Eight Ways to Minimize ERP System Implementation Risks

Enterprise Resource Planning (ERP) platforms allow enterprises to select, install and adopt a new interfaced system. When being adopted, migrations like these are often associated with technical risks and uncertainties.

Businesses must strategize ways to minimize the risks before the ERP implementation to avoid events of ERP failures. Here are eight risk mitigation ways to help companies to lower their liabilities and actively adopt cultural changes during ERP implementation.

Ensure Transparency in Business Strategy

Unclear objectives derail the ERP implementation. Therefore, it is crucial to clarify the goals before the evaluation of ERP vendors begins. Stakeholders, C-suites, and managers must join the process to understand better the business objectives and how the ERP system could support them. This enables all the departments in an organization to make intelligent decisions throughout the project implementation.

Crucial decisions like choosing an ERP software system that meets the requirements and functionality prioritization while comparing the systems, minimize the risks of choosing the wrong system.

Also Read: Leading Challenges Businesses Face During ERP Implementation

Set Pragmatic Expectations

Assessing the cost and timeline expectations is vital without rushing to address the pain points. This prevents businesses from committing to a project timeframe that is short and with a small budget. Enterprises must carefully make realistic estimates that resonate with the current requirements and will be beneficial in the long run.

For this, planners need to research the industry benchmarks, whether the platform meets the software needs, and the types of solutions that require investments and spending. Analyzing all these factors will help enterprises mitigate the risk of potential costs and budget overruns.

Avoid ERP System Sabotage

A crucial challenge while evaluating ERP systems risks is the errors that may occur due to inadequate system entry. Automated ERP systems demand static actions from the users while accessing and performing specific processes to collect data.

Any data entry resource within the organization has ample opportunities to deliberately perform invalid operations, from incorrect data entry to underperforming tasks. Numerous users affect the system with indecisions, indifference, and outright sabotage, reducing the chances of the project being successful.

In particular, the absence of the person in charge of project implementation would only add up to the disaster. These collated risks hinder the successful implementation of the ERP system.

Hierarchize Organizational Change Management

While technical issues are one of the causes of ERP failures, other reasons are related to people and the implementation process. Rather than only focusing on the technical factors, firms must ensure that the workforce is ready to accept the changes that come with implementing the system.

Failing to do so will leave businesses with an “underused” but powerful platform. By prioritizing change management, implementation delays, quality issues, and decelerated productivity can be avoided.

Addressing the change resistance early is recommended, helping the team adapt and understand the change. These changes can be incurred effectively by organizational change management. Communicating the nature and components of change transparently will ensure that the change management plan is comprehensive enough to mitigate the project risks.

Devise Data Migration Plans

While data migration is a crucial step in the ERP implementation, it is necessary to ensure that the migrated data is actionable, reliable, and clean. It is recommended to start the groundwork for data migration as soon as an ERP software application is finalized.

Legacy data is spread across multiple locations with various structures and formats. Hence, building a data strategy encompasses the management of current data, it’s cleansing, quality issues, and preventing data duplication.

These strategies can be discussed collectively with critical stakeholders like data owners, the data migration team, the functional team, and the ERP project team. A robust data management strategy minimizes unreliable data risks and offers better insights.

Carefully Optimize Business Processes

A good time to examine the business process closely is during the ERP software implementation. It will let businesses determine the productivity hindrances caused due to workflows. At the same time, it is critical not to automate inefficient processes without improvements.

Business processes can be optimized by mapping the existing workflows, tracking how the information travels across departments, and the resources required to facilitate this process. This helps map a “not-too-granular” future state.

Despite high-quality efforts, it is still crucial to reengineer the business processes to evaluate solid solutions as per the future state. Careful optimization reduces the risk of costly performance needs and labor-intensive customizations to make the implemented solution work effectively for enterprises.

Stay Vigilant with Customization

While delivering customization, software inadequacies tend to snowball, adding extra time and cost to the project. Businesses cannot avoid customizations but they can respond to amendment requests efficiently. Amendments m, keeping in mind that they should be approved only if they contribute to an organization’s growth.

These decisions can be made by building a solid project governance that offers a strong basis for responding to change requests like a simple configuration or customization.

No Executive Buy-in and Funding

Many businesses place executive buy-in on priority for any business project. However, with ERP implementation, the participation of more executives gives rise to more risks. With ERP projects, commitment issues often take a long time and bring challenges as system migration is inevitable, while the outcomes might be positive or adverse.

Therefore, businesses must ensure that at least one executive takes up the role of a project sponsor committed to the project’s success and visibly engages with the project team.

Also Read: Reasons to Use ERP Systems in Businesses

Simultaneously, funding can be hampered for various causes, with zero ways to mitigate pulling the whole business out of the market. Inadequate funding will not keep the project running. Firms must remember that a well-going project within the budget is less likely to get its financing pulled off.

ERP aimed projects focus on implementing the new system rapidly to replace traditional technologies. As per a recent report by Research and Markets, “ERP Software Global Market Report 2023“, the ERP software market will continue to grow to $187.88 billion in 2023 at a CAGR of 12.3% and is anticipated to reach $294.34 billion in 2027 at a CAGR of 11.9% globally.

With the growing ERP market, businesses must carefully evaluate the risks before ERP system implementation. Adequate communication with ERP consultants is a primary step to minimize the risks as they effectively aid in setting up business-related goals. Mitigating the risks promotes quality, speeds up implementation, and minimizes consulting costs.