ERP Implementations Overview
The first step is to define the need, vision and scope of an ERP solution. You’ll need to form an implementation team that can communicate effectively and has the knowledge and commitment to guide the project from beginning to end. The team should include the following roles.
The team should document and examine current business processes and map out how they flow from one department to another. It’s important to identify common problems or errors, duplicated or unnecessary efforts and missed opportunities with customers.
instructive to do a thorough evaluation of the current state of business operations and then a detailed definition of what the desired future state would consist of. If the company has no perspective on what success looks like, they are unlikely to take full advantage of what a robust ERP solution can deliver.
Understanding your current business processes will help you set goals and objectives for an ERP implementation. Remember to be specific. Decide on key performance indicators and quantify your desired results. Define the exact requirements you want in your ERP solution. Put together a reasonable timeline and budget.
A typical ERP implementation plan can be divided into some phases, each with specific objectives. Every business is unique, so the phases may vary somewhat depending on the company, and they also may overlap.
All ERP projects start with a discovery and planning phase, which includes researching and selecting a system, setting up a project team and defining detailed system requirements.
The project team will handle a broad range of roles related to the implementation, including laying out the project plan and target dates, ensuring adequate resources are
previously developed an ERP business case, it may have already defined broad business issues and goals for the implementation, which may include a faster financial close, improved insight into operations or preparing for an IPO. These can be used to direct more detailed analysis, including documentation of existing workflows, and to focus development of the system.
The team may select and acquire an ERP system during this phase, as the organization develops a clear idea of its requirements. One major decision is whether to use an ERP system that runs on-premises or in the cloud. For an on-premises system, you buy and install hardware and software in your organization’s data center.
Simply creating a phased implementation approach doesn’t guarantee success. It’s equally important to follow ERP implementation best practices within each phase. Overall, best practices include:
Don’t underestimate planning. While it may be tempting to plunge into design and development as soon as possible, it’s critical not to rush the initial planning and discovery phase. This phase should create a firm foundation for the entire implementation project by ensuring that the project has high-level backing, operates with a clear plan and is allocated adequate budget and personnel.
Don’t underestimate support and training. Some project team members may feel that the deployment date is the culmination of the implementation effort and fail to pay adequate attention to what happens afterwards. But for the system’s users, the deployment date is just the beginning; it’s what happens afterwards that is critical to the continued success of the project. It’s important to plan and allocate adequate resources to provide technical support, fix issues and provide updates. End user training is also a significant factor here. Employees need to be comfortable using the system and familiar with any new workflows, particularly if an outside consultant will no longer be around to help. Careful work in these areas will allow your organization to realize the full benefits of the system.
Plan data migration carefully. Organizations sometimes make the mistake of simply migrating all historical data to the new system. In reality, some of the information in older systems may be obsolete or unnecessary. Is 10-year-old order information really valuable? Does every supplier in your list still exist? The transition to an ERP system is an opportunity to clean up and rationalize the organization’s data, and it’s worth creating a clear plan for doing so. It makes sense to comb through legacy data carefully, weeding out old customer accounts and looking for data inaccuracies.
Communicate. This is essential throughout all phases of the implementation. The team should make it a priority to regularly communicate to everyone in the organization the reasons for the ERP implementation, the goals and benefits, and what to expect at each phase. Two-way communication is vital: The project team should listen carefully to user issues before and after deployment.
ERP Implementation Phases FAQ
That depends on many factors, including how easy it is to implement your chosen system, but often the planning and discovery phase is particularly challenging. It may be difficult to convince people across the organization to commit the necessary time and funding, and to agree on a clear project timeline. Jumping into later stages of the ERP implementation process without a clear plan is a recipe for problems.
How can you avoid ERP implementation delays?
Take time to get the first phase right, including developing a solid estimate of timeframe and required resources. Planning an implementation timeline can be intimidating since there are so many moving parts. Many projects fall behind schedule simply because the original planned timeline was unrealistic. Consider reassessing the timeline at key points in the implementation to see whether it needs to be adjusted.
Are the implementation phases different if you use cloud ERP vs. on-premises ERP?
While the phases for each type of ERP system are the same, some of the activities within each phase will differ. The most obvious difference is in Phase 1, when hardware is typically delivered and installed. This phase requires technology skills, as do later phases that involve configuring and updating the system. The overall implementation time may also increase if the organization is installing a system on premises vs. using cloud ERP.
How important is executive sponsorship in the early phases of ERP Implementation?
