The 5 major challenges of ERP implementation
Enterprise Resource Planning (ERP) and similar computer software have been used in companies of all sizes and types for a number of years now. Even small companies and family businesses have joined the general trend and implemented ERP software, taking advantage of solutions specially designed for small businesses by ERP suppliers.
The ERP trend has become so strong that the vast majority of small and medium-sized enterprises (SMEs) have implemented an ERP solution (some of them two or more). But even though ERP use is normal and widespread in most companies these days, any new implementation is a challenge, as each organization is different and responds to its own needs, expectations and processes.
TEC deals with many companies that opt to implement ERP solutions. In this article, we'll look at the main challenges faced by organizations embarking on ERP implementation.
Although implementation issues vary according to a number of factors, the main challenges encountered are the same in all countries and for different company sizes. I've classified the problem categories in ascending order according to the degree of "entanglement."
1. The selection problem
Let's assume that a company has decided, for various reasons, to launch a project to implement a management information system. The first issues facing managers are the type, size and scope of the system they need, and choosing the most appropriate solution from the hundreds of enterprise software options available on the market.
There is no single answer as to how to find what you need, and there are many factors to consider in addition to size, scope and type, such as price and specific functionality (there are often hundreds or even thousands of features and functions for each software package that need to be considered in terms of priority and usefulness).
Many companies can consider themselves immune to this challenge, as they have already thought through their needs and what they expect from a new system. Take care not to jump to hasty conclusions without careful preparation, as the choice of a new software system, especially one as enterprise-wide as an ERP system, is one of the most complex and important decisions your company will ever make. The selection of ERP solutions should be considered with the utmost seriousness, as the choice of ERP system defines a company's strategy for at least 6 to 10 years, and undoubtedly has a huge impact on its future success. A vast enterprise software research and consultancy sector exists to meet the needs of companies faced with the problem of selecting their software for the first (or second or third!) time. For example, TEC, Technology Evaluation Centers, has a range of software selection programs available for companies starting their ERP solution selection process.
2. Technical issues
How to successfully choose a software package is important, but it's not the last hurdle on the thorny path to making the whole system (software and hardware, server and users) work for you and bring value to your business. Another part of the implementation problem has to do with the technical side of the project.
It's more than likely that servers and workstations will have to be overhauled to accommodate the new system, and more modern ones will have to be ordered, purchased and replaced. The internal network must also be analyzed and modernized if necessary, and the speed and bandwidth of existing Internet access must be taken into account, as well as any problems concerning the mobile devices used.
If these needs are underestimated, they can significantly influence the entire project outcome (and delay the joy of seeing the new system finally up and running as intended), or poison the first few weeks (or even months) of using the new system with reduced performance, leading to a slowdown in the pace of business.
However, the change in delivery models in recent years has led to a change in the way ERP and other types of organizational software are made available to users.
A large number of "as a service" and Cloud options have become available, offering hosted infrastructure, data storage, and software services, minimizing the cost and headache of applications, hardware, network and storage issues. These options include software as a service (SaaS), platform as a service (PaaS) and infrastructure as a service (IaaS).
With an on-premises technical environment, everything is hosted on the company's premises - applications, servers, networks and software solutions. With the "as a service" or Cloud option, data, middleware, networks, hardware and applications can be hosted on or off-site, depending on the service model chosen.
For example, SaaS allows businesses to run a hosted software application off-site, typically via a network interface such as a web browser, but they may or may not choose to associate their data with the off-site software application. For more information on "as a service" or Cloud options, I invite you to read Back to basics: Cloud Computing 101
In short, Cloud or hosted delivery models can make implementation much easier and cheaper than with an on-premise solution, but using software "as a service" requires extreme vigilance when it comes to data security and software customization, among other things. Risks need to be carefully considered before a decision is made as to which delivery model to follow.
There are now many more options than in the past, and smart organizations will investigate all options and determine technical requirements upstream, so there are no nasty surprises along the way. Find an overview of the current market landscape of Cloud ERP options in the TEC 2016 Cloud ERP Buyer's Guide for Manufacturing.
