Five Lessons for the Cloud ERP Journey
So you’ve decided to transition to a new Cloud enterprise resource planning (ERP) platform? Awesome! Cloud ERP platforms offer a number of compelling benefits and are rapidly becoming the “new normal.” In fact, estimates suggest nearly two-thirds of organizations are now choosing Cloud ERPs over on-premise ERPs.
And this makes sense given some of the key benefits of Cloud ERPs, including:
Ability to focus on core competencies vs. heavy-lifting of system maintenance/upgrades
Streamlined processes based on industry best practices
Decreased maintenance and support costs
Improved data security
Simplified enterprise architecture
But successfully making the move to a Cloud ERP is easier said than done. In addition to the usual challenges of big technology projects, you’ll face new challenges unique to the Cloud ecosystem like reduced customization and routine updates. Because of these factors and the sheer size and impact of the ERP in many business environments, ERP implementation statistics are a bit daunting. According to data compiled by G2.com:
50% of ERP implementations fail the first time around
64% of ERP implementations go over budget
51% of companies experience major operational disruption at Go-Live
The good news, however, is that there are a number of tactics you can leverage to de-risk your Cloud ERP journey and increase the probability of an on-time, on-budget, high-quality implementation. Here are five lessons from our extensive experience selecting and managing the successful implementation of Cloud ERPs.
Lesson One: First, Look Inward
With any technology project - and certainly with a Cloud ERP project - there is a temptation to immediately look outward, at the various platform options and technology solutions available to your organization. But in our experience, we would suggest first looking inward - at your own organization - to ensure you and your team intimately understand what processes your new system needs to support, what "special sauce" your company may need to incorporate into the tool, and how ready or not your various business units and stakeholders are for major change.
Specifically, we encourage our clients to ask three key questions before embarking on the journey:
Have we built a compelling business case and a cross-functional coalition for change (finance, accounting, tax, supply chain, operations, etc.)? And the business case shouldn't just be "IT savings." It should include real, tangible business benefits to your organization.
Have we assessed all our processes (procure-to-pay, hire-to-retire, order-to-cash, etc.) and determined where we have unique approaches and workflows that can't change due to customer needs, compliance reasons, etc.? These areas will require customization, a sometimes costly aspect of Cloud ERP implementations, while others areas can be standardized to leverage out-of-the-box capabilities.
Do we have leadership support and organizational commitment to making a change of this magnitude? Support from the top is a leading indicator of project success.
Lesson Two: Choose Your Platform (and Your Partner) Wisely
Not all Cloud ERPs are created equal. While there are many capable offerings in the market, some are more well-suited for specific industries and types of organizations. And here's where your introspection from Lesson 1 will be incredibly valuable. The pre-work you did to assess unique and highly customized aspects of your operation will directly feed into your fit-for-use analysis. In other words, leverage not only your high-level functional requirements, but also some of the complicated edge cases to assess the fit of each leading platform option. Ask the software company all the tough questions: about how customizations work (and how much they cost); about routine updates and the upgrade process; about bug fix and enhancement support during and after your implementation; and of course about data security considerations. And seek out references - especially from organizations in your same industry - to validate what the sales team is telling you before you sign on the dotted line.
But the platform isn't the only important selection you have to make. Choosing the right system integrator (SI) partner is critical. Depending on what platform you select, you will have a number of options for your implementation partner, ranging from big-name global consulting firms to niche players who specialize in one specific ERP. The three most important things to look for in your SI partner are:
Specific experience with your platform in your industry (request references!)
Style/approach fit with your team and partnership commitment
Competent, committed, collaborative resources (ask to talk to the people who will actually be doing the work, not just the sales team!)
Lesson Three: Get Your House (and Data) in Order
No matter which platform you choose, it will have a bunch of bells and whistles and no doubt will have you excited about all the possibilities that come from a brand new system. But you can't totally walk away from the technical debt of your past. Understanding the good, the bad, and the ugly of your existing platforms, systems, and data will be crucial to your success on the Cloud ERP journey.
We encourage our clients to conduct an in-depth current state deep dive to identify and document aspects of the current operation that may be unique, highly manual, or otherwise non-standard. Having a well-documented summary of these items will give your SI a checklist of sorts to solve for as they build a transition plan from old to new.
Even more importantly, understanding the state of your data is mission critical to success o the Cloud ERP journey. Cleansing and standardizing your master data (customer, asset, product, employee, etc.) before trying to migrate it to the new system will make everyone's life easier. It's also advisable to take a hard look at your operational reporting and/or data warehouse infrastructure and ensure you have a solid plan for updating source data pulls and key reports once the new system is in place. In our experience, inadequate planning around data and poor change management (more on that later) are two of the most common pitfalls in Cloud ERP deployments.
Lesson Four: Plan, Plan, Plan
Dwight Eisenhower once said, "Plans are worthless, but planning is everything." That is absolutely the case when it comes to implementing a Cloud ERP. Work closely with your internal IT team, your business stakeholders, and your SI to thoughtfully map out the project plan. Pay particular attention to resource loads and dependencies, co-existence strategies if deploying incrementally (which we recommend), and the timing of routine updates from the software company.
Include enough time in your plan for demos and iterative development, multiple rounds of thorough testing, and extensive training and adoption efforts. Understand that the plan is a living document and that you will have to iteratively adjust during the course of the project. And don't skimp on the resources: having the right project and change managers, internal SMEs, IT specialists, and leadership dedicated to the project will dramatically increase the probability of success on your project.
Lesson Five: Invest in Change Management
If there is one most common mistake when it comes to Cloud ERP, it is underestimating the complexity of the effort not only from a technical perspective, but also from an organizational change lens. The fact of the matter is that the very essence of Cloud ERP's value prop - a highly standardized system designed to support hundreds of different companies vs. just one - presents a massive change management challenge. For most organizations, on-prem ERPs = flexibility and extensive customization. Transitioning to standard processes and out-of-the-box workflows, therefore, can be fairly painful.
It is imperative, therefore, that organizations making the move to Cloud ERP invest wisely in change management. Conduct an upfront change assessment to determine which parts of your business will be most affected and which ones are most (or least) ready for change. Invest in a full-time change resource or team to manage project communications, stakeholder management, and training planning. Enlist a group of project champions so it's not just the project team evangelizing the vision. And most of all, remember that getting the right buy-in and equipping your employees with the right knowledge and abilities to actually change will pay huge dividends for you on your journey.
If you find yourself navigating a Cloud ERP implementation and need an external expert to advise you along the way, reach out to us. Our team would love to partner with you on your journey to the Cloud!