Implementing a new ERP system is a substantial undertaking for any organization. Examining case studies from a wide range of companies reveals that, similar to any important project, the choice of implementation strategy significantly impacts the likelihood of success.
An ERP system is an all-encompassing suite of software that impacts various facets of an organization, including accounting, manufacturing, inventory, distribution, and sales. Given the wide-ranging influence of the system, meticulous planning is crucial for a successful rollout, encompassing stages from initial analysis and design to deployment and support.
During the critical deployment stage, there are several potential strategies, each with its own advantages and risks. Carefully considering these options is essential to ensure a smooth and successful implementation process.
ERP Implementation Phases
The implementation of an ERP system generally follows six primary stages, or phases, which span over months or even years. The process begins prior to the selection of the ERP software and continues even after the initial system rollout.
While these phases may overlap and can vary depending on the company, the following path is commonly followed:
- Discovery and Planning: The organization forms a cross-functional project team that gathers input from different business groups to identify their requirements and challenges that the ERP system needs to address. The team then creates a shortlist of vendors, issues requests for proposals, selects the ERP system, manages the implementation process, and ensures that it meets the needs of various groups and is fully adopted. A well-prepared ERP implementation plan is crucial for success and should not be underestimated.
- Design: In this phase, the team analyzes existing workflows and determines how they may need to be adjusted with the new system. Flexibility is key, as administrators and business process owners may need to adapt their tasks accordingly. Using the workflow analysis, the team identifies the critical ERP features for the company, assesses the need for software customization or module additions to meet business group requirements, and determines the data migration strategy to the new system.
- Development: The chosen vendor or integration partner collaborates with the team to configure the software based on the identified business requirements. Other activities such as preparing training materials, documentation, and data import are also carried out in preparation for deployment. For on-premises ERP systems, considerations such as hardware, connectivity, client rollout, long-term maintenance, and security need to be addressed. Similar considerations apply to hybrid ERP systems.
- Testing: Before going live, thorough testing of the system is conducted. This should include comprehensive assessments covering all the ways in which various employees will use the system. Any problems or issues uncovered during testing should be addressed and fine-tuned prior to the system going live, as it is better to identify and rectify issues beforehand rather than having employees encounter problems after the system is already in use.
- Rollout: Once the configuration, data migration, and testing phases are completed, it’s time to go live! However, don’t celebrate just yet because the company won’t see the full return on its investment until the staff uses the system fully for their daily tasks. Therefore, training is a top priority, and it may be beneficial to choose “evangelists” in each department who can serve as valuable resources to their peers.
- Support: Support is also critical for successful ERP implementation. The project team should ensure that users have the necessary support and continue to upgrade the system and fix issues as required. If you have chosen an on-premises ERP system, you will need dedicated IT resources to manage security, patching, maintenance, and troubleshooting problems.
Creating the Perfect ERP Implementation Team: 5 Essential Steps
- Secure Executive Sponsorship: It’s crucial to have strong executive sponsorship for your ERP implementation project. This sponsor will be able to navigate through red tape, secure the necessary budget, and rally the organization to embrace process updates.
- Foster Inclusivity: Avoid having IT dictate to other departments which ERP system to use. Instead, create a “big tent” approach where representatives from various departments are included in the team. This promotes collaboration and ensures that all relevant perspectives are considered.
- Align Team Members with Priorities: The team should consist of members who bring deep insights into user patterns and business processes that align with the discovery process. This will enable them to effectively evaluate different ERP options and make informed decisions.
- Prioritize Planning: ERP implementation projects require a significant amount of time and effort from team members. Planning should be a top priority, and responsibilities should be distributed among team members to avoid overwhelming individuals with excessive workloads.
- Focus on Skills, not Titles: When selecting team members, prioritize their expertise and initiative rather than their job titles. Look for individuals with the necessary skillsets to make meaningful contributions to the project, regardless of their position within the organization.
Building a cohesive and capable ERP implementation team is crucial to the success of the project. By following these steps and fostering collaboration, inclusivity, and expertise, you can create a team that is well-equipped to handle the challenges of ERP implementation.
