How to transition from older legacy system to the ERP system? What are the best practices of ERP implementation? We took a look.
ERP implementation is a complex project, which involves many business processes and causes many changes in the activity of corporation. For this reason, it is likely to be difficult to deploy. The organizations suggesting an ERP system implementation need to elaborate a clear plan that will guide them through this process. There are different strategies of ERP implementation, and choosing the right one is important for the success of the project. Let’s have a quick look at these strategies before going into each of them more deeply:
- Big bang – The new system goes live at once. All users migrate to the new system at the same time.
- Phased rollout – The transition happens in phases. Users move in a step-wise manner.
- Agile – The core is to continuously design, test and implement smaller parts of the system, and then move on to the next part. It provides many possibilities to receive feedback and to verify if the ERP software is meeting the requirements of the company.
- Waterfall – Each step flows seamlessly to the next one.
- Parallel – New and old system are functioning at the same time. Users become familiar with the new system while working on the legacy system.
Big Bang: Sink or Swim
If the big bang approach has been chosen, the ERP implementation is carried out in a single moment. All modules of the new system are installed at the same time and the legacy system is switched off. It is the point of no return and the old system is not used anymore.
This approach contains greater risk than the other approaches do. If one element fails, it puts at risk the other components of the system and the whole business activity. Even after complete testing, there is a possibility that the system won’t function properly after the go-live. This approach also puts under strain the IT department, which must be ready to deal with lots of issues within a short time.
But this strategy saves time and money and does not require any temporary interfaces to be used during the ERP implementation. The changeover period is reduced to the minimum and after it has succeeded (if it has) the enterprise can continue its normal functioning.
“Bing bang” implementation of the ERP system is more easily deployed in small enterprises. It is also recommended in cases when time is precious. The big bang roll-out has several stages:
- Management preparation,
- System conversion,
- Users training.
Let’s bring this process to a sharper focus in the flow chart below.
After the release of the ERP system there is a catch-up period, known as initial dip phenomenon, when the performance decreases for a while because the users are struggling with the new system. Later the performance will increase again, but this catch-up period also needs to be planned to be able to solve the emerging problems.
Although this strategy has many advantages, the risk of failure is high. The process of implementation is intense and the entire organization is under pressure. In case of success, this approach reduces considerably time and money required for implementation. However, if it fails, more time and money are spent for alternative solutions.
Phased: Series of Small Changes
With phased strategy, the shift to the new ERP system is made in a scheduled sequence of steps over a period of time. This approach gives time to find solutions if anything goes wrong and also to temporarily return to the old system for the period while the problem is solved. It also offers a possibility to begin with the modules that is the most important to the organization.Organizations with ERP have 91% customer retention rate. Click To Tweet
If the organization has many sites, the phased approach offers the opportunity to choose a pilot site and then implement the new ERP system to the other sites. Large multinational companies use this strategy too: they create and test a core solution with usual functionality and processes and then deploy the localizations in phased implementation of this solution. The small organizations may not need a complex stepped schedule, but phasing might be beneficial for them too.
Training happens stepwise; during each phase, the employees acquire and accumulate experience. The process of implementation is smoother and the acceptance is improved. Changes take place in each department, as an appropriate step is implemented, and not in entire organization. There is a possibility to make conclusions from previous phases and adjust requirements. The phased approach makes it easier for IT department to fix or complete the details at each phase.
After the first phase has been realised, the first business benefits can be obtained before the entire solution goes live. With phased approach, you may need temporary interfaces to shift from the old system to the new one. Reducing the quantity of these temporary solutions will put down the costs of implementation.
Steps of phased implementation:
There are three different ways to achieve phased implementation:
- By module – This strategy is the most common. One ERP module is implemented at one go. Most commonly, the first modules are those used for everyday operations and main business functions. Though, there might be good reasons to begin with the easiest or the less critical modules.
- By business unit – The ERP system is implemented in one business unit at a time.
- By geography – This approach is frequent for companies with multiple locations or independent departments. The ERP implementation is carried out at one company location at a time.
Phased approach involves less risk and offers a possibility of corrections and adjustments as it gives more time for implementation. If the first step was successful, the process of ERP implementation has more credibility within the company.Need help with ERP implementation?
Agile: A Sprint to Success
It is difficult to manage long-term projects, and agile methodology is aimed to solve this problem. It divides the project into short periods called sprints. Each sprint has a phase of testing and adjustments, allowing to retrieve existing issues and to resolve them right up front, before it becomes too expensive and time-consuming. It gives the possibility to quickly adapt the design and implementation to the business changes – the possibility the other approaches do not provide.
The first step of agile strategy is to collect all necessary information and to prepare the project. Then the sprints are implemented. As any other approach, agile methodology has its advantages and disadvantages. It is well suited to meet dynamic requirements and involves the key users into the project management allowing to avoid misunderstandings.
The use of agile methodology reduces the costs, brings more value and addresses new requirements and changes without impacting the schedule of the process.
Waterfall: Cascade of Changes
According to the waterfall strategy each step flows seamlessly to the next one, in a linear progression, like a waterfall. The client’s requirements are gathered and communicated to the design team. But besides of that the client does not participate in the process of elaboration and ERP implementation, which can result in discrepancy of expectations and needs.
After the requirements have been approved, the plan and the design of the future ERP system are prepared. The plan sets the goals and milestones and the design ensures that all specifications are fulfilled. After the plan has been realized, the system is tested and checked if it meets the requirements. The following diagram demonstrates all the steps of this approach.
This approach is aimed at static systems; in case if requirements change or new ones appear, it is not able to give quick response to these changes. They will be put off until the following phase and then it could be too costly or difficult to make significant adjustments. As a result, there is a risk that the end product is functioning properly but does not meet the requirements any more. Here are other advantages and disadvantages of waterfall strategy:
Although the waterfall strategy is not fit for dynamic environments, it works well in static environments. It is stepwise and traditional, and can bring many positive results to your company.
Parallel: More Moves, Less Risks
The less risky strategy is to implement the new ERP system by any approach while still running the legacy system. The users can learn to use the new system and perform their regular activities with the old system at the same time. When the new ERP system is well in place, the old system is switched off.
On the other hand, this approach involves higher costs, longer implementation period and, of course, more efforts as the users have to enter data into both systems. However, sometimes it is reasonable: if the risk of another approach is not paid off, it can turn even more costs and time-consuming than the parallel adoption.
Which Approach to ERP Implementation Fits You Best?
There certainly is no unique answer to this question. The best strategy of ERP implementation depends on your business processes, goals, requirements and expectations, as well as resources you dispose for this process. Sometimes it is reasonable to combine different strategies, for example, begin with big bang for the most important modules and continue with phased implementation of other parts. Whichever you choose, with careful planning and preparation it will lead you through successful ERP implementation.
Remember this:What ERP system to choose & how to implement it?