An Experts Guide to ERP Success Introduction

8/14/2019 An Experts Guide to ERP Success Introduction

1/18


2/18

Page 1 of 17

3773 Cherry Creek North Drive - Suite 720 - Denver, CO 80209

720-515-1377 Panorama-Consulting.com

Copyright 2012 Eric Kimberling. All Rights Reserved.

Introduction

ERP implementations are tough. Despite the best intentions and the amazing potential of modern ERP

systems, most deployments take longer than expected, cost more than expected, and fail to deliver at least

half of the business benefits that are expected. In fact, consider the following data from Panorama Consultings2012 ERP Report, an independent study of nearly 300 ERP implementations across the globe:

54% of implementations take longer than expected

56% cost more than expected

50% fail to deliver at least half of the expected business benefits

Add to this data the fact that the industry has more than its share of high-profile ERP failures in recent years such as Hersheys, Waste Management, and a host of others and it becomes clear that ERP

implementations are no walk in the park.

For years, executives, consultants, project team members and academics across the globe have asked onesimple question with no good answer: What is the difference between a successful implementation versus a

failure? The intent of this book is to provide a deep-dive analysis of the best practices and critical success

factors required to make any ERP initiative successful. The analysis and recommendations provided in thisbook are based on years of the Panorama Consulting teams ERP implementation experience, our firms

quantitative research of thousands of ERP implementations across the globe, and my personal experiencespanning 15 years of ERP implementation consulting, organizational change management, and providing

expert witness testimony to some of the worlds highest profile ERP failures and lawsuits. Whether you are aC-level executive, project manager, team member, student or an aspiring ERP practitioner, the best practices

outlined in this book will help you better understand and internalize the factors required for successful ERP

initiatives.


3/18

Page 2 of 17




ERP Implementation Overview

Before beginning our overview of implementation best practices, lets first define what exactly we mean by

ERP software. Enterprise resource planning (ERP) software integrates the data, business processes and

work functions performed by an organizations employees into a single system. In general, ERP systems haveseveral components or modules to provide functionality to various departments within an organization,

including accounting, sales, manufacturing and warehouse management. In the early days of enterprisesoftware, ERP systems were used in larger, manufacturing-focused companies to plan how to deployresources throughout the organization. Today, ERP systems have evolved dramatically and are used by

companies of all types and sizes in many different industries.

In order for a software system to be considered ERP, it must provide an organization with functionality for twoor more systems. While some ERP packages only cover two functions of an organization (e.g., QuickBooks:

payroll and accounting), most ERP systems address a wide range of functions, including human resources,

payroll, finance, supply chain management, customer relationship management, scheduling, quality and more.By combining these once stand-alone functions into a single unified database, ERP systems provide a useful

and cohesive structure for many companies. There are dozens of providers of ERP software, including bothglobal outfits and small, industry-specific vendors. Well-known providers include SAP, Oracle, Microsoft, Infor,CDC, NetSuite and Epicor.

The demands of the global market place, increased competition, and the changing economy have all createdthe need for all organizations to streamline business processes and efficiencies. Today, companies arecomplex and require powerful and flexible ERP systems to remain viable. The ultimate goal of an ERP

implementation is to improve an organizations efficiency and effectiveness; it is less about technology and

more about creating better business efficiencies. The software being implemented is simply the tool for theorganization to build and improve business processes. ERP systems enable organizations to make informed

and timely decisions by providing real time access to integrated information in sourcing, production,marketing, sales and other key areas in the company.

The top challenges that companies face during an ERP implementation are lack of employee buy-in, lack of

ERP expertise, lack of project resources and lack of appropriate budgeting. Employees are often reluctant to

embrace a new system for a variety of reasons, including fear of change, fear of being replaced, and fearabout giving up the comforts of the old system. When employees are hesitant, the implementation can becomemore difficult and less efficient than anticipated. The amount of time and resources required for a successful

implementation are frequently underestimated by organizations, which often lack the expertise to fullyunderstand the impact and importance of an ERP implementation. While ERP may seem to be of interest or

use only to technical managers, it affects business managers in an equally profound way. ERP is more thanjust computer software; it's also a way of transforming and optimizing an entire business. Therefore, business

owners and managers should be involved in the purchase decision and the implementation. To ensure asuccessful implementation, the organization needs to have full commitment to the project from senior

executives to front-line employees. In addition, companies must define their future business processes to help

select the appropriate ERP software.

Once the software is implemented and the business processes are in place, the systems need to be monitored

and improved on a continual basis. These processes provide the structure for the business to run effectively. Ifnot used properly, technology alone does little to improve an organizations business.

Of course, ERP isn't for every company. Though the software has become more accessible to moreorganizations in recent years, it still carries a hefty price tag. In addition to the base software licensing costs, it

often requires hardware upgrades, training for employees, implementation costs, and other direct and indirect


4/18

Page 3 of 17




costs. ERP implementation also can be incredibly risky. The media have covered several instances ofcompanies that had to shut down entire operations briefly because of botched implementations. And when

there is a halt in operations, lawsuits often follow. But when the right system is implemented correctly and

supported with the proper people systems ERP can transform a companys operational abilities byimproving efficiency, providing access to real-time data, and streamlining customer service management.

Despite the global economys signs of recovery, capital information technology budgets and technology

investments continue to be scrutinized. Although there is never an ideal time to implement ERP because of the

hours and resources required to make a project successful, the more forward-thinking strategic companies arefinding that current conditions are ripe for an implementation. Despite the economic headwinds, many

companies are experiencing significant growth and need new systems to handle their increased demands.Some simply want to have ERP in place when the economy picks up again so they can leverage new

technology to enjoy a steeper recovery in revenue and profit. Others recognize that now is a perfect time to

negotiate with ERP vendors and reduce the total cost of ownership.

If implemented correctly, ERP should increase revenues and decrease costs, which is the perfect reason to

implement during times of economic strife. The problem, of course, is that many companies fail to select and

implement their ERP system in a way that delivers measurable results. The ones that do are finding that ERPis an extremely powerful tool in this global economy. Next, well summarize some of the best practices

surrounding implementation planning, or those activities that should be completed before your implementation

begins in earnest.

Implementation Planning

I'm a huge fan of professional football (American football, that is). Perhaps the thing that fascinates me most

about the sport is how much each play matters, and how within each play, every little thing matters.

If an offensive lineman protecting the quarterback is just one inch too far off his position on just one play, it canbe the difference between a touchdown and the quarterback being sacked for a loss. When an offense ismoving down the field, one key block that pushes a defender just one inch further downfield can be the

difference between keeping the drive alive with a first down or having to punt to the other team. And we've all

seen many episodes of Sports Center where the receiver makes a spectacular catch in the end zone, only tohave one foot just one inch too far over the line. Sixty minutes may seem like a long time to play a game(especially if you don't like football), but it's often not enough time to overcome a mistake of inches from

earlier in the game.

ERP implementations are much the same way. The average deployment takes 18 months from start to finish,

which seems like plenty of time to make and overcome a mistake or two. But that is not the case. Every littlething counts, from the way you choose your software to the way you design your system to the way youcommunicate changes to employees. Ive seen projects fail because the project team forgot to define that one

little critical requirement during the ERP software selection process, only to find that the software chosen

couldn't handle the functionality needs. This creates a domino effect of customization, cost overruns and

ultimate project failure.

And just like football, ERP implementations are a brutal contact sport. Facilitating business changes, managing

organizational resistance, controlling project scope creep, and trying to work with software that doesn't alwaysfit your exact needs can take its toll. By the end of the game, you're just glad to have survived the whole thing

in one piece.

ERP projects may be like football games in many cases, but they are different in one way: football has a clearly


5/18

Page 4 of 17




defined goal-line and scoring process, while no one has created a universal definition for ERP implementationsuccess. In other words, where is the goal line and when do we declare victory? How do we define go-live?

Are we done once the system is up and running? Which business processes do we have to have addressed in

the new system before we call it a day? How do we know when the business has fully adopted the software?And how will we know that the business has realized a strong return on investment (ROI) from theexpenditure?

The problem is that most people, including the ones running the project, probably don't have answers to these

and other key questions, which can lead to big issues later on. Following are some key tips, definitions andbest practices to get your team started towards the goal line.

Roles and Responsibilities During a Typical ERP Initiative

When developing an ERP implementation plan, organizations need to first define the key roles andresponsibilities of the major players during an implementation.

Purchasing CompanyThe purchasing company is responsible for conducting due diligence to select the software vendor, the

implementation approach and the internal implementation team. The company also should have policies in

place to govern the implementation. The governance of the project generally covers changes to the originalscope, customizations, additional resources, and configuration and set-up decisions.

The company must decide what mix of people will make up the implementation team from within theirorganization, the vendor organization and any third-party professional services firm they plan to hire. Theseroles include a project manager, an executive steering committee (that the project manager reports to), a

senior executive sponsor (that is on the executive steering committee), a core team of functional experts

dedicated to the project and any necessary subject matter experts (SMEs). While the size and scope of theproject determines the extent of people required on the implementation team, the best approach for a large

company is to make the implementation project the full-time job of every team member.

