The Definitive Guide to ERP Implementation

Enterprise resource planning (ERP) solutions have the ability to revolutionize companies by streamlining manufacturing and boosting customer engagement. Yet many businesses are struggling to understand how ERP systems work and how to successfully implement them.

In fact, 75% of ERP projects ultimately fail.

Because of the time and cost involved in ERP implementation, it’s important for your company to thoroughly research and understand the process before getting started. So we’ve put together this in-depth guide on how to avoid failure, as well as best practices for success. We’ll also discuss methodology, risks and challenges, expert tips and costs.

What is ERP implementation?

ERP implementation is the process of examining current business practices, strategic planning, streamlining operating procedures, installing and testing software, cleansing and migrating data, managing change, training users, going live and maintaining support. It’s not a one-time event, but rather a continuous process or life cycle.

7 Steps to Successful ERP Implementation

The seven key steps for a successful ERP implementation are:

  1. Research
  2. Installation
  3. Migration
  4. Testing
  5. Training
  6. Deployment
  7. Support

Some steps may overlap or need to be done simultaneously.

1. Research

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:

ERP Implementation Team
Pro Tip: For the users, select employees who are most impacted by the ERP software. Include them in brainstorming and decision-making sessions. They’ll have the greatest incentive to work toward a successful implementation.

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.

According to Andrew Bolivar, Director of Ultra Consultants Center of Excellence, “We have found it 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.

Pro Tip: Set your goals and objectives before you purchase an ERP solution.

2. Installation

ERP software installation is also an opportunity to evaluate your current operations and re-engineer business processes into standard operating procedures. Figure out which processes to automate or keep manual and then design a blueprint of how new business practices will flow.

The application developer will be responsible for installing the software and building the infrastructure, such as networking facilities and data collection or display devices.

Pro Tip: Don’t lose track of the project’s progress. Keep an aggressive but flexible timeline. Remember that you’re ultimately responsible for your ERP implementation, not the vendor or consultant.

3. Migration

The next step of ERP implementation is data migration, or transferring all records and info to the new system.

Many organizations store their customer, supplier and physical asset records in multiple formats and databases that contain errors and unnecessary information.

This data should be reviewed and edited for accuracy and uniformity before migration begins. Any out-of-date information should also be removed.

When the data has been updated and verified, the application analyst migrates the data to the new system. This step involves setting up new databases, mapping database fields between the old and new systems, and transferring the data.

4. Testing

The quality assurance test engineer is in charge of the next step: testing the system. All interfaces, functionality and reports should work with real-life scenarios and transaction data.

Users should also validate that business processes are flowing correctly between departments.

It’s vital the system is thoroughly tested before the go-live date. User training, discussed below, is another opportunity to see if there are any errors in the system.

5. Training

Training users requires significant time and effort, especially considering employees are also expected to carry out their normal responsibilities throughout the process. How long it takes will depend not only on the size and complexity of the ERP solution, but also on the mentality that employees have about changing the way they work.

Users may “find it difficult to change roles, processes and behaviors that they may have learned over many years of work,” according to Jennifer Gostisha, Senior Manager at Epicor. “Managing change is a constant, ongoing process that needs to start from day one and continue throughout the implementation to the end-user training at the close of the project.”

In the beginning, you should prioritize thoroughly training the trainers. Provide opportunities for users to offer feedback and for the implementation team to act on it. Consistent, meaningful communication between users, trainers, the implementation team and the vendor will decrease the likelihood of lost productivity after deployment.

56% of ERP implementations result in some type of operational disruption after going live, which is frequently attributed to inadequate training.

Some vendors also provide user training and onboarding support, such as live classes, e-learning modules or written manuals. Training may be included with the software purchase or require an additional fee. Be sure to ask your vendor what type of support it offers to new users.

6. Deployment

Depending on how large an ERP project is and the resources available, companies can choose between three methods when going live and deploying the software:

  • Big bang – All users transition from the legacy system to the new system in a single day. This method is the fastest and cheapest option, but technical difficulties can cause major operational problems.
  • Phased approach – Users transition by business unit or function. The implementation team can improve transitions with each group, but the process will take longer, and integrating ERP modules individually can be difficult.
  • Parallel operation – Users run both systems simultaneously. Because there’s a system to fall back on, this method is the least risky. However, users need to spend more time duplicating their work, and running two systems is expensive.

Your company should be flexible and available for unexpected challenges on the go-live date. Have additional, temporary IT staff on hand, as well as employees who can work overtime. Develop a communication strategy in case of system downtime.

When the ERP software has been deployed, you’ll need to test and audit the system again for accuracy, reliability and speed. Prioritize the balance sheet, as well as the inventory and accounts receivable ledgers. IT should support users as they verify, document and modify businesses processes in the live ERP system.

7. Support

Many companies believe that ERP implementation ends on the go-live date. However, it requires ongoing maintenance of the software and support for its users. Budgeting time and resources to identify issues and fix errors will be important throughout the entire life cycle of the ERP solution.

In addition, after going live, start evaluating the success of the ERP project. Consider key performance metrics that are tied back to the goals and objectives of the project:

  • Costs compared to the budget
  • Return on investment
  • Decrease in human error
  • Increase in manufacturing or supply chain productivity, customer engagement, etc.

How long does ERP implementation take?

