When 'free' can be very expensive

You are a mid to large size company.  You bought and deployed a big ERP solution for your HRMS, Payroll, maybe your Accounting and Procurement as well. Flickr - JeffChristiansen

It was crazy expensive, likely took longer and cost way more to implement than you figured, and you ended up making lots more customizations than you had planned for (despite the initial desire for a 'plain vanilla' project).  Aside - you know your Project Manager used that expression at least 10 times in the beginning.

You finally have the ERP running relatively smoothly, to the point where it's time for other long put off projects to get considered.  More 'strategic', high value-add type projects. Things like a new Applicant Tracking System, an automated Performance Management tool, or perhaps Succession Planning.

But in these tough economic times, do you even have any funds for new software?

After all, you are locked in to some hefty annual maintenance/support fees for the big ERP system. But wait, the ERP system can support all these 'strategic' processes. And five years ago, when you hammered out the ERP license contract, you made sure that you would have the right to use all those modules at any time in the future at no additional cost.

It's a no-brainer then, right?  You will simply use whatever functionality that is inherent in the ERP package for your new ATS or Performance Management solution. It is already paid for, it integrates with the rest of the system, and you have functional and technical staff who know the technology.  Slam-dunk.

But wait a second, five years ago when you did your due diligence in the ERP purchase process, did the modules for ATS, Performance, or Succession even factor in to the discussion?  Did you even consider them at all? If you approached ERP selection like most organizations, you spent 95% of your energy on things like integration, technology, and 'core' business processes.  These are all important, and it was altogether fitting and proper that they were the priority. 

But now, when you are ready to deploy some of these 'strategic' modules, are you realizing that while your ERP package supports them, they are difficult to use, don't offer most of the latest advances in the technology, and are not well-received by your end users?  ERP packages are developed and sold from the 'inside-out'.  The tight integration, the unified database, the ability to leverage tools like workflow and security management across a wide swath of the enterprise is what 'sells' ERP.

No one, I mean no one, ever bought an ERP solution for the wonderful E-recruitment capability, or for the fantastic Performance Management module. 

It is a concept that has been repeated for 20 years, it is almost a cliche, but it usually bears true. The big ERP packages simply cannot be as good at all the ancillary strategic capabilities as the best-of-breed vendors.

And when you implement ERP-based, sub-standard capabilities for ATS, Performance, or Succession, areas that impact a much, much wider audience than your core HRMS, you had best be prepared to justify and support that decision. 

When the candidates, hiring managers, line managers, and executives start complaining and griping about the solutions that you have implemented, and adoption rates are slower than you would have liked,  is your primary response going to be, 'Hey it was free'?

'Free' can be very expensive.  Implementing software just because you have already paid for it can be a very costly mistake in the long run.

But we don't want to be the Milwaukee Brewers

Editors' Note - This post originally ran back in July 2008, an update to the story is below

Here is Reason 31 of Steve's reasons why the ERP vendors will eventually crumble. My shop is now about 9 months in to another 'major' upgrade of the ERP system. Before it is all over, we are looking at a full year of essentially no progress on any meaningful, strategic, or high employee or candidate satisfaction project.

No online total comp statements, no automated competency management, performance reviews, or succession planning. No new processes rolled out to employee or manager self-service. No, pretty much a full year of test upgrades, patches, bugs, regression testing, more bugs, five day outage to production, more bugs, support, did I already say more bugs? And we went through pretty much the same scenario in 2003.

So 1 out of every 5 years, all progress stops, the organization retrenches, and all important and interesting work is 'frozen'. In theory we get lots from these upgrades, compliance fixes, latest in technology, new features, etc. And most of that, I admit, is true. But at what cost? One out of every five years essentially wasted.

What does this have to do with the Milwaukee Brewers? Well, for a team like the Brewers, showing slow and steady progress for four years, maybe even making a playoff appearance is a notable achievement. In year 5, if they have to regroup, trade off a few players they can't afford, and load back  up on young prospects, that is really ok with them, and most likely their fans (customers/employees). After year 5, the team (hopefully) starts the slow climb backup to contender status. Maybe they make another run at the top, before the cycle inevitably repeats.

But what about that plan for the Yankees or lately, the Red Sox? They would not be content or satisfied with an every fifth year halt to progress, or worse a regression back to square one. The fans get restless, the media relentless, and team ownership would not stand for it. Managers, executives, or players responsible for the problems would be sacked or traded. Those teams simply will not accept a 'cycle' like lesser teams like the Brewers would.

How does your organization see itself? Do you really want to be the Milwaukee Brewers? Or do you want to be the Yankees? Can you afford to take every fifth year as a 'no-progress, just keep running the Payroll' year? Will your staff accept that? How about your owners, executives and customers?

Is it time to get off the ERP upgrade treadmill?

