ERP Implementation: How to Beat the Odds With Successful Planning

ERP Software / September 2024

Almost 75% of ERP implementation processes fail. This is one of the most, if not the most, important aspects to remember when embarking on your ERP implementation journey. Project management and implementation teams cite delays (60%), budget management (30%), and poor communication (35%) as the main reasons for ERP implementation failure.

That means only a quarter of ERP implementations succeed and as a result improve 95% of a business’s core processes. So, what’s the secret to success for such a complex undertaking?

The answer is simple; formulate a detailed, long-term, top-to-bottom, ERP implementation plan.

The Stages of a Successful ERP Implementation Plan

The ERP implementation life cycle consists of multiple phases including planning, design, development, testing, and deployment/maintenance. When detailing your implementation plan, 9 stages incorporate this life cycle.

1. Assign an internal project manager who communicates with the vendor’s implementation manager.

2. Plan milestone-oriented phased implementation. Set the expectations that only 80% of your implementation will go as planned, there will be unknowns.

3. Speak with customers (Implementation Team) of your chosen ERP Software. Get a detailed idea of their success and learning points. They have ERP implementation hindsight which you can use.

4. Document your implementation plan. Try to use one document for implementation, iterations, and feedback.

5. Start with smaller milestones. Start with simple phases/features and aim to deliver complex features/phases at the end.

6. Start delivering as soon as possible, even if you are starting with very simple features. As soon as your users start to see the software and your data in it, you will gain implementation feedback and implementation momentum. The best implementations nail smaller features at first and then move towards complex features.

7. Create a virtual or a staging environment to test your implementation (users will loose confidence if your small deliveries have gaps).

8. Train your users in a virtual environment.

9. Implementation is a continuous exercise. By the time you are done with your implementation, your businesses or processes will likely change, hence implementation (and customisation) is a continuous activity. Carve out time to constantly review your ERP processes and software to keep it relevant for your team.

4 Types of ERP Implementation Strategies

1. The Big Bang
2. Phased
3. Parallel Operations
4. Hybrid Balanced

Smaller businesses with a limited digital service requirement can go all-in with a Big Bang approach. Implementing and integrating all existing systems at once. Larger enterprises might go big bang, but the risk of breaking something across the supply chain, manufacturing, sales, and other management processes is risky.

The more rational approach for larger businesses is to Phase in the ERP implementations, piece by piece. This makes change more manageable and reduces the risk of data issues.

An alternative version is to run both old and new software in Parallel until all stakeholders are satisfied with the results. This is ideal for mission-critical applications or financial services operators.

Finally, the Hybrid approach mixes the above approaches. This helps a business manage the costs and risks associated with each to deliver the best value and safest approach.

Choosing the Right ERP Implementation Methodology

There are two primary methodologies for ERP implementation; waterfall and agile. Each are well-established project management techniques with varying benefits for quicker delivery, removing waste, and greater efficiency.

Waterfall Methodology

Seen as the most traditional way, waterfall methodologies are synonymous with the implementation of large-scale, complex ERP systems because of their linear tendencies. It incorporates a start and end point for each phase of an implementation plan, ensuring each phase is complete before the next phase begins.

This is the most common methodology as it’s a repeatable step-by-step method familiar to everyone, providing:

• Clear structures/frameworks
• Easy way to track phase progress
• Set start and end dates

However, there are downsides to the waterfall methodology. It’s time-consuming and the robust phase scheduling leaves little room for changes as the project progresses.

Agile Methodology

An agile methodology is a lean-thinking approach to implementing an ERP system. Instead of meticulously completing each phase in a set order – like the waterfall method – the aim is to get the system operational as quickly as possible.

This methodology means shorter planning times, greater project flexibility, more frequent project inspections, and increased collaboration among business functions and departments.

The two main drawbacks of agile project management are the risk of going live with an incomplete system and having an unstructured implementation plan.

How Long Does ERP System Implementation Take?

