Welcome to my first blog post on KPMG's website! I look forward to sharing a range of views and - let's be honest - quite subjective attitudes to what works when we talk about digital transformation.
The goal is to try to deliver a range of recommendations, based on the many projects my team and I have delivered over the years. I hope that you, dear reader, can use some of our experience to avoid starting from scratch if you are facing a complex digitisation project.
If you are experienced in the technological and human twists and turns that this type of initiative often gives rise to, then you may be able to recognise one or more points. If not, the internet never forgets and I have wasted your time - oops. Let's grab a beer if you see me in town one day. My treat!
This is an advertisement for KPMG and what we can do and deliver, because we want to enlighten you about the idea of a collaboration. Very likely on this topic.
Have a cup of coffee and sit down. I borrow 15 minutes of reading time from you. Let's get started.
Who am I?
My name is Thomas Schneider and I have been in KPMG for almost 8 years. Before that, I was at IBM for many years. My profession was originally infrastructure IT architect, but in recent years I have moved away from technology and into all the other factors that create a successful technology project.
I have been a tough generalist lately. A Swiss Army knife. You know, someone who takes care of complex IT projects, perhaps even helps to create the framework for them before they get started - or come and fix them.
I do strategy and analysis, and I am a program manager and trusted advisor to CIO, CFO, and CEO. You know the type. Someone who knows a little bit about everything, but not very much about a single thing (They are called experts or specialists - and I am not).
Common to most of my experiences from the last 20+ years in the IT industry, is that they are an amalgam of large IT outsourcing projects, complex digital transformations, system development, and implementations. Some failed spectacularly and others succeeded, to a greater or lesser degree. But the vast majority of projects started and stopped with pretty much the same challenges, every single time. It was we humans who were to blame. Not the technology - for the most part.
Enough about me. Let's get started on one of my favorite topics. The scary ERP project!
When someone like me at KPMG works with digitization with a wide range of both public and private clients, there is one type of project that often scares an executive or board of directors more than anything else: the ERP project!
The reason is a combination of factors, typically including management's experience from previous similar activities, cautionary examples from consultants, the general press-coverage of spectacular failure implementations and then an intuitive professional understanding that this can be difficult – and expensive!
The horror stories are circulating in the management network, where large-scale but failed ERP projects often lead to layoffs, management changes, massive costs and little or no ROI at all. You thought you would get a smart new IT platform that lifted the organisation to new efficient heights, but instead you were left with a wounded organisation, an overly expensive and complex system and a large bill for suppliers.
The analogy is often that an ERP project is like changing the engine of an airplane at 30,000 feet. And even though it might not be that dramatic in reality, the comparison is not entirely stupid. Because when the projects reach a certain size, it can be both complex and challenging for a company to succeed, on top of everything else you also have to achieve and deliver on.
ERP project? Not on my watch!
ERP is the abbreviation for Enteprise Resource Planning and the system is often the digital platform(s) that handle the business's core processes from order receipt to production, warehousing, logistics, and invoicing - with a financial management layer at the bottom that ensures governance, control, and legality. That is, the entire back office of a company. The system can be so integrated into a company's operational model that it can sometimes be difficult to distinguish the 'system' from the 'process'.
The vast majority of c-suites understand very well what an ERP project entails. And on paper, one can easily acknowledge the many risk factors an upgrade or replacement of ERP can entail. It increases the day-to-day operational risk, it potentially causes delays on other tactical and strategic projects and above all, it is typically expensive and very rarely affects the top line (or bottom line) positively.
If you combine this with the fact that the trend for years has been on a (reasonable) strengthening of the more customer-facing activities such as CRM systems, webshops, strengthening analytics, and maybe even automation through AI/ML or RPA, well then ERP is in a best-case 6-7 place of prioritised strategic digital initiatives.
Therefore, the vast majority of management would like to avoid an ERP replacement on their watch; if possible.
So why do we still see several ERP projects?
Covid helped to kickstart many companies' too poor digital maturity. When employees had to sit at home and serve customers, the digital value chain quickly took off. If the degree of automation was low and the manual measures high, the customers' response was prompt: They found another place to shop.
Furthermore, the requirements from customer-facing systems have increased the pressure on access to data from ERP systems, among other things, to create the insights that can differentiate a company in the market. At the same time, many years of underinvestment in the core systems, including ERP, have now created pressure to upgrade or update the many fraudulent platforms in Danish and international companies, as the requirements for near-real-time data increase.
Last but not least, the security situation has deteriorated. Not only because of decidedly major political crises but also because the threat from well-organised cybercriminals is rising almost daily. An outdated platform, with a lack of vendor support and security updates spinning in a corner of a local data center, is suddenly not so attractive.
There is simply a business requirement that the ERP system to a much greater extent interacts effectively with other best-of-breed systems around it, in a coherent and connected digital value chain, based on a secure, scalable platform.
And yes and then SAP, Oracle, and Microsoft (and a host of other vendors) have introduced new cloud-based platforms that promise exactly that they can deliver the above. In combination with the expiry of support for several large volumes of ERP systems, there is now 'the perfect storm' for ERP projects.