The importance of executive involvement in the project cannot be overstated. The ERP project may need to compete for resources with many other day-to-day priorities. A good executive sponsor—such as the CEO or CFO—can help make sure the project gets the support it needs from everyone in the organization. Without executive sponsorship, the people involved in the implementation—such as the project manager and departmental managers—may face an uphill struggle.
Here are four of the most common approaches.
Big bang
In this approach, also referred to as the single-step method, all users move to the new system at the same time. You’ll need to have completed all configuration and testing of the new system, as well as training, by the
go-live date.
The advantage here is that you quickly start realizing ERP benefits, such as higher productivity, better insights and lower operating costs. However, once you’ve rolled out the system it’s hard to go back, so it’s critical to get things right. Any error or glitch—even a relatively minor one—can impact employees, business partners and customers.
There may also be a temporary productivity drop as employees get used to the new system
Phased rollout
Under a phased approach, the deployment of features, tools and components is done over an extended period, which may cover weeks or months. This more measured approach can be less risky than the big-bang strategy. It also enables the company to focus first on “quick wins”—the functions that deliver the most immediate benefits—and to apply learnings from the initial deployment phases to improve the process for subsequent phases.
But there are drawbacks: It takes longer to get the full benefits of the new ERP, and your company will need to support, and pay for, two systems at the same time.
There are three primary approaches. Organizations may switch on one ERP module, iron out bugs and process issues, and then tackle another phase. Most organizations start with core functions and expand from there. Another possibility is to deploy by business unit, such as HR, finance or logistics, and then move forward based on needs and hierarchies.
The third approach is to phase the rollout by geography. A company might test and perfect the system at one location before moving on to other offices, factories or facilities.
Parallel adoption
With this strategy, the organization keeps using its legacy systems in parallel with the new ERP for a specific length of time. This is generally considered the least risky approach because it’s possible to revert to the legacy system if you run into problems. Because of this safety net, some organizations use this strategy for critical functions that absolutely must always continue operating.
This approach can also make it easier for some users to gradually adjust to the new system. However, parallel adoption can be an expensive approach because it requires more staff time and resources to keep two systems running at the same time. And parallel adoption can create its own risks: Entering data twice, into two different systems, doubles the chance of errors.
Still, this might be the best bet for companies using a two-tier ERP architecture, a setup often found in firms that have expanded, whether organically or through mergers and acquisitions.
Hybrid
As the name implies, this approach combines elements of the strategies above. For example, an organization might switch on core ERP modules, then roll out other modules in phases to specific locations or departments.
No single ERP implementation strategy works for every company and every situation. Your choice of implementation strategy depends on several factors. These include:
Organizational size. where it can be easier to manage the process of transitioning the entire organization at once because you have fewer employees and locations. Larger companies, especially those with complex organizational structures, may find this approach too risky.
Risk tolerance. If you encounter major problems when employees start using the new ERP system, what would be the impact on you.
An ERP implementation can be complex since it affects business processes across the entire organization. And to realize the benefits of the new system, people often have to change the way they work—often replacing longstanding manual processes with more efficient, automated processes.
One of the biggest ERP implementation challenges is getting users and functional groups to change their ways in order to work with the new solution. Driving this change requires strong project management and backing from senior leadership. To develop the new system, the organization needs a committed project team that represents all users of the ERP platform. This ensures the software will support the needs and business processes of all departments across the company.
Some Key ERP Implementation Challenges
An ERP implementation involves people as well as technology. Accordingly, it may face people-related challenges, such as resistance to change, as well as technical obstacles. Common ERP implementation challenges include: Project management. ERP implementations entail multiple phases: discovery and planning, design, development, data migration, testing, deployment, support and post-launch updates. Each phase brings critical tasks, and all elements need to stay on track, which requires meticulous project management. Additionally, successful ERP implementations require participation from all the groups that will be involved in developing and using the system. That can be incredibly challenging, because each department is juggling its ERP project responsibilities with multiple other priorities.
Strong project and people management, which includes setting realistic expectations, time frames and milestones, along with timely two-way communication, is critical to success. As with change management, backing from executives and other top leaders is essential to conquering this challenge, as well.
Project planning:
Organizations often underestimate the time and budget necessary for a successful implementation. One of the most common causes of budget overruns is scope creep—when a business adds capabilities or features to the system that weren’t part of the original plan—and another is underestimating staffing needs.
Developing a clear and realistic plan from the start can help to avoid those issues. A realistic project plan that acknowledges possible speed bumps and minor cost overruns and addresses them in advance will simplify that decision-making process and keep the project on track.