As with most questions like this, the length of ERP implementation depends on multiple factors. The most obvious is the size of the organisation, which is impacted by the number of business functions and the amount of data migration required.

• For small businesses and medium businesses, it can take anywhere between 3 months to 9 months.
• For larger companies, it can take up to 24 months.
• For multinational enterprises, successful ERP implementation can take as long as 3 years.

No matter how long it takes, it’s important to be patient and keep aligned with the 9 stages of implementation. Approximately 52% of ERP implementation projects take longer than expected to go live, with delays being one of the most common factors of implementation failure.

How Much Does ERP Implementation Cost?

It’s important to consider the cost of the implementation process as a whole, alongside the software license fees, when setting out an initial budget. For instance, the cost of ERP implementation can be as much as 200% of the cost of the actual software license fee.

Example costs to factor in your budgeting include:

• Planning and preparation groundwork
• Onboarding and training team members
• IT hardware, infrastructure, and space (if on-premise)
• Software licenses per user required
• Required system customisations (including third-party integrations)
• App and data migrations (lower cost if opting for a cloud ERP system)
• Yearly maintenance and support

4 Ways to Measure the Success of Your ERP Implementation Project

Success starts with day one of the ERP project, identifying the major objectives at a board level.

After the costs, effort, and leadership, the rewards of an ERP implementation need to be measurable and visible across an organisation. With the primary goals typically being to save money and deliver innovation and efficiency.

As the ERP team builds up and explores the current state of the business and the technical benefits, those goals can be codified with metric-based achievements. Typically, these will focus:

1. Hours saved across individuals, teams, or departments
2. Money saved across internal and external costs
3. Growth-based benefits from a new understanding of data
4. Improved operational functionality and efficiency

The Risks and Challenges of Implementing an ERP System

Any major IT project faces multiple challenges, both from adopting new software and preparing existing software and data for it.

The larger the business, the more software steps there are to implement. Meaning the more (larger) teams there are to train and greater data sets to integrate. These create complexity and the potential for issues and require careful and agile management.

The challenges associated with the implementation of an ERP system are:

• Data management: With ERP, the primary challenge comes from ensuring data can be migrated and implemented accurately to deliver process and analytics improvements.
• Process management: Replicating business processes through digital twins, process automation or upgrading existing steps in the ERP may require redesigning processes to generate improvements.
• Customisation and development: A few lucky or very-well drilled businesses can implement an ERP with next to no customisation. For the rest, additional layers of integrations, plug-ins and adapters may be required to bring data or processes in from existing applications.
• Testing and deployment: As the ERP process moves on, stringent testing must take place to ensure compatibility and functionality to ensure the ERP’s desired capabilities. Depending on the type of implementation, these can take place as modules or elements are deployed.
• Support and long-term goals: Managers and technical teams must be in place to resolve issues, and deal with user queries and problems. Leaders must ensure the ERP meets launch success metrics and delivers long-term benefits. If those are not met, then proactive measures must be enforced.

Why It’s Important to Get Your ERP Implementation Plan Right

ERP implementation is the process of integrating ERP Software with existing applications and functions to link data, drive analytics engines, and deliver key insights. An ERP roots itself firmly across business functions such as finance and accounting, HR, sales, manufacturing, and more.

The leading business objectives cited for ERP implementation are to:

• Achieve cost savings (46%)
• Improve performance metrics (46%)
• Enhance efficiencies in business transactions (40%)
• Support growth (36%)

To be successful, the implementation process involves careful planning for installation, configuration, and deployment. CIOs, IT leaders, and project teams must ensure the meticulous planning of requirements, installation processes, configuration, data migration, and testing.

Above: A survey listed the primary benefits of successful ERP implementation planning

When it comes to cost-saving benefits of implementing ERP, specific examples include:

• Reducing the number of applications
• Cutting cloud service or application license costs
• Highlighting efficiencies within business processes
• Identifying supply chain weak points
• Managers can identify and resolve issues faster through analytics and dashboard alerts