Distribution

HCM software holds a unique position in the architecture. Although some believe ERP should encompass HCM processes, regulatory challenges necessitate a dedicated HCM system. Smaller companies may initially rely on payroll software. However, as they grow, the complexity of HR demands sophisticated HCM solutions to navigate compliance and regulatory issues. Notably, the confidentiality requirements for HR data, encompassing compensation and personal information, pose significant challenges. The challenges are dictated by varying state and country regulations.

There’s a significant overlap between HCM, CRM, and ERP software, given their interconnected nature. Companies with union reporting requirements may need ERP processes embedded with employee data, while those with production scheduling needs require employee data integrated into shop floor processes. Certifications and availability are also crucial, ensuring the allocation of the right skill set for specific jobs.

Selecting an unsuitable HCM software that is not tailored to your industry can impact your enterprise architecture. This list aims to outline the pros and cons of the leading HCM software options available in the market.

The 2025 Digital Transformation Report

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10. UKG Ready

UKG Ready stands out among the top HCM software for SMBs, suitable for global organizations with basic HCM needs. Positioned between smaller solutions like BambooHR and ZohoHR and larger ones like Workday and SuccessFactors, UKG Ready offers a more accessible adoption for smaller organizations. Unlike larger counterparts, it doesn’t require configuring enterprise-level approvals, making it user-friendly. Companies headquartered in the U.S., Canada, Mexico, the U.K., France, the Netherlands, Belgium, New Zealand, and Australia can leverage UKG Ready for employee support in over 85 countries.

However, UKG Ready may not suit larger organizations with specific needs like succession planning, flexible benefits, and intricate compliance reporting requirements.

9. Zoho HCM

Zoho HCM is tailored for SMBs in sectors like IT, media, education, healthcare, and finance, particularly advantageous for those already using other Zoho apps. With a budget-friendly licensing price, it’s accessible for startups and smaller companies, complemented by strong support for DIY usage.

Zoho HCM’s simplified design suits their business model but may not be ideal for industries with intricate reporting or compliance needs. Larger companies with complex benefits management requirements may find it lacking. Additionally, Zoho HCM supports around 20 languages, limiting its global reach compared to UKG Ready.

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8. Infor WFM

Infor WFM is tailored for larger manufacturing organizations with union workers, catering to industries like automotive, aerospace, hospitality, public sector, and healthcare. It addresses specific employee reporting requirements governed by OSHA and other relevant regulatory organizations in specific countries.

Infor WFM, being a relatively costly product, is not an ideal fit for SMBs. It is best suited for larger companies with a minimum revenue of $250 million and a substantial workforce. The solution is particularly advantageous for organizations already utilizing Infor products like Infor LN or M3, as it seamlessly integrates with them. This integration facilitates the embedding of employee data into service and procurement scheduling workflows.

7. Ceridian Dayforce HCM

Ceridian Dayforce HCM is designed for SMB companies in manufacturing, retail, hospitality, the public sector, and healthcare. While it shares similarities with Infor WFM, Dayforce is more tailored for smaller organizations with a significant focus on blue-collar and hourly workers.

The solution lacks advanced features like benefits management, what-if scenarios, and succession planning, making it unsuitable for companies needing intricate approval processes or robust security workflows.

6. ADP Vantage HCM

ADP Vantage provides an integrated suite featuring HR Payroll, Workforce Management, Benefits, Recruiting, and Talent Management. Tailored for large enterprises with 1000+ employees, it is particularly advantageous for those already using ADP for payroll, offering separation of duties and accommodating various management layers.

For smaller companies, setting up and maintaining ADP Vantage can be complex, given the additional overhead of separation of duties. Communication issues among different modules, particularly between benefits management and payroll, can pose challenges for real-time interactions, as reported by our customers.

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5. BambooHR

BambooHR, geared towards SMBs with basic HCM needs, competes closely with ZohoHR. Both target similar industries and startups with smaller HR departments and limited implementation budgets. With a total implementation cost as low as $3-5K, BambooHR provides support directly from Bamboo HR or through one of its partners.

The solution has limited reporting capabilities and may necessitate add-ons for advanced features like time clocks. In contrast, more advanced products such as Ceridian offer these capabilities out-of-the-box.

4. UKG Pro

UKG Pro, the flagship product in the UKG portfolio, caters to mid-large organizations with a need for enterprise workflows, separation of duties, and comprehensive workforce management. It seamlessly integrates with UKG Dimension products for advanced workforce management, positioning itself as a full-suite product akin to Workday, SAP SuccessFactors, and Oracle HCM. With native localization in over 100 countries, it eliminates the need for add-ons or partner-provided functionality to support diverse global requirements.

UKG Pro faces a challenge in its ecosystem with a limited number of available partners for product support, especially when compared to industry counterparts like Workday, SAP SuccessFactors, and Oracle Cloud HCM.

