Strategy & Operations » Leadership & Management » FINANCIAL SOFTWARE – We’ll have it done in a sec, guv.

It isn’t difficult to see why the installation of financial software is every FD’s least favourite project. The stuff extends into all your major business processes, it is fiendishly complex and difficult to implement, and it has a reputation for being so expensive that if you get it wrong you can wave good-bye to your profits for a couple of years. Oh, and implementation takes ages – it might be three years before your systems are finished, by which time you’ll probably be looking at yet more upgrades as your business grows. But now software vendors claim to be offering something simpler, quicker and better. Enterprise resource planning (ERP) giants such as SAP and Oracle are marketing rapid installation schemes that they claim will have systems up and running for a fixed price, in less than three months. And the software can be upgraded as your business changes. The software industry is a sucker for a fad, but rapid implementation schemes look as though they are here to stay. The potential savings – reduced consultancy fees, reduced installation costs, increased ability to change to up-to-date systems – appeal to both financial directors and IT departments who are tired of marathon implementations. However, the effectiveness of fixed time schemes is hotly disputed, and most of the offerings are still in their early days. This is a new market for the large vendors and Big Five consultants who made the lion’s share of their fees selling monster solutions to the corporate market. Nevertheless, over the past year, rapid installation services have been pushed hard. Part of the reason for this is the financial software vendors’ need to get companies spending again. The Y2K bug has swallowed large chunks of company IT budgets, and this has caused a slump in the financial software market. The ERP giants have been hit hardest and are desperate to win new customers, which means targeting small and medium-sized companies. And this is where rapid installation comes in. Yet many UK companies remain wary. “Rapid installation services are starting to get a toehold in the market as software companies react to the slowdown,” says Rob Coomber, European practice director for Cambridge Technology Partners, a consultancy and systems integrator that offers its own rapid installation service for the main ERP packages. “But small UK companies are conservative about investing in rapid implementation services and our biggest growth is in the US.” Every IT director knows an ERP horror story featuring missed deadlines and inflated budgets. Many have become business myth, but there are enough concrete examples around to send a shiver down boardroom spines. In July, for example, a two-year, £7m SAP implementation at the University of Newcastle-upon-Tyne was revealed to be £400,000 over budget. The university insisted the project ran to time, but sources close to the project claim it was six months late and one branded it a “disaster”. The godfather of rapid implementation is SAP’s Accelerated SAP (ASAP). Set up in the UK two years ago, it is based around a tried-and-tested methodology for implementing SAP R/3 software templates. These templates – a kind of one-size-fits-all software – are based on industry common practice, so they minimise the amount of customisation that is necessary during an implementation, which is the part that takes the most time. However, unlike more recent packages from rival vendors, ASAP only promises to reduce implementation times. It does not guarantee a maximum implementation time. SAP claims ASAP can reduce consultancy costs, but Peter Robertshaw, manager of SAP’s product marketing group in the UK, stresses that companies going for the “pure” ASAP method need to make quick decisions about changes to their business during the implementation. “Discussing business functions adds time to projects,” says Robertshaw. “We bring in rules such as (customer managers) having to make decisions within 48 hours.” But even these seemingly straightforward rules can create difficulties. FDs should make sure they read the fine-print of their contract carefully to find out who’s liable for what happens in the event that the client fails to adhere strictly to the vendor’s timetable. Ideally a company will set up a steering committee – with a mixture of IT and finance staff – to take the major decisions, for instance on which software functions to adapt to fit the business, and on which business processes to alter to fit the technology. Undeterred by the logistical hurdles, plenty of financial software companies have launched “me too” rapid installation deals. Oracle, the US database and applications specialist, launched a service called FastForward earlier this year. It offers financials and manufacturing modules shrink wrapped for 25, 50 and 75 users. Oracle claims its resellers can implement a financials application in 30 days at a cost of around £170,000 for 25 users. And away from the ERP super-league, small, fast-growing vendors such as Navision and Great Plains claim to have a strong track record in quick installations. The competition is ferocious, so the vendor’s offers are becoming more generous. One company is even prepared to put its money where its mouth is. TenFold, a US financial software specialist, offers