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ERP Implementation Risk Management: Useful Tips & Strategies

According to Investopedia, ERP is the “glue that binds together the different computer systems for a large organization.” Well, we can’t be any more clear about this. Yet, glue is quite a tricky material that necessitates a particular approach. While one glue may harden fast and provide a long-lasting effect, another needs specific conditions to ensure the required result. The same with ERP. This business management system can empower your company with endless possibilities. Nevertheless, this statement is valid only when ERP is appropriately implemented.

How is it possible to conduct ERP implementation smoothly? Which factors should be considered to ensure the success of the ERP system implementation? Which risks are typically associated with this complex process, and how can they be avoided? So many questions… And we’ve managed to answer them in one article. Interested? Then, stay with us, read on, and expand your horizons with helpful risk mitigation tips.

ERP Implementation: Here, the Process Is Everything

It’s impossible to avoid risks without an in-depth understanding of the ERP implementation plan. For this reason, we’ve prepared a brief step-by-step guide based on Smart Tek’s ERP services in order to lead you through this complex process.

The expert team as an engine of the process

We believe that great work starts with great people. For this reason, choosing the right professionals is the first step of our ERP implementation process. We select the talented experts with the needed level of knowledge and experience and engage ERP consultants to ensure the implementation process will run smoothly.

ERP implementation management plan

There is no doubt that a good plan is a key to success. Hence, we plan each aspect, including budget forecast, implementation schedule, training timeline, testing requirements, and go-live activities, to deliver successful results.

Data migration

We’ve prepared and planned as much as we can, so now it’s time to get down to the process of shifting your business over to the new ERP. In a nutshell, this process includes mapping legacy data to new database fields, data cleansing and verification, database setup, testing and validation of legacy data, and data transfer to the new system.

Training ERP user base

The proper user adoption is an inseparable part of each successful project, so ERP implementation is not an exception. Role-based training, well-established feedback, and clear communication – we utilize all of these methods to provide trainees with a profound understanding of the ERP system we implemented.

Go-live activities

This is what we’ve been striving toward: the day ERP implementation goes live. Thanks to such well-planned activities, we are prepared for any potential issues or challenges that may emerge. We conduct pre- and post-go-live testing, check networks’ speed & reliability and identify metrics for project evaluation.

Evaluating results

Finally, it’s time to measure the success of ERP implementation. Does the project meet the client’s budget requirements? Does the ERP system satisfy their business goals? There are plenty of questions it’s necessary to ask about ERP implementation, but all answers will definitely be positive when you work with Smart Tek.

Great, you’re already aware of the ERP implementation process. Nevertheless, it’s not that easy as you might think (or hope) it will be. That’s because there are several key issues you could potentially face while implementing an ERP system into your workflow. To keep you from running into these common difficulties, we’ve grouped them into several categories.

4 Major ERP Implementation “Risk Groups”

1. Owners of the company

It’s not a secret that ERP implementation requires significant financial investments, which will bring in a return no earlier than in a year. Typically, owners’ risks lie in the financial sector. By deciding to implement the ERP system, they are actually signing up for a significant restructuring of work in the company in the near future, which will most likely require substantial financial resources.

2. Company’s management

The ERP system makes the company’s management processes more transparent, which results in the need to restructure its methods with optimizing various business processes, which in turn may require changing the employee motivation system, introducing new work technologies, etc. Top managers’ main risks are associated with the fact that an ERP implementation project may show worse financial results than planned.

3. The company’s employees involved in the implementation

This group is responsible for developing the requirements for a specific ERP solution and working with external consultants. Additionally, when the system is introduced, they are not relieved of their primary responsibilities, which can adversely affect their productivity at work.

4. External consultants that help implement an ERP system

Unlike the company’s employees, external consultants have limited time resources for the implementation of this project. Hence, any time delays caused by the customer directly affect the effectiveness of their activities.

As we’ve described 4 key risk groups, it’s time to consider the potential risks and methods to reduce them in more detail, highlighting the essential aspects that each of these groups should pay attention to.

The Most Common ERP Implementation Risks

1. The implementation will not have the beneficial economic impact

Typically, this risk is a consequence of two major mistakes in project planning:

  • The system implementation does not correspond to the goals of the implementation project.
  • Poor project management activities.