Update - Feb. 2009 - A full 16 months since the major upgrade started, and my organization is still not fully recovered.  We are still logging new bugs every week, sometimes several a week.  Basic functionality that worked fine for years on the prior release, still fails to work consistently or reliably.  No significant new development or introduction of new features or functions have occurred, save only for those that 'Had' to be done, as the new release of the ERP system changed quite a few processes that frankly, did not need changing. So sure, my organization is positioned for the next several years, but was the cost of a year and a half of time, money and lost opportunities worth it? 

Think about this before you jump in the pool with ERP, I urge you.

Workday Envy

This week I had he chance to attend a webinar from Workday centered on the annual Benefits Enrollment process.  It was an excellent session, that showcased Workday's cool user interface, intuitive design, and powerful features. Let's just say I left the webinar with an extreme case of 'system envy'.

For the last few years myself and a colleague in HR have been responsible for ensuring the smooth running of our organization's annual Open Enrollment, which has been done entirely online for four or five years.  In fact, online or web-enabled benefits enrollment is not that novel a concept any more.  If you went to an organization that was still passing out paper enrollment forms, you would probably be surprised.

But Workday takes the process a major step further, with their concept of the 'Workday Benefits Network'.  Essentially, Workday will (for a fee) take over the responsibility of creating the interfaces from your HR system, to the benefits providers for the purposes of enrolling employees in plans and recording changes. I can't begin to describe how much time, effort and cost we have endured in developing and maintaining (on our own) the necessary file feeds from our HR system to our various providers.  It is an annual exercise it seems, us tweaking and modifying our custom code to meet the providers new or changed formats, waiting to hear back from their tech staffs, and us making still more modifications.

Frankly, it is a low-value, behind the scenes activity that is important, but invisible to our employees and managers.

I would love for our ERP provider to take ownership of all of those processes, but I doubt that would ever happen.

Can we switch to Workday now?  

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A 1997 Ford Taurus

Ah 1997, Elton John's Candle in the Wind was on the charts, PDiddy was still Puff Daddy, and one of America's top selling cars was the Ford Taurus.  Maybe you bought one, or more likely had one as a rental car. I swear I drove a Ford Taurus something like 72 weeks in a row when I was consulting. 

Stylin' in the Taurus

She's a beauty, no?

You know what else you might have purchased in 1997?  Your ERP system. The same one that still runs your HR, Payroll, Accounting and Distribution processes.  In 1997, about $14B was spent by organizations on ERP.  By now you would have had to go through two or maybe even three significant upgrades, each one getting progressively more complex, costly, and lengthy.  But underneath it all, the chances are the 'core' of the system is still largely the same as the 1997 model.

What about your business? How many things have changed since 1997?  Would you still make the same ERP purchase decision today that you did in 1997, when chances are you were in a panic over Y2K and you were pretty sure your Cobol mainframe system was going to spontaneously combust.

Is it really time for your organization to begin to let go of the loyalty to a system you bought in 1997? 

Many organizations still feel the need to only look to their ERP solution and try to add-on HR Talent Management functionality, rather than do a comprehensive assessment of the market, the business issues, and make an informed decision about technology. 

You eventually sold (or junked) that '97 Taurus, didn't you?

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The Weakest Link

When an enterprise adopts an ERP system to support most or all administrative functions certain efficiencies are certain to be gained with the inherent integration of data. The list of employees entered in the HR module is automatically that same list available for Accounting and Procurement processes. The organization structures and physical location information is shared throughout the system, so fundamental changes need only be made once, in one place. From a technical perspective, there are often efficiencies and cost savings for be gained from the standardization of operating systems and core database technology. It becomes somewhat easier to find technical talent, as you can focus on candidates with very specific skills.

But the advantages of central ERP are starting to hamper many HR departments’ ambitions to deploy more strategic Talent Management applications. ERP vendors have only recently begun to improve or augment their Talent Management functionality in order to provide a better solution set in this area, (which is the fastest growing sector in HR Technology). Many of these new features will require entire ERP system upgrades for HR departments to try and take advantage of. Remember, ERP upgrades require all components of the system go through the upgrade. So, if an HR department wants to deploy some new Talent functionality, they will have to rally support of Finance, Procurement, and possibly other areas to agree to submit to a major upgrade.

Typically, (especially with Finance groups), those conversations do not go very well. The vast majority of finance departments prefer the reliable status quo. Can you even think of any great innovations in accounting software that would encourage a finance department to want to upgrade?

Quite naturally, either for reasons of functionality, or inability to justify an ERP upgrade, many HR departments will gravitate to third-party best of breed solutions for Talent Management solutions. But then a new challenge faces HR, namely having to convince the IT department that the introduction of a new technology won’t lead to excessive integration work, potential security issues (many of best Talent solutions are SaaS offerings), and an increase in the overall support responsibility.

So no matter which option HR chooses, some kind of internal conflict in likely to arise. For me, I am a staunch proponent of HR departments taking a strong position and advocating for the best overall solution, which more and more is a best-of-breed package. For many HR departments, the right move is to get off the ERP treadmill.

That also could be the latest ERP upgrade I have been involved in has been an unabashed disaster, but that is a post for another day.