By Philip E. Quigley, CFPIM

Large information systems projects are the rage right now. Company after company is installing new systems. The most popular project seems to be installing new enterprise resource planning systems like SAP or Baan. Mountains of money is being spent, and according to articles in Fortune and Business Week and in bar talk at APICS meetings, a large number of the projects are experiencing problems — problems resulting in large budget overruns, implementation dates being missed and career's impacted. The reasons are many, but one factor seems to be overriding — management doesn't want to pay the price for the new systems. But when the new systems fail, they will have to spend more on the failure. In other words — pay now or pay more later. There are several areas where the price must be paid. The first area to pay the price is in management taking the time to learn in the following areas:

• Management commitment to understanding the business. Rather basic, but time after time major systems projects uncover facts about the business management hasn't known or understood. This ends up costing the project time and money — while management is educated. Management solves this by going off-site on a regular basis for a few days to spend time analyzing and thinking about their business, and what it takes to succeed now, and more importantly, in the future.

• Management commitment to understanding information systems. Senior management must understand how information systems can be a competitive weapon in today's marketplace. That means they must understand the basics of information systems. They don't need to be expert, but they must understand the basics — what information systems can and cannot do. Again this takes time and effort. Senior management must take the responsibility to learn.

Paying the price
A management team that pays the price in this area will understand their business and how information systems can help them become more competitive. They will be able to ask the right questions of the software companies and consultants, thus ensuring the project tackles the right business processes and solves the real problems. Bottom line is that they will be leading the project team and giving it the vision it needs to succeed.

A management team that doesn't pay the price will be a passive observer of the process. The project team and consultants will spend much time and effort configuring systems, writing programs, and developing new reports. But without the vision and leadership from senior management, the real business problems and opportunities will be missed.


Change is inevitable
The second area where the price must be paid is changing the organization and handling the conflict caused by change. I've never heard of any system implementation where management decreed that the system must be put in vanilla — no changes allowed. What happens? The system is changed and modified because of objections from the organizations. Some of the objections are justified, many are not, and they are made because the organization doesn't want to change. The issue here is that new systems will demand organizational and process change, and change is difficult in any organization. The bigger the system and organization, the bigger the change and the larger the conflict. Senior management must lead — it must know exactly what the changes are and why they are justified. This comes from knowing the business and systems and being willing to force the change through. The real tough part with change is that blood will be on the floor — people will leave the organization because they can't deal with the change. Good people will be lost, but there is no choice. If individuals, no matter what their history with the company, can stop change, the project will fail and money and time will be wasted.

The final area for payment is paid in real money. Money spent on the infrastructure of the system — hardware and software needed to run and administer the new system. It's surprising how many companies refuse to spend money here and pay the price with systems that cannot handle the volume, systems that fail on a regular basis, and systems that need constant human intervention to keep running. My experience is that management teams that refuse to pay here will quickly, usually within a few weeks of system implementation, be writing much larger checks to fix problems that shouldn't have been allowed to occur.

In summary — pay now or pay more later. A simple statement, but a true one. Before any organization starts a major information system implementation, it must come to terms with this reality.