Software Vendor

The software vendor is responsible for delivering the software and working with the company to determine themost relevant implementation approach. While the vendor should assist the company and provide guidelineswhenever possible, the decisions are ultimately up to the company. The level of involvement and responsibilityof the software vendor during implementation varies from company to company and depends on what is

negotiated in the contract.

Software Vendors Professional Services Team, Value Added Reseller (VAR) or System Integrator

The software vendors professional services team is typically responsible for assisting the company with theimplementation. These services also may be provided by a value-added reseller (VAR), system integrator or

other third-party consulting firm. The teams make-up is dependent on the clients determinations, and typicallyincludes an executive sponsor for the implementation, a project manager, team leads and functional and

technical consultants. Since the purchasing company is paying for these resources, it is the companys

ultimate responsibility to manage them just as they would any vendor or contractor.


6/18

Page 5 of 17




Best Practices in ERP Management

Statement of Work, Implementation Plan and Scope

The scope of the implementation project should be determined before the project begins and should beoutlined in the statement of work (SOW). The SOW is accompanied by an implementation plan which outlinesthe estimated costs and time associated with the scope outlined in the SOW. To complete the work detailed in

the SOW, clearly established roles and responsibilities must be in place within the client company and

implementation partner. More often than not, these key individuals are in place before the SOW is finalized and

have some input in shaping the SOW. The establishment of these key individuals with their correspondingauthorities is considered best practice.

Acceptance of Deliverables

The company should review and accept or deny all deliverables in a timely fashion to keep the project on

schedule. It is the companys responsibility to ensure that vendor deliverables meet their quality and timelinessexpectations. Examples of vendor deliverables include software configuration and documentation and trainingdocumentation and materials.

Remediation of IssuesNo matter how well-managed an ERP implementation is, issues are common. Projects of this magnitude

require companies to make key decisions about how they wish to run their businesses. Leading ERP systems

are flexible, so it is typically up to the implementing company to determine how the software is going to beused.

Unresolved issues should follow the remediation process outlined in the projects governance and controls.The company is ultimately responsible for ensuring that risks and issues are addressed to their satisfactionprior to moving to subsequent phases of implementation.

Executive Sponsorship, Involvement and SupportExecutive involvement is critical to any ERP implementation and especially so in organizations with complex

business requirements. An executive steering committee typically meets at least one or two times a month toreview both project results to date, as well as issues, risks and resource needs. In addition, the executive

steering committee should be involved in making and supporting key strategic and business process decisions

as they relate to the project. Although the core implementation team is responsible for making as many designand implementation decisions as possible, some broader decisions will inevitably need to be escalated to theexecutive team.

Large implementations that cross geographies frequently involve political battles in terms of how the business

will operate in the post-implementation world. Executives often need to be the ones to resolve such issues, sotheir involvement is important in this regard as well. During an IT project, they are often called upon to make

tough decisions regarding changes to operating models, business processes, organizational structures, andother sensitive topics that will not be adequately resolved without their involvement.

ERP projects also require heavy involvement from internal employees. Executives are the ones that can

ultimately make these resources available to the project. Without executive support, it can be very difficult to

procure the employee resources that are needed to make a project successful. Only by having true buy-in tothe project will executives understand the importance of ensuring the right people are available to make theproject successful.

Executive sponsorship, involvement and support are arguably the most important aspects of an ERP

implementation because they enable the best practices outlined in this book. Without executive support, it isextremely unlikely that an implementation team will be able to effectively address the areas critical to


7/18

Page 6 of 17




implementation success.

Implementation Initiation

ERP projects should include a functional and technical manager that supports the project manager with thecore team and SMEs underneath this management structure. These individuals should be actively involved inall ERP-related issues, including establishing and validating processes and training employees across all

functional areas. The SMEs should be valued members of the organization.

Implementation

Project Governance and Control

The management of any project requires proper project governance and controls. An ERP implementation

project is no exception. Effective processes and procedures must be established and clearly communicated at

the start of the project. They also must be consistently adhered to throughout the project with an audit trail thatcatalogs all activity. All elements of the project should be controlled, particularly the following: scope, costs,time, quality and communication.

Best Practice: Institute strong project governance prior to the start of any ERP implementation.

Scope

As mentioned above, the scope of an ERP project is layered with assumptions that support the SOW. Changes

to the scope of an ERP project increase the overall cost and the risk of successfully completing the ERPimplementation within the defined time frame. This occurs because an increase to the scope results in a

material increase in the effort and dollars necessary to complete the work, which puts the original timeline atrisk. Likewise, a decrease in the scope results in a material decrease in the work and cost necessary tocomplete the project, which gives the original timeline a higher likelihood of succeeding. As a result, scope

management is critical to the projects overall success.

The governance and controls of the project should outline how scope changes are handled. Typically, anychanges or customizations that are not in scope warrant a corresponding change order and approval from the

companys steering committee and executive sponsors. Unapproved scope creep in a project can pose

significant risk. The companys project manager is responsible for keeping the project in scope and adhering toproject time lines.

Best Practice: Ensure that scope and related decision processes are tightly managed as part of theoverall project governance.

Costs

Because changes to the scope have a material impact on cost, managing costs in an ERP project should be

done through change controls. These controls are similar to traditional accounts payable processes andinclude an approval process for costs at certain levels, manager sign-offs, audit trails and executive oversight.

As a general rule, ERP projects that do not have effective change controls have higher implementation costs.Best Practice: Institute change controls at the start of the ERP project.


8/18

Page 7 of 17




Time

Traditionally, time is managed through a project plan that outlines a set of tasks within clearly establishedmilestones. The tasks themselves are managed through specified resources and/or personnel within theprojects management structure.

Best Practice: Use a project plan to manage time (as well as tasks).

Quality

Quality controls for an implementation project include procedures to validate all configurations and

customizations. These controls should be managed through an approval process. The approval of anycustomizations should be considered critical to their associated value because their development is expensive.Additionally, configurations and customizations are often outside the scope of the original SOW. Likewise the

work must be validated through testing procedures with real data prior to go-live.

Best Practice: Define project stage gate reviews at key pre-defined milestones throughout the

project in order to mitigate risk.

Communications

The management of communications is critical to the success of an implementation project. Communicationsbetween the vendors and the project team must be organized and consistent with clear authority. If the vendor

is receiving multiple or conflicting directives, then costs can increase.

Best Practice: Establish directives between the vendor and project team at the start of the

implementation.

Senior management must be actively engaged and resources must be readily available. Internal

communications should provide key, branded information about the implementation project to employeesthrough newsletters, intranets, posters and the like.Communication plans should include a messaging strategy that targets specific departments of theorganization as well as the organization on a whole.

Consistent messaging will help to ensure that employees support the project, understand the companys

objectives and are prepared for changes. All messaging regarding the ERP implementation should be plannedaccording to organizational and project objectives and must be consistent through go-live.

Best Practice: Ensure your communication materials encourage dialogue between end-users and

management.

Risk Management Planning

Every ERP project has a set of critical tasks that must be completed before a successful implementation can

occur. These include functional, technical and project turnover issues.

These risks should be identified at the beginning of the project. In theory, if the risks to critical tasks areidentified quickly, then the management team should be able to arrange resources and strategic measures for


9/18

Page 8 of 17




these critical tasks so that the project is not jeopardized if problems do occur. This practice is the best way toeffectively manage the risks associated with completing an ERP project.

Best Practice: Build a risk mitigation strategy that outlines resolution alternatives for tasks along theproject timeline.

Commitment of User Community

There is no disputing that a lack of end-user involvement can pose a serious risk to the implementation of an

ERP system. However, the reverse also is true. Too much end-user involvement or unstructured end-userinvolvement can quickly overwhelm a project. In my experience, end-user communities are not particularly

strategic and tend to look at an ERP project through a narrow and highly personal lens. Uncontrolled end-user

involvement can result in a derailed timeline due to the endless gathering of conflicting requirements with nocut-off date and/or the addition of costly requirements that are of little or no value to the ERP project or theoverall business.

Best Practice: Solicit the opinions of strategic members within the end-user community (traditionallymanagers) that can represent the opinions of a broader functional area during the blueprinting phase.

(Blueprinting is the phase of process mapping and decision making for determining when the system

will be used.)

Complexity of Operations

Many organizations that implement ERP do so in order to simplify their complex operations. Companies that

have multiple offices or business areas or who have grown through acquisition generally have inconsistent and

non-standardized business operations. One of the key values of ERP software is that it helps companiesperform their operations in a more consistent way across different concerns.

Best Practice: Insist that standardized processes are defined across an entire company early in a

design phase and then conduct a phased roll-out of that standard software functionality to geographic

offices.

