Minimize ERP Risk

Board of Directors and company executive leadership teams are rightfully nervous and risk averse when it comes time to replace or implement a new ERP platform.  While ERP platforms are necessary for efficient and automated operations that scale across locations, the complexity and resource requirements required for successful implementation are daunting and intimidating to most every company…but especially those who are small or mid-size.  Ironically, these smaller companies are those who most benefit from modern ERP platforms — because they can take advantage of the automation, best practice processes, scalability and efficiency to allow them to achieve even higher growth.  However, contrast that opportunity with challenges that include (1) a typical lack of internal IT experience with ERP projects combined with (2) business challenges allocating internal SME resources to these kinds of projects at 50% or greater capacity due to the fact that those SME’s also happen to be running the business day-to-day!  It is no wonder minimizing risk is one of the most important aspects of ERP governance for experienced boards and executives. 

As a CIO leader I have led ERP implementations in Europe, Brazil, Australia, and the USA.  They have varied in size from $1.5M all the way up to $110M in size, while including both on premise and cloud solutions from such vendors as Oracle, Sage, NetSuite, Infor, Peoplesoft, and even niche industry solutions like Banner or FAMIS.  Risk mitigation strategies are surprisingly common across ERP projects, regardless of size and chosen software vendor.  Below are my top risk mitigation strategies that your executive leadership and Board can employ to radically reduce the risk for your ERP implementation.

  1. The implementation partner and internal team members are more important than the technology – most ERP projects focus too much on evaluating the technology to see if it fits the requirements of the business. While that is very important, I have found that the most important success criteria to any ERP projects is the quality, experience, culture fit, and % dedication of the human resources assigned to the project.  This includes the key team members at your vendor implementation partner, such as the Project/Program Manager, ERP module experts, ERP configuration/developers, and Testers.  Interview these people like you were hiring them and do not settle for anything less than the best fit people. It is worth starting the project late to get the right partner team in place.  Equally important is the willingness to assign our best internal SME personnel to the project at a minimum of 50% dedication. Your best resources will ensure you get a product that meets your needs, and they will give their best to ensure it is successful, just like they give their best in day-to-day running of the business. More importantly, your best people are usually the most knowledgeable and the most flexible at solving problems quickly…a trait required for ERP success because you will be solving problems that come up throughout the entire project.  For internal SME resources, do not forget to align their annual incentives with ERP success, and help them figure out backfill or delegation opportunities to ensure they can commit the required time.
  2. Performance test early, often and throughout the configuration/customization process – ERP software is big and complex, and you should not expect everything to be optimally performing. Vendors often do not improve specific module performance until sufficient customers complain, or they sadly roll out new features that degrade performance. This happens with the best vendors.  When you combine this problem with adding configuration and customization complexity to business processes automated by the ERP, you have a recipe for introducing performance problems throughout the ERP system. The good news is most performance problems can be solved, either by changing the configuration/customization, tuning code/queries, or by pushing the vendor to fix things.  The bad news is if you wait till late in testing to find performance problems, you likely will not have time to remediate them before going live, thereby leaving you with the bad alternative of either delaying the project or launching with known performance problems.  I encourage you to report any performance problems found during demo/requirements gathering to the vendor and push them to fix them early in testing.  I also encourage you to mandate that your ERP implementation partner not only do unit testing of any configuration/customization changes, but also do performance testing to ensure these changes don’t negatively impact performance.
  3. End to end testing with common and edge case scenarios is the most important testing – too many companies perform only department testing, and often with what I call ‘happy path’ scenarios.  Then they are surprised when data and processes do not flow seamlessly between all the departments required to run the entire operation.  Certainly, department testing is important, but gather your SME’s together in conference rooms for as many days as is necessary to do full end to end testing.  And make sure they bring both ‘happy path’ test scenarios, and edge-case scenarios for things that cause problems today that you want to ensure work in the new platform. 
  4. Work on the hardest and most complex business processes early in the project – strangely many companies prioritize the easy and simple ERP work first. They forget that the difficult processes require the longest time to figure out, and worse, if you leave them to the end, you often run out of time to finalize, test and performance tune these areas.  This always leads to missed dates and big problems.  If you prioritize these difficult items early in the project, you will have sufficient time to finish them if you unexpectedly run into difficulties configuring/customizing or testing the system to support these difficult areas.  Additionally, remember that you can often throw more resources at easy items if these get time-crunched at the end of the project, but that never works with the difficult items.
  5. Clean up your data first, not last – it is remarkable how often bad data causes delays in projects, usually because the clean up is not prioritized early enough to ensure the data is ready for testing. If you want to maintain your project timelines, prioritize cleaning up your data at the start of the project, not in the middle or end.  Equally important is make smart decisions on what data to convert…and, be honest, if it is really bad data, don’t convert it.  Would you buy a new house and bring over your garbage to fill the house?  No system runs well on bad data.
  6. Use Automated Testing to test integrations – I have found that one of the most problematic areas for ERP failures is when you integrate other systems to the ERP platform and exchange data. These integrations, if bespoke, often cause errors, bad data, and workflow problems. The best way I have found to ensure this does not happen is to hire/contract solid automation testing resources to build automated test harnesses that test thousands of test cases, automatically, to ensure the integration works properly.
  7. Ensure tax software is a primary focus – taxes are complicated, and integrating with tax software, the right way, is difficult.  Getting all the tax information setup, acquiring tax exempt certificates from customers, and testing tax integration with quotes, orders, PO’s, and invoices is complicated work.  Make sure you have resources working on this as if it is a critical path item for the project…because I guarantee it likely will be.
  8. Do not rollout other tech initiative in parallel with your new ERP – too many companies try to roll out new software along with the ERP such as a separate SFA/CRM platform, a new mobile field platform, a new customer or partner portal, etc.  The problem is that the ERP is hard enough to get right and adding additional a large scope parallel initiative dooms one of them from the start.  I guarantee that one of these projects will not get the resources and attention it needs, and it will likely fail to either work, be on time, or it will cause problems with integration to the ERP.  Instead focus on the ERP and then do a phase 2 to implement these other tech initiatives.  This will help ensure they both are more likely to be successful.
  9. Get your users involved in UAT testing, because that is the best training – if you want to ensure that your users know how to use the ERP once it’s rolled out, get them heavily involved in UAT testing.  By the end of UAT you will have a core group of users that intimately knows the new system and can serve as SME resources to help everyone else in the company by answering questions once the system is live.   You still need broad user training, of course, since you cannot involve everyone in UAT testing.  But push to involve as many users as possible in UAT testing…you will end up with quick adoption of the new platform once it is live.
  10. We all know it…adopt the ERP workflows, and resist urge to customize – everyone says they will not customize the ERP because they want to adopt the built in best practices, but that gets slowly chipped away during the project until suddenly you are customizing 30, 40 or even 50% of the workflows.  This is a recipe for disaster, and what this really tells you is either (a) you picked the wrong ERP platform, or (b) your SME resources are not willing to change and just want to do things they way they’ve always done things.  Combating this tendency takes very strong leadership that puts in place processes to review every customization request and reject those that do not have clear business return on investment.  A key tip to help reduce customizations is to require your teams to prepare small business cases for every customization, while also providing alternatives that would allow them to still get business done without the customization.

If your leadership and board of directors ensure these risk mitigation strategies are employed at your organization you will significantly reduce the risk of any failures with your ERP implementation. There are no guarantees in life but applying proven risk mitigation strategies gives your teams and your company a fighting chance to be on time, on budget and successful!

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