Midsize business

The business owner’s guide to ERP implementation

Enterprise Resource Planning (ERP) implementation is the process of installing and a software suite that streamlines business operations. Rather than one application, ERP software includes multiple modules like accounting, inventory management, and payroll, designed to run your business from end to end.

When deciding to purchase an ERP system, it’s important to consider the benefits and drawbacks of an ERP.

In this guide, you’ll learn:

Let’s get started with the first step of the ERP implementation process: research and planning.

The 8 steps of the ERP implementation process

1. Research and planning

When shopping for  ERP functionality , it’s critical to have input and feedback from all departments impacted by the new system. Buy-in should start at the top of the organization and continue down to end-users. At this phase, you’ll want to audition various vendors and begin to determine which product meets your needs.

2. Product-company fit

As you begin to get a feel for products, service-level agreements, and the companies and consultants that back them, you’ll need to determine if an  ERP solution fits your industry  and current business processes.

3. Budgeting

When examining costs for the implementation, you’ll need to account for known expenses as well as unexpected ones that arise. Along with the quoted price to install the software solution, there will likely be an annual subscription or licensing fees. Less obviously, you may also need to hire more IT help to support the platform after putting it in place.

4. Data migration

Once you install an ERP, existing or historical data will need to be pulled over into a database that  integrates information  gathered and processed by the new platform. This is an excellent time to check the integrity of the data you own and discard any records you will not need.

5. Testing

In the system testing phase, you’ll execute practice versions of various functions and processes to ensure that the software is working correctly. Thorough testing of the platform is crucial before the actual launch of the solution. This simulation will help identify bugs or errors that, if not identified, could cause unplanned disruption to the business once the ERP is live.

6. Training

Employees must be well trained with a new ERP system before they’re able to do their jobs. While an adequate amount of training is essential to a successful ERP implementation, training should not stop once the software is in use. Proficiency in the product will further boost the platform’s return on investment.

7. Go-live

After the planning stages, go-live is the point where practice ends, and the headlined event begins. This is the last stage of implementation. All the preparation and training have been done to ensure your company sees the software’s benefits and cost savings. It’s important to note that this launch can be done incrementally by department, for example, or all at once.

8. Post-implementation considerations

When your ERP has launched, the relationship with a software company or consultant does not come to an end. This is a critical time to report and fix any issues with the system. Product support and service will be an integral part of using the software to its full capabilities. Some ERP projects can be customized to suit the operational needs of your business. And as users become more familiar with functions and reporting packages, this is a point where you can fine-tune your software.

Common ERP implementation issues and pitfalls

Implementations can sometimes extend beyond planned milestones, and often, unexpected issues are the reason for missed deadlines. Here are some common issues that can cause ERP implementation failure:

Disconnection at the top

If management isn’t united in the implementation plan for an  ERP solution , the rest of the organization may not buy in. As a result, the investment may be wasted if the ERP software isn’t used to its full potential.

On- or off-campus

Businesses that choose an ERP implementation can elect for software-as-a-Service (SaaS) or cloud computing platforms. In this case, servers and other hardware on the premises may have outlived their usefulness. The cutover to SaaS or cloud ERP may warrant that you add additional time to implementation deadlines and expect a more complicated integration with and migration away from legacy systems.

Rushing to meet a deadline

Deadlines are important for the launch of a new ERP system but realize the date shouldn’t be etched in stone. The cost of implementing the solution before it’s been thoroughly tested can have consequences beyond dollar figures. Disruption and downtime can impact employee engagement, and prolonged incidences could lead to losing key personnel.

ERP implementation best practices

Two key factors should help keep an ERP implementation on track. First, you need to shop for the solution that best fits your business’s circumstances and operational style. The selection methodology should involve interviewing sales personnel that directly represent the software company or a consulting firm or reseller with years of experience as an ERP vendor. These entities understand the capabilities and strengths of the applications. Once you’ve hired a firm, keeping the system implementation on the rails will depend on your continued communication and interaction with the vendor.

This leads to the second point. Designating a specific employee to serve as a project manager (PM) will help facilitate requirements gathering and those communications between internal stakeholders and the external implementation team. Comprehensive project management will help set expectations with the project team and create timelines for each phase of the process to ensure the transition flows smoothly.

How long does the ERP implementation process take?

The time it takes to implement an ERP largely depends on the size and complexity of your organization. On top of those basic characteristics, understand that any significant change management in an organization can sometimes be met with resistance. You may find some team members who may have been left out of the decision-making process yet are relied upon to move the software implementation forward.

With that in mind, out-of-the-box ERPs take less time to install, and some solutions are relatively easy to learn and use for professional and non-professional staff members alike. On the other hand, large entities may see implementations take months to unfold as business requirements are gathered, data migrates over, customizations are built, and users are trained on the new software.

How much does an ERP implementation cost?

Much like time frames for an ERP implementation project, pricing depends on the organization’s size, the solution you choose, and the organization’s number of users.

For platforms that are easy to roll out, count on paying an annual subscription or licensing fee per user, and volume discounts will typically apply as the number of users increases. These annual fees will vary between providers, and you can expect to pay more for programs with  ERP-quality functionality  as opposed to basic packages.

In addition to annual fees, you may incur upfront charges for implementation that can run anywhere from a few thousand dollars up to $100,000 or greater. These expenses depend on how complex the implementation is and the amount of data migrating from your current systems. Hidden from an initial cost analysis can be billings that result in extended implementation project deadlines that trigger additional consulting fees and further training for some employees.

Final thoughts

  • ERP implementation is a serious business undertaking that requires organization-wide buy-in. The key to a smooth implementation is choosing a solution that best fits your business needs and offers expert guidance throughout the process.

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