9 step ERP implementation plan for business operators
Enterprise Resource Planning (ERP) is part of a business’ core operating model. It’s a business management tool that facilitates and integrates vital business processes and operations in growing organisations as a means of maintaining oversight and control as complexity increases
Implementing an effective ERP is crucial to your business’ success. ERP implementations can be challenging if you don’t have accounting software experience and can become an incredibly costly exercise if performed incorrectly.
The main reasons for implementing an ERP system are to increase efficiency (35%) and reduce costs (29%). Yet, 30% of ERP projects take longer than expected, and 64% go over budget, losing millions of dollars and damaging business operations in the process.
So, if you want to gain the benefits of a successful ERP implementation, while avoiding the costs and headaches of a botched job, read on.
In this guide, you’ll discover the key phases of an ERP implementation plan, plus 9 best practices and 9 costly mistakes to avoid so that you can make your implementation a roaring success.
What is ERP implementation?
An ERP implementation describes the process of planning, configuring, and deploying an ERP system.
It’s a complex process that takes several months, or even years, to complete because the software supports and automates many different business functions, including sales and manufacturing, inventory, financial management, and human resources.
But when you execute it correctly, you can expect to benefit from increased efficiency and cost reduction.
To ensure a successful ERP implementation, an organisation needs to define its requirements carefully, redesign existing processes to take advantage of the new functionality, configure the software to support those processes, and rigorously test it before going live.
If you want to complete all those steps on schedule within budget successfully, you’ll need a structured, phased implementation plan.
What are the key phases of an ERP implementation plan?
You can divide an ERP implementation plan into several phases with specific objectives. As every organisation is unique, the stages can vary or overlap accordingly.
1. Gather business requirements
All ERP implementation projects begin with a discovery phase, which is all about determining the business requirements. Many businesses focus on the tech and forget about the end goal and business outcomes. But unless you have a thorough understanding of current issues and process inefficiencies, you won’t be able to set your objectives and requirements for the new ERP system.
An ERP implementation project also impacts employees and company culture, so it’s vital to make sure the whole organisation understands the reasons behind the project.
By the end of the discovery phase, you should have a clear understanding of the requirements, vision, and scope of the project.
2. Confirm budget and resources
The planning phase includes defining detailed system requirements, setting up an implementation team, and researching and selecting an ERP system.
Resources:
The ERP implementation project team typically includes an executive sponsor, a project manager, and functional leads (or super users) from across your organisation who know your current processes inside and out and will champion change.
The implementation team may also include external consultants or an ERP implementation partner with relevant skills and industry experience.
Budget:
When estimating your ERP implementation budget, always add a further 25% for contingency costs. One of the major decisions is whether to use an ERP system that runs on-premises or in the cloud. On-premises ERP solutions require a substantial initial investment. In contrast, a cloud ERP system has lower initial costs plus ongoing subscription fees calculated by the number of users or resource consumption.
3. Determine any necessary customisations
The design phase builds on the discovery and planning phases to develop a detailed design for the new ERP system. The main objective is to design more efficient workflows and business processes that maximise the new functionality.
You can use gap analysis to identify processes that may require changing to work with the ERP system or customisations of the ERP software to fit your operations.
4. Configure software to business requirements
The development phase involves installing, configuring and, where necessary, customising the software to support the redesigned processes. It may also include developing integrations with existing business applications.
During this phase, the implementation team also starts developing training materials to help users adjust to the new system later.
5. Cleanse, format and import data
In the migration phase, the implementation team determines which data to migrate as some might be redundant.
Before importing any data into the new system, the team must ensure it’s clean and formatted correctly. Then they have to work out how to extract, transform, and load the data from one or more existing systems into the new system.
6. Test system functionality
The testing phase starts by checking basic functionality, followed by integration and system testing, culminating with user acceptance testing (UAT), where selected end-users test the ERP system for all their day-to-day activities before deployment.
7. Deploy ERP system
The deployment phase is a significant milestone in the ERP implementation when the business finally goes live on the new system. During this phase, the implementation team needs to resolve and fix issues, answer questions, and help users understand the software.
There are several deployment models to choose from:
Big bang deploys the complete ERP system concurrently. This model has the highest risk level and steepest learning curve but costs less overall.