3. Data quality issues
This problem is particularly symptomatic of companies implementing an ERP solution for the first time and transferring their traditional data into the new system from Excel spreadsheets, manual records or disparate legacy applications. Fundamentally, the problem is that old data that has been used and stored for years may, for many reasons, appear approximate or even incorrect in the new ERP reality. In fact, according to our research, replacing a legacy system and consolidating disparate solutions are the two biggest challenges facing companies.
For example, take this situation from my previous professional experience (during an ERP implementation project for a medium-sized metal fabrication company): in the middle of the project, we converted existing BOMs, routings and applied hourly rates into the new system, only to find that the new product lead times exceeded the real ones by a factor of two or more.
With sufficient time allocated to the conversion phase during project planning, we had some time to repair the data by putting engineers and analysts on the task full-time for a few months and modifying the implementation plan. But even then, the project was delayed by two months. So be careful with your old information, as it may not reflect current reality, and always "pilot" test new system outputs using existing data before converting or transferring them to the new system.
4. Changes in corporate philosophy
ERP implementation brings significant changes to a company's conventional business model, and to the day-to-day practices it has used for years or even decades. Take a look at these examples of likely business process changes with a new ERP:
- The level of responsibility of some employees increases dramatically, because, with the new system, it is more difficult (sometimes impossible) to correct erroneous data or typing errors ;
- New approaches to reporting and data mining, and therefore new management principles and practices, need to be established;
- Business models and operational processes may require massive changes due to new real-time possibilities and data availability.
These are just a few examples of how companies can be seriously and significantly transformed after implementing an ERP system. By following sound, forward-thinking ideas and designs when implementing ERP, it is certainly possible to achieve a much more appreciable return than a simple change of data format or an updated user interface. It's a real challenge, but at the same time, it's an excellent opportunity to renew the company and bring in new ideas by drawing the strategic contours for your organization's future.
5. Cultural and change management issues
This is the most difficult problem to solve. It's easy to forget that the success of a software system depends primarily on its users. The system itself is a non-living, logical entity that follows the steps and processes as programmed, but the system's users are humans accustomed to previous procedures, with software that worked in a particular way, and who will find it more difficult to switch to a new way of doing things, especially if the benefit of the new methods is not immediately obvious or imminent. This is the ERP project manager's worst nightmare, stemming from user habits and their understanding of what's good for the business in general and the user in particular. "It's always been like this, even long before you arrived", "I don't think it's going to work", "It doesn't work on my PC", "I'll talk to the CEO about this system" or "You don't understand how it should work" - these comments should be familiar to anyone who has ever tried to implement a new system or change user requirements. I It's really hard to describe or categorize the possible problems that can arise when a new enterprise software system is implemented. In fact, almost any issue can arise. Unfortunately, change is hard to accept without seeing the benefits, and if you don't take steps to help your employees learn about them before the software is implemented, you'll probably regret it later. I would recommend trying to anticipate such problems at the planning stage to reduce the potential negative impact of resistant users. In addition, raising the interest of different groups and categories of system users well in advance of the project start date, and involving them during implementation, will help to encourage the "mindset shift" required among your employees for a successful implementation. Consider following these steps to inform and engage employees before, during and after a major software implementation project:
- Inform all employees of project milestones as the project progresses
- Establish dedicated communication channels for employee feedback
- Encourage employees to generate new ideas and suggestions
- Organize interesting and promising training sessions
- Highlight the user's best achievements in training with the new software system
Assigned employees at all levels must become allies of the ERP project team for every new implementation, as ignoring user experience and concerns jeopardizes the success of the whole project and can wipe out any meaningful participation.
Planning for successful ERP integration... Difficult, but worth it
Like all company-wide projects, software implementation requires planning and follow-up to ensure success and minimize problems. Solving the five challenges above can help plan the steps and ensure that all potential problems are addressed before the software is implemented. By facing up to the challenges and making sure you've done your due diligence, you'll feel confident about implementing your enterprise software and keep costs and delays to a minimum.
If this is the first time your company has implemented ERP, consulting a specialist company will make the process that much simpler and easier. TEC offers implementation monitoring systems and an accreditation program (reports based on customer reference checks) to help companies choose a software implementation partner or service provider according to their needs. TEC can also provide templates and best practices based on a proven approach to ensure that change management does not disrupt companies' day-to-day operations.
Article translated from French