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8 tips for a successful ERP upgrade project

Follow this expert advice to avoid surprises such as data mapping hassles and scope creep and ensure that the new ERP system is a change for the better.

Whether you love them or hate them, ERP upgrades are a fact of life.

Nowadays, they are often the vehicle for a digital transformation that enables new lines of business, vastly improves the user experience and boosts efficiency. But when executed poorly, an ERP upgrade can threaten business continuity by disrupting your core business operations.

For these reasons and more, the ERP upgrade process calls for informed decision-making and a well-thought-out project plan.

Why you should upgrade your ERP system

There are a number of other reasons for upgrading to the latest release of your ERP system, including the following:

Access to a more modern ERP system. Technology is outdated soon after it is released. If your organization is running on legacy technology, you're probably missing out on data insights that can help your organization stay competitive, said Justin Bateh, a supply chain expert and professor at the School of Business at Florida State College at Jacksonville.

If you're on an SAP system, for example, and you have a lot of customized business processes, it will be easier to maintain them, said Andrew MacMillen, former analyst at Nucleus Research.

No employee retraining. You won't have to retrain end users as you would if you moved, say, to an Oracle shop from an SAP shop, MacMillen said.

Vendor support. You don't want to get too far behind on upgrades, because at some point the software vendor stops supporting older releases. It also isn't investing nearly as much research and development in old releases as the latest one, said Eric Kimberling, CEO and founder of Third Stage Consulting Group in Denver.

Upgrade vs. replace

If you're not satisfied with the return on investment that the current ERP system is delivering to the business or its cost of ownership, you may want to consider starting over from scratch, particularly when the upgrades to the latest version involve moving from on premises to the cloud, according to Kimberling.

"In many cases, these types of upgrades are complete rewrites of the software, and they're completely different [from what you have]," he said. "It's almost the equivalent of ripping out and replacing. It just happens to be from the same vendor."

ERP upgrade checklist

In general, if you decide to move from an on-premises ERP system to ERP cloud services from the same vendor, you'll lose some of the advantages of staying with that vendor because the new versions are so new, Kimberling said.

So, if you have to rip out the current system and replace it anyway, you might want to look at offerings from other vendors, he said.

"For some companies, if they're going to have to do it anyway, they don't want to be backed into a corner or forced to upgrade to the incumbent vendor, so it's a window of opportunity for them to consider other options," Kimberling said.

Other companies may look to replace their current ERP systems because they're not comfortable with the latest versions of their vendors' software, especially the newer cloud platforms, such as SaaS ERP. Maybe there's a critical deficiency in the new software that they're not comfortable with, so they look to other ERP vendors, he said.

8 tips for ERP upgrade success

Regardless of the reasons, upgrading a mission-critical system like ERP is a major undertaking that requires significant preparation and know-how. These experts offered the following eight tips for meeting your goals.

1. Get executive buy-in

It's probably the most important thing, MacMillen said. Executives, such as the CEO or CFO, need to understand and champion the value message of an ERP upgrade.

"They're the ones who need to be convinced because they're the ones whose signature eventually goes on everything," he said.

2. Identify the pain points and establish benchmarks

Determine if there are any bottlenecks or other trouble spots directly related to the ERP software, MacMillen advised. It could be any number of things, from the financial close, to poor data integration and low user adoption, to name just three examples.

"Figure out what the problems are first," he said. "That's going to require some benchmark data, so benchmark, benchmark, benchmark. Then you can go about addressing them by upgrading."

3. Involve frontline users

"When planning for an ERP upgrade, the most important piece of advice I have is to involve the frontline users of the organization in the process from day one," Bateh said.

Often organizations present a new system to employees and expect long-held business processes and practices to automatically adapt to the new system, but that's a huge risk and likely won't end well, he said.

Learn, document and understand the processes that will be impacted by the ERP upgrade before implementation. For example, if employees are used to pulling a specific report each day, will they still be able to?

"Even the smallest day-to-day tasks that become part of the continuous operation should be considered, and you only get this by involving all levels of employees," Bateh said.

4. Identify gaps

One of the first things to do is identify the gaps, because every system has imperfections, according to Kimberling.

You want to go in with eyes wide open, he said. Identify the misalignment between your needs and what the software can or can't do.

"You may decide to either have a third-party system address those areas, or you may decide to customize the software to meet your needs. Or, you may decide to force the change to your business to fit what the software limitations might be," Kimberling said.

Whatever the resolution, you want to identify gaps up front so you can plan accordingly and have a realistic view of how long the ERP upgrade will take, how much it will cost and how the system will look when you get to the other side.

5. Develop a realistic implementation plan

You have to understand the true nature of the ERP upgrade project and know that it probably won't be as simple as an IT infrastructure upgrade, Kimberling said. It's more of a material change to your core business operations and your people -- the two things that will take the most time and money -- and not necessarily the technology.

Having a realistic implementation requires "sanitizing" what the software vendor is proposing, which may be based on a perfect-world scenario, he said. "You have to apply your own assumptions of what reality looks like and tailor the plan for what's going to meet your needs the most. Having a solid implementation plan and strategy is an important part of that."

6. Expect to handle data mapping

Data mapping varies from vendor to vendor, but often more of the workload falls on the plate of the implementing company than the vendor or systems integrator, Kimberling said.

"Oftentimes, the vendor will say, 'OK, here's what the tables in our new system are. Now, you need to figure out how you're going to map your old data to this,'" Kimberling said. "Or more commonly they say, 'OK, we may help you map it to the new system, but we're not going to help you clean up your old data.' That's because the vendors focus more on their systems' data, not the data in other systems."

7. Manage scope creep

In scope creep, a $1 million ERP upgrade project can easily reach $2 million if business requirements change or are added during development and implementation, according to Bateh. So, make sure the original requirements agreement is rock solid, and have a change management plan to handle change requests, such as how many are allowed, who can make them and how they impact the implementation costs and delivery date of the project.

"Oftentimes, we'll see scope creep occur and the implementation of the ERP is delayed for months or years and remains unfinished," Bateh said.

8. Educate and train users

You have to educate your users, which is different from training them, said Lisa Anderson, founder and president of LMA Consulting Group, which is based in Claremont, Calif.

You still want to train people on how to use certain functions, but more importantly, you want to educate them about what they're actually doing and why they would be interested in taking advantage of the new functionality, she said.

It's more about helping people understand the concepts behind and reasons for the ERP upgrade and "how that fits together with the business objectives of their performance, or their ability to succeed," Anderson said.

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