Phased deployment prioritises specific modules or processes and then introduces others in stages. While a phased deployment model can take longer, it does provide more flexibility to test individual parts of the new system as they go live.
Parallel deployment runs the legacy and new systems side-by-side to ensure the new system is fully functional before the old one is retired. This model reduces the risk of data loss, but it’s more expensive as more resources are required to run and operate both systems.
8. Train employees
The training phase ensures all users receive proper training on the new ERP system. Training can be a mix of vendor tools and implementation team materials created in the development phase.
9. Provide ongoing support and maintenance
In the final phase, the implementation team starts to withdraw from the project and hand over the day-to-day running of the ERP system to the support and maintenance teams.
The implementation team may listen to user feedback and adjust the system accordingly. They’ll also be involved in any development and configuration of new features to the system. Otherwise, it’s a case of returning to business as usual.
How long does an ERP implementation take?
An ERP implementation can take several months or years depending on the company size, level of customisation, amount and quality of data, number of users, and project resources.
On-premise ERP systems take much longer to implement than cloud ERP systems as they require the procurement and setup of hardware and infrastructure.
You can get a rough estimate by dividing the cost of the ERP system by 100. For example, if the ERP system costs $50,000, the implementation time would be approximately 500 hours – roughly 3 months.
How much does an ERP implementation cost?
An ERP implementation is not a one-time cost, but an ongoing investment, including:
software license and renewal fees – based on the type of system (cloud or on-premises), the number of modules and applications, the number of users, and the level of customisation
implementation staff, including external consultants and partners
infrastructure installation, maintenance, and upgrades for on-premises implementations, cloud-based systems include these costs in the recurring subscription fees
data backup and storage charges
support staff for infrastructure, software upgrades, bug fixes, and customisations.
Overall, small to medium-sized businesses can expect to pay between $75,000 and $750,000, and large enterprises can expect to pay between $1 million to $10 million.
ERP implementation best practices
Follow these nine ERP implementation best practices to ensure you get the most out of your new system.
Get crystal clear on the desired business outcomes
A common reason for ERP implementation failures is that organisations don’t get crystal clear on their desired business outcomes.
It’s easy to get caught up in the ERP software and technology you want to implement. But that’s only one part of the equation. It’s more important to spend time defining your current and desired workflows so that you maximise the ERP implementation.
Instead of asking:
“How can we use [ERP application] to achieve [business outcomes such as increased sales or efficiency]?”
You need to ask:
“How can we achieve [business outcomes such as increased sales or efficiency] with [ERP application]?”
Determine your system requirements
Before selecting your ERP software, you need to know and document your current and future business requirements.
During the discovery and planning phases, the implementation team can interview stakeholders from across the organisation on current pain points, feature requests, and potential future gains to get a thorough understanding and list of requirements.
Don’t underestimate planning time
Although it may be tempting to jump into the design and development phases as soon as possible, it’s vital not to rush the initial discovery and planning process. By securing executive-level support, developing a clear plan, and allocating adequate budget, time and resources, these initial phases will create a solid foundation for the overall ERP implementation project.
Get the right team in place
It’s essential to get the right implementation team in place by assigning the best available talent. The cross-functional team not only needs to understand how their business unit works but also how it operates with other departments. They also need to be capable of defining new and better business processes.
When building your implementation team, evaluate potential candidates across multiple dimensions, including:
functional business expertise
cross-functional business process knowledge
fundamental ERP concepts
documentation skills
communication skills
adaptability to change.
Be realistic about the timeline and budget
It’s important to be realistic about the timeline and budget. ERP implementations are complex, so allow some contingency for the unexpected or unknown parts of the process.
The estimated timeline should include contingencies in each phase that you can use if required. And budgets should consist of at least a 25% contingency for unexpected costs.
Cleanse your data prior to migration
Preparing and cleansing your data before migration is another crucial part of an ERP implementation. Data must be purged and verified in its current system before migrating the required data to the new system. The process includes:
formatting existing tables and databases
removing duplicate records.
Identifying redundant data not required in the new system.
Test the system before deployment
It’s vital to test your ERP system before deployment and ensure that it’s fit for purpose to replace your legacy systems.
