This article was originally published by Oracle NetSuite.
Enterprise resources planning (ERP) solutions are designed to support an organization in just about every aspect of business operations by centralizing data and through automation. These platforms control internal processes, facilitating the business planning of financials, vendors, materials, goods, services, customers and employees.
The central feature of all ERP systems is a shared database that supports multiple functions used by different business units. In practice, this means that employees in different departments, such as accounting and sales and human resources, can rely on the same information for their business process needs.
What is the ERP implementation process?
Every ERP implementation is slightly different with no standard template, but overall, the implementation process has core similarities in each instance. At a high level, an ERP implementation strategy includes similar phases to get from purchasing the solution to installing licenses or software, transferring financial and transactional data, and mapping business processes and system access for each department, user group or business role.
ERP implementation methodology stages
The methodology of an ERP implementation can be simple or complex, based on factors like size of the organization, the project’s complexity, and whether you’re implementing an on-premises or cloud solution.
On-premises solutions have the added steps of including hardware infrastructure installations as well as adding staff to maintain the infrastructure. Because all support activities, such as configuration hosting and setup, are managed in-house, these added phases can change and often prolong the implementation.
Cloud ERP implementations can skip some of the traditional steps that an on-premises deployment involves. The solution provider manages the infrastructure, allowing businesses to focus on data migration, process changes and employee training. The added steps of hosting, servers and maintenance are typically managed by the ERP vendor.
ERP project team
The project team is responsible for the overall health of the implementation project, overseeing day-to-day initiatives and timelines that guide members through their ERP implementation checklist. Depending on the size of the company and whether it’s deploying a cloud-based or on-premises ERP solution, the project team will look different.
Members of the ERP project team will consist of project managers from the ERP vendor and the organization, as well as analysts, developers, key users and engineers. Each member fulfills independent, tactical roles focused on conducting the configuration, installation, testing and migration tasks.
With smaller, less complex implementations or cloud-based deployments, project teams are slightly different. They consist of a project manager, key users and often a consultant from the ERP vendor to help install, migrate and test the new solution.
Complex implementations for larger companies will often have steering committees. The steering committee consists of the business’s executives and management, and it establishes the big-picture items like the strategy and priorities that justify the investment. The committee dictates the budget and typically establishes the high-level goals.
ERP implementation budget
The success or failure of an implementation project can hinge on establishing a realistic budget, and the main reason companies go over budget is because they expand the scope of the ERP project. ERP implementation budgets can be broken down into three categories: technical costs, workforce costs and data migration costs.
Technical costs incorporate all software, licenses, hardware and known technical implementation costs. This will include factors like infrastructure hardware and software upgrades, database configurations, maintenance and support, customizations and even hosting.
Workforce costs include internal and external people-related costs, which include education and training costs, project management costs, consulting costs and other change management costs such hiring as additional employees.
ERP data migration costs will include areas such as legacy system data extraction and sunsetting costs, as well as transferring clean data to the new ERP solution.
How much does an ERP implementation cost?
There isn’t a simple number for ERP implementation costs, but you can estimate based on factors like business size, number of users or licenses required, training sessions, customizations needed, app and data migrations, and whether the ERP is an on-premises vs. a cloud solution.
As a rule of thumb, best practices suggest planning for at least one percent of the organization’s operating budget. This figure increases and decreases with the size of the organization.
On-premises solutions demand a larger capital expenditure because they require large upfront and ongoing costs for purchasing and managing the perpetual license fee. In addition, on-premises solutions have added costs related to maintaining the solution’s IT infrastructure with the necessary hardware, servers and facilities, as well as additional personnel to maintain these systems.
Initial costs are typically much lower for cloud ERP systems, because you only need to focus on the software requirements and connectivity to the system, which is why almost half of ERP deployments are cloud ERPs. This is because the ERP provider hosts and maintains the IT infrastructure for the organization, which minimizes demands on time and resources.
ERP change management plan
One of the largest hurdles during an ERP implementation is transitioning employees to your new business processes. Migrating employees to new systems, rules and procedures requires clarity and training, and companies need a solid change management plan for that.
The change management plan should have a detailed roadmap that defines the specific goals of the new processes with some of these elements:
Design and development
During an ERP implementation plan’s design and development stage, the customer and vendor define procedures and document new processes of how the new ERP solution will manage data. After the processes are defined, they develop a database framework that meets those new requirements and procedures.
For example, if you’re migrating to a cloud ERP solution from on-premise or if the new solution needs to connect with other platforms, like a POS or an inventory management solution, the project team will need to design and develop those customizations or APIs before migrating any data to the new system. The team then identifies the data from their old solution that needs to be transferred to the new solution.
Data migration is crucial to a successful implementation, but transferring data from one system to another can be cumbersome and present unanticipated roadblocks. The goal is to move clean data that has been identified, scrubbed and mapped to the corresponding location in the new system. You can make this process more efficient by coordinating with a project analyst before the migration to perform a data analysis and mapping analysis.
To unlock the benefits of the ERP, you need to ensure the end-users, your employees, understand how to leverage the new system. Training should be comprehensive and available to employees through a combination of online learning opportunities.
E-learning allows users to complete training on their own time and focus on training that is geared towards their role specifically, all while making broader training accessible. Some solutions are especially complex, and providing continuous learning beyond the implementation phase promotes long-term user ownership.
After installation, administrators go through a testing phase with the vendor to ensure systems and data are running as expected. This is also a chance to troubleshoot any problems or establish remedies for areas that aren’t up to standard or running as they should.
Developers, engineers and other users from the project team test connections and validate data migrations, fine-tuning adjustments so the ERP solution runs optimally before the final data transfer and go-live date.
Go-live and deployment
It’s the big moment: Systems have been developed, most data has been transferred, product training and onboarding activities have occurred and testing is complete.
But there are a few steps left. Transaction-based data—inventory, orders, POs, AR/AP, and balances—is dynamic and changes frequently, so you should transfer it over at the last moment to maintain accuracy. After you’ve fine-tuned everything, set the go-live data and the system is ready for use.
Post-mortem and evaluation
To evaluate the solution’s efficiency, you should look at factors like how customers react and employee adoption habits, to determine the actual return on investment by asking these questions:
- When it comes to workforce productivity, are employees using and adopting technology to its fullest potential?
- Is the ERP automation resulting in noticeable efficiency or improved customer satisfaction?
- Are there higher or lower retention rates for customers?
- Are referrals and sales metrics improving over time? How about customer relationships?
- Are there reduced levels of inventory and better workflows through planning and control?
- What does production throughput look like?
Measuring intangible metrics may be difficult to evaluate. With the ERP’s automated processes, you should find improved workflow efficiency with fewer errors throughout the organization, resulting in increased revenue over time and saved costs.
Waiting a few months to a year to evaluate these intangible metrics may paint a better picture ERP and organizational performance, as employees may still be adjusting to the new solution.
Post-implementation support is the final piece of an ERP implementation project. Even when everything is up and running, things don’t always go as planned. Experienced support personnel should be available to assist with unforeseen issues and be able to answer questions. Depending on the size of the implementation or the complexity, the vendor may offer different levels of support to assist with further needs
No matter the type of business, implementing an ERP solution is a critical project that demands careful planning and commitment from the entire organization. ERP implementations can be a large undertaking, but with proper planning and execution, implementing a system should lead to increased revenue with fewer resources involved.