Earlier this week, I met with the CFO of a client that we recently helped select ERP software for and are about to start implementation with. He mentioned that he is generally excited about his upcoming transformation – until he reads one of my blogs or watches one of my videos on my YouTube channel.
This wouldn’t be the first time I have been compared to the character “Debbie Downer” from Saturday Night Live for the way I call out the industry and its incumbents for its shortcomings. I don’t consider myself a negative person – just a realist. I prefer to think of myself as the voice of reason here to share my opinion on the risks of digital transformation, and more importantly, what you can do to mitigate those risks.
The digital transformation and ERP software industry has a big black eye
In another heavy dose of reality, this article focuses on fatal flaws in the digital transformation industry. The industry has, in my opinion, gotten out of control. Transformation failures at Revlon (SAP), Lidl (SAP), Haribo (SAP), Hertz (Accenture), and others are giving the industry a big black eye, but the underlying dynamics are even more concerning.
There is a day of reckoning on the horizon for the industry, and it won’t be pretty.
Here are some of the dynamics to be aware of as you prepare for your digital transformation or ERP implementation journey:
Maturity of flagship ERP systems are lacking in the shift to the cloud
This is the first time in my career where all the major players are releasing relatively new and unproven flagship products. For example, while SAP spent roughly 20 years fine-tuning its R/3 product, S/4HANA has only been on the market for a few years. The number of customers successfully using this new product is relatively small. The kinks haven’t been worked out and the breadth of functionality simply isn’t there yet.
The same is true for Oracle ERP Cloud, Microsoft Dynamics 365, and other top ERP systems. In some cases, the vendors have rewritten the software from scratch (example: Oracle). In other cases, they have pieced together the “best of” older flagship products (example: Microsoft). In most cases, these products are not as ready for prime time as their predecessors were.
ERP consultants don’t know the software well and are flying blind
The industry is experiencing a major shortage of resources who know these new systems well. They simply don’t have the number of lifecycles implementing the solutions and learning from the battle scars that come from implementing them. As more companies deal with vendor-imposed deadlines to migrate to new flagship products – such as SAP’s 2025 deadline – this resource shortage will become even more painful.
So, here’s what is happening in the field: relatively inexperienced consultants are insisting that they can implement the new solution in X amount of time. But the reality is that they don’t really know. They are creating a false sense of confidence in being able to implement these solutions quickly. They are leaning on overhyped and ineffective buzzwords such as “agile” and “industry best practices” to justify what they don’t know. (More on this point later in the article).
Digital transformations are becoming too focused on technology and not focused enough on business operations
New technology and resources who don’t fully understand that technology leads to too much focus on figuring out how in the world the technology works and too little time on the things that really matter. For example, SAP consultants are spending inordinate amounts of time figuring out the nuances of S/4HANA when they should be spending more time helping clients adopt to the new software.
This reality runs counter to best practice. Business processes should be driving technology – not the other way around. Project teams should be focusing on how to improve the customer experience and business process efficiency. They can’t do this while they are still trying to make sense of the technology.
Big ERP systems integrators are misleading and applying way too much pressure on their customers
The biggest industry offense, in my opinion, is that software vendors and the big systems integrators are misleading and pressuring their customers in reckless and highly unethical ways. They are insisting that customers “must” move to the cloud – even if that’s not the best solution for them. They are insisting that they should implement quickly – even if that isn’t in their best interests, either. They are forcing software on them that they don’t necessarily need.
For example, we have worked with at least 20 different S/4HANA customers so far this year. I would estimate that at least 17 or 18 of those instances involved a big systems integrator putting extreme pressure on the customer to implement all of S/4HANA, Ariba, and SuccessFactors within a 3-year window, which seems to be the canned duration that SAP implementors pressure their customers into. These are examples of getting Accentured (or Deloitted, E&Y’d, Capped, etc.) at its worst.
In some cases, these are massive, global companies that will need at least twice as much time to implement. But the system integrators will accuse customers of being “resistant to change” or “refusing the adopt best practices” when they push back on those timelines. These are some of the most ridiculous things I have seen in my 20 years in the industry, so it’s time that the big ERP system integrators be exposed for their ways of business.
The day of reckoning and how to mitigate the risks of ERP implementation
All of this is a recipe for disaster – for ERP software vendors, systems integrators, and most importantly, their customers. The path they are headed down simply isn’t sustainable. The economic incentives and biases may be driving behavior now, but it won’t last. Organizations are too smart to let this happen without consequence.
The good news is that I’m not simply the bearer of bad news here. There are several things that you can do to avoid the landscape we’re up against:
- Remember that you are in control of your project and you call the shots – not your vendor or systems integrator.
- Understand the economic biases that lead industry incumbents to want you to rush implementation: more software license revenue, another customer logo they can use in marketing materials, and more consulting dollars sooner rather than later.
- Recognize the rushing your implementation or adopting more software than you need is not in your best interests – and act accordingly.
- Don’t let the fox guard the henhouse and instead hire an independent third-party quality assurance and PMO consultant such as Third Stage Consulting to identify and mitigate risks.
- Don’t put your entire transformation in the hands of your systems integrator. Hire them for what they are good at (software configuration and testing) and utilize others to handle organizational change management, business process improvements, user acceptance testing and other critical project activities.
- Aggressively manage your implementation partner rather than letting them manage you. If things get bad enough, don’t be afraid to fire your systems integrator.
If you are seeing some of the warning signs above, feel free to contact me to discuss ideas on how to work around them. My team and I are happy to be an informal sounding board as you continue your digital transformation journey!