Cooperation of the Divisions

In a large, multi-office ERP implementation, cooperation and involvement from various divisions anddepartments is critical to success. Input from these teams is extremely important if a company is attempting to

standardize processes and corresponding software functionality across multiple business units, offices anddepartments. The value of this involvement is twofold: 1) it ensures that a companys entire business

processes are considered while defining requirements and designing the system, and 2) it builds employeebuy-in and support of the project so that they will not fear or resist the corresponding changes from the new

system.

Best Practice: Cooperation between divisions is best enabled with a robust organizational changemanagement (OCM) plan, which should be incorporated into the overall implementation plan.

Interfaces

The value of ERP systems is that they eliminate the need for multiple software systems and keep most or all ofa companys operational data on one platform. In rare instances, however, companies decide to leverage one


10/18

Page 9 of 17




or more third-party systems to increase the functionality of the core ERP system. This elevates implementationrisk and necessitates both more technical skills and overall system testing.

Best Practice: Fully test interfaces with other systems as part of a comprehensive business, functionaland integration-testing plan.

Effect on Information Technology (IT) Operations

ERP implementations have a tremendous effect on the IT department. IT staff needs to be trained on how the

software works, how to both maintain and continuously improve the software, and how to providecorresponding help-desk support to employees to enable them to use the new system. In addition, IT

operational staff need to understand configuration and customization tools so they can maintain and support

the system in the long-term without reliance on outside consultants or technical staff.

Best Practice: Ensure a robust organizational change, training and skills migration plan for your

internal IT group.

ERP System Personalization, Configuration and Customization

While some ERP packages are advertised as out of the box (i.e., to be used as delivered with only the

configuration and set-up required by every ERP software package), most ERP software requires at least some

changes or adjustments in order to perform optimally. ERP software is a highly configurable solution. Thepotential usage of an ERP system is determined through configurations or changes to the system.

There are three different levels of change to ERP systems during the implementation process:

1. Personalization.The first and simplest level of change, personalization includes the options for the look

and feel of the system that available. Personalization includes choices like the color, font, background,logos, screen and dashboard layout of the system.

2. Configuration.The second level of change, configuration, refers to the options for process flow, dataflow, calculation and data association that the system provides. The configuration choices are availableas a part of the systems flexibility and do not require any changes in the program code.

3. Customization.The third level of change is customization or modification. Customization refers to

changes required by the client that the systems design does not support and therefore require a changein the program code. Changes of this type represent a significant investment in time and cost. They can

make acceptance and testing of later releases of the software another customization project.

Most large companies request changes to their ERP software to address particular requirements, businessprocesses and workflows. This can include functions such as check printing, custom purchase orders and

invoice creation. In general, the more complicated the company, the more complicated the configuration and

the more likely that change will be needed. Further, every company has a unique need for their logo and otherinformation on some documents, which generally requires configuration or enhancements.

Production and Test Environment Architecture and Build-Out

All configurations and customizations must be fully tested prior to introducing the system to employees. Toconduct these tests and go live safely, ERP systems are deployed in multiple environments. Each


11/18

Page 10 of 17




environment is a separate location for the software and data and is used for different purposes. As a form ofbest practices, three environments are set up during implementation: production environment, test environmen

and development environment.

Although some organizations choose to combine the testing and development environment for cost reasons,the production environment should be separate from untested software or development efforts. This is because

the combined environments can create erroneous practices such as conducting acceptance testing

simultaneously with development efforts. Consequently, ERP systems are best deployed in the three distinct

environments mentioned above. The design and development of a separate production environmentarchitecture creates a secure environment, separate from testing, development, and current production, to

control the system modules that are ready for production after the go-live.

An established testing environment with defined controls for validating processes and procedures is critical.

This practice clearly identifies key issues prior to going live. These issues can be resolved in the developmentenvironment and retested until the issue is corrected and ready for a production environment.

Best Practice: Include user sign-offs to validate both modified and unmodified elements of software

functionality during testing.

Software Testing and Conference Room Pilots

Testing is a critical component of a successful ERP implementation. There are different types of tests. At the

most basic level, an ERP system should include the following: performance testing, functional testing, andintegration testing.

Performance Testing

A key goal of ERP implementations is technical performance, which is usually not known until after the go-live.Performance testing mitigates some of the performance risk associated with going live. Converting software

often results in an overhaul of the entire IT platform (including infrastructure).

ERP systems have minimum requirements to function properly. These requirements include limits for capacity,

bandwidth, load parameters and so forth. The minimum requirements for the functionality must be tested priorto go-live to catch any issues early. In addition to load-related testing activities, performance testing alsoincludes stress testing of system overload to identify points at which the system could potentially crash. Bestpractice is to conduct performance tests in a testing environment prior to go-live.

