Implementing an ERP in a business environment is a complex process. There are various ERP implementation strategies and each company decides what route to take according to the resources it has, its business objectives, budget constraints, and time sensitivity. Each strategy comes with its own set of advantages and disadvantages. The following are the ten most widely used implementation strategies:
In the big bang strategy, all the ERP modules and enterprise-wide functionalities are installed in a single go. All the employees working in the organization migrate to the new ERP system on the same date. Implementation varies in size — it can be in a single city, a country, or multiple countries as well. The major challenge of this ERP implementation methodology is that it is difficult to return to the old legacy system once the migration has happened. Thus, it's imperative to create fall back plans in case this strategy fails. Other disadvantages include overlooking of project details and business processes. The advantages of this strategy are that the implementation of ERP takes relatively less time than other strategies and helps address long term resource shortages. Since the changeover often happens fast, there is also a huge risk factor involved.
The Mini Big Bang implementation strategy is similar to the Big Bang implementation strategy except that the former follows a phased implementation approach. There can be many scenarios. Some companies carry out the ERP implementation process division-by-division. Others implement an ERP software based on function. For example: First, the finance component of all the divisions will be taken over by the ERP system, followed by human resources and marketing. The advantages of this ERP implementation strategy are that employees are fully trained before the initial rollout. The implementation challenges are more pronounced after the roll-out so they can be rectified easily. As compared to other implementation strategies, the implementation cost is also less. The disadvantages are that some companies experience performance decline after the implementation. Also, employees need to learn the nitty-gritty of the new ERP system before the go-live date. This can seriously affect their productivity and exhaust them.
This strategy carries out the ERP implementation process in many phases that are spread over a long period. The project teams brainstorm and frame a strategy that contains the following: business process mapping, customization, and system testing. The advantages of this strategy are that the team gets adequate time to adapt to the new system and they learn from the failures of initial implementation stages. There are many disadvantages as well. For example, the implementation time is so big that employees undergo fatigue. Also, there is less urgency as compared to the big bang strategy which means that the implementation can get delayed.
In this ERP implementation strategy, each application module carries out processes inside specific functions of the business. Inventory, general ledger, enrollment, account payable, and benefits administration are some of the common ERP application modules. In this strategy, the ERP modules are implemented one at a time starting from the core ones and then moving towards the less essential ones. The advantages of this implementation strategy are that it involves less risk than the others that we have discussed above. It helps every department to meet its needs. Also, the negative impact of change management is far less as compared to the big bang implementation strategy. The disadvantages are that implementation time is too high and the integration process is also complex. Moreover, the creation of interface programs demands a large number of technical resources.
This strategy is adopted by those companies that have branches in multiple locations. The importance of this strategy is increasing nowadays as some geographical features are unique to how the business process functions. This strategy helps form a link between the political, organizational, and cultural aspects of the business. The demerit of this approach is that it is too risky as it requires a concurrent deployment of robust change management processes. And since it is global, it should adhere to the laws of respective countries.
In this strategy, the rollout is carried out for one or more than one business unit within a company. Big business units are autonomous entities that possess relevant funds, human resources, and are liable to their stakeholders. Many companies form internal teams that visit from one business unit to the other. They install the ERP in one unit, gain experience from their mistakes, and then move on to the next one. The advantages of this strategy are that the rollout process is efficient, it enjoys a higher employee acceptance rate, and is less risky. On the other hand, the only disadvantage of this strategy is that it has a longer implementation timeline.
This strategy includes both — legacy system and the new ERP system. It makes it easy for users because they have the option to learn the new ERP system while working on the old one. The advantage of this ERP implementation strategy is that there are not many data integrity and migration issues. On the other hand, the disadvantages have decreased the popularity of this strategy. It has happened because the approach isn't efficient as every transaction has to be recorded twice — first in the legacy system and then in the new ERP system. Also, implementation cost increases substantially in the later stages.
This ERP implementation strategy is a combination of the parallel rollout strategy and the phased rollout strategy. The effectiveness of this ERP implementation strategy changes from one company to the other. Some may find phased rollout better, others may decide to go with the parallel rollout. The best part of this strategy is that ERP software can be tailored according to the goals of the company.
This ERP implementation strategy follows a unique sequence. Different functional areas are sorted according to their benefit. So those areas that provide the greatest benefit are implemented first. It requires intensive planning and administration. The risk and cost associated with the pilot rollout strategy are less but takes the highest time to implement when compared with other strategies.
This strategy is implemented digitally via the internet. It is run behind a firewall on a personal computer, local area network, or both. There are many subscription models that the customers can opt for — such as the pay-as-you-go model, on-demand service, or some other affordable and scalable fee structure. The service is available over the cloud but due to the complexities of the ERP software, it can support only one domain — such as finance, marketing, sales, human resource management (HRM), customer relationship management (CRM), payroll, etc. The advantages of using Software as a service (SaaS) rollout approach are that it's completely available over the Internet. So the user doesn't require any kind of physical hardware. Only a good internet connection is required. It also frees up the employee's time and allows them to focus on business-critical processes such as creating business strategies and forming long-lasting relationships with customers.
With growing advancements in technology, it has become imperative to implement an Enterprise Resource Planning system. Whether you are a small business or a multinational, whether you are a start-up or have been for long in the industry, an ERP system is a must. It helps you to better organize your business processes, gather and analyze data to give you a bigger picture of the market, better engage with your customers, and thus increase your revenue and spread good word-of-mouth all around. An ERP is the best investment you can make to grow in the competitive world that we live in.
Once you have selected the appropriate ERP implementation strategy, it's time to think about how you can implement it in your organization.
