Six Pitfalls To Avoid When Modernizing Your ERP Environment

I can’t name many companies in the Fortune 500 who have not started or completed an ERP modernization initiative. Simply put, these are table stakes. You’ve got to have a modern ERP system.

As more organizations seek to better manage their business functions within a centralized and integrated system, the global ERP software market is projected to grow significantly according to many industry analyst firms.

That’s easy to understand. As businesses around the world entered pandemic-related lockdowns a year ago, it became vital to invest in a technology like ERP, particularly during “troubled times” when innovation and agility are even more important to survival.

However, as critical as ERP systems are to modern business, they don’t age well. In fact, we need to recognize that older ERP systems may even wind up hobbling an enterprise as an organization outgrows its original ERP implementation which was designed to meet the needs of a very different business.

A company may have started out in mining but then turned into a chemical company or started out as a manufacturing company and then moved into contract manufacturing. Over the decades, companies regularly change, either organically or through acquisitions and divestitures. The upshot: they’re left in dire need of a modern ERP that will be on a common platform that allows integrated applications to communicate with each other.

ERP implementations tend to be big, involved and roll out over a long time. Still, this is a mission-critical necessity that’s strategically important to the enterprise. Unfortunately, CIOs, technology and business leaders don’t always get this right (which may contribute to explaining why their average tenure is fewer than 5 years.) ERP modernization is almost synonymous with SaaS Cloud, iPass based integrations and mobile capabilities.

But that leaves out a few important considerations. Here’s what you need to think about and plan for:

• Start with a clearly defined ROI. Modernizing your ERP sounds like a great idea. ERP transformations can be technology-led but should always be business-driven. Collaborate with business leaders to define a clear ROI and measurement criteria with measurement and reporting milestones. ERP modernizations should be about driving value and being future-ready as opposed to software updates.
• Communicate broadly and clearly. Communicate your ROI requirements with your software vendor, your systems integration partner, your business teams and your broader user base. This will foster a common goal everyone can get behind. It will also help people clearly understand choices between, let us say, implementing a world class ERP versus implementing a “fit-for-purpose” ERP. As an added benefit, this will have the effect of involving all stakeholders in delivering the ROI as opposed to letting it all revolve around a single point of failure. This is one of the first and very important step in adopting the new solution and a new set of streamlined business processes.
• Ignore business best practices at your peril. Make sure you collaborate with your global line of business leaders. Otherwise, your progress will be hamstrung by business managers who demand a say in the spending decisions without being fully educated about what it’s going to take to properly carry out an ERP modernization. The design should always be focused on modern best practices, a push for retail solutions as opposed to a ‘special order’ and must include design considerations for integration and reporting.
  By standardizing business processes, you can unleash the promise of SaaS where a single code line runs for the entire installed base. A bug for you is a bug for all. It might sound like a lot. But while ERP modernization initiatives are costly and complex, when done correctly, the benefits will pay for themselves many times over.
• Understand your commitment for SaaS and PaaS deployments. A modern ERP is integral to making good on your cloud/ SaaS and PaaS deployments. Moving to the cloud doesn’t mean you can fire your IT department and put everything on autopilot. You still have contractual commitments and also need to be compliant with software patches – especially if you have more than one application running in the cloud. Prepare so that there’s adequate testing of updates in PaaS and SaaS, including compliance patching and testing every 3 months (or more frequently in the case of hybrid, multi-vendor cloud SaaS enterprises).
• Come up with an MDM (master Data Management) strategy. This is an area where most implementations get delayed or exceed budget. This needs to be treated as an important track by itself with adequate cross functional representation from business and IT.
• Map out a clearly defined support structure. Going live is only the completion of the first step in your modernization journey. The next steps involve keeping the system compliant with quarterly update testing and patching (and yes, you are responsible for some patching of the platform.) You also need to make sure to continuously tweak business processes and reporting needs as the new implementation settles down and business users start to learn more about it.

There is a reason this is such a large industry and ERPs are powerful mission critical investments for businesses. When done right, ERPs have the power to scale businesses, provide insight to business data and intelligence like never before and increase efficiency that can be the difference between thriving or perishing in today’s fast-paced environment.

Join Debkrishna at the virtual Hitachi Social Innovation Forum technical session, The Art of ERP Done Right – A Customer and Industry Practitioner Lens, to learn how to execute ERP the right way from a customer executive and an industry practitioner. Register here.

Debkrishna Acharya is Vice President of Digital Enterprise Business at Hitachi Vantara.