11 tips for selecting and implementing an ERP system
From laying the organizational groundwork to planning for the long haul, IT experts offer insights on how to make this challenging business transformation smooth and successful.
Enterprise resource planning (ERP) systems are the backbone of modern businesses. The agility afforded by a modern ERP system backed by honed business processes can help any company compete in today’s business environment, which has been severely affected by supply chain disruptions as well as disruptions to traditional business operations due to employees working from home due to COVID.
If your organization has cobbled together point solutions or limped along with a legacy, on-premises ERP platform, it may be time to invest in overhauling how your business operates.
1. Lay the organizational groundwork
Prior to starting the vendor selection process, organizations must first lay the groundwork by addressing the requisite political, organizational, change management, and governance issues upfront.
Every organization experiences power struggles and political issues borne of the differing mandates and pressures its various groups work under. A classic example? The tussle between IT security practitioners and “shadow IT,” in which lines of business deploy technology without explicit IT approval. Then there is basic human nature around change, with some individuals trying to drive evolutionary shifts in the business, while others prove more resistant to change, worrying that new technologies will disrupt their everyday work routines, or even take away their job.
Because an ERP implementation is so profound and impacts every aspect of the business, companies need to resolve political issues before moving ahead. They need to put change management processes in place, address employee concerns through transparency and training, and resolve governance questions. Who owns the ERP? If you’re moving to a SaaS model, what happens to internal IT? Those questions need to be answered before prospective vendors are brought in.
2. Overhaul your processes
Implementing a new ERP system is a great opportunity to rethink — and optimize — how your organization works. Simply compiling a list of current business processes and trying to replicate them in a new ERP system is the wrong way to go.
Instead, companies should use an ERP deployment or migration as a critical part of their digital transformation efforts. Forrester analyst Liz Herbert says companies should consider exercises such as design thinking or journey mapping to explore new and creative ways of improving business processes. Organizations should also open up the brainstorming process to include not only department leaders but also rank-and-file end users, even customers and partners.
3. Get your data ducks in a row
Companies moving to consolidate a variety of point products, homegrown apps, or a legacy ERP system into a modern, comprehensive ERP platform need to consider whether their data collection capabilities are up to speed.
As ABI Research analyst Michael Larner puts it, “How robust is the source of information that the solution can obtain information from, in order to provide a single version of truth.” This is particularly important as companies struggle with supply chain issues and need to have real-time insight into end-to-end systems that can encompass multiple functions such as ecommerce sites, sales, billing, manufacturing, inventory management, delivery, support, or customer service.
4. Focus on critical business requirements
Organizations certainly want to move quickly to begin reaping the benefits of the new ERP system as soon as possible, but Lisa Anderson, president of LMA Consulting Group, cautions that it’s better to take the time to get the vendor selection process right than to rush into something that you might regret down the road.
When undertaking vendor selection, large organizations often come up with a list of dozens and dozens of business requirements. And most vendors will tell you that they can satisfy all of them. Anderson recommends taking the time to whittle that list down to a few critical business processes that have unique functionality or provide a significant business differentiator. She adds that companies should pin the vendors down on specifically what it would take to improve those critical business functions in terms of cost, time, complexity, and training.
5. Plan for the future
Larner emphasizes that selecting a vendor that will provide the same functionality as you have now is never enough, especially when migrating to the cloud. Implementing a new ERP system is a great opportunity to make use of advanced data analytics and simulations such as digital threads or digital twin technology, for example, to anticipate future needs and concerns, Larner says.
Be sure to ask vendors what their platforms offer to ensure your business thrives beyond implementation. “Does it help me understand what is happening today, and what will happen tomorrow. Can it anticipate shortages or bottlenecks? That takes the ERP system upgrade from a simple procurement tool to a strategic tool,” Larner says.
6. Conduct a demo at the beginning of the process
Many organizations go through the entire vendor selection process and then bring the winning bidder in to conduct a demo that shows employees what the new system will look like. A better approach, says Herbert, is to bring in a vendor or two to perform a demo at the beginning of the process, so that employees can envision the possibilities of the new system when there’s still an opportunity for feedback and, from a political perspective, it doesn’t come across as a fait accompli that is being forced on employees without advance notification.
7. Partner for the long haul
For most organizations, the transition to a new ERP system will require outside help, either because of internal IT staffing constraints, time pressures, or lack of skills. According to Anderson, this means making a hard choice with significant impact: Do you partner with the ERP vendor, with a reseller or systems integrator affiliated with the ERP vendor, or with an independent technology provider or consultant?
Look for a partner that has deep industry expertise, understands your business processes inside and out, and has a track record of process expertise. It’s also important to make sure the ERP vendor and/or third-party partner has the global reach to meet your requirements. Remember, once you make an ERP decision, you’re committed for the long haul.
8. Make user experience a priority
It’s critical to consider not just the software itself, but how easy it is for end users to learn the new systems and to operate them. The last thing you want is to deploy software that turns people off and becomes something they avoid until they’re absolutely forced to use it.
Check to see what the vendor offers in terms of templates, online guides, training materials, communities, and forums. What does onboarding look like? Is there a self-service option so that end users can get up and running without intervention by IT?
9. Make sure the new ERP integrates with other apps
The ERP system doesn’t operate in a vacuum. The IT department is still responsible for the smooth functioning of complete business processes. ERP applications interact with databases, legacy apps, other SaaS applications such as CRM, and industry-specific apps such as quality management in manufacturing. Companies need to understand how well the new ERP system will be able to integrate with the rest of the IT infrastructure. Find out what types of APIs are offered.
10. Resolve the customization vs. standardization debate
In the ERP world, there is a constant tug of war between customization and standardization. Organizations are oftentimes tempted to build their own ERP apps in order to improve business processes or user experiences. Over time, however, the proliferation of customized apps can create problems in terms of consistency and updatability. Standardization enables companies to stay on the vendor path and take advantage of innovations that are developed by the SaaS provider, says Herbert.
The trend these days is more toward standardization, so organizations should have policies and procedures in place to make sure the companies don’t stray too far from the vendor path, while still enabling some customization when it makes business sense. Herbert says an 80/20 split is a good benchmark to follow.
11. Take advantage of agile and low-code
Legacy ERP systems are often described as inflexible monoliths that can’t be updated at the speed of business simply because of the way they have been designed. With the recent shift to agile software development and the general democratization of IT enabled by advances such as low-code or no-code development environments, companies can change that.
Herbert says that in the past developers were skittish about rolling out a new ERP update because it could be disruptive to the business and people were “afraid to touch anything that might bring down the system.” But as organizations become comfortable with SaaS applications that update frequently, there’s an opportunity to apply agile development principles to the ERP system. “Agile is a huge shift in ERP deployment,” says Herbert. “You don’t have to plan out every use case, every functional piece up front. You can be iterative in what you build and what you consume.”
And with low-code and no-code options, companies can safely develop improvements to business processes at the edges without impacting the core ERP system. Of course, Herbert adds that organizations that go this route also need to have the proper governance in place.