3. Oracle Cloud HCM

Designed for larger enterprises with complex management structures and approval flows, Oracle Cloud HCM is ideal for industries like technology, media, telecommunications, and healthcare. It offers additional advantages for organizations already utilizing other Oracle products, such as Oracle Cloud ERP. 

Despite its strengths, Oracle Cloud HCM presents challenges, particularly with its user interface, which relies on legacy products like Taleo. Smaller companies may find its complex workflows and data setup overwhelming. Moreover, it may not be the optimal choice for industries employing blue-collar workers, emphasizing the importance of considering these factors when evaluating the solution.

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2. Successfactors

Tailored for enterprises, the SuccessFactors HXM suite is an ideal choice for companies utilizing other SAP products, notably SAP S/4 HANA. Boasting support for 43 languages and over 45 localizations, it provides a holistic solution. With a dynamic ecosystem of consultants, it meets the varied requirements of manufacturing and trade-related industries, presenting a compelling option for businesses deeply rooted in the SAP ecosystem.

SAP SuccessFactors seamlessly integrates with other enterprise-grade SAP products like Qualtrics for comprehensive employee experience workflows. However, its extensive capabilities and costs might be overwhelming for smaller companies.

1. Workday

Workday caters to enterprise-level companies requiring intricate management workflows, particularly in complex hire-to-retire and benefits compensation processes. Its strength lies in industries like technology, media, telecom, insurance, and financial services, aligning with sectors where Salesforce is prominent. Workday is frequently deployed alongside Salesforce, FinancialForce, and ServiceNow to address comprehensive IT management and workflow automation needs. A key advantage of Workday is its cloud-native UI and seamless integration with other suite products, including EPM and Financials.

Despite its strengths, Workday Financials is not always a fully matured product and is sometimes overpromoted by its partners, leading to instances of failed implementations. Success with Workday requires careful selection and expertise in enterprise architecture.

Final Words

Given the variations in labor laws across states and countries, selecting and implementing HCM products demands a deeper level of expertise, such as that of independent ERP consultants. HCM workflows are often intricately linked with ERP, MES, and Service Scheduling modules. Consequently, HCM software selection can have wide-ranging implications on the overall enterprise architecture, potentially influencing operational efficiencies.

When incorporating HCM software into your architecture, it’s essential to clearly define roles and responsibilities for each system interfacing with the HCM software. This list aims to assist you in shortlisting potential options that align with your architecture needs.

FAQs

Looking for an ERP consultant who might be able to answer every question you might have? Well, unfortunately, just like different skill sets exist in a house construction project, ERP projects are no different with their need for digital transformation roles and skill sets. In fact, at a much bigger scale. Also, the more components you have in your architecture, the more skillsets you might require. Because the underlying technologies may be different, and they require years of training and specialization – to hit the ground running from day one, as that would be the expectation from ERP consultants.

Additionally, their educational backgrounds vary. The person who studied Supply Chain is likely to be deeper in the Supply Chain role. The same could apply to accounting and sales processes as well. A weaker chain (or an inexperienced resource) might slow down the whole project as they would need to be coached at every step of the way. Think of coaching basic ERP concepts such as the difference between a receipt and a voucher – and their implications on the process if interchanged. Their decision-making might not be sound either, which might have catastrophic consequences for the project.

So, understanding the importance of each of the digital transformation roles is critical for the success of your digital transformation initiatives. Most digital transformation initiatives fail because of a missing skillset. Or assigning unqualified resources to crucial positions. This is especially important for key cross-functional roles such as project manager or sponsor. These roles are typically more critical than the others, such as subject-matter experts. This list will help you understand the different digital transformation roles that might be required for your unique project.

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10. Change Management Consultant

The change management consultant drives the entire change management process (and is among one of the most critical digital transformation roles). It starts with the identification of change, creating a business case to justify the change, exploring several change initiatives, and finally, implementing and monitoring changes. Depending on your budget, you might hire a dedicated change consultant or work with an independent ERP consultant. The independent consultants might bundle change management offerings along with their ERP selection, implementation, and integration expertise. 

Irrespective of the approach, change management is absolutely essential for the success of your technology initiatives. The technical vendors (and your internal teams) will struggle with change management due to the “power struggle.” So an external change management consultant is recommended. Depending upon the structure of your organization (and the scope of this role), you might need up to 20-25% of their time allocated to the project. With more involvement during the pre-selection phase, as well as the training phase.

9. Best-of-breed Apps and Add-on Experts

The role of best-of-breed apps and add-on experts is to provide the functional and technical expertise of these add-on products. Most ERP consultants are unlikely to have depth with each add-on or application. 

So you might need at least part-time resources that are familiar with these apps. The more apps you have in your architecture, the more skill sets you might require. And the more part-time resources you are likely to have as part of your project, the harder the scheduling will be, driving the overall costs of the project. Depending upon the structure of your organization (and the scope of this role), you might need a couple of hrs of their time as and when needed. Since these resources could be a true bottleneck to the project planning, you might want to pre-allocate some of their capacity. Or identify areas where their input might be required early in the process to ensure that they are not a showstopper for the project.

