Implementing an enterprise resource planning (ERP) software, an integrated suite of business applications, isn't as simple as downloading some files and going live instantly. Depending on the system requirements, it can take weeks, months, or years to fully roll out an ERP software. And that's if everything goes right. Understanding the key implementation phases can help you prepare an effective plan for your workplace.
ERP implementation is the process involved with installing and setting up new ERP software, migrating your data from the previous system, and training your staff to use the new tools properly and as intended. An enterprise resource planning implementation project is essentially a change management for your organization, as it considers all approaches to prepare, support, and help your team members and decision-makers in making organizational change.
Implementation methodology actually starts in the pre-deployment phase--where you receive technical consulting on your specific needs compared with the industry best practices. Project management helps your project team define your project scope to create schedules, monitor timelines, and accomplish milestones. Finally, system implementation and configuration is the process of deploying the software as you envision it, such as on-premise or cloud-based.
Some ERP implementations are rather swift--this means an ERP solution is almost entirely functional "out of the box". This streamlined approach means software requires little to no customization. Other business requirements, such as including add-on modules, may require a phased rollout and more involvement from your implementation team.
If your business is looking to purchase ERP software, you need to consider the implementation process in order to avoid hidden costs and potential delays.
Need help choosing an ERP software? View our list of the best ERP software options to find a solution for your company.
There are six main phases of ERP implementation, though depending on the exact methodology there may be fewer or additional phases ranging from four to twelve. Some steps have different names, though they lead to the same overall process. The broad phases can be categorized as follows:
Within each phase of the ERP implementation process are some necessary steps to ensure a smooth transition to a new ERP system.
Once you've selected an ERP, the 5 key steps to actually implement software are:
At times these steps may run concurrently, and at times they may not be able to begin until the previous step has been completed. When used correctly, each step is intended to streamline the implementation process so you can start using your software faster and with lower costs. Some steps not mentioned (but equally important) include pre-deployment business and technical consulting, identifying your project scope, and training on your new ERP system.
Installation seems like the easiest way to start implementation, yet there are a few things to consider before getting started:
Configuration is the process of adapting the raw functionality of ERP software to your specific security requirements, workflows, and business needs. For example, security requirements involve user permissions which can allow varying levels of access to employees depending on their department and job level.
The second process of configuration is making your software support your workflows without disruptions. System testing, while a significant time investment, can reveal issues and ensure your software performs as intended. This requires a multi-step process--such as inputting company details, defining the chart of accounts and inventory levels, setting up banking integrations, and more. Even with the right ERP there are dozens, or even hundreds hundreds, of system configurations.
Customization refers to instances where you are augmenting or altering the underlying software code to include extra functionality. When it comes to ERP software, systems already cover a wide variety of functions in different business departments, like accounting and human resources (HR). However, any desired customization should be decided upon before implementation, in order to avoid delays or additional user training post-go-live.
Software providers handle most customization since the vast majority offered is not open source ERP software. In situations where base system setting modifications and configurations do not provide the necessary functionality to meet requirements, it can be worthwhile to make the investment in customization.
|Customizing and configuring||Only configuring|
|Frequently creates reliance on original programmers||Easier to source external support|
|Often leads to pockets of undocumented code||Predeveloped documentation generally available|
|Can be relatively expensive||Economies of scale can lower cost|
|Highly tailored||May not fully provide optimal functionality|
Importing your existing data from a legacy system is the next step in any successful implementation. One major challenge is the lack of a single, standardized format for data. The underlying database tables that track financial records--for example-- will differ from one ERP system to the next.
Manually inputting or reformatting data can be tedious and cost-prohibitive. ERP software providers may have the experience needed to assist you by using automation for data migration to speed up the process.
Finally, the ERP implementation life cycle reaches the integration stage, which determines how your new system will communicate with your existing software platforms. For instance, if you maintain a legacy CRM software when implementing new ERP software, your business should desire customer data changes made within the CRM to be reflected in the ERP system.
Real-time integration lets changes in one system be reflected immediately in the other. This is accomplished through the use of a common database. Alternatively, many programs provide APIs (application programming interfaces), which pre-configures a set of usable instructions that allow for changes in one program's database to be triggered by actions in another.
There are a number of top-level business benefits associated with a well managed ERP implementation plan:
Successful ERP implementation can take months or even years, no matter how much planning and research you do. A poorly managed ERP implementation can and will take a long time to execute, with delays caused by hardware insufficiencies, unexpected business process adjustments, or ill-planned training. Proper planning can shorten delays and ensure user acceptance by key employees.
ERP implementations require planning, employee input, and the allocation of resources to execute. Each represents an opportunity for costs to swell, if not properly managed. The total price of implementation may not account for individual user subscriptions, training, or hardware upgrades. Contracting with an experienced ERP vendor offers a way to put a definitive cost on implementation services so you can plan your budget better.
End-user training can be another hiccup during implementation. How experienced are your employees with technology? Do they need multiple training sessions to understand the new system, or can they learn as they work? Answering these questions will reveal whether your ERP software is capable of growing with you.
A change in ERP comes with business continuity risks--including a data security risk. Best practices to ensure data security have been worked out over time with existing systems. A well-executed implementation will make sure the right user permissions and security measures are carried over and improved upon.
However, while this can increase the total time for setup and costs, it provides a safety net for your business by getting as much vendor assistance as possible. Any installation issues can be identified and addressed by a professional rather than your overworked team.
How much does a typical ERP implementation cost? This completely depends on the size of your business, the scope of the software being implemented (such as the number of applications required at setup), the number of user licenses (end users requiring access), and other services your business may choose to pay for (such as data migration).
Over the course of ownership, a small business ERP software can range between $25,000 to $150,000. Meanwhile, a mid-sized business or large enterprise can expect to spend anywhere from $150,000 to $500,000. However, the actual cost to operate ERP software is only a small fraction of the overall implementation costs.
When implementing an ERP system, your business should budget for:
SaaS options, or cloud ERP software, are usually billed on a subscription basis, and support is generally included in your monthly or yearly subscription. Whatever support route you decide on, you can anticipate an increase of about 3% to 5% each year when it comes time to renew.
While ERP software can offer a lot of benefits to your business, there are risks to consider. Famous cases of failed ERP implementations include:
In all these cases, minor issues led to expensive consequences. How does a company avoid these failed implementations? A few quick tips: