We all like to keep score. It helps us sort out what works and what doesn’t, and it propels us to keep trying to improve. That’s certainly the case when companies invest in new ERP systems.
ERP 2.0 builds on the benefits of legacy predecessors but is delivered through the cloud, which eliminates the most painful side effects of server-delivered ERP 1.0: lengthy implementations, costly maintenance, limited integration and high-friction scalability.
Once a company has implemented a modern ERP system, it’s natural to want to quantify the value of the investment. I’ve learned some things from our clients over the years about doing this, and I’ve put together the following list of tips.
1. Results will vary, and they should. Companies define success differently, so there is no single magic formula for the “right” way to measure it. Choose to measure things that are in line with your goals and objectives. Social, mobile and analytics might be the most important new benefits for one company, while scalability might be tops for another.
2. Plan what you want to measure early in the project. Don’t wait until after the deployment to decide what to measure. This will help lay a realistic foundation of expectations and can inform decision-making during the project. Choose metrics that you know you will be able to collect and that are reflective of the project’s business case.
3. Don’t pick too many metrics. You don’t need many points to measure. I recommend companies choose two or three. Choosing a lot more than that causes unnecessary complication and doesn’t add much value. If you are picking a small number of KPIs that are meaningful to your strategy and easy to collect, you will have the information you need to measure benefit. You can always add or replace other metrics later, but trying to track down too many from the start will impede progress.
4. Be realistic. If you don’t have the ability to measure something, don’t get hung up on it. Be realistic about the resources you have available and the support you’ll receive from others. I sometimes think people underestimate the work involved in gathering and synthesizing results. Choosing a metric that’s going to be difficult to manage isn’t necessary. Pick another one.
At the same time, don’t give up on a metric just because it lacks historical documentation. Usually people can recall enough information to calculate good estimates. For example, you might not have one rolled-up number of what the prior ERP implementation cost, but people probably can estimate what percentage of a capital budget was used, how long it took, how many consultants were involved and other factors that can be used to calculate a reasonable estimate.
5. Include “low-hanging fruit” metrics. One obvious and relatively easy cost saving to measure is what ERP 1.0 costs in terms of hardware vs. ERP 2.0, which is essentially zero. You can measure this fairly quickly (about 60 to 90 days post-deployment) to see a meaningful difference.
Be sure to also measure the cost of staff to maintain that hardware. Consult with your financial team about other potential hardware costs that have been eliminated.
It can also be illustrative to measure the value of IT projects that weren’t started or completed because IT staff was working to maintain the legacy ERP system. Usually, these are projects that would bring strategic value to a company but never stay as priorities because the tech specialists need to keep day-to-day operations working first. If these projects come to fruition and return value post-deployment, it would make sense to attribute their worth to the ERP modernization and its cloud foundation.
In fact, I think it’s a good practice to put some of these “on hold” projects on the ERP modernization timeline. One of the primary promises of the cloud is that it frees up resources for more growth opportunities, so it makes sense to have a plan to capture that benefit.
6. Soft metrics are important. Not all metrics need to be measurements of hard costs in order to be important. For example, user engagement is crucial to the long-term success of any workforce technology investment because it impacts productivity. If users don’t like the system, they probably are going to avoid using it if they can. This will chip away at long-term benefit.
One way to measure engagement is—prior to the deployment—to conduct an employee survey about your existing ERP system. Ask a question akin to: “We’re going to be doing a new system rollout. What would be your biggest expectations from a new system?” Then, in subsequent surveys after deployment, ask about the specific expectations that were common. Have they been met? If so, it’s an indicator of high satisfaction with the system.
7. Seek help from knowledgeable partners if needed. Professional partners can bring a breadth of experience to your measurement framework. For most of the clients I work with, this is the first time they’re doing an on-prem to cloud project, so they are lacking institutional knowledge. Getting the perspective of experienced partners that have worked with a variety of companies on similar projects can be highly valuable.
Above all, communicate and listen to the people who will be using the system and relying on it to do their jobs. In today’s decentralized, empowered workplaces, the value of any workplace technology flows through the actions and decisions of those using it. Success starts with them.
For more in-depth advice on assessing and measuring the success of your ERP 2.0 rollout, I invite you to read our CFO handbook, “Your Complete Guide to Modern ERP.”