Key factors for a successful ERP implementation
Implementing an Enterprise Resource Planning (ERP) solution is a major undertaking for most businesses. A modern and responsive ERP system can bring many benefits, including improved productivity, streamlined workflows and processes, reduced costs and improved return on investment.
Over the years, there have been (and continue to be) many examples of where ERP implementation projects have suffered from budget overruns, taken longer than expected or not have delivered the benefits that the organisation was looking for. The reasons for failures in ERP implementation projects can be complex and numerous, but there are some key factors that can help to contribute to a successful outcome, which we discuss below.
Set realistic expectations
Usually, the implementation of an ERP solution is undertaken with the objective of supporting a range of business goals and delivering specific business benefits. Whilst an ERP solution will most certainly contribute to delivering significant improvements and benefits, it is important that this is put into the broader context and that efforts are made to ensure the organisation is properly prepared for the task ahead.
Understand the business value that the ERP solution will deliver and set out the business benefits that the organisation is looking to deliver – a business value engineering exercise can be a good way to help discover and define these elements
Define the required outcomes that the organisation is looking to achieve, in language that the business stakeholders will understand. These outcomes can include a wide range of things that ultimately contribute to the “hard numbers” and it is important to identify measurable criteria (as far as is practical) that can be embodied into a benefits realisation plan alongside the hard financial or operational criteria
Recognise that the ERP solution is a commercial off the shelf (COTS) offering and not an in-house system, which brings with it certain constraints – whilst ERP solutions offer a high degree of flexibility and configurability, it is vital that the organisation remains open to evaluating alternative ways of doing things that may require some changes to its business processes and operating procedures
Be honest about the readiness of the organisation to embark on the ERP implementation project and look for ways to improve this before setting out. Often, the organisation will not be accustomed to running a project such as an ERP implementation and will not be set up to deal with the required approaches – a structured business readiness assessment can help to uncover areas where the organisation needs to improve its capabilities and set out pragmatic actions to address areas of weakness
Make sure that the key stakeholders understand that the “go-live” of the ERP solution is not the end of the journey and that the organisation will need to put in place the necessary structures, approaches and roles to ensure it continues to make ongoing improvements to processes and ways of working, supported by the ERP solution – it is also vital to ensure that proper consideration is given to how the organisation will manage ongoing maintenance of the ERP solution such as upgrades
Set a realistic budget and timescale for the implementation project that considers all aspects, including IT and business elements – the introduction of an ERP solution will bring about changes to business processes and ways of working, which will need to be addressed alongside the more technical elements of implementing the ERP solution itself
Ensure that the organisation clearly understands the need to allocate the required time from its people to participate in the project – this will require specific actions to be taken such as securing back-fill for those people taken out of their usual roles
Carry out proper planning
Having a properly thought-out, comprehensive, complete and realistic plan for the ERP implementation project is paramount. The plan needs to consider all aspects of the implementation including the IT elements and the business elements, which must be aligned to each other. Taking time to develop the plan, with involvement from all relevant stakeholders, is an important factor in getting prepared for a successful project.
Take time to fully understand the approach to implementing the ERP solution, what resources will be needed and what the best method of deploying it will be
Seek advice, guidance and support from experienced partners and look for learnings from other organisations that have gone through a similar project – the ERP vendor will often be able to give access to other customers that have gone through a similar project, and many ERP solutions have one or more user groups where organisations can gain valuable insights and connect with others using the solution
Really test the plan with the various stakeholders to ensure all scenarios and potential approaches have been considered
Challenge all assumptions to make sure these are sound and continue to review these assumptions to make sure they are still valid
Do a thorough risk analysis and risk assessment, and ensure that the resultant risks are reflected against the plan to understand where specific actions may be required
Ensure key stakeholders are engaged early and are kept engaged throughout
Gaining commitment from key stakeholders to the project and its outcomes is vitally important to ensuring the organisation is aligned with the project. There will doubtless be tough times and having the key stakeholders on board to provide leadership and support can make a real difference.
