Considerations for successful ERP Implementations

According to Gartner, 55% to 75% of Enterprise Resource Planning (ERP) Systems implementations fail to meet their business objectives. McKinsey estimates that more than 70% of all digital transformations fail. The Chaos Research shows a staggering 31.1% of projects being canceled before completion. The results also illustrate 52.7% of projects cost 189% of their original estimates. The cost of these failures and overruns are just the tip of the iceberg, the lost opportunity and transformation costs are not measurable, but could clearly exceed the out of pocket expenses. Recognizing the repeated causes of failure would permit understanding, preventing occurrences and coming up with proactive risk mitigation strategies.

Selecting the right ERP System and System Integrator (SI)

When it comes to selecting the right ERP solution, it’s not a one-size fits all approach. Every business or organization is unique; therefore, the software needs to be able to fulfill their individual/specific requirements. It is very important that you identify the in-scope business processes, evaluate your current business operations and how the ERP software can fit into them and how it is aligned to your future vision, business strategy and IT/digital transformation roadmap.

When replacing an existing system with a new ERP, don’t consider it as yet another IT project, rather an opportunity to analyze end-to-end business processes, redefine the architecture and re-engineer processes to create a seamless integrated system. Do a thorough fit-for-purpose analysis by involving process champions to evaluate ERP systems, arrange review calls with ERP system providers, study similar industry and business implementations to select the right ERP system.

It is equally important to select the right system integrator(SI) or partner for your transformational journey. Not selecting the right SI may lead to schedule slippage, cost overruns and unsuccessful deployments. As a starting point carefully create the vendor questionnaire as per your unique business needs when preparing for RFP (Request for Proposal). You should ask right questions to get right responses, don’t consider reusing an existing questionnaire as is from another proposal, how similar it may be. Provide enough and adequate information to vendors for proper response.

Evaluate SI’s experience in implementing similar ERP systems and success/failure ratio. Seek feedback from their referenceable clients. Deciding your partner wisely and establishing right expectations with a well defined work statement is critical for your ERP implementation success.

Look out for less Customizations and more Out-Of-Box (OOB) Features

Once you identify the scope, decide the ERP solution and select your partner in crime the next important step is designing and developing your business processes and workflows with ERP system. From my observation there are two common syndromes you need to be careful about during this phase.

Too much software customization in an ERP system should be avoided. For many business users the ERP software is viewed as too rigid or restrictive. However, responding to a lack of perceived flexibility by customizing the software before fully investigating re-configuration options, business process work-arounds or an interim period of trial before committing to customization can violate the integrity of the software, delay project progress, lead to excessive costs and impose significant risk to project success. The SI along with business process champions plays a major role in explaining the challenges of customization, training the business users on out of box feature of the ERP related to specific business processes and generating a consensus on resolution approach to avoid unnecessary customization.

It’s important to understand that with an ERP implementation, many of your current processes will need to change in order to adjust to this new way of doing things. Your business will need to be willing, at all levels, to adapt its culture and processes to new ways, rather than struggling to adapt the system to match the old ways — this includes even changing current processes that work well. Need to remember adopting a new ERP system is not just an IT change but expected to bring in behavioral and cultural change for the workforce. They need to understand the broad picture, should be aware of the changes in business processes due to new system, associated benefits etc. So preparing the workforce of these changes by required training and learning sessions and arranging design thinking workshops for business processes and work flows expected to change, would help in bridging the gap.

Also, need to overcome the notion that business is always right and IT is just to serve the business, rather we should consider IT as a tool to transform business processes and enhance/optimize the capabilities. This is one of the challenges I have faced in business driven organizations.

Testing and Test Automation Considerations

Testing the ERP system requires specific strategies. Comparing results from your legacy system and new one would be ineffective. The processes and data differences would make the outputs incomparable in many ways. Instead, it’s vital to start by identifying what you need to test, this should be as comprehensive as possible. As a starting point, each business unit should define each and every business scenario that will be reengineered in the new system and build test scripts around those. It is good to refer the test scripts from earlier legacy system but don’t modify them to be reused, which is a common approach in many ERP implementations leading to inadequate testing. Also think of incremental testing vs testing all in each test cycles.

Test automation is a very good option and much talked about in any software implementations but should be considered and planned carefully in different phases of your system and integration testing. From my experience the test scripts covering relatively complex business processes and automated during very early phases of testing become obsolete with changing requirements and becomes a costly affair to keep them usable. So in early phases of development and testing it is useful to automate testing of basic business processes executed repetitively, thus saving time and cost. More complex and end to end test scenarios can be candidates for automation at a later stage of system and integration testing.

Now a days, there are a lot of lightweight, code-less test automation tools available, but selecting the right one is very important as it can be leveraged for post production support activities on long run.

Also service virtualization is an useful option during initial development and testing phases to minimize real-time integration dependencies by emulating the behavior of external systems. Very useful for test driven development or customization (TDD) of the ERP system and helps in reducing cost in initial assessment and development phases.

Comprehensive Data Conversion Strategy

I have seen IT support teams dealing with data issues for several years after ERP implementation because of data conversion errors left unattended before production go-live. For a successful ERP implementation, you should perform a thorough assessment of how legacy data is being stored, how it can be aggregated, unlocked, and aligned with the new ERP system. You also needs to figure out how to integrate data from ERP, CRM, and other systems in order to provide a complete view of business processes.

While may not a cause for project failure, dirty data is a common cause for project delays. Most organization’s do not schedule sufficient time for data cleaning and are not aware of their poor data quality until they retrieve that data for import into the new system. The old “garbage in, garbage out” adage applies here, organizations need to consider this as an opportunity to scrub and rationalize their data so that real-world data from sources such as open work orders and open invoices etc. can be used while testing, tuning, and optimizing the ERP system. Many a times it runs as a parallel activity with system configuration and brought to the environment at a later stage leaving less room for through testing and correction.

Data integrity throughout the entire ERP implementation process is paramount. Be sure to track your data at every stage of the process. Identify and implement processes and policies to ensure the integrity of the data that is being entered into the system is maintained. It’s a good idea, also, to systematically archive no-longer relevant historical data as part of the ERP implementation plan.

Planning, Budgeting and Change Management

Last but not the least, comprehensive project planning, adequate budgeting and change management strategy play a major role in successful ERP implementation.

Estimating an overall timeframe for implementing an ERP system is a good start, but it’s not quite enough. Considering the complexities involved, you need to break each component of the implementation into steps, with a set timeframe for each e.g. system configuration, designing processes, workflows and customization, data conversion, in/out-bound integrations, testing, training etc. Those steps will also need to allocate time for any potential and unforeseen issues and additional time for troubleshooting.

Consider proper budgeting with adequate contingency plan in place as per project plan. Along with ERP system cost, consider additional budget components, such as licensing fees, testing, system support, user training, hyper-care/warranty support, handover to production support etc.

Change management is another important aspect to be taken into account. Though it is always good to identify all business process, workflows and customization needs for each module at early stage of ERP implementation, but changes are unavoidable and may pop up in different testing/validation phases. So you need to have adequate planning in place for required analysis, evaluation and adoption of changes throughout system configuration. Considering the requirements and user expectations tend to be complex in ERP implementation, proper change management process would help in due assessment and evaluation of alternate solution approach to avoid unnecessary customization.

Last Thoughts

ERP implementation is a complex and sensitive initiative that needs visible, vocal and meaningful executive sponsorship. Executive sponsors should actively demonstrate leadership, commitment to the project and support of project team members at every possible point. They must quickly intervene to resolve obstacles and champion the projects forward movement.