Functional TestingProcess customizations and configurations are natural parts of an ERP implementation. Functional testing

validates the accuracy of the processes within the system. These tests can take different forms, such asacceptance testing for a particular process or scenario testing for a particular situation. Best practice includes

functional tests for all processes, particularly configured or customized processes. This is a critically importantmethod of early detection to avoid finding the same errors after go-live. Functional testing should be conducted

with real (historic) data, even if data conversion is not complete. Validating the accuracy of real data is easier

for end-users than validating the accuracy of unfamiliar data.Integration TestingAlthough an ERP system should be used throughout the organization, specific legacy or third-party solutions

are sometimes necessary to address a particular function. If multiple systems are used, integration testing isnecessary to ensure connectivity between the systems. This is particularly important if interfaces are

developed between two systems.ERP software testing is not limited to performance, functional and integration testing. It is critically important to


12/18

Page 11 of 17




test every aspect of functionality and connectivity prior to going live to identify any issues as early in theprocess as possible.

Defining Business Requirements

The definition of business requirements is a fundamental milestone and an absolute necessity to realize any

form of success with an ERP implementation. If business requirements are constantly added to an

implementation, then the scope of the implementation will grow beyond resource constraints and will becomeincreasingly difficult to complete.

Best Practice: Create an end-to-end model with sign-offs from authorized managers to establish buy-in

and to verify the accuracy of the requirements.

The documentation of the business processes and workflows should be developed with SMEs that are keysystem users and functional process owners to include their valuable insight into the system functionality

needs. The business process and workflow reconciliations migrate as is business requirements to to be

business requirements. Best practice for this effort is a gap analysis that outlines the functional gaps betweencurrent and future states.

Best Practice: Conduct a gap analysis that outlines the functional gaps between current and futurestates.

Once a gap analysis is conducted, planning to address functional gaps can begin. This is primarily managedthrough conference room piloting and end-user acceptance testing.

Given that ERP software is configurable, all business processes and workflows must be defined within the

system. These definitions should be finalized prior to any configurations because any change to the definitionshas a corresponding impact on the configurations. The development, review and finalization of business

process and workflow definitions are fundamental implementation deliverables. This effort lays the foundationfor all gap analysis and reconciliation work and ultimately produces a static definition for to be business

processes.

In the softwares methodology, defining business processes and workflows within a future state occurs duringthe blueprinting phase. In addition to process mapping, the blueprinting phase includes future interfaces anddata mapping. (For clarification, all implementations require process mapping for as is processes, gap

analysis, and to be processes to configure the ERP systems.) After blueprinting is completed, the realization

phase begins, which involves creating baseline configurations required for to be process functionality,interfaces and conversion development. All configurations and any customizations must be reviewed and

tested to validate that the delivered changes address the desired business processes and requirements.

Additionally, the methodology uses pre-configured processes to expedite the delivery of the ERP system. As aresult, the blueprinting phase simultaneously defines and reconciles functional gaps for business processes

and workflows because the to be processes are suggested through pre-configured processes and either used

or altered. If pre-configured processes are not used, then the software is either configured or customized tomeet the desired needs.

The implementation team must understand all functional areas of the business prior to implementing thesoftware. This practice helps to identify areas of uniqueness within the business as well as competitive

advantages. The practice also helps to qualify the functionality of a system and can serve as a baseline fordetailing a final set of requirements for the implementation of the system. If a company does not define all


13/18

Page 12 of 17




business requirements across all the functional areas of the business prior to implementing an ERP system,then critical components can get overlooked, not installed, or installed poorly during the implementation. This

lack of definition can also lead to additional requirements during an implementation, which can be costly and

dangerous because development efforts have already begun and will require rework.

Data Migration

The migration of a companys data history from its original systems to a new ERP system is one of the mostfundamental tasks of an implementation. All data being migrated to the new system including live data

entered on or during the go-live and legacy data must be cleaned (or standardized) before it is introduced.

Migrating clean data has both organizational and implementation ramifications. Within an organization, critical

data may be stored differently. For example, a customers address may be recorded as 2900 Franklin Way or2900 Franklin Way, Ste. 200 or 2900 Franklin Way Unit 200. All three references identify the same customer.Data cleaning involves the standardization of data fields, values, tables and so on across all functional areas

throughout the systems for all the history being migrated into the new system.

It is important to note that each functional area may have a compelling reason why they classify data in their

respective ways.

