You’re considering implementing a new ERP system. It’s a big investment – typically 1 to 3% of a company’s annual revenue. However, the potential payoffs are substantial. A powerful and well-integrated ERP system has many benefits, including:
- A single source of truth due to standardised, centralised and more secure data
- Better visibility to make faster, well-informed business decisions
- Boosts in efficiency and productivity through repetitive task automation
- More accurate reporting and forecasting that allows you to track KPIs and compare department performance to see what needs attention
Organizations report a wide range of benefits from updating their ERP systems. Nearly 78% improved productivity, 77% removed silos and 75% improved compliance. Among organizations that performed an ROI analysis before implementing a new system, 83% said the project met their ROI expectations one-year post-implementation.
As many benefits as they bring, ERP implementations aren’t to be taken lightly. There needs to be complete clarity on goals and on the level of support required to ensure the system meets them.
6 Questions to Ask Pre ERP Implementation
Before diving headfirst into an ERP implementation, we recommend asking these six questions:
1. Do you have clearly defined business goals that an ERP system will support?
Successful implementations begin with strategic alignment, not technical specifications – that comes later. Start with the overarching business objectives, such as increasing efficiency and productivity with automation or gaining real-time data visibility, rather than immediately honing in on specific software features.
Once high-level goals are established, you can categorise desired features into ‘needs’ and ‘wants’ – functions your business can’t operate without, and ones that would improve workflows but aren’t 100% essential. By prioritizing your most critical business goals first, you ensure the project delivers value where it is needed most.
2. Have key stakeholders been identified and engaged in the ERP planning process?
ERP implementation failure is rarely due to technical issues – it’s usually a people-and-processes issue. A lack of executive commitment is a common reason why projects fail to deliver the expected ROI. Among companies that successfully completed an implementation, 77% cited institutional leadership support as the most critical success factor, closely followed by effective communication with all stakeholders.
Another common pitfall is treating an ERP implementation solely as an IT project. While your IT team and external technical partners play an essential role, it’s a company-wide initiative that requires a broad range of expertise, including an executive sponsor, a project manager and functional leads from all departments affected by the change.
Then there’s the matter of resource allocation. Key stakeholders can’t manage a full ERP implementation if they’re still expected to perform their typical day-to-day tasks. Identifying stakeholders early allows you to backfill their role while they’re dedicating more time to the project.
3. Is there a defined budget for the ERP project, including software, implementation, training, and support?
To create an accurate budget for an ERP implementation, you need to look beyond the sticker price to the Total Cost of Ownership (TCO). Implementation costs can exceed software costs – industry benchmarks suggest that for every dollar spent on software, companies should expect to spend $2 to $5 on implementation.
A sufficient budget should also account for hidden costs associated with ERP implementation, including consulting fees, customizations, data migration and user training. Organizations that prioritize change management are three times more likely to meet their objectives. Hidden costs like these are what cause ERP budgets to overrun. In fact, almost 75% exceed their allocated budget. That’s why including a contingency buffer ensures the project doesn’t fail before the finish line.
4. Are your current business processes well-documented and standardized?
Businesses are upgrading their ERP systems partly to embrace automation, which requires well-documented, standardized business processes. After all, software hates inconsistency. If your current processes are fragmented, a new ERP system will only automate the mess. Many companies rely on ‘tribal knowledge’ – long-term employees who understand the unwritten rules of how things get done. But this is a significant risk factor during an ERP implementation.
Documentation is the bridge between tribal knowledge and a functional ERP system. Standardizing your processes ensures that workflows can be followed by all users without relying on specific individuals. The pre-implementation phase is the best time to audit your current workflows, allowing your organization to move on from outdated legacy habits in favor of more streamlined processes.
5. Have your teams identified pain points and inefficiencies in current workflows?
Executives often see the end result of a process, but the people conducting the daily workflows see the friction that slows it down. To find the root cause of inefficiencies, you must get the process users involved. Without this vital feedback, you risk fixing a problem that doesn’t exist while ignoring a bottleneck that is costing you time and money.
When identifying these pain points, try to quantify them. Rather than concluding that “invoicing is slow”, find hard numbers. For example, “an employee spends 10 hours per week manually invoicing, costing the company $X per year.” Assigning a price to these pain points helps you prioritize the ERP functions that deliver the fastest ROI.
6. Have you assessed integration needs with other software?
While ERPs are certainly comprehensive, they don’t exist in a vacuum. To create the ultimate single source of truth, you must identify which applications your new ERP needs to talk to, including but not limited to your CRM, HR platform or document management system.
Integrating these tools creates the single source of truth you’re looking for, extends the ERP’s functionality, and enables new, streamlined workflows that save time and money. However, good integrations require good integrators. An imperfect integration means you lose many of the benefits of integrating in the first place. Instead, you’ll spend more time fixing errors than making efficiency improvements.
Is Your Business ERP Implementation-Ready?
Many businesses see significant ROI from their ERP implementations. However, these returns are only possible if you bridge the gap between the software’s capability and operational readiness. The six questions explored in this article provide a good starting point for your team, and answering them helps you avoid the tribal knowledge issues and budget overruns that stall many implementations.
Our ERP Readiness Assessment provides a 10-question framework to help you benchmark your preparation, allowing you to pinpoint exactly what work needs to be done to ready your business for a transformative ERP implementation.
Identify potential roadblocks before the project begins. Take our ERP Readiness Assessment to ensure your people, processes and budget are aligned for a successful rollout.