January 2004
Volume 20
Number 1
Reviewing the ERP: Are We Getting Our Money's Worth?
A long and interesting history, spanning almost forty years: we started with simple data processing systems, then went to administrative information systems, then moved to campus-wide information systems, and now we have enterprise resource planning systems (ERPs). But the history is not just long and interesting, it is also very bumpy – from the first few keypunch cards that ran payroll to trays of cards that supported arena registrations to batch data-processing jobs that updated the general ledger all the way up through today’s very sophisticated, web-based information systems that can support an institution’s entire administrative workflow, there have been an astonishing number of ups, downs, surges forward, and leaps backward. There have been spectacular successes and countless failures. But throughout all this turmoil, two constants have remained: these systems are very expensive and they are very difficult to implement.
As a result, more and more colleges are doing formal reviews of their ERPs. Of course, assessment of almost any sort is generally a good idea, but there is another significant motivation behind these reviews: to answer the Big Question: Are we getting our money’s worth? It may be members of the Board of Trustees who are asking this, or perhaps the president and executive staff. It may be others around the institution who are aware of the enormous expense of the implementation and ongoing support, but not necessarily of the benefits that have accrued as a result. If no one is asking, the institution is either unusually enlightened regarding information systems or not enough people are paying attention. In any case, the CIO, either as the leader or as a partner with another of the institution’s senior managers, should do a formal review. The institution should have an opportunity to become educated about the return-on-investment of its ERP, and the CIO is in a perfect position to make this happen.
Be careful of the timing
When the review is done makes a big difference to the outcome because
benefits will be slower to identify and accumulate than the costs were.
Assuming an end-date of the implementation can be identified (the date
that probably comes closest is the go-live date for the final module), it
is best to not do a review until at least a full year has passed.
Let’s suppose, for example, that the institution was hoping for greater efficiency in its work processes – a very common rationale for a new ERP. Waiting a year to judge the ERP on this criterion really makes sense, because the period right after the implementation is most likely the least efficient period the institution has ever experienced. This period is typically characterized by long learning curves for both technical and user staffs, the cost for additional help to backfill key offices, new business processes that are still being developed to take advantage of the software, the reconsideration of some of the initial implementation decisions after the system is in production, the documentation and help sources that have not been written, and on and on. How many users complain right after the go-live date that it now takes twice as long to perform a function because of extra screens or not having a report in the right format?
This post-implementation period is where we very often see a huge halo appearing around the memory of the old system, along with much gnashing of teeth over the new system. It is very likely at this stage that there is a long list of issues to be addressed ranging from the way certain reports look to post-conversion data cleanup, but neither the issues themselves nor the length of the list tell the full story.
It is very common for institutions that have gone through such a major transition for the expected benefits to be elusive at first, and some, or even many, users may be frustrated with what they see to be not only a lack of improvement but actual steps backwards. It is no wonder that when institutions do formal reviews at this stage, many of them wonder whether they have done the right thing and whether their large investments in the new system are justified by the returns.
The good news is that this first year is also characterized by a tremendous amount of learning and adaptation. Slowly, the benefits of this enormous effort begin to emerge. By year’s end, a formal review will yield more accurate results.
Consider the original goals
A good place to start in the review is with the original motivation to
have an ERP. It may have been so long ago that most people have forgotten
this stage, but chances are that the institution developed either a formal
Request For Proposal (RFP) to send out to software vendors or at least
documented in some way the need to do things differently with regard to
enterprise technology. There may have been some kind of a needs analysis
or study done; perhaps a committee report is available.
In any case, the part of this history that is most important are the high-level goals. Considering the ERP against the institution’s broadest objectives will be the most useful way to go, especially since long after an ERP implementation is done, most people remain immersed in the details and may find it difficult to see above them. Most institutions had three major reasons to do an ERP project: to provide a higher level of operational efficiency in accomplishing administrative tasks; to provide good, accurate, accessible information for decision making; and to provide the highest quality service to students and others in the community. These are the criteria against which the ERP should be judged.
Be rigorous, but…
A good review will take many factors into account and will certainly
include original and actual budgets (and whatever differences there are
between the two). But analyzing those numbers is relatively easy compared
to identifying and quantifying benefits. A traditional cost/benefit
analysis in this case is unlikely to yield meaningful information.
Although there may be quantitative information available, such as an
increase in enrollment or a decrease in the institution’s payroll, it is
much more likely that benefits will be seen in things like better service,
more accurate information, less paper floating around administrative
offices, and so on. These are real benefits, and of great value to the
institution, but also very hard to plug into a formula in a spreadsheet.
Typical review findings
Almost always, the overall result of the review is that yes, this was
worth doing. In addition, the longer the ERP is in place, the more
benefits will accrue (especially if there is a strong partnership in place
with a good vendor). However, there may also be certain areas which, if
given more attention and resources, will allow the institution to increase
even further the value of its investment. Typically, these areas would be
the among the following: We need more training. We need more systems
analysis to tell us where we can take better advantage of the system’s
particular features. We need more new business processes. We need to
review our data access and security policies. We need to broaden access to
the system’s features. We need to make reports easier to do. We need to
stop relying so much on paper. We need to trust the system more. We need
to improve administrative self-sufficiency. Finally, one issue that often
gets overlooked: We need a communications plan that lets everyone know why
this ERP is such a very important asset.
What is often the case is that the institution needs an ERP Phase II. There isn’t anything inherently wrong here – it’s just that the ERP project has not gone far enough yet. Having further to go is perfectly normal – it is not necessarily a reflection of problems with the implementation or even of deficiencies in the software itself.
The only constant is change
It is very important for everyone to realize and accept that the ERP is a
living project, not a fixed state. It is very common for the folks at an
institution that has just gone through an implementation, especially the
people who worked so hard to make it happen, to feel they deserve some
breathing room before making any changes to what was achieved at the time
of going live. But there really can’t be such breathing room. In fact,
delaying the natural progress of the system does a disservice to the
campus, denying it the full benefits of everything it worked so hard for.
It would be helpful for people on the campus at all levels to publicly
embrace the idea that the ERP is a growing, evolving organism. This
evolution will mean continuing to learn new things, master new features,
take advantage of changes in look and feel, and rethink policy decisions
and procedures. The change should be almost continuous, not episodic; it
should be almost automatic, not delayed by waiting for enough support to
gather. The payoff for taking this dynamic attitude toward the ERP will be
better ways of meeting the needs of the institution. LF
The Edutech Report is a monthly publication of Magna Publications
The EDUTECH REPORT is published each month by Magna Publications www.magnapubs.com, 2718 Dryden Drive, Madison, WI 53704; 800-433-0499. President: William Haight whaight@magnapubs.com; Publisher: David Burns dburns@magnapubs.com; Managing internal editor: Rob Kelly robkelly@magnapubs.com. Content provided by contributing editors Linda Fleit lfleit@edutech-int.com and Thomas Warger twarger@edutech-int.com. Subscription Customer Service custserv@magnapubs.com. Copyright 2004. All rights reserved. Authorization to photocopy items for specific clients is granted by Magna Publications for users registered with the Copyright Clearance Center (CCC) Transactional Reporting Service, provided that 50 cents per page is paid directly to CCC, 222 Rosewood Drive, Danvers, MA 09123. Phone: 978-750-8400; www.copyright.com. For those organizations that have been granted a photocopy license by CCC, a separate system of payment has been arranged. One-year subscriptions: $199. Discounts available for multiple subscriptions.