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The 5 Biggest Challenges When Implementing ERP for the First Time

Written By: Aleksey Osintsev
Published On: July 14 2009

Enterprise resource planning (ERP) systems or similar IT packages have become widely used in businesses of all sizes and types. From my understanding, small and family businesses or companies are the only ones yet to join the mainstream trend of implementing ERP software, although the vast majority of medium and lower-medium-sized companies have already performed an implementation at least once (some of them twice or even more often). But I thought it might be interesting anyway to see how my personal experience and the conclusions I have drawn for myself correlate to implementation issues and business practices in different regions and sizes of businesses. I placed the 5 categories of problems in ascending order based on the degree of “entanglement.”

1. The selection problem. Say a company has decided for many reasons to launch a managerial information system implementation project. The very first question that managers will face is what type, size, and scope of the future system they actually require and how to choose the most suitable solution among the hundreds offered on the market. There is no single answer on how to find what you need; and the whole consulting and research industry is there to serve these needs. Our company tries to deliver the best value, as well presenting its core eBestMatch decision support engine and a long list of other supplementary services. Eventually, this selection problem arises for all businesses without exception and should be considered as seriously as possible for the reason that ERP system choice predefines a company’s strategy for at least the following 6 to 10 years and, no doubt, has a telling impact on the future success of the entire business.

2. Technical issues. How to successfully select a software package is important but not the last problem that will appear on the thorny path toward getting all of the system of software and hardware working together and bringing any value back to the company. Another set of implementation issues is related to the technical part of the project, and covers the servers and workstations to be revised and— probably—the new and modern ones to be ordered, purchased, and replaced. The internal network also has to be analyzed and modernized if required; the speed and bandwidth of the existing Internet access should be taken into consideration, along with possible technical concerns about the mobile devices being used. If these questions are underestimated, they can dramatically impact the overall result of the project and easily delay the “happy hour,” or poison the first few weeks (or even months) of using a new system with slow performance, resulting in a slackening of the existing pace of business. However, I must note that the situation has been changed during the last few years, and plenty of software-as-a-service (SaaS) applications that have shown up on the market now allow the cost and headache of hardware problems to be minimized.

3. Data quality issues. This issue is particularly symptomatic of companies that are implementing ERP for the first time and transferring their legacy data into the new system from Excel spreadsheets, manual records, or old disparate applications. Basically, the question is that old data that have been used and stored for years can for many reasons appear approximate or even incorrect in the new ERP reality. For example, in my experience (an ERP implementation project for a midsize metal manufacturer): in the middle of the project, we converted existing bills of materials (BOMs), BOM routings, and hour tariffs into the new system and realized that the products’ new lead times exceeded real ones twice or more. Thanks to adequate project planning, we had some time to fix the data immediately by dedicating engineers and analysts full-time for a few months and accordingly modifying the implementation plan; but even in this case, the project was delayed for two months. So, be careful with your old information, as it can be far from reality, and always make “pilot” tests of new system outputs using legacy data.

4. Business philosophy changes. ERP implementation brings significant changes into a company’s conventional business model and the day-to day practices it has been using for years or even decades. With the new system, information that a user enters in one screen becomes immediately available to another user; an employee’s level of responsibility is dramatically increased as it is more difficult (sometimes impossible) to fix erroneous data or typing errors; new approaches to data reporting and mining and, thus, new managerial principles and practices have to be established; and finally, real business models and business processes might require massive changes because of new real-time opportunities and data availability—these are only a few examples of how serious and meaningful business transformation can be, post-implementation. Using wise and forward-looking ideas and conceptions when implementing ERP, it is definitely possible to return something much more appreciable than simply screen replacement. This is a real challenge, but at the same time it is a great opportunity to refresh the business and bring new ideas and lay a strategic foundation for future breakthrough.

5. Psychological issues. This is the most difficult type of issue to resolve. These are the questions and issues that originate from the aspect of human nature that never accepts any change without seeing the visible advantages of it. This is an “ERP project manager‘s favorite” variety of problem, arising from users’ habits and their understanding of what’s good for the business in general and for the user in particular. “It’s been always like this before you came in,” “I don’t think it will be ever working,” “It’s not working on my PC,” “I will be talking with the CEO about this system,” or “You don’t understand how it should work”—these comments sound familiar to anyone who’s ever tried to implement a new system or change users’ requirements. It is really difficult to describe or classify the possible troubles in this topic; actually, any question can appear. I would recommend trying to predict such problems at the planning stage of the project in order to reduce the potential negative impact of users’ possible contra-collaboration activities. The best way here is to interest different groups and categories of system users ahead of the project; inform them of any news and project milestones; establish reliable feedback communication channels; stimulate people to generate new ideas and provide suggestions; organize interesting and promising training sessions; celebrate the best user’s achievements; and so on. In other words, ERP project leaders must become respectful allies; otherwise, ignoring the users’ experience and concerns puts in doubt the entire project and can kill any excellent undertakings.
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