8. ERP Integration Consultants

Most ERP applications are huge in size and have thousands of tables and modules. The traditional ERP consultants are divided into two streams: functional and technical. ERP technical consultants specialize in Windows and proprietary database programming for that application. Also, traditional ERP applications were not service-oriented architecture-based. So, ERP consultants didn’t have as strong integration skills. The integration consultants specialize in API integrations, enterprise integration patterns, master data governance, and enterprise architecture. 

If you have multiple applications in your architecture, you will need specialized ERP integration consultants. Depending upon the complexity of your architecture and integration requirements, you might need part-time or full-time integration consultants. The integration consultants might also require time from ERP technical or functional consultants – to get help on cross-functional testing (as they might not be as deep functionally with each application in the architecture). So their availability can’t be the bottleneck, similar to other cross-functional roles mentioned below.

7. ERP Technical Consultants

ERP technical consultants are the technical experts of specific applications. Each product may have its own technical specialist. For example, technical consultants who focus on NetSuite might not have experience with Oracle Fusion Cloud. Or vice versa. The technical consultants are also extremely weak in their functional knowledge. And they can’t act as a functional consultant due to their limited knowledge. Their educational background is in software engineering, while the ERP functional consultants are likely to have an accounting, industrial engineering, supply chain, or mechanical engineering degree. 

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Even among technical consultants, there might be several skill sets, such as a report writer, form designer, DBA, or data migration consultants. They each have different expertise and skill sets. Depending upon the customizations expected, the need for technical consultants might vary. Heavier customization would typically require a higher allocation of technical consultants. However, technical consultants might not be required for the entire duration of the project. Their need would be more critical during the development phase. Once the customizations stabilize, the functional consultants should be able to handle the project – without their help.

6. ERP Functional Consultants

ERP functional consultants specialize in specific functional areas. The larger the products, the more complex the functional processes are likely to be. And the more consultants you are likely to need. For example, Smaller systems such as NetSuite or Acumatica may require only one functional consultant. Systems such as SAP S/4 HANA, Oracle ERP Cloud, and Microsoft Dynamics F&O, on the other hand, may require several functional consultants with a specialization in each functional area, such as accounting, supply chain, manufacturing, sales, etc.

Depending upon the complexity of your project, you might need full-time or part-time functional consultants – to test the configurations and resolve functional issues. Their role will also be to assist the principal functional/technical consultant (and project manager) with research and recommendations. Their role would be relevant during the implementation phase, with minimal involvement during the pre-selection phase.

5. Vendor- and Solution-agnostic ERP Consultant/Enterprise Architect/Principal Functional Consultant

Just like you need architecture for your home or kitchen, you also need for your software and IT applications. Architecture is a blueprint that clearly describes the boundaries of each system and its role in enterprise architecture. It also describes the interaction flows, with a clear agreement between data producers and custodians. Finally, it defines the model for reconciliation between different systems – should there be a conflict among systems.

Most teams and vendors are likely to create architecture from their perspective. And this often results in application silos, duplication of efforts, overengineering of components, and data issues. This one is perhaps among the most critical digital transformation roles for your project. Some independent ERP consultants might be able to include this role along with their change management expertise. However, an external consultant is recommended for this role. Depending upon the complexity of your architecture, you might need at least a part-time resource who acts as the advisor or oversees the overall process. This role is the longest-serving role of the ERP project, starting from the beginning of the project to the post-implementation phase.

4. Internal Subject Matter Experts

These subject matter experts should be the focus of your implementations. Why? Because they need to drive the training and evangelize the change for their internal teams. It’s critical that they appreciate and embrace the new platform. These are your internal operational users (such as supply chain managers, ops managers, and sales managers) who have the most depth in the business processes. They provide crucial details that strategic business process owners need to make key decisions. 

You need to allocate at least 10-20% of their time for the entire project. And involve them during the selection, process re-engineering, solution design, UAT, and training. 

3. Internal Business Process Owners

These are your business processes executives such as VP of Sales, VP of Ops, VP of Engineering, VP of Supply Chain, and VP of Finance who are responsible for making crucial decisions for their respective functions. 

They work in conjunction with subject matter experts and make decisions with a strategic perspective in mind. You will need their few hours allocated every week to be part of weekly demos and monthly steering committee meetings, along with any detailed meetings that may require their input for the to-be state.

2. ERP Project Manager

The ERP project manager is perhaps the second most critical role in your transformation. And ideally must be served by controllers, VP of Finance, CFOs, and sometimes by the CEOs for smaller organizations. They might hire a project coordinator to hand off some of the operational responsibilities if they are too busy with their day jobs. 

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This person is responsible for driving the project and keeping the project under budget and on time. This person must be comfortable negotiating with business process owners in the event of a conflict among different functions. Depending upon the size of the organization, allocate either full-time or 50% to ensure he/she is not the bottleneck for the project.

