Manage ERP initiatives as new ventures, not IT projects

Enterprise Resource Planning (ERP) initiatives combine business process reengineering and application of information technology (IT) on a scale never before seen by most companies. ERP vendors, such as SAP and Oracle, promise huge benefits from the improved efficiency and visibility into a business enterprise made possible by their integrated software suites. But along with the huge potential benefits of implementing ERP, come huge costs (typically one to three percent of sales) and huge risks (implementation failure rates are high). In this paper, we argue that the high return/cost/risk profile of ERP initiatives makes them more like new ventures than large IT projects, and we develop a framework for managing ERP implementations as new ventures. To illustrate the distinctive characteristics of ERP initiatives, we present results from a recent Harvard Business School survey of executives. We draw illustrations of new venture management principles from successful ERP implementations by Cisco Systems and Tektronix.