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Posts Tagged ‘Minimizing ERP Risk’

Software implementations carry significant risks, including budget and duration overruns and implementation failures. As the folks at Panorama Consulting pointed out in a recent article, quite often, these risks can be mitigated with proper planning at the beginning of the project. Instead of making decisions based on fear, you should feel confident you’re addressing the potential pitfalls of ERP projects.  Here are six ways they propose to mitigate risk before beginning the software implementation process:

 

  1. Understand Your Business Strategy Objectives – Clarifying your business strategy requires collaboration among all stakeholders. During these discussions, define what customer success looks like and determine what’s working and what’s not. Most importantly, clearly articulate your objectives – do you want to create new business models or generate new revenue using ERP software? These discussions will help you achieve organizational alignment. Ultimately, executives and middle management should be aligned around what changes are needed to improve your organization’s competitive advantage.
  2. Set Realistic Expectations – ERP failure is often caused by unrealistic timelines and budgets. Understanding what benchmarks are realistic for your industry and company size will help you set realistic expectations. While you may need to adjust expectations throughout the project, starting with a realistic estimate will make these adjustments less surprising to executives.
  3. Prepare Employees for Organizational Change – It is human nature to resist change. Change resistance causes implementation delays, quality problems and reduced productivity. If employees don’t adapt to change, your digital strategy will not lead to lasting business transformation. Obtaining buy-in from executives first is a good way to obtain buy-in from team members and employees. If executives are excited for change, this attitude will be contagious. You can obtain buy-in from all stakeholders by communicating the nature of upcoming changes and the reason for change. Communication should be guided by a change management plan, which is informed by readiness assessments and user acceptance testing.
  4. Optimize Your Business Processes – An ERP implementation is a good opportunity to optimize your business processes. While most back-office processes can be optimized based on standard software functionality, some processes should be redesigned independent of software. Processes that provide competitive advantage shouldn’t be constrained by an ERP vendor’s “best practices.” Optimized processes help you develop demo scripts for ERP vendors to ensure they focus on your unique needs.
  5. Plan for Data Migration – With every software implementation, there is the risk that ERP software will not enable the organization’s strategic objectives. To mitigate this risk, reliable and actionable data is essential.  As soon as you select a software application, you should start preparing for data migration. Most legacy data is not ready for new systems. Data is usually spread across multiple sources with various structures and formats.  To account for this complexity, document and establish a data strategy. You also should define future nomenclature for items, item descriptions, units of measure, etc.  Successful data migration requires involvement from four key groups: data owners, the functional team, the data migration team and the project team.
  6. Limit Software Customization – Once you start down the path of software customization, it’s difficult to stop. Strong project governance and project management ensure the implementation team doesn’t over-customize the ERP software. Investing in business process reengineering also is a good strategy for limiting last-minute customization.

We think these tips are a good foundation for looking at your ERP project, and encourage all purchasers to think them through early and often.  History will then be on your side.

 

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