1. ERP Sponsor

The ERP sponsor is either the CFO, COO, or CEO, depending upon the size of the organization. The role of the sponsor is to set the vision for the project, provide resources, set KPIs to measure success, and help business process owners make key strategic decisions. 

Their role is not to make decisions for them. But to ensure that the decisions are consistent with the original vision and the interests of all functions are equally represented in the architecture. The ERP sponsor must participate in the monthly steering committee meetings and will need a few hours of their time each month. 

Final Words

Building an ERP project team is an art and science, with the expertise to be able to foresee showstoppers before it’s too late. The issues could be related to the team or technology. They each impact the cost and scheduling of the project.

While you will get better with your team-building expertise and experience, don’t underestimate the importance of any of the roles mentioned on this list. The primary reason why most organizations struggle with digital transformation initiatives is that they underestimate the effort involved with these initiatives – and try to “outsmart” the process, which fires back more often than not. So be really informed with each of your decisions – as you build your core project team that is capable of delivering on your vision.

FAQs

Who would not like to find the “secret” recommendations for digital transformation? Unfortunately, with enterprise-wide transformation projects, there is no checklist that can be followed. These projects require careful preparation and alignment of several areas. And they all, collectively, drive the success of your digital transformation projects. 

Also, with enterprise transformation projects, technology alone can’t solve business issues for you. You will need to align the compensation structure along with KPIs and enterprise architecture. Also, even if you have invested in substantial efforts with your pre-selection and business process reengineering, things might fall off during the implementation phase unless you have controls in place for code, master data, and architecture review (and compliance).

Finally, most departments typically try to pull the architecture in their direction. This often results in the “loudest” departments being more represented in the architecture. Implications? Both overengineering and under-engineering issues will cause a disjointed experience for users. And they might end up with siloed applications or spreadsheets – defeating the overarching purpose of transformation initiatives. Following these recommendations for digital transformation will set you up for a successful transformation project.

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1. Reassess Your Current Architecture and Systems

People often forget that your architecture is more important with enterprise-grade transformations than the technologies used. While it might appear promising at the surface, new software very rarely would solve your business problems. But why? Because unless there is a clear alignment in current gaps and process changes, the new system might not be as effective. It might even cause disruptions to your current operational processes if not planned well. 

Your chances of success will be higher if you redefine a vendor-agnostic architecture tailored to current operational limitations. First, improvement opportunities with the current architecture were identified. Then, only if it makes sense, replace a system where it’s a clear misfit based on your business model and growth ambitions. Assessing your architecture requires deep subject matter expertise with your systems, processes, and data – in order to perform an informed assessment. This assessment helps understand if the changes would make sense for your architecture (and at the stage of your business).

2. Centralized Transformation, Change, and Budget Management

Due to the lack of perceived short-term benefits (and risks for business process leaders), enterprise transformation initiatives typically take the backseat. So what’s the solution? Form a centralized digital transformation team and allocate a corporate budget for enterprise-wide transformation. 

What else? Identify change opportunities that impact your current systems and processes. Manage them centrally. And Define the blueprint for each changeset and assess its impact. Anything else? Yes, prioritize them and design phases including release strategy, And then execute them based on feasibility. Recommendations for digital transformation such as this help your vision take the front seat and resolve conflicts easily.

3. Compensation and KPI design

Have KPIs that are not only departmental. However, they should be aligned with the strategic priorities as well. Most corporations focus on short-term results. And that comes at the expense of the lack of interest in long-term strategic investment and initiatives such as enterprise-wide transformation. 

Impact of the short-term mindset? It results in duplicated efforts across departments and information silos. These silos are typically counterproductive for the overall success and financial health of the organization.

4. Don’t Ask Your Technology Vendors to Define Your Enterprise Architecture

Your enterprise architecture is essentially your business model. While technology vendors such as SAP or Oracle and their resellers might provide great technical capabilities, they are experts at tools in their portfolio. Their role should be limited to defining system architecture once the other architecture has been well-defined. 

So, what are these other architectural pieces? Business, process, and data architecture. And they all must be designed in a technology- and vendor-agnostic fashion. Who can help with this design? Qualified consultants with multi-system and multi-ERP expertise are better positioned to offer recommendations for digital transformation architectural components and their interactions.

5. Invest in Pre-selection Phase

The software development lifecycle requires you to go through the four critical phases of software implementation. Namely, requirement, design, test, and implementation. While buying enterprise software can save you a ton of effort and risk, these phases are equally relevant even for enterprise software implementation. Sometimes, even more so. 

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The pre-selection phase identifies requirements and process states. It also provides visibility into the as-is and to-be workflows for each department. Then it helps focus on the right critical success factors along with identifying gaps and development efforts required.

6. Get help from Independent ERP and Digital Transformation Consultants

Most executives go through 3-5 digital transformation initiatives in their careers. So designing the state of the system and processes based on this limited experience would not provide enough data and sample size to learn the architectural best practices. And forecast the possibility of each decision. 

