ERP Implementation Steps and pitfalls to avoid in an ERP implementation

Regardless of what ERP software package a company chooses to run their business on, there are a specific set of steps they should go through to ensure success.   The steps may vary in their duration and intensity but they all must in one way or another be addressed.

Steps to ERP Software Implementation

With Cloud based applications you can skip the first step of acquiring and installing hardware and software.     Step one for cloud based implementations is generally nothing more than having PC’s with good internet connections.   There is no hardware to buy to run the application.  There is no consulting cost to configure the hardware and install the applications software.  There is no cost to develop and test a complete backup and disaster recovery plan.  This is all taken care of by the software vendor for cloud based solutions.

The majority of an implementations cost is for the consultants needed to assist in the implementation.  The budget may also include cost for temporary help to free up key users to focus on the implementation.   An enormous amount of time is needed from the people who really know the business.  And those people are frequently in critical jobs.  Most American firms are very lean and its very difficult for them to free up key people for 10-20 hours a week for a number of months to a project of this magnitude.  Companies will frequently make the assumption that their people can be freed up to spend this amount of time and that feeds a plan that uses fewer consultants and fits their desired budget.    But the likelihood of getting an implementation of ERP done successfully using current staff, in their spare time, with little outside help, is something that seldom happens.

It’s possible to free these key people up by filling in for them a couple days a week with another person in the company who would be that person’s backup.   Keep going down the ladder filling in until a part time person can be hired on a temporary basis until the project is done.   The big caveat here is the type of business.  Complex manufacturing companies like Biotech and Specialty chemical will require much more effort to implement than a professional services firm that contracts out consultants.  But ERP is enterprise wide and that makes it a complex thing to implement no matter how simple the business.

Good + Fast = Expensive

Good + Cheap = Slow

Fast + Cheap = Low Quality

Fallacy’s we would like to believe:

• Our people can devote time to the project, they just have to work harder:  Sometimes the accounting staff can find a way to get this done since they are accustomed to peaks and plains in their work load due to month ends, year ends and endless projects.   But outside of this group most key users will be in jobs that generally have a steady workload and they are already well up to their eyeballs in work.
• Our people are smart, they can learn the system and act as internal consultants:   The reality is that even though they may be plenty smart and have ERP experience with some other system it still takes many months if not years to really understand a full ERP package.    Having your employee who with salary and benefits might be costing you $100,000 a year, ignore his existing job and take 3 months (worth $25,000) to “sort of” learn a product so you can avoid paying a really knowledgeable person $10,000 doesn’t make economic sense.  In addition to that, another major problem is that implementations are like a team of people pushing a huge snowball up a hill.  If one person stops pushing while he goes and learns something the rest of the team loses momentum and the ball pushes them all back down the hill.  The loss of momentum in a project like this is critical to avoid.  The entire team needs to push as hard as it can forward at all times and time must be utilized efficiently. The use of experienced consultants makes the whole teams time more efficiently spent.

Changing Your Business Practices can help control ERP implementation costs:

The bulk of the expense in the implementation project is the use of consultants.  The consultants know the software and may have strong business knowledge.  Your people know your business and its processes.  The goal is to figure out how to take your business and its processes and perform them with the software.  That at least has always been a succesfull approach.  Software companies and consulting firms are now trying to define “best business practices”.    The goal is to reduce the cost spent on consultants and the time spent by your people trying to map the existing business processes into the software’s capabilities.  Some ERP vendors have defined specific business processes and how you use their systems to execute those processes.  The training is all focused on this and the goal is to implement these processes as is.  If the processes fit the business and the business is willing to accept that way of doing things then this will save considerably in the implementation cost.