Best Practice: Define clear rules and formats for the data being migrated.

Defining these rules may require executive decision-making to settle functional disputes. Completing datacleaning efforts may require external experts to hasten the process.

A key part of data cleaning is also getting rid of or junking old or useless data. Simply put, the more data you

bring over, the more you need to sort through at conversion and the more likely to impact go-live. What is junk?Well, how about an item that has not been sold in the last five years? The last three years? How about an item

that you no longer manufacture? A customer that has gone out of business or not bought anything from you forthe last three years? All closed sales and purchase orders? Determining the data that needs to be kept can be

quite arbitrary and dependent on the industry and purpose the data provides. Forecasting needs to be

considered as well. There are no hard and fast rules, but management needs to come to firm agreement onwhat does or does not need to be kept as decisions can span several departments.

Bear in mind that different industries have different regulatory requirements that may need to be considered.

Some regulations restrict the ability to change certain kinds of data records, such as HIPAA with Electronic

Medical Records (EMR) or PCI DSS with credit card data and transactions. Some govern the length of timerecords need to be kept, such as for auditing purposes. However, most of these might be addressed using

paper records, thereby lowering the required data needed for migration and cleaning.

There is a range of quality tools (typically provided by software vendors) that are designed to quickly migratedata into an ERP system. Companies are responsible for cleaning the data so that it can be converted. As a

result, data migration is oftentimes a burdensome task during an implementation. There is a general

misconception that the IT team can handle all of the cleaning. While there is data cleaning software, thesepackages can only help identify potential areas and records to be cleaned. Someone still needs to know, forexample, which is the correct out of two different address records for a company. Or someone knowledgeable

needs to be able to verify that the closing balance is in fact correct. It is this data integrity and accuracy that acompany must seek. In most cases, the owner to clean these records is not the IT department, but the actual

functional departments or users. However, both need to work together to ensure success.


14/18

Page 13 of 17




In-System vs. ExcelThere are pros and cons for both methods of data cleaning and I often use both. In-system cleaning is to

correct the data in the legacy system database. This method is good especially if you intend to keep a final

snapshot of the legacy system for your records. Downloading data and changing it in Excel is often used whenthere are fields that are not in the legacy system.

The time associated with this process is dependent on the amount of data being converted and the team of

individuals migrating the data. Because an organization cannot go live until the history is properly migrated, the

process can significantly delay an ERP implementation. Additionally, all converted data must be tested in thenew ERP system.

Early efforts must define how much data will be migrated and how the data will be migrated (standardized

numbers, addresses, etc.). There also should be training or procedures put in place to ensure minimal cleaning

is needed moving forward. These efforts should begin as soon as possible, particularly in organizations wherestructured approvals are necessary. Additionally, the data migration process should include the use of toolsthat simplify the export of data from the legacy system. A resource assessment also should be done to identify

if additional resources (e.g., temporary employees) are needed to support the effort.

Best Practice: Implement a clear strategy at the beginning of the project and use a dedicated team and

team manager to achieve it.

Business Process Reengineering

Modern ERP systems are configurable and require defined processes and workflows. As a result, businessprocess reengineering is unavoidable during an ERP implementation. The reengineering process is an iterative

process during an implementation that includes the following steps: define requirements/processes, configure

solution, run tests, perform gap analysis, and address gaps.

Companies must repeat steps three through five until system is ready to go live.

Best Practice: Begin business process mapping, improving and re-engineering prior to

implementation, defining more detail as the software is designed and configured.

Systems Go-Live

Preparation for the go-live begins well before the actual go-live date. A series of steps needs to take place prioto going live. These steps include validating final processes and verifying the organizations readiness through

process manuals, support structures, and the like. The organizations final processes within the system shouldbe validated through associated approved tests at the end-user level. These tests should validate that the

system can operate without system errors that could lead to business interruptions.

Best Practice: During go-live, combine on-site assistance and documented processes and proceduresfor end-users.

To ensure both go-live and post-go-live success for end-users, there must be a step-by-step manual of theprocesses and procedures outlining how each employee will perform their jobs in the new system. These

manuals serve as useful tools both in training new users and helping all employees retain knowledge aftertraining.


15/18

Page 14 of 17




Cutover is the moment at which the old system ceases to be primary, and the new system is online. The go-live cutover is a seminal moment in an implementation that can define success or failure. The project manager

should verify all measures and adequate technical support should be available for any problems that may

emerge. This should be conducted during non-working hours so that end-users can validate the systemsaccuracy in a low-volume environment. This precaution is necessary given that the system deals with live dataafter the cutover. Any bugs, discrepancies and end-user training issues must be identified and resolved

immediately.

