ERP software implementation is a daunting and complex task that affects virtually every aspect of your business processes. Whether it’s challenges that come from your organization or your vendor, issues are bound to arise. Before committing to an ERP implementation, consider the potential challenges that may come up so that you can do your due diligence to minimize them as much as possible.
What is ERP?
Organizations use an ERP system to be able to manage and streamline all of their business processes including inventory, accounting, purchasing, sales, light manufacturing and more. As companies grow, it becomes harder to manage all of these processes on spreadsheets or multiple stand-alone systems. An ERP system can help you manage processes on one all-in-one system while scaling with your organization's growth. Some of the main goals of ERP software are to:
- Provide a centralized database to eliminate data inconsistencies and facilitate collaboration
- Automate manual processes to increase efficiency
- Provide robust real-time reports to improve decision-making
- Help businesses comply with regulations unique to their industry
What is the ERP Implementation Process?
The ERP implementation process includes preparing your ERP system for deployment. When implementing an ERP solution, some businesses might be transitioning from introductory standalone software, others from a different ERP system and some from no system at all. The ERP implementation process might differ slightly depending on your previous system, but in general, the process is similar across the board. Once you sign a proposal and commit to an ERP solution, you and your vendor must collaborate to prepare your new system for deployment ahead of your estimated go-live date. The steps involved in an ERP implementation project include:
- Data Cleansing and Migration
- Mapping Your Processes
The implementation process can range in length depending on the size of the project, the cleanliness of data, and potential roadblocks.
8 ERP Implementation Challenges
50% of ERP implementations fail due to the complexity of the process. But don’t let this scare you. With the right vendor, your implementation will be successful. It’s important to be aware of the most common ERP implementation challenges so that you’re able to take steps to prevent implementation failure, business disruptions, delays, and other costly headaches. Here are 8 common ERP implementation challenges:
- Picking the Wrong Software Vendor
- Data Migration
- Change Management
- Misaligned Expectations
- Not Aligning Processes with Technology
- Going Over Budget
- Business Disruption
- Lack of Post-Implementation Support
Picking the Wrong Software Vendor
When a company picks the wrong software vendor to begin with, the implementation process can be an uphill battle. After a sale closes, it’s the vendor’s job to provide the right post-sales support. If a vendor sets certain expectations for what the implementation process looks like but does not follow through with those expectations, then that can be problematic. Perhaps they are not training you properly or showing you how you can get the most value out of the system. Or maybe they’re not providing you with the custom work that you need for your unique business processes.
Your vendor may have also misled you into believing that their system is compatible with your company’s processes when it isn’t. They may have advertised themselves as a “one size fits all” solution when there is no such thing. It’s usually during the implementation process when companies begin to see that the system, they purchased wasn’t a good fit for their business.
Data migrations can be a major hurdle in the implementation process for a variety of reasons. For one, finding all your data can be difficult if it’s scattered throughout multiple sources. Locating all your data can prove difficult, especially if it is handwritten and stored physically. Ensure you have access to all your data ahead of implementation to avoid inaccurate or duplicate data when you go live.
Validating and cleansing data before a migration can be challenging. There may be outdated or inaccurate data that you and the vendor must work to clean up. The last thing you want in your new ERP system is for it to be filled with unwanted data as it can lead to mistakes and poor decision-making.
When deciding to switch to a new ERP software system, you cannot neglect how you manage change amongst members of your organization. You likely already got buy-in from other leaders within the company before signing the proposal, but it’s important to have a plan in place to address the change with employees. The implementation process is when a big change is being implemented, and it’s your responsibility to ensure that everybody is as comfortable as possible to make the transition seamless. Many will resist change and miss how they used to do things before. To manage change, you must effectively explain the benefits that come with the new system and provide the proper education and training on how to use it.
During an ERP implementation, there is potential for the expectations of the buyer and vendor to be misaligned. Your software vendor must set realistic expectations about what they can complete in a set amount of time. For instance, you might expect them to frequently be on-site with you during the implementation process when they don’t have the time and resources to be able to do that. Misaligned expectations have the potential to lead to resentment and can strain the relationship with your vendor.
To set the right expectations, it’s important to work with your vendor to come up with a comprehensive mutual plan so that the project stays on course. Having a plan ensures that goals and deadlines are being met to ensure that the implementation is completed in a reasonable amount of time. If you pick the right software vendor, they will also be transparent with you about what their software can or cannot do so there are no surprises down the line. In general, there needs to be lots of communication and transparency both in the initial phases and throughout the implementation process to ensure both parties are on the same page.
Not Aligning Processes with Technology
One of the main purposes of ERP implementations is to ensure that your organization knows how to get the most out of your system. You may be able to utilize certain functionality with your current practices, but you’re likely going to get more out of your system by adopting newer practices. For example, your new software might have order-picking functionality that allows you to track when orders are being picked. However, if you don’t improve your order-picking strategy by reorganizing your warehouse or adopting a new consolidated picking strategy then this functionality will be useless. Your vendor should help you to make sure your software and business processes are aligned so that you can maximize your investment into your new ERP software system. This means picking a vendor that has expert consultants who care and will go out of their way to make their clients’ lives easier.
Going Over Budget
ERP implementations can go over budget because of a lot of hidden costs that vendors fail to mention. For example, some vendors might promise a “guaranteed implementation cost” only for the final cost to end up being nowhere near the price that was initially discussed. Software implementation services are typically billed on an hourly basis, and many variables make it difficult to predict the final cost. Training costs are often the most underestimated as your staff may require more training than you think to be able to maximize the capabilities of your new software.
A major challenge in ERP software implementations is how it has the potential to disrupt your business processes. Roughly two-thirds of businesses experience operational disruption when implementing ERP software. There may be some downtime, particularly if you’re taking a big-bang approach to data migration and doing it all at once. It’s also going to take time for employees to become fully trained in using the software, which might result in disruptions. Employees might have less time to complete their normal work since they are spending time learning the new system.
Lack of Post-Implementation Support
ERP software implementation doesn’t just end after your go-live date. Your software vendor must provide ample post-implementation support for your implementation to be successful. You and your vendor still must work towards continuously improving your processes and getting long-term value from your ERP system. To prevent a lack of post-implementation support, you must choose a vendor that doesn’t leave you to fend for yourself and provides ongoing personalized support, training, upgrades, customization, and maintenance well after the go-live date.