Implementing an ERP solution is a complex process which involves substantial amount of effort and as consultants we are here to help you get your head around the idea. However, we cannot say that the success of the implementation solely depends on our consulting and development skills. There are a number of factors which influence a project’s success and together with the project team and mutual dedication we can accomplish a successful implementation.
What value an ERP system brings to the business?
Enterprise Resource Planning systems play a key role in the company’s decision making support and provide enhanced control over the company’s operational performance. An ERP is an integrated system that makes use of data and information gathered by different business units. An ERP solution helps to integrate the organization’s management principles, business processes, enterprise business data, resources and business-line applications into a single platform. In order for organisations to stay competitive within the market, they must come up with best business decisions in a limited period of time, and an ERP solution is the right tool to support such requirements in an efficient manner.
To Customize or not to Customize?
While considering various implementation models of an ERP, it is imperative that the system reflects the business processes and fulfils the requirements of the enterprises’ business model. A successful implementation project demands knowledge about the system (software wise) and the organisation’s business processes. The misfit between ERP system functionality and enterprises’ requirements is the most common problem in adopting an ERP solution.
Looking back at the 20th century, companies which had decided to implement enterprise systems had to adapt or even completely change their processes to fit and align with the systems’ functionality. Such practise had a negative impact on the companies’ performance as changes in the crucial corporate operational processes are very risky[iv]. In recent years the matching process has inclined towards fitting the system into business requirements and adjusting enterprise systems according to the business processes.
The alignment of the standard ERP functionalities with enterprises’ business processes is considered a crucial stage of any implementation process. Although some research shows the advantage of implementing an off-the-shelf ERP solution, which is equivalent to embracing best practices by using standard functionalities, there is still a need to customize the system to support the business processes in an efficient manner.
I know my business, so why hire consultants?
The use of services from third party resources is common in many ERP projects. In parallel to the change of implementation approach, new parties have become involved in the process of implementing an ERP. The impact on a successful implementation is not limited to the systems’ quality but also to the role of external facilitators such as suppliers and ERP consultants. Configuring off-the-shelf ERP solutions is not an easy task and due to this demand for solution experts has been on the rise. In this regard, the consultants’ broad knowledge of the ERP functionalities guides organisations in implementing the right ERP solution.
Such benefit of knowledge and experience helps to improve the quality of the system and ensures end-user’s involvement in the design of the system. Managing a wide range of knowledge of various stakeholders together with experienced implementation consultants and business representatives has been identified as a vital factor for the ERP projects’ success. The ERP consultants primarily hold expertise in the system functionalities and configurations, while business users possess industry specific knowledge and know their current business processes inside-out.
How to make it right?
An ERP implementation project is a significant investment and an overall organizational undertaking which consumes a lot of time, effort and costs. Therefore, in order for the company to decide implementing such a system, it is essential for the project delivery to be a success. The successful implementation of an ERP system is a complex process and therefore depends on many different variables. Creating a system that reflects all the business processes and operational needs can be quite demanding as Enterprise Resource Planning systems must reflect all organization’s functions properly.
There are many factors that are critical to the successful implementation of an ERP. Since the process is very complex it requires the involvement of different parties to cooperate in order to gain a mutual understanding of the business needs. Many studies have been conducted to analyse what factors influence the implementation to be a success. We have grouped these variables into 5 categories;
- Internal support and change management: An implementation of an ERP is greatly associated with the company’s readiness for change and the internal support of the implementation idea by its employees. It encompasses the commitment from top management to end users. ERP system brings with it extensive changes across the board and this is why it is crucial to have an effective change management in place. Building the right project team with a competent leader is critical for the project’s success. Additionally, the morale of the team should be maintained in order to keep a positive attitude towards the implementation among the employees.
- Organization-Consultant cooperation and communication: The success of an ERP system implementation is highly dependent on having a clear understanding of business requirements and therefore, it is crucial for the project team to communicate effectively. Apart from that, the consultants’ support with their knowledge, experience and tools is required throughout the implementation project and in post-implementation assistance. The consultants are also required to effectively resolve conflicts and manage the organization’s expectations, so they do not exceed the systems’ functional capabilities. The more consultants and users understand each other, the better the mutual understanding of user requirements and hence, the more precise IT solution. Therefore, there is a need of an open and transparent communication and mutual trust in the project team.
- Precise IT solution: For the implementation to be a success, the ERP solution should precisely reflect the business processes. That means either choosing the right system package that best matches the organizational needs or reengineering the processes so that they are aligned with the system functionalities. Either way the appropriate balance between the ERP system itself and business processes is required, while customisations ought to be kept to their optimal minimum. It is also important to analyse best practices, understand the current IT architecture and plan the ERP implementation accordingly. The knowledge about the respective data that is necessary to be transferred into the new system together with data migration strategies are fundamental factors that strongly influence the implementation success.
- Knowledge transfer: An ERP system with its many functionalities creates a big potential to support company’s processes. However, the complexity of the system might limit the users and stop them from using it properly. Hence, it is important that the system is used to its fullest potential and users should be trained accordingly to do so. On one hand, the knowledge transfer refers to the consultants, which can share their in-depth understanding of the functionalities through user training, but on the other hand it also relates to having internal implementation team collaborating with the rest of the organization on new reengineered business processes. There is also the required knowledge transfer between the business process experts, users’ feedback and consultants.
- Project management: An ERP system implementation is primarily a project, and like any other project it must be managed effectively in order to achieve desired goals. It is crucial to define clear objectives and strategies to accomplish them. A detailed plan that defines the scope, time, resources and cost constraints must be determined and agreed upon by all stakeholders. Additionally, the right project team with appropriate skillset must be selected. Furthermore, after defining the goals it is necessary to measure the results, quality and progress towards the attainment of the goals set in each phase of the implementation. It is also required to assess risks and identify procedures to minimize their impact.
ERP systems bring competitive advantage to businesses and improve efficiency of business operations. Definitely, the right ERP system can become a strategic asset of a company. Nevertheless, there are always potential risks of an implementation to be a failure, therefore the enterprise needs to be aware of the determinants that influence the success of the implementation project to mitigate risks and make the implementation a success story.