The independent ERP and digital transformation consultants work with many different businesses. And they have already seen the mistakes that you are likely to make with your next transformation. Are consultants too expensive? Hire them at least to vet your plans and mentorship if you are on a tight budget.

7. Don’t Let Developers/IT Managers or Functional Subject Matter Experts Design the Architecture

Designing an enterprise system is similar to engineering functions in manufacturing. How so? The skill set that might be good with operational execution might not be the best for strategic and engineering design. Also, the developers and IT managers typically don’t have the visibility and business background to be able to negotiate process changes with functional stakeholders. 

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The same applies to functional leaders. While they might know a lot from the business perspective, the technical perspective is equally important in assessing performance and process issues due to poorly coded and integrated processes. You need someone who has a deep background in designing enterprise-grade systems, along with deep business expertise and education. 

8. Try to Reduce the Amount of Code You Own

With custom software, you might own 100% of the code, whereas with an ERP implementation, you might own roughly 30%. This might include any customizations, home-grown integrations, or proprietary systems. While software development might appear cheaper on its surface, owning and maintaining code over time requires economies of scale. So unless the custom code is part of your commercial offering, owning it will always be more expensive. 

So are there any components that are better suited for internal ownership? Yes, the components that change frequently such as EDI integration. Or the ones that may require substantial manual inputs from business users during the processing of transactions. The rest of the components can easily be bought at a much cheaper price from enterprise software vendors.

9. Invest in Master Data Governance

Most organizations end up reimplementing the same ERP system at least 2-3 times even within 5-10 years of the upgrade cycle. Most times it’s the mismanagement of master data that is the culprit. Poor master data management often leads to ad-hoc processes, adoption issues, and the need for external systems. 

The successful management of master data requires clearly defined roles and responsibilities for each system. And functions controlling the data and its interaction flow. It also requires forming a centralized function responsible for designing and maintaining master data compliance. 

10. Be ready to “Kill Your Darlings”

Fragmented and siloed operations often result in proprietary applications. These applications might make sense in a siloed and fragmented architecture. But not in the context of enterprise architecture. 

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The legacy and proprietary applications might drive the customizations and additional unnecessary integration flows to accommodate their shortcomings. It might be cheaper to replace these proprietary systems and use components that might be pre-integrated with the new solution.

Final Words

There are no secrets to digital transformation. It’s the structured approach along with the alignment that makes or breaks ERP implementation. With the increased number of channels driven by customer experience, the importance of architecture can’t be underestimated.

The digital transformation initiatives were never meant to be this difficult. But they do require expertise and thoughtful execution. Also, cultural and process changes have a direct impact on digital transformation initiatives. By following these recommendations, you will be set up for success with your digital transformation initiatives.

FAQs

Most executives are afraid of digital transformation. And I don’t blame them–with the amount of undertaking required for such projects. Not to mention that it took a long time for companies to understand – that digital transformation projects are not meant to be technology projects (The initiatives that developers can code in their backyard. The ones that can provide a crystal ball that can solve all your business performance issues). In reality, digital transformation failure typically has more impact on your businesses than most other disruptions (Unless it’s a full nuclear war). So why are some projects more successful than others?

There are millions of variables that could be responsible for failure. Team. Technologies. Vendors. Project managers. Change Management. Also, with so many variables involved, everyone is likely to have their own theories. There is no clear consensus, which makes it confusing for first-time buyers. While it’s much harder to find why a specific digital transformation project may have failed, it’s much easier to analyze the successful ones. One thing that successful teams do differently is that they don’t underestimate the efforts involved with these projects. 

That’s probably the reason why the larger companies with multiple ERP implementations under their belt are likely to be more successful than the smaller companies. There are smaller companies that are likely to be successful as well. However, in their case, the executives must have experience leading multiple ERP implementations at larger companies. While this is one factor, there are more layers to what makes them successful (as per our study done with more than 200 executives suggests). Excited to review the results?

1. Misalignement in scope 

Misalignment in scope is perhaps the #1 reason for digital transformation project failure. Some people might blame the “invisibility” aspect of software development – to claim that there will always be surprises with software implementation. Also, there is a common misconception that there is no point in planning if there are going to be surprises anyway. Following this approach is an “extreme” thinking mindset where you don’t prepare for an exam – just because there might be a chance of failure.

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Software implementation projects require the same amount of engineering processes. As much as manufacturing or construction. Sure, there have been advancements in methodologies – such as agile – to uncover risks earlier. However, the fundamentals of software engineering still apply. They require careful analysis and design by qualified ERP consultants (the consultants that regularly implement for various industries and business processes).

Also, unfortunately, analyzing at “100K-foot” levels (the mindset that going too deep into technical analysis may be a waste of time) approaches aren’t good enough to be successful with these projects. It’s a careful balance of high and low-level needs. A balance that will help you find the scope with an iterative process and a scope that will likely not have any misalignments. Or surprises (Don’t we like surprises?).

