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It's Time for the Healthcare Industry to Rethink ERP Upgrades

By Vince Vickers, Senior Vice President, Healthcare and Health Sciences, Zanett
A Fresh Coat of Paint
Imagine taking your car to the shop for a routine tune-up, and, much to your surprise, the mechanic tells you that your engine is in need of significant repair (possibly even a complete replacement) to run efficiently again, and your tires need replacement because you've been driving on new road conditions. As your mind floods with the thoughts of an unexpected, costly bill, your mechanic attempts to allay your concerns by saying, "Don't worry. I think just a fresh coat of paint will do the trick and you'll be as good as new."

Doesn't make much sense, does it? Unfortunately, I've noticed that this type of logic seems to be applied in consideration of upgrading ERP systems. Since the huge push towards ERP systems in the late 90's (a little thing called Y2K has something to do with this), many healthcare organizations have done little to that software since they first implemented it - except for a possible technical upgrade. If you are upgrading regularly to stay compliant with your software vendors' maintenance agreements, but are not using that opportunity to assess your use of the software and make adjustments, then really you are just putting a fresh coat of paint on your ERP.

New "Road" Conditions
These days, as we all know, new revenue is tough to find, and cost-cutting (typically headcount) is to a point where we are all working longer hours than ever to fill in the gaps and keep service levels reasonable for our customers. So it's time to start working smarter, because it is becoming difficult to work much harder. And saving money is as good as making money in this environment, isn't it? One way to work smarter is to have information systems that give us access to timely - and better quality - information, automate manual processes, and reduce risk with better controls.

The reality is, even if you had a flawless initial ERP implementation (which is rare!), a lot of important variables have likely changed (i.e., new "road conditions") since you first flipped the switch at your go live:

  1. Turnover of key team members (executive sponsorship, power users, and transactional users)
  2. Your business model (merger and acquisition, divesting, new products or service lines)
  3. The marketplace (new competition, new partners)
  4. Compliance and regulations (HIPAA, HITECH)
  5. Of course, there is the economy, itself - a little different than the late 90's, right?
  6. Finally, did that Phase 2 (or 3, or 4, or X) ever even happen? You know that "next phase" - the one that had all of the efficiencies you were really excited about in the demos when you first saw the software?

Any of this sound familiar?

Time to Look Under the Hood
Time and time again, I have seen that organizations can make some really impactful operational improvements with just a few configuration tweaks, some retraining, and a rethinking of your business processes. Here are several foundational concepts that organizations leverage to achieve these improvement:
  1. Studies have shown that organizations are using less than 60% of the capabilities of the software they have implemented. Focus on increasing this usage by enhancing the capabilities available to your transactional users (using features they were unaware of, forgot, or were never trained on to begin with).
  2. Reduce your shelf ware (software modules purchased, for which maintenance is being paid but has never been implemented). Either implement it or get rid of it and save yourself the maintenance.
  3. Refine business processes around the interaction points with the software.
  4. Retrain your staff.
  5. And finally, use the detailed analysis to present, in scorecard fashion, the improvement metrics with costs to implement and time-to-value.
The key point here is that if you are going to upgrade anyway - because that is a regularly scheduled technical activity to stay in compliance - why wouldn't you use the opportunity to make some key configuration and process changes and do some training and make the case that you can pay for that technical upgrade?
Optimization Workshops: A New Diagnostic Measure
Zanett has been offering a series of Optimization Workshops for the past 12 months with great success for our clients seeking to improve the value and ROI of their ERP upgrades. I have seen great examples of where one can show clear, tangible returns on the investment to an upgrade in a very reasonable timeframe. Here's a quick run-down of our Workshop process:
  • First, we conduct a series of meetings with your Management Team to learn about the current business models, potential strategic change, identified pain points, and expectations for outcomes from the Workshop. This also has a number of additional benefits: sets the stage for commitment to supporting change, opens communications between departmental leaders and many times uncovers collaboration opportunities, and begins dialog on industry benchmarks on key metrics and how the organization might be doing relative to its peer group. This last point is key to finding the return on investment for your upgrade project. If you are not tracking some of these metrics today, we will also provide some help in starting that process, because fundamentally you can't manage what you can't measure.
  • The next step is to meet with the various departments represented by the Operational Team members to review the business processes and software configuration. We often find that the models that management is counting on don't match the day-to-day operational activities in their various departments. Additionally, the current configuration and use of the ERP software are often seriously misaligned with the desired business models. This often contributes to an inability to quickly get the pertinent information required for making daily business decisions. Again, there are additional benefits to this series of meetings, as well: new interest in process improvement and the software product, a feeling of inclusion and support from management that begins breeding a culture of continuous improvement, buy-in that is particularly important for change management, and typically enlightenment around the software's capabilities and industry best practices in process design. Many of your team may not have interacted with an industry and product expert at any real level of detail in recent years and these meetings alone often produce a list of "low-hanging fruit" that allow for immediate action.
  • The final step is a comparative analysis conducted offsite by the Zanett team, using the collected data and the industry benchmarks to produce a list of prioritized recommendations with timelines, investments and projected return on those investments. Many times the recommendations are not even software-specific and can be implemented regardless of the timing of your technical upgrade - but, remember that the goal of the "program" of the selected recommendations for implementation is to cost justify and pay for the upgrade. This collection of recommendations is then reviewed first with the Operational Team and then ultimately with the Management Team and often summarized for presentation to other potential Executive stakeholders.
Depending upon scope, size of the organization, and individual client needs, typically our consulting team is onsite for 2-3 days and needs a few additional days for aggregation and recommendation offsite - that's a pretty low investment in time with some immediate value. In the past 12 months, Zanett has completed over 25 of these upgrade workshops - all, with very successful outcomes. At a minimum, each customer has acted on improvement opportunities, and most have found a clear path towards cost justifying their upgrade by complementing the technical activities with significant business area improvements. Examples have ranged from inclusion of a two-bin replenishment process in their upgrade, to a re-implementation of their chart of accounts to accommodate some significant acquisition consolidation needs, to a complete redesign of the organization hierarchy and security matrix to address risk from a recent security audit.
Nothing's "Free", Right?
Well, Zanett's Optimization Workshops are free. That shows our level of confidence in the opportunities that exist for your ERP system's future.

So, if you are like one of these organizations and you either: a) can't get an upgrade budgeted, b) can't seem to get any value out of your technical upgrades, or c) are just generally frustrated with the performance of your ERP system - let's talk. There is likely a much clearer path to justifying, and ultimately receiving a return on, your upgrade efforts.