users a money-back guarantee if its applications miss their installation deadline. TenFold’s vertical, template-based applications take from four to eight months to install. TenFold may be relatively unknown in the UK, but it aims to expand its presence rapidly, and is targeting the blue chip market. It is also talking to a number of Big Five firms about reselling and implementing its applications. Mike Pilcher, TenFold’s UK sales director, says its no-nonsense approach appeals to financial directors who are caught in the crossfire between the IT and finance departments. “Financial directors sit between business and IT departments, and have to approve the application projects,” he says. “Business people tend to blame IT people for IT projects going over deadline, and IT staff blame the business people because they don’t specify their business requirements properly. They are often both right.” Pilcher believes that the crucial stage for a financial director comes before the installation, when the business and technological requirements of the application are defined. As a result, during the first month of an implementation, TenFold consultants will work with finance, IT and sales staff to thrash out what the business wants from the software. “We’ll produce an executive overview that is up to 70 pages long, without going into low-level technical stuff,” he says. Any speedy and glitch-free software project depends on co-operation from the workforce. Previous financial software projects may have run on less than rigid deadlines, and many departments are not used to making complex IT decisions quickly, so, says Pilcher, this is another area that TenFold concentrates on. For example, when a director at a public sector client asked Pilcher whether he would be allowed six months to make an important decision, such as how link a transaction to a general ledger, he was reminded that this was not possible in a rapid implementation. This, Pilcher says, sums up how much of the rapid implementation of financial software has to do with rapid decision-making by the client. Today, the sheer variety of rapid installation schemes is bewildering, and as most are still in their formative stages, it is difficult to tell which cut the mustard. Chris Gant, head of KPMG’s ERP practice, is refreshingly outspoken on the subject. He argues that many of the fixed-time deals are only slickly repackaged old schemes – a kind of rapid implementation lite. “I do have praise for ASAP, but some other rapid implementation schemes have been little more than marketing projects. Users have to look under the cover,” he says. However, Gant’s perspective is not entirely neutral, because KPMG offers its own ERP rapid installation scheme, called Rapid Return On Investment (RROI). It originated in the US and offers pre-configured Oracle, JD Edwards and SAP applications so customers do not have to customise great swathes of their software. The aim is to get most of the software, say around 80%, up and running as quickly as possible to overcome the major obstacles. After this the user can fine-tune the system, although the ability to do this will vary with each individual package. Fine-tuning is not enough for everyone though. Some argue that the industry’s obsession with speed is dangerous and say that rapidly installed software takes too long too change after it goes live, so it can’t grow with the business. Major changes to a company, such as a restructuring or an acquisition, will then often require a change of financial software. “There is a real danger that you’ll get locked into a piece of pre-configured software,” says Simon Hallam, a business unit manger at JBA, which specialises in manufacturing software. “Re-configuring an application can take as long as the implementation because elements of the software are dependent on each other.” One way to get around this is to forgo enterprise software. Instead many companies opt for schemes in particular areas, such as budgeting and consolidation, which, with their sharply focused remit, are often better suited for rapid deployment. (See case study box, page xvi.) Budgeting and reporting specialist Comshare, which focuses on the mid-market, claims it can install its budgeting product, BudgetPlus 3.1, in three weeks. This includes a core budgeting system – profit and loss and balance sheet – that is tailored for the finance department’s requirements and configured for the database. It can be run on desktops or through Web browsers. The big attraction for finance departments of programs like this is that they don’t require that existing business processes are overhauled to suit the software. Instead, says Naresh Patel, a senior consultant at Comshare, the software fits the business. “People can start a budgeting system without going through the pain of re-engineering their budget,” he says. Patel explains that before the implementation starts, the company and vendor decide on the number of days to dedicate to the implementation. Then, in the early stages, they choose the database and decide which of the existing systems will feed information to the budgeting application. Patel adds that if the user wants to develop more sophisticated rolling forecasts it can call in Comshare consultants. In the end though, whatever software wonders are touted by the vendor, glitch-free installations depend on the human factor – on how well prepared your employees are for the new system. And preparation is difficult if finance staff are feeling threatened by the prospect of having to adapt to a new system, which is particularly likely if they are kept in the dark about the way it works. The best way to build support for a new application is through a well-funded training programme. “Existing ERP systems in a company might have had quite a few tweaks and nice graphics to fit the needs of the finance department,” says Glynn Jung, team leader of NETg, a SAP trainer. “But the new ERP software might look more bland and feel less friendly.” NETg believes that around 80% of a company’s training to cope with this can be delivered by distance learning on CD-Rom courses. Classroom-based teaching is more expensive and reserved for the more complex business processes and software modules. Jung stresses that he has yet to come across many successful rapid implementation schemes. He believes this is because companies don’t know how to judge the effectiveness of software after it has been installed and recommends that they set clear business goals before the installation – decreased delivery time, for instance – and work out how staff roles can change to exploit all the functions of the new software. “Rapid implementation only focuses on getting the software in,” says Jung. “But then you have to start thinking about how jobs will change so you can make the most of the system.” According to Cambridge Technology’s Coomber, this holistic approach to installation only comes when companies take implementations slowly. “Rather than replacing its global financial system, a company could replace its general ledger system first,” he says. “It might be the part of the organisation which is hurting most.” On the face of it, rapid installation schemes make good sense for finance departments, IT directors and software companies. The potential savings in cost and time are obvious, particularly for small companies without the generous IT budgets of the blue-chip elite. But rapid implementation has its own pitfalls. Most UK companies have little experience in making far-reaching business and technology decisions over a period of weeks during a tight six-month software installation. And a similar question mark hangs over most of the financial software vendors – they lack a track record in speedy installations, which makes their marketing claims hard to verify. Add to this the concern that shrink-wrapped software may be difficult to adapt post-installation and the case for rapid implementation becomes less clear cut than it might seem. In short, the implementations may be rapid, but the contracts should not be signed in too much of a hurry. CASE STUDY: BRIAN MUIRHEAD, FD OF LIBERTY Brian Muirhead, financial director of Liberty, the up-market retailer, is well aware of the pressures involved in installing sophisticated financial software quickly. Last year, only two months after he joined the company, Muirhead decided that the finance department needed a new management reporting and consolidation system. Much of the management reporting was still done through spreadsheets and the project was seen as urgent. Muirhead had three months to install a new system. He chose a consolidation and reporting package called Comshare FDC, which he had used at a previous company. “Comshare is flexible and easy to install,” says Muirhead. “Once the files are loaded you don’t need the IT department holding your hand all the time.” The hardest part of the project, according to Muirhead, was working out the specifications for the product before the installation began. The planning stage took a month. “It’s often the hardest part because of the business questions the product forces you to answer,” Muirhead argues. “You can fudge when you’re in a messy environment like a spreadsheet, but FDC gives you a logical structure.” The core of the project was the design of reporting structures and the all-important database, and the software went live in three months, with a minimum of outside IT consultation. Currently used by eight people in the finance department, there are plans to distribute elements of the budget to the desktops of around 30 managers. BUYING A RAPID INSTALLATION SCHEME – 10 QUESTIONS YOU SHOULD ASK 1. Do the advantages, such as fixed and reduced costs, outweigh the disadvantages – less time to make decisions plus fewer opportunities to tailor the software to the nuances of your business? 2. How will you measure the success of the package, post installation? Are you looking for cost savings across the whole business or just one part, such as the supply chain? 3. Is there a maximum time and price for the installation written into the contract? 4. Does the contract actually guarantee a maximum implementation time and a fixed cost? 5. Who picks up the cost if the project overruns? 6. If the project overruns will you be compensated? 7. Can you add modules to the package and how easy will it be to adapt after the software has gone live? 8. How much experience does the vendor have in rapid installations? Ask for reference sites. 9. Do you have board-level support for the installation, including the necessary resources for training employees in the new system? 10. How much support – for user queries and upgrades – will you get from the vendor or consultancy after the implementation?