2. Unrealistic Expectations

The only reason why unrealistic expectations lead to ERP implementation failure is to underestimate the amount of effort required. In fact, unrealistic expectations and misalignment in scope are so interdependent that they could be each other’s cause (Wait, what? Have I confused you enough yet?).

The root cause for unrealistic expectations is the “mindset” that maybe there is an easier way. Maybe the “consulting companies” are in the business of overcharging their customers. Maybe consultants have a tendency to overcomplicate things so they can make more money. While, as with any profession, there might be some bad apples out there, the issue is typically with the companies who don’t have enough experience under their belt in leading digital transformation initiatives.

The best way to mitigate such issues is to be patient with the process and do as much research as possible to understand the core issues. Also, recommended is not ignoring the advice of your consultants. The more implementation you have under your belt, the more conservative you will be with these projects. And the higher chances you will have of success with such projects. The only way to succeed is to be realistic (and extremely conservative) with these projects.

The 2025 Digital Transformation Report

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3. Inability to re-engineer processes (aligned with the capabilities of new system architecture)

Constructing a house based on how your old house appears today is likely to result in the same “old” house – with not much improvement (Isn’t that what we all want? The constructive ways of wasting our money? For all practical purposes, no!). Constructing an improved house requires you to have a deep reflection on the old house as well as the root cause of each issue you had in the old house. Along with the “mental model” (I prefer a blueprint on a piece of paper) of the new house based on your new needs. This task is way harder than you would think. 

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Being successful with it would require a solid knowledge of several different ERP systems and implementation experience in several industries. So, you have enough data points to identify the right model that will be successful, given the constraints of this new house. Without business process reengineering, companies mistakenly assume “old and broken” processes as their needs. And hand it over as requirements to the technical teams. 

Given the constraints, the technical team might spend months customizing these needs. And even after successful technical implementation, they might never work for users as they might deviate from the system’s optimal state. Skipping the crucial step of business process reengineering results in ERP implementation failure. Along with adoption and change management issues due to the limited understanding of the rationale for change.

4. Over-customization of the software

Most companies with limited experience with ERP implementation have a tendency to underestimate the effort involved in customizing software. The customization not only results in the core system’s sub-optimal performance. But it also causes user adoption issues due to the alteration of systems’ natural state.

Also, most organizations that may have promoted their developers to IT operations managers too early to a CIO role are likely to customize the software heavily (Also, they hate dollar conversations, which is perhaps the bread and butter for a CFO) The business rules in ERP are so nested that even if you implemented a feature successfully (for your own use case), it’s likely to break for other departments.

So, customization of software will always have a much higher chance of implementation failure. The best strategy to save an ERP implementation because of over-customization is to perform a thorough gap analysis during the selection and get recommendations from implementation architects in terms of the effort involved – in implementing each gap. If the effort seems too high, most likely, you have selected the wrong software. Or your process needs to be simplified further (You also have the option to pray. They always work with digital transformation). Thorough scrutiny and deep probing of each gap will help you understand that you are customizing only when it’s absolutely essential.

5. Usage of too many poorly written bolt-ons (impacting operational performance)

Most systems’ design assumes their natural state for optimal performance. While they all might allow customization, the system may have never been tested with the overlapping boundaries of add-ons. The add-ons might also be poorly written – and might cause performance implications.

There is also a misconception that no-code technologies can help you integrate anything and everything. Yes, that is true. But when it comes to mapping data flows and identifying sources of authority, the fewer variables you have in your model, the higher chances you would have with your digital transformation initiatives. (You want one thief to steal your money. So you kind of know who stole what)

Using too many add-ons is a major factor in digital transformation failure. This is due to the increased number of variables that are controlled by multiple vendors, their technologies, and release cycles. Having too many add-ons is a clear red flag that there might be better options out there. And a factor that you should watch closely while signing your software contract.

 6. Organizational change management

Underestimating the importance of change management results in digital transformation failure. But change management is typically the first symptom (Like a fever is an expression of inner rage) that you might notice regardless of the underlying issues that might be driving poor adoption. For example, change management issues could be a result of poor training, suboptimal system design, and workflows – or misfit technical systems. 

“Business consultants” with very little background in formal software engineering have a tendency to believe that you can solve all change management issues with superior training. Well, it’s almost like saying that you can solve all sales performance issues with the right “mindset.” Can you?

Sure, “mindset” and “training” play a huge role in change management. But it’s not just the training that is responsible for the success of digital transformation initiatives. It’s the synergy of systems, technologies, design, processes, and motivations that make digital transformation initiatives successful. But the most important factor for effective change management would always be the ability of change management consultants to work with the technical teams – to ensure that there is no misalignment in strategy and execution.

 7. Lack of maturity of enterprise architecture

The lack of maturity in enterprise architecture is a leading cause of digital transformation failure. Most SMB companies don’t even understand the number of components that might be included as part of the software contract. Just like manufacturing, a critical part can halt your product line, and a weak component of your “software BOM” could lead to digital transformation failure.