ERP implementation can last between a few months to several years before the software is deployed. The exact duration will depend on the company size, amount and quality of data, level of customization, number of users and project resources. Be prepared for possible delays and setbacks.

Avoiding ERP Implementation Failure: 6 Common Mistakes

Even with a strong understanding of the ERP implementation process, there are many risks, challenges and mistakes that can lead to project failure or hurt your results. Here are some of the most common issues and how to respond to them.

1. You fall back on old business practices.

Remember: You don’t want to make a bad process faster with automation. Instead, consider how to use the ERP solution to streamline the way you run your business, reduce duplicated efforts and manual labor, and improve employee communication and customer satisfaction.

2. You don’t have the support of senior leadership.

The implementation team should seek broad buy-in from upper management. Make sure to get sponsorship as early as possible and manage expectations throughout the entire process.

65% of executives believe ERP systems have at least a moderate chance of hurting their businesses due to the potential for implementation problems.

3. Vendors will push for more functionality than you need.

Don’t let the vendor define your needs or oversell you on unnecessary features. Define your ERP requirements early in the process based on your goals and objectives. And if possible, consider an industry-specific solution or one that can share data with your supply chain.

4. You only think about current business needs.

Plan for the long term. Consider possible events like future upgrades or increasing the scale of the software.

23% of businesses are unable to grow as quickly as they’d like because they lack the tools in their current ERP system.

5. On-premise ERP solutions require a huge initial investment.

If your company doesn’t have the funds to properly implement an on-premise solution, consider a cloud ERP or open-source ERP software. The initial costs are lower, and fees are charged by number of users or resource consumption.

6. You think ERP implementation will be an inexpensive and fast process.

Be realistic about your timelines and budgets. Make sure to give your project team and IT staff the resources they need to succeed.

61% of ERP implementations take longer than expected and 74% exceed budget.

ERP Implementation Best Practices: 3 Expert Tips for Success

It’s easy to get bogged down in all the ways an ERP implementation can go wrong, so we wanted to provide actionable advice to help companies succeed. We asked experts with real-world ERP experience for their best practices.

1. Understand the responsibilities and resources of your implementation team

“Businesses should focus on what is required from their resources to be successful and on time. A project manager or partner that is experienced in ERP implementation can help scope this internal effort. Ultimately, the most important indicator of success is the visible support from upper management and the dedication of the necessary resources in order to meet the demands of the transition to a new or updated ERP solution.”

Andrew Bolivar
Director, Center of Excellence
Ultra Consultants

2. Invest in training and change management

“Change management is crucial to the success of an ERP initiative. Employees need to be introduced to new processes and job roles over a period of time so that they can accept and internalize these developments. Neglecting this aspect of implementation or putting it off until late in the project may result in organizational resistance to the new system, even to the point of operational risk. To be most effective, training should concentrate on business workflows and how these changes affect job roles and the people who do the work.”

Jennifer Gostisha
Senior Manager, Training
Epicor

3. Plan for future growth and scale

“It’s incredibly important to find technology that will be able to expand with a business, not outgrow your needs several months, weeks or years down the line. ERP systems, especially those that offer cloud-based apps through one platform, should be a tool to enable businesses with invaluable insights that provide more efficiency and functionality into the business.”

Tom Kelly
Senior Director, Product Marketing
Oracle NetSuite

Costs of ERP Implementation

The costs of implementation aren’t just the one-time fees you pay to install the software. There are many ongoing expenses of operating an ERP system. The true cost of ownership includes initial and ongoing expenses, such as:

  • Software costs based on the type of license and its renewal, type of system (cloud or on-premise), scope of business units and applications, number of users and level of customization
  • Implementation team, consultants and trainers
  • Installation, maintenance and upgrades of the ERP infrastructure
  • Data backup and storage
  • Support staff for hardware and networking maintenance, software upgrades, bug fixes and custom development

Be sure to plan for these costs and draw up a budget. In addition, forecast the increased revenue and reduced costs that you expect post-implementation. Compare the expected gains to your budget to determine whether ERP implementation will be profitable for your business.

For more info on costs, check out our 2019 ERP pricing guide.

How much does ERP implementation cost?

In total, small to medium-sized businesses can expect to pay between $75,000 and $750,000. Costs for large businesses range from $1 million to $10 million.

ERP Implementation Consultant

ERP implementation consultants should have a proven implementation methodology and experience with your industry. Their goal is to reduce the risk of failure at every stage of the process.

Consultants can also help negotiate conflicts between ERP vendors and your business. Vendors are motivated to sell more software by pushing rich functionality. However, your business should focus on adding only what’s necessary to simplify your business or generate more revenue.

A good ERP implementation consultant:

  • Understands your industry, as well as the software
  • Knows how to apply and set up the software for your business
  • Keeps you focused on your project goals
  • Addresses the fear of change in your organization
  • Trains users with familiar language

Depending on your resources and the complexity of your project, a consultant may or may not be right for you.

Conclusion

ERP implementation can be a lengthy and difficult process for any company. But with the right methodology and strategy, you can see dramatic improvements in your business afterward.

ERP Implementation Checklist

Use this free ERP Implementation checklist to ensure success. Access PDF

If you need more help deciding which ERP solution is right for you, check out our ERP Buyer’s Guide.

 

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