Luciano Cunha
Depending on your sources of research, and how exactly one defines “failure,” between roughly one third and two thirds of ERP implementations fail. Sometimes they don’t deliver the expected benefits, run vastly over budget, or are many months (even years) late. Although the idea of a project implies a firm end point, some of them never quite finish. In other cases, employees don’t adopt the new business management tools. You don’t want any of that to happen in your ERP project! Here are ten critical success factors for an ERP implementation. If you plan with all of them in mind, your likelihood of success is very high. If you do not consider them, failure is a distinct possibility.
#1. Clearly defined goals
You probably already know what the shortcomings of existing systems and processes are. But it’s not enough to say the new system should be better than what you have now. You need to clearly define the goals you have in mind, across all areas of business activity. At the same time, you also need to review current business processes in the company, and determine where and how these goals and processes interact. You certainly don’t want to automate inefficient business process, which will still be inefficient and will not serve your goals. Following these two steps, you’ll know which results your ERP implementation needs to achieve.
#2. Business process definitions
Your company’s business processes are the basis of the ERP deployment. Therefore, you need to clearly define what your processes are and how they take place. A business process modeling and management application can help you document your business processes, and ensure that the new ERP solution will support them. In our experience, companies which, because of lacking organizational maturity or for other reasons, cannot define their business processes should not move forward with an ERP implementation. Understanding and defining business processes are essential prerequisites.
#3. Stakeholder buy-in
The choice, deployment, and adoption of an ERP system are highly consequential milestones in the life of any organization. Without support from all key people they cannot succeed. You need at least 1-2 executive sponsors who are fully on board throughout the duration of the project, and full support and participation from stakeholders in each business group—manufacturing, sales, marketing, finance, operations, human resources, and any others. In our experience, it really helps if the HR department has a leading role in the ERP project, because members of this team will understand the impact of an ERP deployment on people.
#4. Credible, strong solution provider
As you review ERP solutions and the companies that deliver them, you’ll have to find the right balance between your business goals and the new ERP system’s costs and capabilities. But, no matter which system you choose, a successful deployment depends to a high degree on the vendor’s ability to understand your business, collaborate with your people, adjust the technology to your processes and operating conditions, and stay within your budget and timeline. Your solution providers need to be responsive to all your questions and concerns. They should have a thorough understanding of your industry and reference customers with whom you can speak. Of course, they should also have a track record of successful ERP projects.
#5. Solution fit
Vendors always say that they understand your business and will deploy the ERP solution in such a way that it works for you—but proving that is another matter. Some software products simply will not accommodate the way your people and processes work, and will instead require that you adjust the business to the technology.Of course, adjusting business processes can be a viable option, for example, when you incorporate industry-best practices. But you should not be forced to do it by an inflexible software system. Some vendors promise to meet a high percentage of your needs out-of-the-box, but they might be offering canned best practices that really do not mean much for your company. Your vendor’s reference customers can shed much light on this area. It’s very unlikely that any ERP system will work for you without any adjustments or extensions.
Many times, the best option is a combination of a standard ERP solution together with industry-specific software from a software vendor with true expertise in your domain. When you determine the fit of a solution for your company, you also want to ascertain how well a solution will be able to scale to your business growth and how well it can support changes in the way you operate.
#6. Meaningful, complete budgets
You have many types of investments to consider—including software licensing, upgrades and enhancements, deployment, ongoing user and IT management support, customizations, integrations, data migration, additional and replacement hardware, third-party software tools for your specific industry or company, and training. If you choose to have your ERP system in the cloud, some expenses, such as upgrades and enhancements, will likely drop off, but you might still make a significant, long-term investment. As you prepare your ERP deployment budget, you need to consider everything that might have a bearing on it. Your vendor should be able to help you plan your finances and resources, and provide visibility of your total cost of ownership.
#7. Effective scope, risk, and project management
Some ERP deployments are considered failures not because the technology does not perform as expected, but because the projects can go on for several years, do not even deliver intermediate results, and they are still nowhere near complete. You need to clearly define the scope, timelines, project milestones, and risk factors for your ERP project and make sure all stakeholders are aware of them.
#8. Clearly defined technical requirements
Your business management system does not run in isolation. You will probably need to connect it with specialized systems that your company uses to manage materials, make goods, ship products, maintain regulatory compliance, transact business online, etc. You probably also own a wealth of business data that you hope to continue using. As you prepare an ERP implementation, you need to know which integrations you require, and what data needs to be migrated from legacy systems into the ERP system. Solution providers offer proven tools to realize dependable, efficient data migration and painless integration with your other business systems.
#9. Effective change management
One thing you can be sure of: New requirements, both functional and technical, will start popping up right after you start your project. Managing these requirements effectively, which includes adjustments in the scope, activities, and deliverables, will be essential in the success of your ERP deployment. For this reason, procedures and systems should be in place to accommodate project changes, and stakeholders should be aware of them before the project actually starts. Your project stakeholders need to have full visibility of the change management process, and following this process closely is key in the successful completion of your project.
#10. Easy adoption
The threshold your company’s employees need to cross in working with the new business management system needs to be as low as you can make it. Ideally, the ERP solution will be intuitive and easy to use, and it will offer the functionality and information people need without requiring searching or complex navigation. If the ERP project involves a cultural change in the way people collaborate and exchange information, you need to clearly communicate to everybody how their work will change, and test and promote productive new practices before the ERP system is in place.Knowledge transfer and training have to be effective in readying your people to work with the new software. Not all popular approaches to user enablement work for all companies. Training by departments may be ineffective because it fosters a silo mentality you wish to overcome, and the train-the-trainer approach many companies practice may put too much of a burden on certain users and not give employees enough of a comfort level to embrace the new technology.
Any of these ten points are critical in your successful ERP implementation, and all of them are worth discussing in more detail. Feel free to get in touch with me -- or if I left out any critical considerations!
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Luciano Cunha