Identify the key stakeholders early on and understand what their expectations are – performing a thorough stakeholder analysis can help to discover the motivations, values and concerns of the various stakeholders, so that this can be reflected in the stakeholder management plan
Develop a stakeholder map to set out the levels of interest, influence and commitment each stakeholder has with respect to the project, and understand where there are gaps between where they are now and where they should ideally be – addressing any gaps in the level of commitment is a key focus of the stakeholder management process
Create a formal stakeholder engagement plan to run alongside project plan, that sets out how the various stakeholders and stakeholder groups will be engaged, including who will be responsible for managing these relationships, and review it regularly to ensure it stays relevant
Aim to involve key stakeholders in activities related to the project – having visible support for the ERP implementation from key stakeholders in actions, not only words, is a powerful way of helping to drive commitment throughout the organisation
Make sure there is a real focus on data
Ensuring that the ERP solution is set up with accurate, complete and relevant data is a critical factor in ensuring that it will operate correctly and deliver the expected benefits. Many organisations will find that the data they currently hold has issues with completeness, accuracy and currency. It is also common to find that data is held in various places, not only in the “official” IT systems but in spreadsheets, offline databases and even on paper. Understanding, collating, cleansing and preparing the data to put into the ERP solution can represent a challenge and needs specific focus.
Establish a dedicated function within the project with responsibility for data and ensure it is appropriately resourced – this function should cover all aspects including the delivery of data into the ERP solution, dealing with access to historical data that is not loaded to the ERP solution, plus liaising with the relevant functions to agree the ongoing approaches to data governance and data management
Take time to understand what data is needed to support the ERP solution including how any gaps will be addressed, and consider how much historical data is required to support the business processes or to meet legal or regulatory requirements
Consider how historical data that will not be loaded to the ERP solution will be dealt with, as there will be requirements to have access to this data going forward
Establish ways to determine the quality, accuracy and relevance of existing data and put together plans for performing cleansing as part of the data migration process - often, organisations find that some of the data being held is redundant, out of date or incomplete, which can lead to issues when trying to migrate this into the ERP solution
Where possible, include migrated data in the testing phases to validate that it has been migrated correctly and properly supports the business processes - it might be that the data migration has been performed correctly but there are issues with the content of the data itself
Ensure there is a dedicated focus on managing change in the organisation
Even now, after decades of ERP implementation projects, ineffective management of business change is a major factor in why projects fail to deliver the expected outcomes. Fundamentally, introducing an ERP solution together with new ways of working requires changes to the behaviours of the end users to ensure proper adoption – implementing the necessary changes can be difficult and those affected need to be supported through the process.
Set up a dedicated change management function to take ownership and accountability for managing change within the organisation – whilst it may be necessary to get support from an expert partner it is always better for the organisation to have visible ownership of business change rather than handing it over to a third party
Identify in detail what the impacts on the business that will be from introducing the new ERP solution and consider the different areas where these impacts might appear, such as policies, business processes, workflows, job roles and responsibilities or technology - the change management plan should include specific interventions and actions to address the change impacts, as appropriate
Address the "what's in it for me?" question by understanding the different personas in the business and mapping out how the change will impact them (positively and negatively) so that appropriate approaches can be defined to dealing with the impacts - making it personal is a powerful way of establishing support and commitment from those affected by change
Be prepared to tackle the difficult topics rather than avoiding them, but take time to work out the right way to do this that reflects the circumstances of those affected
Take training seriously
All too often, training is one of the main areas to suffer from tightened timescales and budget restrictions, but it is the one area where the project really “touches” the end users. Ineffective, insufficient or inappropriate training of the end users can have a negative impact on the outcomes from the project and act as a barrier to proper adoption.
Set out a pragmatic and realistic approach to training – not every end user will require lots of classroom training and not all training needs to be done in the classroom - a structured training needs analysis will help to answer the key questions of who needs to be trained, what they need to be trained in, and how they should be trained
Understand the different cohorts in the end user population and determine what methods of training will be most appropriate for each of them, for example instructor-led classroom training, virtual classroom training, e-learning, bite-sized videos or briefings (or a combination of several methods)
Make sure end users can access support during and after training, and think about how this can be provided – examples of this can include drop-in sessions, floor-walkers during deployment, local "super users", online or printed reference materials, quick-reference cards or in-system guidance
Aim to eliminate the “cottage industries”
Identify where the business processes are really performed – even where there is an IT system it is common to find that there are numerous other tools used such as spreadsheets, offline databases or even written records. There are often underlying reasons why the organisation uses alternative methods to run processes, which can expose important issues that need to be addressed.
