The 5 Biggest Challenges When Implementing ERP for the First Time
Enterprise resource planning system or similar IT packages have become widely used in businesses of all sizes and types for a number of years now. Even small businesses and family-owned companies have joined the mainstream trend of implementing ERP software, with many ERP providers offering solutions just for smaller-sized organizations.
The ERP trend has become so strong that the vast majority of small- to medium-sized businesses (SMBs) have performed an ERP implementation at least once (some of them twice or even more often). But even though ERP usage is widespread and the norm for most companies of any size these days, there are still challenges for each new implementation, as each organization is different and comes with its own needs, expectations, and processes At
Technology Evaluation Centers (TEC) we deal with many companies embarking on ERP selection and implementation projects. In this article we’ll look at the main challenges facing organizations starting out with an ERP system implementation.
Although implementation issues vary according to a number of factors, the major challenges faced are the same across different regions and sizes of businesses. I’ve ordered the categories of problems in ascending order based on the degree of “entanglement.”
- 1. ERP Implementation Challenge # 1. The Selection Problem
- 2. ERP Implementation Challenge # 2. Technical Issues
- 3. ERP Implementation Challenge # 3. Data Quality Issues
- 4. ERP Implementation Challenge # 4. Business Philosophy Changes
- 5. ERP Implementation Challenge # 5. “Mindshift” Issues
1. The Selection Problem
Say a company has decided for many reasons to launch a managerial information system implementation project. The very first question that managers will face is what type, size, and scope of system they actually require and how to choose the most suitable solution among the hundreds of enterprise software options available on the market.
There is no single answer on how to find what you need, and there are multiple factors to consider on top of size, scope, and type, including price and specific functionality requirements (there are often hundreds to thousands of features and functions for each software system that each need to be considered in terms of priority and utility).
Many companies may consider themselves immune to this challenge as they have already decided what they need and want in a new system. Be careful about coming to this conclusion without proper background work though, as selecting a new software system, especially one as all-encompassing for a company as an ERP system, is one of the most complex and important decisions your company will ever make.
ERP selection should be considered as seriously as possible for the reason that ERP system choice predefines a company’s strategy for at least the following 6 to 10 years and, no doubt has a huge impact on the future success of the entire business.
A comprehensive enterprise software consulting and research industry exists to serve the needs of companies facing the selection issue for the first (or second or third!) time. For example, TEC offers a range of software selection program available for organizations starting out on an ERP selection process.
2. Technical Issues
How to successfully select a software package is important but not the last problem that will appear on the thorny path toward getting the whole system (software and hardware, server, and users) working together and bringing any value back to the company. Another set of implementation issues is related to the technical part of the project.
More than likely servers and workstations will need to be revised to accommodate the new system, and new and more modern ones may need to be ordered, purchased, and replaced. The internal network also has to be analyzed and modernized if required, and the speed and bandwidth of the existing Internet access should be taken into consideration along with possible technical concerns about the mobile devices being used.
If these needs are underestimated, they can dramatically impact the overall results of the project (and easily delay the “happy hour” once the new system is finally in place and working as planned), or poison the first few weeks (or even months) of using a new system with slow performance, resulting in a slackening of the existing pace of business.
However, changes during the last few years in delivery models have caused a shift in how ERP and other types of organizational software are made available to users.
Plenty of “as a service” and in the cloud options have become available, offering hosted infrastructure, data storage and software services, which now allow the cost and headache of applications, hardware, network, and storage problems to be minimized. These include software as a service (SaaS), platform as a service (PaaS), and infrastructure as a service (IaaS).
With an on-premise environment, everything is hosted on-site—data, applications, servers, network, and software solutions. With “as a service” hosting or cloud option, data, middleware, networks, hardware, and applications can be hosted on or offsite depending on the service model chosen
For example, SaaS enables companies to run a software application hosted offsite, generally through a network interface like a Web browser, but they have the choice of whether they want their data associated to the offsite software application or not.
In short, cloud or hosted delivery models can make the implementation much easier and less costly than with an on-premise solution, but there are caveats with going with an “as a service” option (data security and software customization, for example) and these need to be explored fully before a decision is made as to which delivery model to go with.
The options are now much more numerous than in the past, and smart organizations will explore all of the options and figure out the technical requirements at the start, so there are no nasty surprises along the way. An overview of the current market landscape of cloud ERP
3. Data Quality Issues
This issue is particularly symptomatic of companies that are implementing ERP for the first time and transferring their legacy data into the new system from Excel spreadsheets, manual records, or old disparate applications. Basically, the issue is that old data that have been used and stored for years can 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 top two common challenges companies face.