4 Effective Strategies for Implementing ERP Systems
Implementing a new ERP system requires careful planning and execution to ensure business success. There are several proven strategies to choose from, each with its advantages and disadvantages. Here are four common approaches:
- Big Bang: Also known as the “single-step method,” this approach involves transitioning all users to the new ERP system at once. The advantage is that you can quickly start realizing ERP benefits, such as improved productivity and cost savings. However, there is a high level of risk involved as any errors or glitches can impact employees, business partners, and customers. It requires thorough configuration, testing, and training before the go-live date to minimize risks.
- Phased Rollout: In this approach, features, tools, and components are deployed gradually over an extended period, focusing on “quick wins” that deliver immediate benefits. This approach allows organizations to learn from initial deployment phases and improve the process for subsequent phases. However, it takes longer to realize the full benefits of the new ERP system, and the company needs to support and maintain two systems simultaneously, which can be costly.
- Parallel Adoption: This strategy involves running the legacy system in parallel with the new ERP system for a specific length of time. This is considered a less risky approach as it provides a safety net to revert to the legacy system in case of issues. It also allows users to gradually adjust to the new system. However, it can be resource-intensive and increase the chances of data entry errors as data needs to be entered into two different systems.
- Hybrid: This approach combines elements of the strategies mentioned above. For example, an organization may use a big bang strategy to implement core ERP modules and then roll out other modules in phases to specific locations or departments. This approach provides flexibility in choosing different strategies for different parts of the organization based on their requirements.
Selecting the right ERP implementation strategy depends on the organization’s needs, resources, and risk tolerance. Careful planning and execution are critical to ensure a successful ERP implementation process.
Selecting the Right ERP Implementation Strategy
Choosing the right ERP implementation strategy for your company requires careful consideration of various factors. Here are some key factors to take into account:
- Organisational size: The size of your company can impact the choice of implementation strategy. A big bang approach may work well for small and midsize firms, where it’s easier to manage the transition for the entire organisation at once due to fewer employees and locations. However, larger companies with complex structures may find this approach too risky and may prefer other strategies.
- Risk tolerance: Consider the impact on your business if you encounter major problems during the implementation process. If your business relies heavily on 24/7 system operations, you may be less inclined to take risks associated with a big bang approach. In such cases, a parallel adoption strategy, at least for critical modules, may be preferred to mitigate risks.
- Desired pace of return on investment (ROI): The pace at which you expect to realize ROI can influence your implementation strategy choice. Phased adoption allows you to roll out ERP modules that address specific business bottlenecks, potentially generating ROI relatively quickly. On the other hand, a big bang approach completes the entire transition quickly, allowing for the potential for greater ROI as the benefits of an integrated system are realized across the entire organisation.
- Cost: Project cost is a crucial factor to consider. If cost is a primary concern, a big bang strategy may be appealing as it eliminates the cost of operating old and new systems concurrently.
It’s essential to carefully assess these factors and choose an ERP implementation strategy that aligns with your company’s unique needs and circumstances. Consultation with ERP implementation experts and stakeholders can help in making an informed decision.
Steps for Implementing ERP
Regardless of the implementation strategy chosen, there are common steps involved in ERP implementation. These typically include:
- Configuration: The organization configures the ERP software according to its specific needs and requirements. This involves setting up various modules, defining workflows, and customizing the system to align with business processes.
- Preparatory steps: The organization takes preparatory steps such as training employees, migrating data from legacy systems to the ERP system, and conducting extensive testing to ensure the software is functioning properly.
- Deployment: Once the configuration and preparatory steps are completed, the ERP system is deployed to users. This involves making the software available to end-users and providing necessary training and support to ensure smooth adoption.
With a big bang strategy, the project team typically focuses on each of these steps consecutively, with the go-live date being the culmination of the implementation process. Subsequently, the team can shift its focus entirely to providing support and addressing any needed enhancements.
On the other hand, with a phased approach, the team may work on multiple steps simultaneously for different functions or parts of the organization. For example, while the team is deploying core financial modules, they may still be working on the design and development of CRM function, thus implementing ERP in a phased and parallel manner.