How to minimize this risk

Fortunately, these risks can be easily mitigated. One of the best strategies to solve this issue is to outsource a project audit and hire project management consultants to make employees’ training more efficient and therefore get a beneficial financial outcome in the future.

2. Short-term results

Owners risk facing this problem when the implementation of the system is delayed for a long time because of organizational changes, both internal and external. Let’s explain it with a representative example. For instance, during the process of ERP implementation, a company may expand its expertise by adding more services and involving new departments, etc. As a result, the system will require revision or even transformation in the software platform itself. Therefore, a business management system won’t be 100% efficient in the long-term perspective unless it’s updated.

How to minimize this risk

To avoid this risk, it’s necessary to take into account the company’s development strategy at the stage of project planning. Moreover, it would be a good idea to consider opportunities for adjusting the system and choose a software platform with the ability to customize, configure or add new functional modules.

3. Implementation may slow down current business processes

In fact, it takes time to integrate ERP into the company’s organizational structure. Unfortunately, if business processes were poorly organized, it would be difficult to optimize them quickly with ERP. This happens when employees forget about their current responsibilities and plunge into the implementation of a new business management system.

How to minimize this risk

First of all, top management should provide workers involved in ERP implementation with well-established responsibilities and obligations. This crucial measure will result in sufficient positive experience associated with implementing ERP solutions.

4. Loss of current management tools because of their replacement with new ones

After the introduction of the new ERP system, some methods familiar to top managers risk being inefficient anymore. For example, if earlier the head of the particular department succeeded thanks to his organizational talents, now he will be more responsible for comprehensive analysis and improvement of labor efficiency. That’s because the ERP system will take over the lion’s share of the organizational work.

How to minimize this risk

Managers can reduce this risk by actively participating in introducing the system in their departments, simultaneously learning new management tools.

5. Conflicts with management

On the one hand, each team member participates in decision-making, representing the interests of their department. On the other hand, each worker acts according to the interests of the company as a whole. In some cases, these interests can contradict each other, so employees risk finding themselves between two fires. Furthermore, a company’s initiatives like ERP implementation may be negatively accepted by some workers that aren’t used to working with such business management systems.

How to minimize this risk

To avoid this adverse situation, HR managers can arrange systematic meetings with diverse departments in order to solve emerging conflicts at the early stage.

General Tips on ERP Implementation Risk Management

Taking into consideration all of the above, it’s clear that the risks associated with the implementation of an ERP system may vary for different parts of the company. For example, the chance that the project will turn out to be more time-consuming than previously assumed is relevant to the owners of the company or its top management. At the same time, the danger that the implementation of the system will require a significant increase in the level of qualifications of employees is not of fundamental importance for consultants, owners, and even employees involved in the implementation but may be essential for top managers and employees of the company who are not involved in the implementation.

In general, it’s possible to minimize risks by following several vital tips that we managed to formulate thanks to our long-term experience. Hence, key factors contributing to the success of the ERP system implementation are as follows:

  • a clear understanding of the goals and objectives of the project;
  • taking into account the specifics of the business;
  • a realistic yet aggressive implementation plan;
  • the engagement of the most qualified specialists of the company;
  • selection of the “best” partner for the implementation of the system;
  • careful planning of migrations, interfaces, and reports;
  • informing the company about the project;
  • training the project team and users;
  • involvement of the company’s management in the project;
  • minimization of changes in the system;
  • achieving measurable results.

On a Final Note

According to Arnold Bennett, a famous English novelist, “any change, even a change for the better, is always accompanied by drawbacks and discomforts.” There is no doubt that risk-free projects do not exist. Any initiative is associated with some changes, and with change always appears uncertainty, which means that risks have to be taken. In this regard, avoiding risk in ERP implementation is therefore not an option. On the contrary, companies should focus on efficient ways to manage potential risks.

Notably, ERP implementation is a complex process that includes many changes, both functional and technological. Therefore, a predefined plan for ERP implementation risk management can ensure the success of the project.

What Are Your Next Steps?

In our article, we discussed some of the most common risks associated with the implementation of the ERP system. As we’ve mentioned earlier, choosing a trustworthy ERP Development, Implementation & Customization Company is one of the key factors contributing to the success of the ERP system implementation.

Fortunately, you don’t have to worry about this aspect as your steady software development partner, Smart Tek, will provide your business with top-notch ERP implementation and allied services. Just drop us a line and explore how seamless ERP implementation with minimized risks looks like in action.

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