For example, take this situation from my previous work experience (during an ERP implementation project for a midsize metal manufacturer): in the middle of the project, we converted existing bills of materials (BOMs), BOM routings, and hour tariffs into the new system and realized that the products’ new lead times exceeded real ones by a factor of two or more.
Thanks to adequate time allotted for the conversion phase during project planning, we had some time to fix the data by dedicating engineers and analysts to this task full-time for a few months and modifying the implementation plan accordingly; but even in this case, the project was delayed for two months. So, be careful with your old information, as it can be far from reflecting the current reality, and always make “pilot” tests of new system outputs using legacy data before converting or transferring all the data over to the new system.
4. Business Philosophy Changes
ERP implementation brings significant changes to a company’s conventional business model and the day-to-day practices it has been using for years or even decades. Take these examples of likely changes to business processes with a new ERP:
- some employees’ level of responsibility is dramatically increased, as with the new system it is more difficult (sometimes impossible) to fix erroneous data or typing errors;
- new approaches to data reporting and mining and, thus, new managerial principles and practices have to be established; and
- business models and business processes might require massive changes because of new real-time opportunities and data availability.
- inform all employees of news and project milestones as the project progresses
- establish reliable feedback communication channels for employees
- stimulate employees to generate new ideas and provide suggestions
- organize interesting and promising training sessions
- celebrate the best user achievements in training and with the new software system
These are only a few examples of how serious and meaningful business transformation can be, post-implementation.
Using wise and forward-looking ideas and conceptions when implementing ERP, it is definitely possible to get a return that is something much more appreciable than a simple change in format of data or an updated user interface. This is a real challenge, but at the same time it is a great opportunity to refresh the business and bring new ideas as well as laying a strategic foundation for your organization’s future.
5. “Mindshift” Issues
This is the most difficult type of issue to resolve. It’s easy to forget that the success of the implementation of a software system depends mainly upon the users. The system itself is a non-living and logical entity that follows logical steps and processes as it has been programmed to, but the users of the system are humans who were used to processes with software being one way and will more than likely find it hard to switch to a new way of doing things, especially if the benefit of the new methods is not immediately obvious or forthcoming.
This is an ERP project manager‘s “favorite” variety of problem (meaning their worst nightmare), arising from users’ habits and their understanding of what is good for the business in general and for the user in particular. “It’s always been like this, long before you came in,” “I don’t think it will ever work,” “It’s not working on my PC,” “I will be talking with the CEO about this system,” or “You don’t understand how it should work”—these comments should sound familiar to anyone who’s ever tried to implement a new system or change users’ requirements.
It is really difficult to describe or classify the possible problems that can arise among the user base when a new enterprise software system is implemented; actually, almost any question can appear. Unfortunately, change is hard to accept without seeing the visible advantages of it, and if you don’t take steps to help your employees see these advantages before the implementation begins you will likely regret it later. I would recommend trying to predict such problems at the planning stage in order to reduce the potential negative impact of users’ contra-collaboration activities.
Also, gaining the interest of different groups and categories of system users well ahead of the project’s start date and keeping them involved during the implementation will help to encourage the “mindshift” required in your employees for a successful implementation. Consider following these steps to keep employees informed and engaged before, during, and after a big software implementation project:
Affected employees at all levels must become allies to the ERP project team for a new system implementation, as ignoring users’ experience and concerns puts in doubt the success of the entire project and can kill any excellent undertakings.
Planning for Implementation Success… It’s Not Easy, But It’s Worth It
Like almost any enterprise-wise undertaking, implementing software requires a lot of planning, effort, and monitoring to ensure success and minimize problems. Addressing the five challenges above can help with the planning stages and make sure all potential issues are addressed before the implementation gets underway. Addressing challenges head-on and making sure you’ve done your due diligence means that you’ll be able to feel confident in your organizational implementation and keep the costs and time down as much as possible.
If this is your company’s first implementation, you may want to look into third-party implementation services to make the process smoother and easier. TEC offers implementation monitoring services and an accreditation program (reports based on client reference checks) to help companies choose a software implementation partner or service provider based on their implementation and service needs.
TEC can also provide templates and best practices based on a proven approach to handle change management that minimizes disruptions to companies’ day-to-day operations.
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