Enterprise resources planning (ERP) solutions are comprehensive tools that enable organizations to centralize data and automate various aspects of business operations. These platforms facilitate efficient planning and management of financials, vendors, materials, goods, services, customers, and employees, streamlining internal processes.
The hallmark of ERP systems is a shared database that supports multiple functions utilized by different business units. This allows employees across departments, including accounting, sales, and human resources, to access the same information for their respective business processes, promoting consistency and accuracy.
What is the ERP implementation process?
ERP implementation processes may differ from one organization to another, but they generally share similar phases. These can involve acquiring the solution, installing licenses or software, transferring financial and transactional data, and mapping business processes and system access for various departments or user groups, forming the basis of an ERP implementation strategy.
ERP implementation methodology stages
The methodology of an ERP implementation can vary in complexity, depending on factors such as organizational size, project complexity, and the choice between on-premises or cloud solutions.
On-premises solutions typically involve additional steps, such as hardware infrastructure installations and staffing for infrastructure maintenance. Since all support activities, including configuration hosting and setup, are managed in-house, these added phases can change and often prolong the implementation process.
In contrast, cloud ERP implementations may bypass some of the traditional steps involved in on-premises deployments. The solution provider manages the infrastructure, allowing businesses to focus on data migration, process changes, and employee training. Hosting, servers, and maintenance are typically handled by the ERP vendor.
ERP project team
ERP implementation budget
The success or failure of an implementation project hinges greatly on establishing a realistic budget, and one common reason for exceeding the budget is expanding the scope of the ERP project. ERP implementation budgets can typically be categorized into three main areas: technical costs, workforce costs, and data migration costs.
Technical costs encompass all software, licenses, hardware, and known technical implementation expenses. This includes factors such as infrastructure hardware and software upgrades, database configurations, maintenance and support, customizations, and hosting fees.
Workforce costs involve both internal and external people-related expenses, including education and training costs, project management costs, consulting costs, and other change management costs such as hiring additional employees or contractors.
ERP data migration costs encompass various aspects such as legacy system data extraction and sunsetting costs, as well as transferring clean data to the new ERP solution. It’s important to account for these costs in the budget to ensure a smooth and successful ERP implementation.
How much does an ERP implementation cost?
Estimating ERP implementation costs is not straightforward, as they depend on various factors such as business size, number of users or licenses required, training sessions, customizations needed, app and data migrations, and whether the ERP is an on-premises or cloud solution.
As a general best practice, it is recommended to plan for at least one percent of the organization’s operating budget for ERP implementation. However, this figure may vary based on the size of the organization.
On-premises solutions typically require a larger capital expenditure due to upfront and ongoing costs associated with purchasing and managing perpetual license fees. Additionally, there are added costs related to maintaining the IT infrastructure, including hardware, servers, and facilities, as well as additional personnel to manage these systems.
In contrast, initial costs are typically lower for cloud ERP systems as they primarily focus on software requirements and connectivity to the system. That’s why almost half of ERP deployments are now cloud ERPs. Cloud ERP providers host and maintain the IT infrastructure, minimizing the demands on time and resources for the organization.
ERP change management plan
One of the significant challenges during an ERP implementation is effectively transitioning employees to new business processes. Migrating employees to new systems, rules, and procedures requires clarity and training, and companies need a robust change management plan in place.
The change management plan should include a detailed roadmap that defines the specific goals of the new processes and incorporates the following elements:
- Analysis – Analyze the readiness of the new platform to identify opportunities and risks.
- Role Assessment – Evaluate the current workforce to identify any gaps in personnel skills and capabilities.
- Communication Plan – Develop a comprehensive communication plan that outlines objectives, milestones, deliverables, and transition processes.
- Workforce Enablement – Facilitate the success of employees in the transformed organization by implementing new roles and a training plan.
- Training Execution – Conduct onboarding training for the new systems to ensure employees are equipped with the necessary skills for their roles.
Design and development
During the design and development stage of an ERP implementation plan, the customer and vendor collaborate to define procedures and document new processes for how the new ERP solution will manage data. Once the processes are defined, a database framework is developed to meet the new requirements and procedures.
For instance, if the migration is from an on-premise solution to a cloud ERP solution, or if the new solution needs to connect with other platforms such as a Point of Sale (POS) or an inventory management solution, the project team will need to design and develop customizations or APIs before migrating any data to the new system. The team then identifies the data from the old solution that needs to be transferred to the new solution.
Data migration is a critical step for a successful ERP implementation, but it can be challenging and may encounter unforeseen roadblocks. The objective is to transfer clean data that has been identified, scrubbed, and mapped to the appropriate location in the new system. To streamline this process, you can work with a project analyst prior to the migration to conduct data analysis and mapping analysis, which can help improve efficiency and accuracy.
To fully capitalize on the benefits of ERP, it’s crucial to ensure that end-users, your employees, are well-equipped to leverage the new system. Comprehensive training should be made available through a combination of online learning opportunities.
E-learning enables users to complete training at their own pace and focus on role-specific training, while also providing access to broader training. This is particularly valuable for complex solutions, and offering continuous learning beyond the implementation phase fosters long-term user ownership.
Go-live and deployment
The moment has arrived: Systems have been developed, data has been transferred, product training and onboarding activities have been completed, and testing is finished.
However, there are a few remaining steps. Transaction-based data, such as inventory, orders, POs, AR/AP, and balances, is dynamic and subject to frequent changes. Therefore, it’s advisable to transfer this data at the last possible moment to ensure accuracy. Once everything has been fine-tuned, the go-live data can be set, and the system will be ready for use.
Post-mortem and evaluation
To assess the efficiency of the ERP solution, it’s important to consider various factors such as customer reactions and employee adoption patterns. This can be done by asking the following questions:
- Are employees utilizing the technology to its fullest potential, resulting in improved workforce productivity?
- Is the automation offered by the ERP system leading to noticeable gains in efficiency or enhanced customer satisfaction?
- Are customer retention rates higher or lower?
- Are there improvements in referrals, sales metrics, and customer relationships over time?
- Are there reduced inventory levels and improved workflows through planning and control?
- What does the production throughput look like?
Measuring intangible metrics may be challenging, but with the ERP’s automated processes, you should observe enhanced workflow efficiency and reduced errors across the organization, resulting in increased revenue and cost savings over time.
It’s worth noting that evaluating these intangible metrics may yield a more accurate assessment of ERP and organizational performance after a few months to a year, as employees may still be adjusting to the new solution.
Optimal post-implementation support is the crucial concluding phase of an ERP implementation project. Even with a seamless setup, unexpected challenges can arise. It’s vital to have skilled support teams on hand to address sudden complications and provide clarifications. Depending on the project’s magnitude or intricacy, vendors may proffer varied tiers of support to cater to evolving needs.
Regardless of the business nature, deploying an ERP system is a pivotal task that necessitates meticulous preparation and unwavering dedication from the entire team. While ERP rollouts can be extensive, with strategic planning and adept execution, the new system should optimize revenue generation while streamlining resource utilization.