Define the scope of the ERP system First of all, it's imperative to understand the scope of the ERP system. Make a list of important goals you want to achieve. Take a detailed look at your business processes, what are the exact problems you are facing, and check how an ERP can help you achieve them. Your business goals should be realistic. Find out the bottlenecks that slow down your ERP system and create a detailed business study. Brainstorming with your team is a good idea. It helps you take note of the problems that your team is facing at the ground level. It also tells you what are the crucial business areas that are being affected the most. Ask your team what benefits do they want and how can they achieve them by using an ERP software. Also, it's important to anticipate risks like cost overheads. Many businesses don't conduct a risk analysis and then they face problems in making a positive impact in the bottom line. Another thing that businesses need to take into consideration is assigning teams and defining roles. Companies often hire people whom they could easily spare from regular work and forget to recruit those who have the potential to make a real impact. It's important to have people who understand the real problems faced by the user. So make sure that you make a team that has the market knowledge, possesses the right skill set, and has the experience to deal with real issues being faced by your end-user. If you have a team of such a high caliber, you will be able to implement the ERP system as per the exact needs and requirements of your company, and eventually make higher profits.
Select the type of ERP systemsSelecting the right ERP is an important step in the ERP implementation life cycle. It depends on a lot of factors — including cost, installation time, offline or online implementation, customer support, vendor relations, etc. With the power of cloud-based solutions, you can easily conduct business remotely. For example, Dominos allows you to create your pizza from its mobile app. You can add your favorite spices, toppings, or make a personalized combo offer with cold beverages and desserts. The order is collected by ERP and then the food items are prepared. Finally, the order is delivered to your home. The major merit of cloud-based solutions is that installation cost is less and there are no rental costs associated with it. On the other hand, legacy systems are expensive and require regular maintenance. Also, they require a team of experts that knows how to handle ERP. But it has its share of merits too. It is more secured than the cloud-based solutions and can be changed according to your needs. This is not the case with cloud-based solutions because they are pre-developed and don't offer such personalization.
Build a project plan The third stage of ERP implementation mandates building a fool-proof project plan. Unless you have a complete understanding of what is ERP implementation, how it will benefit you, and what are the steps you need to care for, there is a high probability that you will commit a mistake somewhere or the other. And when there is so much at stake — money, time, and resources, it makes it all the more important to have a fool-proof project plan. To design such a project plan you need to take the following things into account:
Conceiving the implementation phasesEvery business operates differently. They have a distinct client base, have different objectives, adopt varied business approaches, and follow diverse workflows. Consequently, their ERP implementation strategy is also different from its competitors. Brainstorm with your team as to what ERP modules you require for increasing your output, find the most important business function that requires a revamp, and decide how you can bring a change in your workflows to increase your efficiency.
Create a schedule There is no doubt that by implementing an enterprise resource planning software in your business, you will gain huge benefits. But time plays an important role. If you take twice the allotted time to implement the system, the purpose will be defeated. Here are a few advantages of creating a schedule:
Prepare a communication planA communication plan plays an important role during ERP implementation. It keeps the company and the vendor abreast of the latest details and provides them real-time information about the implementation process. Regular meetings between the vendor and the customer also help to dig hidden opportunities. Both parties can discuss what new is happening in the industry and how they can implement the same. Meetings should be planned properly and should have fixed agendas. They should be short, crisp, and must not deviate from the planned agenda.
Keep an eye on the ERP implementation process One of the major reasons for the failure of the ERP implementation process is that the review stage is pushed to the end. Companies rarely check how the implementation process is being carried out and fail to communicate with their vendors. This break in communication causes repentance later when the ERP fails to achieve the desired results. To avoid this from happening, companies should arrange mid-way approvals. These approvals prepare a system of checks and balances and keep vendors on their toes.
Conduct a full-fledged testing sessionBefore deploying the enterprise resource planning software, you should conduct a full-fledged testing session. This is because faulty code can lead to errors and can defeat the purpose of the ERP. Go through the project plan that you prepared in step 3. It will enable you to check whether everything has been done as planned. Ask the vendor to demonstrate all the functionalities of the ERP. Conduct a user acceptance test that includes the senior management of the company and IT experts. Check whether the software has an automatic backup system. It's an important feature that keeps the files updated and available when the system is going through a major revamp.
Migrate your data Data migration is the process of transferring business-critical data to the new ERP. This data may include employee credentials, customer information, supplier data, vendor data, distributor data, product forecasts, consumer demographics, etc. This is also a good opportunity to remove outdated data or make corrections. Review and approve the data before uploading it to the new ERP.
Make your team ready for the changeAlong with the implementation of the ERP, it's essential that you also prepare your team for the big change. Change management is an essential part when it comes to implementing an ERP. Inform your team that a new ERP software is going to be installed. This will create a sense of urgency and let them prepare mentally. Also, distribute documents, guidelines, and make videos that will provide technical knowledge to them. Call industry experts and hold lectures so that your teams find it easy to deal with the new technology.
Be ready to go-live The last stage of ERP implementation is to go-live. It should be planned days ahead so that everything falls in place and nobody feels left out. Keep in mind that it's a hectic process. Before going live you should test all business and accounting reports of the system along with the static and dynamic data. Go through the user acceptance test and see whether the reports are positive or negative. Check whether auto-backup measures have been taken and also examine the system reports. Remember that once the implementation is complete, it will be difficult to make changes.
Ensure system support and maintenance Once ERP implementation is complete, it's necessary to maintain it and secure it from unprivileged access. For this, you should have annual support and maintenance contract with your vendor so that your ERP is always up and running.