Start by testing basic functionality and end with rigorous testing of the entire system:
unit testing for each module of the system
integration testing to ensure that each module integrates
system testing to ensure that the whole system operates as expected
user acceptance testing (UAT) to ensure selected end-users test the system for all their day-to-day activities.
Maintain a clear line of communication at all times
Throughout your ERP implementation, ensure you maintain a clear line of communication from your leadership team, including the CEO.
Communication can include presentations, charts, graphs, newsletters, bulletins, or blog posts. You could also schedule monthly Town Hall meetings to provide updates, identify problems and issues, and communicate successes.
It’s a good idea to keep external stakeholders, such as business partners, suppliers, and customers, updated on progress and highlight how the changes may affect them.
Invest in ongoing training and support
It’s important to invest in ongoing training and support that starts before going live and continues afterwards.
You need to tailor training to different roles, such as project team training, IT team training, business user training, and end-user training. You also need to set up an introductory training program for new employees who join the company.
After going live, you’ll need to ensure you have proper support processes and teams in place to handle any end-user issues and questions.
ERP implementation mistakes to avoid
Even with a strong understanding of the ERP implementation process, many risks, challenges, and mistakes can cause a project to fail. Here are 9 of the most common ERP implementation mistakes to avoid.
Failing to get full executive buy-in
It’s essential to get full executive buy-in before you start your ERP implementation.
Without executive support, you’re sending a clear message to the whole organisation that this project is not important. And the project team will struggle to get the ERP system implemented on time and within budget.
Failing to collect all business requirements
Your business requirements are the most critical component of a successful ERP implementation.
Before you consider purchasing your ERP software, you need to know your current and future business requirements. Once you’ve gathered your business requirements, you can start to match them to ERP features and find the best solution.
Failing to consider cloud ERP solutions
Organisations have a choice between on-premises and cloud ERP solutions. It’s important to weigh the pros and cons of both systems and see which meets your requirements.
For example, on-premises ERP systems require a substantial up-front investment in the latest infrastructure plus ongoing maintenance and support costs. On the other hand, cloud-based ERP systems, like MYOB, only require a minimum initial investment and regular subscription-type payments to cover ongoing maintenance and support.
Failing to set milestones
Since your ERP implementation will take a significant amount of time, you will need to set milestones. Major milestones are the key phases of your ERP implementation plan:
discovery
planning
design
development
migration
testing
deployment
training
support and maintenance.
But within each of those phases, you can set mini-milestones. For example, in the planning phase, your mini-milestones include:
assigning your project leader
selecting your team members
setting a realistic timeline and budget.
Failing to set milestones will cause the project to fall off-track and take longer than planned.
Failing to consider future business needs
It’s essential to plan for the long term when you’re defining your business requirements. For instance, you’ll need to consider future events like upgrades to keep the system on the latest technology and functionality and scaling the system as your business expands.
Failing to test before deployment
Failing to test the new ERP system before deployment is another major cause of project failures. Testing needs to pass various stages, from a single test of every critical business process to volume tests and a mock go-live cutover.
Failing to devise a change management strategy
Implementing an ERP system is a significant change that disrupts every organisation. Failing to devise and execute a change management strategy is one of the most common reasons ERP projects ultimately fail.
ERP change management not only involves business processes but the whole culture of an organisation. When employees aren’t engaged, process changes aren’t communicated clearly, and expectations haven’t been set, ERP implementations usually fail.
Failing to adequately train employees
An essential part of any ERP implementation is that all employees get the required training.
If you fail to train users adequately, they can drain the smaller post-implementation support team focused on resolving critical issues. And as more employees become frustrated, the adoption of the new system fails.
Ready to start your ERP implementation?
Embarking on an ERP implementation is a significant undertaking and a massive change for any organisation that requires meticulous planning and preparation.
But if you execute it correctly, you can expect your business to benefit from increased productivity and cost reduction.
If you want a successful ERP implementation, make sure you follow a structured project plan, embrace best practices, and avoid costly mistakes.
When you’re ready to start your ERP implementation, check out the range of ERP solutions designed by MYOB specifically for Australian and New Zealand businesses, including a powerful cloud ERP and payroll platform and a comprehensive on-premise ERP solution. Book a demo today!
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