Implementing an enterprise resource planning (ERP) system can be a complex undertaking thataffects many parts of the business. As with any major initiative, a carefully designedimplementation plan is critical. Dividing your implementation into phases, each with clearobjectives, can maximize your success.
In contrast, diving into an ERP implementationwithout first establishing clear project direction, scope and structure increases thelikelihood of encountering significant problems later.
What Is an ERP Implementation?
An ERP system integrates many functions across the business, such as financial management,human resources, sales and manufacturing, to deliver benefits such as increased productivityand efficiency. ERP implementation describes the process of planning, configuring and deployingan ERP. The process typically continues for a few months—and it’scomplex,because an ERP system supports and automates many different functions.
To ensure a successful implementation, the organization needs to carefully define itsrequirements, determine how to redesign processes to take advantage of the system, configurethe ERP system to support those processes and rigorously test it before deploying it tousers. Successfully navigating all those steps on schedule requires careful planning and astructured, phased implementation approach.
Key Takeaways
- Initial planning is critical, so develop a clear project direction, scope, andstructure. The initial planning phase, including discovery and setting clear objectives,is fundamental to the project’s success.
- ERP implementations are complex processes, and dividing the implementation into clearphases with specific objectives is crucial to maximize success and mitigate risks.
- ERP implementations phase planning should involve stakeholders from business functionslike financial management, HR, sales, and manufacturing to prevent and mitigatechallenges during implementations.
What Are the Phases of an ERP Implementation Plan?
A typical ERP implementation plan can be divided into six phases, each with specificobjectives. Every business is unique, so the phases may vary somewhat depending on thecompany, and they also may overlap. The six-part ERP implementation phase lifecycle includesdiscovery and planning, design, development, testing, deployment and support.
1. Discovery & Planning
What is the first phase of ERP implementation? This includes researching and selecting asystem, setting up a project team and defining detailed system requirements.
The project team will handle a broad range of roles related to the implementation, includinglaying out the project plan and target dates,ensuring adequate resources are allocated, making product and design decisions, andday-to-day project management.
The ERP project team typically includes an executive sponsor, a project manager andrepresentatives from the departments that will use the system. Involving senior managementis critical to ensure the project gets the resources it needs and to provide the backingneeded to implement change across the organization. The team also may hire an externalconsultant or ERP implementation partner to provide expertise in designing and configuringthe system. It should also include any internal specialists involved in implementing thesystem, such as a representative from IT and a report writer who will develop customizedreports for users across the organization.
One of the team’s early goals will be to develop a detailed understanding of currentissues, including process inefficiencies and requirements for the ERP system. If theorganization has previously developed an ERP business case, it may have already definedbroad business issues and goals for the implementation, which may include a faster financialclose, improved insight into operations or preparing for an IPO. These can be used to directmore detailed analysis, including documentation of existing workflows, and to focusdevelopment of the system.
The team may select and acquire an ERP system during this phase, as the organization developsa clear idea of its requirements. One major decision is whether to use an ERP system that runs on-premises or in the cloud. Foran on-premises system, you buy and install hardware and software in yourorganization’s data center. In contrast, cloud-based ERP is generally provided as asubscription service accessed via the internet, so it can be faster to implement andrequires fewer in-house IT skills.
2. Design
The design phase works from detailed requirements and an understanding of current workflowsto develop a detailed design for the new ERP system. This includes designing new, moreefficient workflows and other business processes that take advantage of the system.It’s important to involve users in the design phase, since they have the most intimateunderstanding of current business processes. Involving them in the design also helps toensure that they’ll welcome the new system and take full advantage of it.
Gap analysis can be used to identify process intricacies and unique quirks that may requirecustomization of the ERP software or changes to workflow or processes to more closely alignwith the ERP system itself. The team can present the gaps to its implementation partner orsupplier and ask them to identify potential solutions.
3. Development
Armed with clear design requirements, the development phase can begin. This involvesconfiguring and, where necessary, customizing the software to support the redesignedprocesses. It may also include developing integration with any of the organization’sother existing business applications that won’t be replaced by the ERP system. Ifyou’re using an on-premises ERP system, the organization will need to install thenecessary hardware and software.
In parallel with software development, the team should develop training materials to helpusers adjust to the new system. It also needs to begin planning data migration, which can becomplex since it often involves extracting, transforming and loading data from multiplesystems, each of which may use different formats and may hold duplicate or inconsistentinformation. The project team should determine which data to migrate in this phase, avoidingthe blanket migration of all historical data, lots of which is likely irrelevant. (See moreon data migration below.)
4. Testing
Testing and development may occur concurrently. For example, the project team may testspecific modules and features, develop fixes or adjustments based on the results, andretest. Or, it may test one ERP module whileanother is still in development. Initialtesting of the basic functions of the software should be followed by rigorous testing of thefull capabilities of the system, including allowing some employees to test the system forall their day-to-day activities. This phase should also encompass testing of the migrateddata and include introductory end-user training.
Most vendors can supply pre- and post-deployment tools to begin user training. But inaddition to vendor support, the organization should make good use of the training materialscreated in the development phase. There is real value in resources that specifically caterto your end-users’ day-to-day responsibilities.
5. Deployment
This is what you’ve been striving toward: the day the system goes live. Be prepared forpotential issues, since there may be a lot of moving parts and possibly some befuddledemployees, despite your best efforts to prepare them for the change. The project team shouldbe readily available to answer questions, help users understand the system and attempt tofix any issues. Your implementation partner should be able to help with troubleshooting ifnecessary. It may take time for users to adapt to the system and achieve the anticipatedproductivity gains.
Some data can be migrated ahead of deployment, while other information—such as currenttransactions—should be migrated immediately before going live.
