By Austin Caldwell | Senior Product Marketing Manager
Transitioning to a new ERP system is a major undertaking for any organization. Case studies of a wide range of companies show that, as with any important project, choosing the right implementation strategy will greatly increase the chances of success.
An ERP system is an integrated suite of software that reaches into many corners of your organization, from accounting to manufacturing, inventory, distribution and sales. Precisely because the system affects so many parts of your business, it’s vital to carefully plan your rollout, which encompasses stages from initial analysis and design to deployment and support.
When it comes to the critical deployment stage, there are several possible strategies, offering different potential advantages and risks.
ERP Implementation Stages
An ERP implementation typically is broken down into six primary stages, or phases, spread over months—or, in some cases, years. The process needs to begin well before you’ve made a decision about which product to buy, and it continues after the initial rollout of your chosen system.
These phases may overlap, and they’ll vary somewhat depending on the company. But in general, companies will follow this path.
- Discovery and planning. The organization brings together a cross-functional project team, which gathers input about different business groups’ requirements and the problems that the ERP system needs to solve. The team is tasked with making a short list of vendors, issuing requests for proposals, choosing the ERP system, managing the implementation and ensuring it meets the needs of different groups and is fully adopted. A solid ERP implementation plan is perhaps the most important success factor, so don’t shortchange preparation.
Design. Here, the team analyzes existing workflows and determines how they may change with the new system. Flexibility is key, as administrators and business process owners who are responsible for day-to-day operations need to be open to adjusting how they perform tasks.
Using that workflow, the team determines exactly which ERP features are critical to the company, how you may need to customize the software or add modules to meet the needs of each business group and which data to migrate to the new system.
- Development. The vendor or integration partner works with the team to configure the software to match business requirements and also perform other activities to prepare for deployment, such as preparing training materials and documentation and beginning to import data. If you’re using an on-premises ERP system as opposed to cloud-based SaaS ERP, you’ll need to decide how to handle hardware, connectivity, client rollout and long-term maintenance and security. A hybrid ERP system requires the same considerations.
- Testing. Before going live, test the system. This should include comprehensive assessments covering all the ways various employees will use the system. You may have to fine-tune to fix problems uncovered during testing, but that’s better than having employees discover problems after you push the system live.
- Deployment. After you’ve completed configuration, data migration and testing, go live! But don’t celebrate yet: Unless your staff use the system fully for their everyday jobs, the company is not getting full return on its investment. Prioritize training, and consider selecting “evangelists” in each department. These power users are invaluable peer resources.
- Support. The project team ensures that users have the support they need, and continues to upgrade the system and fix problems as needed. If you’ve selected an on-premises ERP system, you’ll need IT resources dedicated to security, patching, maintenance and troubleshooting problems.
5 Steps to the Perfect ERP Implementation Team
Get executive sponsorship. Who will cut through red tape, secure budget and rally the organization to update processes?
Have a big tent. While large teams can be unwieldy, there are ways around that. It’s a mistake to have IT dictate to finance and other departments which ERP system they’ll use.
Map members to priorities. Remember, this team needs to bring deep insights into the user patterns and business processes aligned to your discovery process so they can properly evaluate options.
Make planning a priority. This project will take up a significant chunk of some employees’ time. The larger the team, the more you can spread out work. Still, some duties may need to be reassigned.
Go for skill, not title. Choose team members based on their expertise and initiative. You already have an executive sponsor. Favor team members with the skillsets to make meaningful contributions.
4 ERP Implementation Strategies
There are a number of proven strategies for transitioning to a new ERP system, each with advantages and disadvantages. Implementing an ERP solution is all about stakeholders working together toward a single goal: business success.
Here are four of the most common approaches.
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.
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.
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.
As the name implies, this approach combines elements of the strategies above. For example, an organization might switch on core ERP modules using a big-bang strategy, then roll out other modules in phases to specific locations or departments.
How to Select an ERP Implementation Strategy
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. The big bang strategy often works best for small and midsize firms, 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 your business? A business that is completely reliant on systems operating 24/7 may be less inclined to take the risks associated with a big bang approach, and perhaps might choose a parallel adoption, at least for the most critical modules.
- Desired pace of return on investment (ROI). With a phased adoption, you may be able to roll out ERP modules that address specific business bottlenecks, and therefore generate ROI relatively quickly. Big bang, of course, completes the entire transition to ERP quickly, with the potential for even greater ROI because the organization soon starts realizing the benefits that accrue when everyone is using the same integrated system.
- Cost. If the overall project cost is an overriding concern, a big-bang strategy may be appealing because it eliminates the cost of operating old and new systems at the same time.
ERP Implementation Steps
Whichever implementation strategy an organization chooses, most of the actual steps are the same. When rolling out new functions to users, the organization configures the software; takes preparatory steps, such as training, data migration and extensive testing; then deploys the software to users and provides training and support.
With a big bang strategy, the project team focuses its efforts on each of these steps consecutively. After the go-live date, it can focus solely on support and any needed enhancements.
With a phased approach, the team may be working on multiple steps simultaneously, for different functions or parts of the organization. For example, the team may be at the deployment stage for core financial modules while still working on the design and development of the CRM function.
ERP Implementation Tips
The transition to ERP represents a significant change in how the organization operates, and any change brings risks. These tips can help smooth the path to success.
- Obtain senior management buy-in. Without the backing of top management across departments, an ERP implementation is likely to falter. It’s also a best practice to have one overall C-level champion.
- Manage expectations. No project of this scope will come off without hiccups. It’s critical that employees have realistic expectations about the transition. This requires communication from the project team throughout the entire implementation process.
- Consider the impact of customization. Most organizations, and various departments, will ask for some customization to support business processes. However, with on-premises ERP software, extensive customization can make it difficult to upgrade to new releases, which hinders your ability to take advantage of desirable new features. For SaaS ERP, IT or an integration partner can make customizations, but again, that adds cost. Before piling on custom code, look closely at whether processes could be adjusted; you may find that you end up with more efficient ways of getting work done.
- Use the right KPIs. Your ERP system can help you track key performance indicators (KPIs) that enable the organization to measure progress and results. But it’s important to focus on the metrics that are most meaningful to your business goals, whether that means tracking sales growth or operational efficiency.