Irrespective of whether you buy or build – or how many ever add-ons you have in your architecture – enterprise architecture is extremely critical. The enterprise architecture encompasses four different perspectives: 1) business architecture 2) process architecture 3) data architecture 4) system architecture. 

When most companies think of enterprise architecture, they see it as a “technical” concept. But just like an org chart is to people, enterprise architecture is to systems. And the success of your enterprise architecture relies on having clear boundaries of systems and processes. Because they each play a role in defining cross-functional processes So not having a clearly defined enterprise architecture is the surefire way of failing your digital transformation initiatives.

 8. Poor governance of master data

Master data forms the foundation of your enterprise architecture. Without having a clear interaction model of each dataset, the systems are likely to have duplicated data in multiple systems. The inefficiencies caused by duplicate data and data silos lead to more fragmented systems. Ultimately causing even more data silos. Tracing data dependencies in your enterprise architecture might feel like a confused mouse in a maze.

Even developers and technical architects struggle to understand the concept of sources of truth. The most common misconception is about the multiple sources of truth. Some people believe that multiple sources of truth mean keeping duplicate data in multiple systems. Sure, are there any systems that can be implemented by completely decoupling data dependencies? Yes. But is that architecture going to be appropriate for every single dataset? Probably not. And most certainly not for the architecture containing financial systems and processes.

Implementing event-driven architecture with completely decoupled datasets works when the reliability of data is not as important a concern. Think of social media messages or error logs published by remote devices. What’s a big deal if we might lose an error or social media message? No big deal right? But with financial data where the books need to be reconciled to pennies, the reliability of data is extremely critical. And the data architecture that allows you a high degree of relatability and traceability is a crucial requirement.

 9. System selection gone wrong

Selecting appropriate systems requires you to have updated knowledge of architectural patterns – and several enterprise software categories, including ERP, HCM, CRM, and eCommerce. The software systems available in the market have extremely overlapping boundaries – with substantial duplication in code bases. And this is only going to get worse! Also, it is equally critical to have profound expertise and advanced knowledge of your industry and business model.

Without a comprehensive knowledge of systems and processes, your gap analysis is likely to miss critical gaps that command the highest amount of dollars — and lead to ERP implementation failure. Also, prior to investing in technology, you need to invest in defining the other three legs of the stool: 1) business architecture 2) process architecture 3) data architecture. Selecting a poorly fit system will lead to over-bloating of processes and systems, resulting in serious adoption issues. Don’t sign a software contract without performing an exhaustive search of all systems available in the market.

 10. Past results = Future success (With digital transformation initiatives)

You might never be proud of the first home that you bought. As you develop deeper recognition of your own needs, you are likely to do a lot more planning and “sketching” with your next purchase. The same principles apply to digital transformation. First-time executives are likely to be most optimistic about finding “cheaper” and “smarter” approaches to digital transformation (unfortunately, poker strategies don’t work very well with digital transformation initiatives). 

As you implement more systems, the deeper will be your analysis. And more conservative will be your approach. The conservative approach to system design and planning leads to digital transformation success. So make sure you don’t cut corners in hiring the right expertise to lead your digital transformation initiatives.

 11. Ability to work with technology vendors

Just like an engineer must be able to connect and relate with your shop floor workers, your ERP core team must be able to connect and relate with your developers and technical consultants. This relatability requires you to speak their language in the format they understand (and with digital transformation implementation, God will not translate for you). 

Not listening to their concerns or ignoring their advice with the attitude of “too much into weeds” will lead to ignoring critical issues that might have disastrous consequences on your enterprise architecture. They also require translating business vision and priorities into technical architectural components that will help them connect the dots. Several years of experience working with technology vendors helps in building the right rapport with technical teams – and leads to digital transformation success. 

 12. Poorly written test scripts (and the missing framework for test compliance)

Writing good test scripts takes years of practice. With ERP systems, it’s even harder. Because you need to segment the functionality that is pre-tested and provided by OEMs – from your custom configurations and customizations. To do this, you need to have a deep understanding of the core ERP functionality. And The more lines of code you own – the more testing you need (like the more money you own, the more stress you will have).

The main issues with enterprise-grade systems are data dependencies and the length of enterprise transactions. That makes documenting and tracking test cases and results much more difficult. It takes years of practice for ERP testers to identify the right test scripts. That will help uncover critical issues early in the process. And avoid showstoppers later in the release cycle. The showstoppers that typically lead to digital transformation nightmares.

 13. Uncontrollable issues

Because of the “invisibility” issue of software implementations, you will always find uncontrollable issues. However, it is the thorough planning and early detection of critical technical and process issues that help minimize uncontrollable issues. It is also the research that has gone into each issue to minimize the impact on time and budget.

But sometimes, finding a fine balance between the time required to perform research and the budgetary implications of showstoppers is key. Investing too much time in issues that might never surface may be a pure waste of time and resources. This is why consultants who have deep experience in executing large programs are better equipped to identify these issues much earlier in the process – and save digital transformation nightmares.