Best Practice: Employ an end-user validation process during the cutover to verify success with sign-offs.

Go-Live Cutover Lessons Learned

A large multi-site implementation plan requires a phased approach with an initial site going live on the newsystem, followed by rollouts to subsequent sites. Site order should be selected strategically for go-live based

on the complexity and magnitude of the implementation. The first go-live offers valuable insight into potential

problems for the next sites scheduled to go-live. Lessons learned should be incorporated to mitigate risks andincrease the success factors for future implementations. Benefits are never guaranteed. According to research

published by my company, Panorama Consulting Solutions, only half of companies surveyed realize 50-

percent or more of the business benefits expected from their ERP systems. A full 54-percent of ERP projectsrun over schedule and 56-percent of projects run over budget.

A go-live should be a structured process in which errors are detected and resolved, processes are reviewedand sentiments from the end-user community are gathered and evaluated. Best practice is a post go-live auditreview or assessment with recommendations.

Organizational Change Management (OCM)

Organizational change management (OCM) focuses on employee transition to the new system, including the

implementation of new processes, related training, and communications. OCM is a key success factor for any

ERP implementation because the software cannot be used if members of the organization cannot understandand apply it. The actions that successful OCM projects support include process development and change, roleand responsibility definition, communication, training and organizational design.

Organizational Readiness Assessment and Risk Migration Plans

There are varying levels of readiness for an ERP implementation within an organization. A readinessassessment should be conducted to understand which areas would have the most trouble implementing an

ERP system. Employee difficulty or resistance can occur when there is tenured staff, poor morale, poor

technical and business resources, or limited capabilities. A company should determine where there might be

employee resistance and create risk migration plans that include customized training plans, communication

plans, and organized resources to address the resistance.

Best Practice: Continue support after the go-live by collecting employee feedback and offering furtherassistance if needed.


16/18

Page 15 of 17




Communication and Training Plans

In successful implementations, end-users are adequately trained on the new ERP system. Sufficient training is

reflected by the readiness of an organization for a new ERP system. It is rare to see an ERP implementationwithout a significant level of employee resistance at the start of the project. Employees are typically concernedabout being forced to depend on a new system without proper training. Experienced users, who gained power

within the organization because of their understanding of the legacy system, are often concerned that they will

lose much of their workplace prestige if a new system is implemented. Communication and training plans are

essential to forming positive attitudes and a cultural acceptance towards the acquisition of the new skillsneeded to succeed.

Best Practice: Identify and mitigate resistance through organizational assessments that segue into

communication and training strategies prior to go-live.


17/18

Page 16 of 17




Conclusion and Summary

The above introduction provides a summary of the ways that organizations can and should leverage bestpractices to make their ERP implementations more successful and effective. Clearly, there is no one

component that will make a project; instead, ERP success requires careful and experienced management of alof the above implementation critical success factors. An oversight or shortfall in any one of the above areascan be the difference between success and failure and there is very little margin for error. These ERP best

practices and critical success factors will be covered in more detail in forthcoming chapters of this book:

Chapter 1. Strategies for Preparedness

Chapter 2. ERP Software and Vendor Selection

Chapter 3. Analysis of Specific Systems

Chapter 4. Planning for Implementation

Chapter 5. Achieving Implementation

Chapter 6. Organizational Change Management

Chapter 7. Realizing Benefits and ROI

Chapter 8. ERP Implementation Challenges . . . and Failures

Chapter 9. Looking Forward


18/18

Page 17 of 17




About the Author

After 15 years of ERP consulting at large firms including PricewaterhouseCoopers and SchlumbergerSema,Eric Kimberling realized the need for an independent consulting firm that really understands both ERP and the

business benefits it can enable. He currently serves as the managing partner of Panorama ConsultingSolutions, the worlds leading independent ERP consultant.

Eric began his career as an ERP organizational change management consultant and eventually broadened hisbackground to include implementation project management and software selection. Erics background includes

extensive ERP software selection, ERP organizational change, and ERP implementation project managementexperience.

Throughout his career, Eric has helped dozens of high-profile and global companies with their ERP initiatives,including Kodak, Samsonite, Coors, Duke Energy, and Lucent Technologies to name a few. In addition to

extensive ERP experience, Eric has also helped clients with business process re-engineering, merger andacquisition integration, strategic planning, and Six Sigma. Eric holds an MBA from Daniels College of Business

at the University of Denver.

Documents

An Experts Guide to ERP Success Introduction