Implementing an ERP system is an expensive proposition that can cost millions of dollars (with the software licenses, consulting fees, integration costs, training and upgrades factored in) and take months, even years, to fully deploy. And, according to a report commissioned by Panorama Consulting, one in five ERP implementation projects (21 percent) end in failure.
So what steps can you take when choosing or deploying an ERP solution to decrease the likelihood of failure? Here are eight suggestions from ERP experts, systems integrators and project managers who have successfully implemented an ERP software system.
1. Choose an ERP solution that best suits your business’s needs (and industry requirements). “Because it’s a major investment of time and money, be sure to create a comprehensive list of requirements with input from multiple key stakeholders,” says Sumanth Dama, CTO, CuroGens, a systems integrator.
“Define your company’s core needs,” says Evert Bos, solution architect, Sikich, a professional services firm. “Your system requirements should be a short list of functional and operational must-haves and an equally short list of key strategic requirements that will support your future growth. A well-defined list of requirements will result in a more seamless implementation process and an ERP system with lower total cost of ownership.”
“Seriously consider how [the system] would fit into your current IT infrastructure,” says Dama. And “ensure that [the] ERP [you select] can support the regulatory requirements of your business – [and if] you will have to pay big dollars for customizations. Make your choice not solely upon price or vendor alone.”
2. Look at total cost of ownership (TCO). “My best advice to a cost-conscious [organization] deciding on an ERP system is to really look at total cost of ownership,” says David Valade, vice president of operations at Alta Vista Technology. “Yes, the software itself costs money, but as you compare costs for different solutions don’t forget about hardware, consulting dollars to implement, internal resources to maintain the software and future upgrade costs that come with it. I know a company that doubled the size of its IT department to maintain an ERP solution that initially looked like a bargain.”
3. Vet vendors/integration partners carefully. “Choosing the right vendor is a major part of the process,” says Dama. “Ensure the vendor has done their homework and can get the job done to your specifications. Be sure they’re prepared to give specific estimates regarding TCO and the ROI you can expect for your business and in what period of time,” he says. “Discuss in detail the budget and project completion time and require references from other organizations that have hired them. Also be certain they have the proper experience serving your specific industry.”
“When embarking on an ERP implementation, it’s essential for your software and service provider to know your business,” says Paul Magel, president, business applications and technology outsourcing division, CGS. “Every industry has its own requirements, from terminology to specific functionality. A one-size-fits-all ERP will leave you with many gaps and needed customizations,” he says. “Whether you are in a specialized vertical such as footwear or are a well-known apparel manufacturer, ensure your vendor is an industry expert.”
4. Make sure senior management is on board. “One key predictor of how your ERP implementation will go is upper management buy-in,” says Kirk Heminger, marketing manager, Penta Technologies. “Senior management [doesn’t have] to be integrally involved in every step of the implementation process. However, management involvement and backing in prioritizing the project, setting direction, allocating resources and facilitating communication can be the single most important success factor in any implementation process.”
“It’s imperative the team tasked with choosing a new ERP system collaborate with senior leadership team or a member of the C-suite, where one individual from [the] executive team can serve as the sponsor and internal champion of the project to streamline approvals and break down internal silos,” says Rick Hymer, vice president, North America service line leader, packaged based solutions, Capgemini.
5. Develop a roadmap. “A roadmap not only ensures a smooth process, but it shows financial stakeholders when the implementation will start, the cost and when they can expect to start seeing benefits,” says Ramesh Iyanswamy, global head of SAP HANA, Tata Consultancy Services. “Roadmaps help manage large, complex technology and business process transformations in a series of well-defined phases, and help take control of cost planning. [Use the] roadmap [to] phase deployment over a period of shorter go lives, spreading out the cost over years.”
“It is critical to establish a well-defined footprint for your ERP implementation,” says Bos. “Define the functional areas of your organization that will be both affected and unaffected by the ERP system. For the affected areas of the organization, detail the ERP functionality that will be deployed and the business case for expected improvements,” he suggests. “Once this is complete, it is critical to exercise strong control over the scope of the project. Changing the scope of an ERP system should be a difficult process.”
“Putting together a detailed roadmap that outlines what steps the business needs to take before transitioning to the new system will help pinpoint potential ramifications and identify ways in which to mitigate those speedbumps from the get go,” says Hymer.
6. Establish a cross-functional team to oversee implementation. To help smooth the implementation process, companies should set up an interdepartmental implementation team. “This team should be made up of individuals [from different departments,] such as accounting, operations, information technology, payroll, human resources, purchasing, service and inventory,” says Heminger. “The team needs decision-making authority and a clear escalation path when facing decisions beyond their authority.”
“By building a cross-functional team, companies not only improve the likelihood that all areas of the business are addressed, but also help create buy-in that can drive the overall project’s success,” says Christine Hansen, senior manager, product marketing, Epicor Software Corporation. “All cross-functional teams should include certain key organizational functions such as project management, IT and executive management.”
7. Deploy the ERP one module at a time (not all at once). “For example, implement your accounting applications first, such as your general ledger, payables and receivables,” says Allan Alutalu, a project manager for Fujitsu Consulting. “Once those modules are up and running, implement your other modules, such as HR and payroll. Then implement your satellite modules and other add-ons. Many organizations have failed [in] their ERP implementations by using the big bang approach and attempting to convert all their systems to the ERP all at once – a big, costly mistake.”
8. Don’t skimp on training. “The most critical element of an ERP rollout is the people,” says Curtis Thornhill, CEO, Apt Marketing Solutions. “Create a full plan to train and onboard stakeholders. Ensuring implementation resources remain assigned for the first six weeks is essential to supporting end-users, managing change requests and addressing points of failure. Appreciable support is the most important factor for ensuring successful adoption of a new ERP system.”
“Make a solid investment in training,” says Hansen. “This is another key element to successful ERP deployments and should not be overlooked. If employees are undertrained, they will often fail to take full advantage of the tools they’ve been given, and can become frustrated, abandoning the system and resorting to manual workarounds that drain time and resources and create islands of information,” she explains. Therefore, it’s important to create “a training program that is appropriate to each user’s role within the company, with specific goals and outcomes defined.”