Where to Start with ERP Implementation

An ERP software system is an extremely powerful business tool. They are comprehensive packaged software solutions, whose capacity for integration, create a fully automated business environment. In fact, their prominence in this market has made them the industry standard for the replacement of legacy systems. However, the many benefits available to businesses with the implementation of an ERP system must be carefully guarded against the failure to manage this process. There are many critical considerations that must precede the implementation of an ERP system. Much of the research in this segment of the industry has shown that an overwhelming number of ERP implementations fail, in large part, because they exceed their budget and their time allocations.

This concurrence of factors, i.e., the large number of businesses turning to ERP system solutions and the overwhelming number of implementation failures, has motivated researchers to come up with an ERP ‘implementation framework’ that addresses the challenges of implementation while attempting to maximize efficiencies.

Perhaps one of the more critical business considerations that should be discussed and articulated by management staff, prior to implementation, is the question of scope. ‘Scope’ incorporates and defines the extent and type of benefits that a company is looking for from an ERP system and, most importantly, clarifies the degree to which the ERP system will impact managerial autonomy, task coordination, and integration of business units of the enterprise.

ERP Implementation Approaches

Once the strategic aspect of the ERP implementation has been completed, an organization’s next task is to look closely at the question of deployment methodology or implementation approach. The two most common implementation approaches are:

  1. Phased or Incremental Approach
  2. Big Bang Approach

The big bang implementation approach is characterized by distinctive phases which are executed in a strict order; in the phased approach, the phases are iterative and incremental. They strive to deliver smaller chunks of functionality over time. With the big bang, the switch from the legacy system to the new system happens at one single date for all. There is no going back. This approach can be quite risky because there are few learning opportunities incorporated in this approach. The phased approach, on the other hand, attempts to offer operating functionality, starting with the components that are most critical for business operations.

Advantages and Disadvantages

One of the biggest challenges with the phased approach is the heavy use of  temporary interface programs while ERP is not fully functional. This caveat will place a considerable burden on the cost of the project. The other significant challenge is the length of time that this approach may require, contributing as well to the cost of the project. The advantages, as already touched upon, include the lowered risk of failure. Personnel acquire knowledge at every step of the implementation and steps can be reversed and changes made along the way.

The big bang approach, on the other hand, requires a company to make a large financial commitment at the start of the project in one step. Additionally, any change that requires either stopping or going back on the implementation process, once it is underway, would be too costly to undertake. The risk involved in this approach, as discussed, is greater given the pressure to be completely operational at conversion date and the potential for training to be less thorough. From a positive perspective, the duration of the implementation is more tightly controlled, and the need for an interface is eliminated. This approach does permit a greater control over the budget and the possibility of overruns.

Selecting the Best Approach and Why It Matters

Selecting the so-called ‘best approach’ is a highly subjective and contextual decision-making process. There is little by way of consensus among industry experts or best practices for ERP implementation to guide with strategy selection. In fact, some fairly recent studies (2008)  have revealed a fairly even outcome, in terms of popularity between the two approaches (about 50.7 percent big bang to 49.3 percent phased approach).

Overall, the better way to determine which strategy to pursue is to assess factors relevant for the organization under consideration – for example, initial costs, operating expenses, return on investment (ROI), and the impact of implementation on productivity. A successful implementation of an ERP system might opt to adopt a more hybrid approach – one that favors neither approach fully but selectively chooses aspects from both on a best fit basis.

Choosing a successful ERP implementation strategy matters because it helps mitigate against major business risks that are present at the preliminary stage of the project as well as the long term success or failure of the ERP venture, on the whole.  ERP applications establish and lock the operating principles and resources of the organization into the software systems. This is exactly why it is critical to reconcile the technological criteria of the enterprise systems with the business needs. Failing to attend to this step could result in a software system in conflict with the logic of the business systems. The cost, complexity, and investment of time and staff make a rollback very difficult, if not impossible.

Closing Remarks  

It is safe to conclude that the differences in the approaches to implementation methodology are, largely, due to variations in the organizations and their strategies to manage and achieve project objectives. It is also clear that ERP benefits have a greater success of being realized when there is a cogent link between the implementation approach and the business processes of an organization. In other words, the ERP implementation process must be viewed as a socio-technical challenge that posits the organization as a total system. Understanding the implementation process through this more balanced perspective, will give sufficient weight to the behavioral processes and actions, will ensure and guide the change process, hopefully preventing unpleasant surprises. ERP implementation is a complex process that requires a fundamentally different approach from technologically-driven innovation. This balanced perspective that gives space to both the technical as well as the behavioral aspects of an implementation contains the essential elements that contribute greatly to the success of an ERP implementation.

 

Contributed by Gabriel Gheorghiu – Experienced consultant and analyst focusing on business software and customer interactions

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