Data integration:
One of the key advantages of ERP is that it provides a single, accurate source of data for the whole organization. A key step in ERP implementation is data migration, which typically involves moving data from multiple older systems into the ERP database. But first, you have to find all of your data. This may be much more challenging than you expect. The information may be spread far and wide across the organization, buried in accounting systems, department-specific applications, and spreadsheets and perhaps on paper.
Well-planned data migration can help to keep the entire ERP implementation project on time and on budget. It’s also an opportunity to winnow out obsolete and redundant data lurking in the organization’s older systems. In contrast, under prioritizing data migration can cause issues such as inaccurate or duplicate data and challenges to your go-live date.
Data quality:
Once the organization has located all data sources, it can start thinking about migrating it to the ERP system. But that may involve a serious data hygiene exercise. Because multiple departments interact with the same customers, products and orders, organizations often have duplicate versions of the same information in their systems. The information may be stored in different formats; there may be inconsistencies, like in addresses or name spellings; some information may be inaccurate; and it may include obsolete information such as customers or suppliers that have since gone out of business.
Ensuring data quality can become a sizable project on its own, involving validating the data, cleaning out duplicates and adding missing values before migrating data to the ERP system. The new data should also be thoroughly tested before going live with the ERP system. Make sure your team understands the importance of cleaning up data, and assign clear responsibilities in doing so. For example, the accounting team will handle all financial data and the customer service group will clean up customer data.
Change management.
An ERP implementation involves more than just switching to a new software system. It typically means overhauling business processes to take advantage of the efficiency and productivity improvements possible with the new solution. This requires a shift in mindset and a change in everyday work processes for many employees, which presents typical change management challenges.
The design phase works from detailed requirements and an understanding of current workflows to develop a detailed design for the new ERP system. This includes designing new, more efficient workflows and other business processes that take advantage of the system.
It’s important to involve users in the design phase, since they have the most intimate understanding of current business processes. Involving them in the design also helps to ensure that they’ll welcome the new system and take full advantage of it.
Gap analysis can be used to identify process intricacies and unique quirks that may require customization of the ERP software or changes to workflow or processes to more closely align with the ERP system itself. The team can present the gaps to its implementation partner or supplier and ask them to identify potential solutions.
Armed with clear design requirements, the development phase can begin. This involves configuring and, where necessary, customizing the software to support the redesigned processes.
It may also include developing integration with any of the organization’s other existing business applications that won’t be replaced by the ERP system. If you’re using an on-premises ERP system, the organization will need to install the necessary hardware and software.
In parallel with software development, the team should develop training materials to help users adjust to the new system. It also needs to begin planning data migration, which can be complex since it often involves extracting, transforming and loading data from multiple systems, each of which may use different formats and may hold duplicate or inconsistent information.
The project team should determine which data to migrate in this phase, avoiding the blanket migration of all historical data, lots of which is likely irrelevant.
Testing and development may occur concurrently. For example, the project team may test specific modules and features, develop fixes or adjustments based on the results, and retest. Or, it may test one ERP module while another is still in development.
Initial testing of the basic functions of the software should be followed by rigorous testing of the full capabilities of the system, including allowing some employees to test the system for all their day-to-day activities. This phase should also encompass testing of the migrated data and include introductory end-user training.
Most vendors can supply pre- and post-deployment tools to begin user training. But in addition to vendor support, the organization should make good use of the training materials created in the development phase. There is real value in resources that specifically cater to your end-users’ day-to-day responsibilities.
This is what you’ve been striving toward: the day the system goes live. Be prepared for potential issues, since there may be a lot of moving parts and possibly some befuddled employees, despite your best efforts to prepare them for the change.
The project team should be readily available to answer questions, help users understand the system and attempt to fix any issues. Your implementation partner should be able to help with troubleshooting if necessary. It may take time for users to adapt to the system and achieve the anticipated productivity gains.
Some data can be migrated ahead of deployment, while other information—such as current transactions—should be migrated immediately before going live.
Some organizations aim to deploy all the modules of the ERP system concurrently, while others focus first on specific high-priority modules or processes and add others later in stages.
To minimize risk, some organizations also continue to run older systems in parallel with the new ERP implementation for a time, although this can add to the overall project cost and reduce user productivity.
Nurturing your ERP implementation after deployment helps to keep users happy and ensure the business achieves the desired benefits. The project team may still be responsible for the ERP system during this phase, but its focus will shift to listening for user feedback and adjusting the system accordingly.
Some additional development and configuration may be needed as new features are added to the system. New staff will also need to be trained on the system.
If you have an on-premises ERP system, you’ll need to install periodic software updates and may even need to upgrade hardware over time. If you’re using a cloud-based ERP system, your vendor may update the software automatically.