Some organizations aim to deploy all the modules of the ERP system concurrently, while othersfocus first on specific high-priority modules or processes and add others later in stages.To minimize risk, some organizations also continue to run older systems in parallel with thenew ERP implementation for a time, although this can add to the overall project cost andreduce user productivity.
6. Support & Updates
Nurturing your ERP implementation after deployment helps to keep users happy and ensure thebusiness achieves the desired benefits. The project team may still be responsible for theERP system during this phase, but its focus will shift to listening for user feedback andadjusting the system accordingly. Some additional development and configuration may beneeded as new features are added to the system. New staff will also need to be trained onthe system.
If you have an on-premises ERP system, you’ll need to install periodic software updatesand may even need to upgrade hardware over time. If you’re using a cloud-based ERPsystem, your vendor may update the software automatically.
Video: A Guide to Planning Your ERP Implementation
ERP Implementation Best Practices
Simply creating a phased implementation approach doesn’t guarantee success. It’sequally important to follow ERP implementation best practices within each phase. Overall,best practices include:
Don’t underestimate planning. While it may be tempting to plunge intodesign and development as soon as possible, it’s critical not to rush the initialplanning and discovery phase. This phase should create a firm foundation for the entireimplementation project by ensuring that the project has high-level backing, operates with aclear plan and is allocated adequate budget and personnel.
Don’t underestimate support and training. Some project team membersmay feel that the deployment date is the culmination of the implementation effort and failto pay adequate attention to what happens afterwards. But for the system’s users, thedeployment date is just the beginning; it’s what happens afterwards that is criticalto the continued success of the project. It’s important to plan and allocate adequateresources to provide technical support, fix issues and provide updates. End user training isalso a significant factor here. Employees need to be comfortable using the system andfamiliar with any new workflows, particularly if an outside consultant will no longer bearound to help. Careful work in these areas will allow your organization to realize the fullbenefits of the system.
Plan data migration carefully. Organizations sometimes make the mistake ofsimply migrating all historical data to the new system. In reality, some of the informationin older systems may be obsolete or unnecessary. Is 10-year-old order information reallyvaluable? Does every supplier in your list still exist? The transition to an ERP system isan opportunity to clean up and rationalize the organization’s data, and it’sworth creating a clear plan for doing so. It makes sense to comb through legacy datacarefully, weeding out old customer accounts and looking for data inaccuracies.
Communicate. This is essential throughout all phases of the implementation.The team should make it a priority to regularly communicate to everyone in the organizationthe reasons for the ERP implementation, the goals and benefits, and what to expect at eachphase. Two-way communication is vital: The project team should listen carefully to userissues before and after deployment.
Implementing an ERP system may be one of the largest investments oftime, money and resources your company can make. And, it will only be as good as how youimplement it. Develop a strong plan and continue to review and optimize your businessprocesses after your initial ERP go-live date. This combined with gradually adding featuresand functionalities as you go will help you achieve a successful ERP product in the longterm.
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Choosing the Right ERP System
When considering an ERP and the challenges of implementation for your business, you shouldchoose one tailored to meet the specific needs and budget of your organization. Embracingbest practices from the outset, including clear requirements definition and ongoing support,is critical to staying within your timeline and under budget. NetSuiteERP offers a cloud-based solution that simplifies the deployment process,eliminating the need for a significant upfront investment in hardware and minimizingdisruption to accelerate your time-to-value.
ERP Implementation Phases FAQ
Which is the most difficult phase in an ERP implementation?
That depends on many factors, including how easy it is to implement your chosen system, butoften the planning and discovery phase is particularly challenging. It may be difficult toconvince people across the organization to commit the necessary time and funding, and toagree on a clear project timeline. Jumping into later stages of the ERP implementationprocess without a clear plan is a recipe for problems.
How can you avoid ERP implementation delays?
Take time to get the first phase right, including developing a solid estimate of timeframeand required resources. Planning an implementation timeline can be intimidating since thereare so many moving parts. Many projects fall behind schedule simply because the originalplanned timeline was unrealistic. Consider reassessing the timeline at key points in theimplementation to see whether it needs to be adjusted.
Are the implementation phases different if you use cloud ERP vs. on-premisesERP?
While the phases for each type of ERP system are the same, some of the activities within eachphase will differ. The most obvious difference is in Phase 1, when hardware is typicallydelivered and installed. This phase requires technology skills, as do later phases thatinvolve configuring and updating the system. The overall implementation time may alsoincrease if the organization is installing a system on premises vs. using cloud ERP.
How important is executive sponsorship in the early phases of ERPImplementation?
The importance of executive involvement in the project cannot be overstated. The ERP projectmay need to compete for resources with many other day-to-day priorities. A good executivesponsor—such as the CEO or CFO—can help make sure the project gets the supportit needs fromeveryone in the organization. Without executive sponsorship, the people involved in theimplementation—such as the project manager and departmental managers—may face anuphillstruggle.
What is ERP implementation life cycle?
An ERP implementation life cycle is the time it takes to deploy ERP software within yourcompany. The implementation life cycle includes multiple steps and processes, includingdiscovery and planning, design, development, support, deployment and training. Theimplementation timeline can vary depending on the complexity of your business. But thelifecycle usually takes six to 12 months.
What is the first phase of ERP implementation?
Discovery and planning are the first phase of ERP implementation. During this phase, aproject team will be formed to start constructing an ERP project plan. This plan shouldserve as a guide throughout the rest of the project. Initial meetings will also occur, anddocumentation will be developed as the team works to identify current issues and potentialsolutions. During the phase, the defined team should also research and select a system anddefine detailed system requirements.