Thoroughly evaluate the existing business processes and speak with people who actually perform them to understand the reality of how they are executed – this will often help to uncover the use of off-system methods
Look at the reasons why these alternative methods exist and how they will be addressed by the new ERP solution – it might be that there were unresolved gaps when the existing IT solution was brought in, or business processes may have evolved over time and no longer be reflected in the current solution, or training of the end users may not have been fully effective
Ensure that all off-system activities are considered in the design of the future business processes and ERP solution so that they are eliminated or, where there is a valid business justification, formally incorporated into the design
Use the standard functionality of the ERP solution
Keeping things standard in the ERP solution is paramount in order to reduce complexity and ensure ease of maintenance. The ongoing cost of maintaining an ERP solution is far lower and future upgrades are much simpler where standard solution functionality has been adopted.
Ensure that stakeholders and business process owners understand the approach and constraints of implementing a commercial off the shelf software, so that the business processes and solution design process take this into account
Be prepared to look at how business processes can be adapted to fit within the constraints of ERP solution’s standard features – most ERP solutions are highly configurable to meet a wide variety of requirements, so always look for ways to configure rather than customise
Put in place a robust governance approach to challenge and justify any requests to customise the ERP application, which should include understanding what the likely impact on future maintenance will be
Ensure that testing is thorough and comprehensive
Testing of the ERP solution and business processes is a key element in ensuring readiness for go-live and establishing confidence within the organisation that the solution is fit for purpose and the organisation is ready to adopt it. Thorough testing requires an investment in time and resources, but it is far better to make this investment during the project rather than find issues following go-live that can be much more expensive and disruptive to correct.
Put a formal testing strategy in place that considers all areas including the configuration of the ERP solution, integration between applications, execution of the business processes, and the operational and support processes
Perform at least two “mock” business cycles during testing, to ensure that the various key business activities are validated, using real data if possible - aim to include key elements such as payroll runs, supplier payment runs, month-end and year-end
Set out specific entry criteria that must be met to commence each phase of testing and specific exit criteria that must be met to complete each phase of testing – these should ideally be a combination of metric-based criteria and outcome-based criteria
Look to carry out testing of the future support processes to validate that these are properly defined and fit for purpose
Involve stakeholders in testing activities where appropriate, to help build confidence that the ERP solution, business processes and the organisation itself are ready
Think about how support will work at the beginning
Having a well-designed, properly organised and appropriately resourced support organisation for the ERP solution is vitally important to ensure smooth operations. Often, the approach to support is not considered until later in the project however, considering how the organisation will operate and provide support at an early stage can have real benefits. The organisation may not have experience of supporting an ERP solution and lack the some of the skills and competencies to perform the support activities – thinking about how support will work early on can ensure focus on developing the necessary competencies and help with understanding what role a partner could take in providing specific support services.
Define the support approach at an early stage so that this can be developed in detail during the project – by selecting and appointing a support partner early it is also possible to involve the partner in key testing and readiness activities, ensuring thorough knowledge transfer takes place and helping to build confidence that the future support processes, roles and responsibilities have been properly validated
Ensure that a comprehensive approach is defined to early life support (ELS) that includes specific measures and criteria to understand the readiness of the ERP solution, business operations and support function, which can then be used to determine when ELS can be closed and transitioned to business-as-usual operations – it can be very effective to define the ELS exit criteria to include measures that relate to achieving business outcomes and not only technical measures, for example successfully completing financial period close, processing payroll, paying suppliers or processing customer payments
In this post, we have discussed some of the key factors that can help to ensure a successful ERP implementation based on the collective experience of the DNASTREAM team gained at numerous projects for over 20 years. There will no doubt be other factors beyond those we have discussed above, and we will continue to take learnings from current and future projects to help our customers get the right outcomes.
WE MAKE TECHNOLOGY USEFUL – we are an independent UK-based consultancy, established in 2006, with a focus on driving real value from IT applications and technology by ensuring strong project management and proper end user adoption. As an IFS Authorized Channel Partner, we have extensive experience in leading and supporting the implementation of ERP, EAM and Field Service Management solutions in the utilities, facilities management and field service industries, with an established track record of successful delivery at many leading organisations.