The 5 major challenges of implementing an ERP system
Enterprise Resource Planning (ERP) and similar computer software has been used in businesses of all sizes and types for a number of years now. Even small businesses and family-run 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 businesses today, any new implementation is a challenge, as each organisation is different and has its own needs, expectations and processes.
TEC deals with many companies that are opting to implement ERP solutions. In this article, we will look at the main challenges faced by organisations embarking on an ERP implementation.
Although implementation issues vary depending on a number of factors, the main challenges encountered are the same in all countries and for different company sizes. I have categorised the problems 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 good preparation, because choosing a new software system, especially one that encompasses the whole business like an ERP system, is one of the most complex and important decisions your company will ever make. The selection of ERP solutions needs to be taken very seriously indeed, 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 programmes available for companies starting their ERP solution selection process.
2. Technical issues
How you successfully choose a software package is important, but it is not the last hurdle on the thorny path to getting the whole system (software and hardware, server and users) to work and deliver value to your business. Another part of the implementation problem is linked to the technical aspect of the project.
It is more than likely that servers and workstations will need to be overhauled to accommodate the new system, and more modern ones will need to be ordered, purchased and replaced. The internal network also needs to be analysed and upgraded if necessary, and the speed and bandwidth of the existing Internet access needs to be taken into account, as well as any problems with the mobile devices in use.
If these needs are underestimated, they can significantly influence the overall outcome of the project (and delay the joy of seeing the new system finally up and running as intended), or plague 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 organisational software are made available to users.
A large number of 'as a service' and Cloud options have been made available, offering hosted infrastructure, data storage, and software services, minimising 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 customisation, among other things. The risks need to be carefully considered before a decision is made on which delivery model to follow.
There are now many more options than in the past, and smart organisations will consider all the options and determine the technical requirements upfront, so there are no nasty surprises along the way. Find an overview of the current market landscape of Cloud ERP options in the 2016 TEC 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. Basically, 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 businesses.
For example, take this situation from my previous work experience (during an ERP implementation project for a medium-sized metal fabrication company): in the middle of the project, we converted the existing bills of materials (BOMs), routings and applied hourly rates into the new system and found that the new product lead times exceeded the real ones by a factor of two or more.
With enough time allocated to the conversion phase during project planning, we had some time to fix 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 to the new system.
4. Changes in company philosophy
Implementing ERP brings significant changes to a company's conventional business model and 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, as the new system makes it more difficult (sometimes impossible) to correct erroneous data or typos;
- 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 change due to new real-time capabilities and data availability.
These are just a few examples of how businesses can be seriously and significantly transformed after implementing ERP. By following sound, forward-thinking ideas and designs when implementing ERP, it is certainly possible to achieve a much more appreciable return than simply changing the data format or updating the user interface. It's a real challenge, but at the same time, it's an excellent opportunity to renew the business and bring in new ideas by drawing the strategic contours for the future of your organisation.
5. Cultural and change management issues
This is the most difficult problem to solve. It is 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 users of the system are humans used 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, arising from the habits of users and their understanding of what is good for the business in general and for the user in particular. "It's always been like this, even long before you arrived", "I don't think it will work", "It won't work on my PC", "I'll talk to the CEO about this system" or "You don't understand how this 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 difficult to describe or categorise 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 issues at the planning stage to reduce the potential negative impact of resistant users. In addition, engaging different groups and categories of users of the system well in advance of the project start date and involving them in the 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
- Organise interesting and promising training sessions
- Highlight the user's best achievements in training with the new software system
Employees at all levels must become allies of the ERP project team for each new implementation, as ignoring users' experience and concerns jeopardises the success of the whole project and can wipe out any meaningful involvement.
Planning for successful ERP integration... Difficult, but worth it
Like all company-wide projects, software implementation requires planning and monitoring to ensure success and minimise problems. Solving the five challenges above can help plan the steps and ensure that all potential issues are addressed before the software is implemented. By addressing the challenges and ensuring you've done your due diligence, you'll feel confident about implementing your business software and keep costs and timescales as low as possible.
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 programme (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 day-to-day business operations.
Article translated from French