ERP decisions impact organizations for years. Whether weighing a first-time enterprise software purchase, an upgrade, or replacement, insight into the ERP life cycle — and defining your strategy — help maximize cost savings and results. We explain.
Enterprise resource planning (ERP) software and other enterprise applications are the central nervous system of your organization. An integrated software suite, ERP applications connect functions, power efficient business processes, and form the foundation for advanced technologies like AI, automation, and analytics. Properly deployed enterprise applications arm you with the data your organization needs to help you make strategic and operational decisions to minimize risk and improve competitiveness.
Whether you’re considering purchasing ERP software for the first time, or upgrading or replacing your current solution(s), understanding the life cycle — planning and roadmapping, selection, implementation, optimization — helps maximize cost savings and results. ERP projects are complex, and decisions impact an organization for years. Meeting your objectives depends on having a plan and leveraging best practices, structured processes, and strong governance throughout all stages of the ERP life cycle.
Defining your ERP strategy and roadmapping
Before you embark on any ERP or enterprise application project, you need to determine your business objectives, key requirements, and the justification for the initiative. How does the work fit into your organization’s overall digital strategy? What does the current state look like — data, business processes, integrations, what’s working well, and what are the pain points?
Then, envision and map the future state. What do you want your ERP to do for your organization? Given your strategic goals, what functionalities and technical requirements will you need to retain or add? As the capabilities of enterprise applications grow, how can you integrate and streamline them across functions? Keep in mind that often an organization’s current ERP software can be optimized; depending on the outcome of your planning process, you may not need a brand-new solution.
Key to the planning and roadmapping phase, and to all ERP life cycle phases, is internal alignment. Enterprise software initiatives should be driven by the executive team, with support throughout the organization for strategic goals, direction, and established decision-making processes.
Since ERP projects aren’t turnkey — a common misconception — they require your best and brightest talent. Establish a core project team early, with all functional areas represented. Identify roles and responsibilities. Elicit multiple perspectives to inform planning and decision-making.
Any key issues identified during planning and roadmapping should then be translated into a comprehensive requirements list. Establish selection criteria and procurement strategies. Open bid? Request for proposal? Cooperative purchasing agreement? Are you pursuing one application or taking a best-in-class approach?
As you work toward next phases, don’t overlook other critical needs, such as project management, change management, testing, training, and risk management.
ERP selection
With decision-making processes and evaluation strategies established, you’ll need to assess several factors: vendor viability, functional fit, implementation approach, and back-end technology — cloud or on-premise, personalization and configuration flexibility, reporting tools, and more.
Product demos are crucial here. Invest time to prepare demo scripts to ensure consistency in evaluation criteria. You want to take ownership of this process, so that product walkthroughs add value and reflect the organization’s specific requirements — not just the bells and whistles the vendor wants to show you.
Next, you’ll need to undertake a thorough contract review process, with particular attention to scope, implementation services, pricing and payment terms, and service level agreements. Perhaps a vendor agrees to help with data migration, for example, but the scope of work won’t get you as far as implementation requires. Experienced outside experts can be invaluable in identifying issues that might otherwise go unnoticed.
Cost is a critical factor in ERP selection, from licensing and subscription fees, implementation costs, and data conversion expenses to training, internal labor, and other indirect costs. Vendors won’t itemize these the same way — you’ll need to normalize all costs to understand the total cost of ownership over a five- to 10-year period. Only then can you make an accurate comparison.
ERP implementation
Enterprise software projects take months, even years, to implement and stabilize depending on scope and complexity. Successful implementation — a solution that enables your organization’s strategic goals many years into the future — requires meticulous implementation planning, execution, and go-live.
Within the governance and decision-making frameworks you’ve established, implementation should hew to the requirements and expectations identified in earlier phases. Beware of budget and scope creep and project teams working in siloes.
While your vendor or implementation partner will bring their methodology, you’ll still need to provide significant resources — typically 50 to 100% of each involved staff member’s time. Also consider establishing a project management office (PMO). The PMO is responsible for measuring and coordinating project execution and plays a critical role in enabling implementation success. A common pitfall is to underestimate the commitment it takes to execute on strategies and implementation plans — ensure you assign the right resources to your PMO.
But simply making people available isn’t enough. Involve them in implementation work, and make sure they understand their role in the mission. Include owners of all functional areas, and prepare them to vet configuration options, consider impacts on the rest of the organization, and make decisions. Internal team members who know the organization inside and out are most likely to design the most effective processes.
It’s easy to stay focused on the technical and operational aspects of implementation, but change management throughout this stage is paramount. Be prepared for resistance; you can invest in the best enterprise software, but without strong change management, decision-making and, ultimately, user adoption, suffer.
ERP optimization and continuous improvement
Like other areas of your organization, enterprise applications should run on a continuous improvement cycle. Best practice calls for putting the backbone in place first, a minimum viable product without many extras; the more you try to implement, the more complex the project and the harder it is to manage. Carefully defining the initial scope of ERP implementation improves the likelihood of success.
Rather than trying to do everything at once, focus instead on integrating data flow, where reasonable, throughout the organization and building competence to design, configure, and test. This way, you can continue to roll out new processes as you identify improvement opportunities and use cases for advanced functionality long after go-live. Define KPIs (key performance indicators) for measuring efficiency and effectiveness and continually consider how new business opportunities might impact your ERP and overall IT and digital strategy.
Wherever you’re starting, consider working closely with objective third-party experts who can perform an ERP assessment and based on your organization’s unique situation help you navigate the complexity of your ERP project — planning and roadmapping, developing effective demo scripts and coordinating selection, guiding your project management office during implementation, helping you identify improvements to optimize your current enterprise software stack, and more.
Set a strong foundation from ERP planning and roadmapping to optimization
Enterprise projects can test many aspects of an organization. Internal alignment, technical competency, stakeholder engagement, governance structures, decision-making processes, and the right third-party expertise — these are critical at all stages of the ERP life cycle. And yet many organizations find they’re lacking the experience, horsepower, and confidence to carry out a successful ERP initiative. Drawing on outside expertise can help you assess current state and plan and roadmap toward future state in alignment with your business goals.
And while decisions for enterprise software have lasting impact, you can course-correct.
Over time, your organization, its business needs, and your current enterprise applications will change. That’s the beauty of the enterprise application life cycle; wherever you are, you can always decide the best path forward by beginning the cycle anew.
