to Sell ERP
  • Chapter 7: The High TCO and Low ROI of ERP
  • Chapter 8: ERP and the Problem with Institutional Decision Making
  • Chapter 9: How ERP Creates Redundant Systems
  • Chapter 10: How ERP Distracts Companies from Implementing Better Functionality
  • Chapter 11: Alternatives to ERP or Adjusting the Current ERP System
  • Chapter 12: Conclusion