5 ERP integration challenges that COOs need to be aware of

ERP systems are designed to offer a broad spectrum of functionality within a single coherent application set. In fact, ERP integration with external systems is typically necessary to achieve a truly unified view of operations. Unfortunately, most organizations encounter hurdles when ERP integration challenges delay projects or cause technology initiatives to fall short of their full potential. To deliver the best possible outcomes, COOs should anticipate potential roadblocks and take proactive measures to mitigate these challenges.

This article addresses five ERP integration challenges that every COO should keep in mind when planning new initiatives.

Challenge #1: Data compatibility and quality issues

Data models vary significantly across business applications, making it difficult to map information from one system to another. A dedicated order-processing system that stores each customer's ship-to address as a standalone entity might be difficult to integrate with an ERP system that allows customers to have parent-child relationships. Address fields, likewise, often vary slightly from one application to another.

This problem is often compounded by data quality issues, including inconsistent formats, duplicate entries, missing values or data entry errors. The accuracy of CRM data, for example, typically erodes fairly quickly. Some systems enforce clear rules to maintain consistency, whereas others allow significantly greater latitude.

Legacy systems can make ERP integration even more challenging, storing data in obscure formats or in obsolete systems not designed to interact with modern APIs and database technology.

COOs can mitigate these problems by conducting rigorous data audits upfront, cleansing their data and implementing master data management. Establish cross-functional teams to work together on these initiatives, including data governance standards to ensure consistently high data quality going forward.

Challenge #2: High implementation and customization costs

When it comes to software implementation projects, budget overruns and late deliveries are not uncommon. Fortunately, it is possible to avoid these pitfalls by following a disciplined project management approach.

Start with a clear plan, including objectives and well-defined measures for success. Specify the project's scope, including, to the extent possible, which items are out of scope. Cascading change orders are a frequent cause of delays and overruns. Keep the project as simple as possible and limit scope creep by implementing a disciplined approach to change.

When it comes to software implementation projects, budget overruns and late deliveries are not uncommon. Fortunately, it is possible to avoid these pitfalls by following a disciplined project management approach.

Customization can also extend timelines and drive costs higher. This affects not only initial project costs but also the total cost of ownership (TCO). To mitigate this problem, prioritize out-of-the-box functionality and perform rigorous cost-benefit analysis. Collaboration with your CFO or finance team is essential in determining TCO.

Challenge #3: Organizational resistance to change

Technology projects usually imply changes to how work gets done, often modifying roles and responsibilities. Employees' fears, preferences and longstanding habits often stand in the way of success. Organizational change management is designed to address these human challenges. It succeeds, however, only when it receives the sustained investment of time and resources it requires.

Effective change management starts with a cross-functional team of project champions. COOs should develop a thorough communication plan to inform stakeholders of the upcoming changes, timelines and impact on their jobs, then follow up with routine updates. Consider phased projects or pilots to demonstrate quick wins and build confidence throughout the organization.

Challenge #4: Security and compliance risks

Today's organizations must grapple with a long list of data privacy and security requirements. Increased data flows create greater risk exposure, increasing an organization's vulnerability to breaches and regulatory failures.

GDPR affects nearly everyone, for example, whereas industry-specific regulations like HIPAA are critically important for affected businesses. An increasingly complex patchwork of data sovereignty regulations adds even more compliance risk to the mix.

Once again, strong data governance creates a framework for compliance, establishing guardrails that prevent ERP integration projects from inadvertently exposing an organization to security or regulatory failures. COOs should also work with their CTO to implement least-privilege access, encryption, routine audits and vendor security assessments.

Challenge #5: Process misalignment across departments

ERP integration challenges often stem from misaligned processes and expectations across functional silos. It is therefore critical to involve key stakeholders from affected departments. COOs should lead an initiative to map their organizations' business processes and existing data flows, ensuring validation from the people directly engaged in that work. Adjust processes where necessary to standardize and align them across departments.

ERP integration challenges are inevitable, but they often follow common patterns. With proactive planning and disciplined project management, COOs can turn these challenges into opportunities to improve operational performance.

James Kofalt spent 16 years at SAP working with SME business applications and was a product manager for integration technology at Microsoft's Business Solutions division. He is currently the president of DX4 Research, a technology advisory practice specializing in ERP and digital transformation.