 14. Not having a dedicated internal skilled project manager

The most challenging part of a digital transformation project is the missing cross-functional link. Typically, in SMB organizations, the CEO has the most cross-functional understanding. And the only person who is qualified to negotiate with each department in executing or organization’s vision. The problem may be more difficult with organizations with multiple subsidiaries. 

And unfortunately, the CEO very rarely has time to get into the “weeds” of the project (who cares for a neglected weed anyways?). Or mediate conversations when there is a conflict among functional or BU leaders. This is where the project mangers’ role is absolutely critical for the success of the project. 

The project manager must have several ERP implementations under his/her belt and have a formal educational background in business or supply chain. Also, one of the most critical skills of a project manager is to be unbiased (except when it comes to preference for their coffee) and spend time working closely with executive teams. Hiring an intern or a “generalist” project manager with no formal background in Supply Chain and software engineering is a sure recipe for disaster.

 15. Treating digital transformation projects as a technical implementation

While the major component of digital transformation initiatives is technology, it alone can’t solve all your problems (with solitude, it’s independence; with digital transformation, it’s interdependence). It has to be the synergy of processes, data, organizational structure, compensation plans, and systems. 

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Treating your digital transformation project as a technical project typically leads to over-customization of workflows, overengineering of processes, and data siloes. They all lead to poor adoption – and, ultimately, digital transformation failure. Involving your business users from day one through the process of business process re-engineering will help them understand the technical challenges and articulate their needs in a technically feasible manner. This will also help forecast the challenges they might expect when they are live on a system.

Final Words

There are several factors that could lead to digital transformation failure. It’s never one vendor. Or a system. But one surefire way to fail your digital transformation would be – to underestimate the amount of effort involved with digital transformation and ignore the pre-selection phase. This sets the tone for how badly the digital transformation initiative will fire back. Because they always fire back unless carefully planned.

Digital transformation initiatives are like going for heart surgery. The first time will always be the most painful. As you get used to surgeries — and how to mentally prepare for the surprises with each one – hopefully, you won’t be as afraid with your next surgery.

FAQs

2024 turned out to be another slower year, following the trend of previous years. While there were hopes for a boost in the second half of the year, most companies remained cautious. They were cautious due to uncertainties surrounding the U.S. elections, ongoing geopolitical conflicts, and macroeconomic challenges. Despite some optimism that the new administration would be more business-friendly, the uncertainty will persist through 2025. Uncertainty is primarily due to tariff disputes and geopolitical tensions. With this outlook, most CFOs will be conservative with budgets for initiatives with uncertain short-term returns.

One promising factor expected to drive the economy is the ongoing investment in AI technologies. Many tech companies have significantly increased their spending on AI in hopes of boosting product prices and maintaining market share. These advancements, as a result, will transform interaction models for enterprise applications, improving lead and cycle times for most commercial transactions. The improved lead and cycle times, consequently, would offer a significant competitive edge for companies. Ultimately, this trend is likely to accelerate the replacement of legacy systems, making them AI-ready and driving digital transformation initiatives.

While AI’s broader influence is set to greatly impact the enterprise software market, policy changes associated with the potential implications of AI technologies may lead to stricter reporting requirements. These reporting requirements would affect not only tech providers but also other industries. This could result in higher financial and compliance costs, presenting opportunities for enterprise software vendors. Despite these challenges, expect a positive shift in 2025 if market conditions improve in the second half of the year. On the other hand, with the uncertainty surrounding tariffs and policy decisions, 2025 may be just as slow as 2024. Regardless of the outcome, these trends are likely to shape digital transformation initiatives and the enterprise software market.

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1. AI-Augmented Agents and AI Governance Platforms

Throughout 2025, enterprise software companies will face mounting pressure to justify their pricing. The most immediate opportunities for value creation and revenue generation will likely surface from AI agents integrated into various software categories. These agents will power use cases such as customer service and “generative insights” for complex systems.

As AI agents become increasingly proficient at specialized tasks, how will businesses leverage agent-to-agent orchestration engines to enable smooth collaboration between AI and humans? What impact will the rise of fully autonomous workflows have on business operations, and how can organizations ensure they remain ahead of these advancements? Moreover, with evolving policies and regulations, how will new AI governance platforms emerge, and how can businesses navigate these changes? To gain insights into how AI is shaping the future of business, download the full top 15 digital transformation trends for 2025 report now.

2. Chat-GPT Induced Revised Search Patterns and Consumer Behavior

ChatGPT could give rise to a new wave of search engines with multi-modal capabilities, posing a threat to Google’s market dominance. As these emerging competitors gain traction, Google would be compelled to integrate generative AI into its search workflows. This shift would also disrupt paid media as search engines explore new monetization strategies centered around ChatGPT-driven interactions.

As consumer behavior evolves with the rise of AI-driven search engines, how should businesses adjust their content strategies to balance both organic and paid visibility? What role will these shifts play in transforming business processes and influencing the future of enterprise software? To uncover more about how these changes will impact your organization in 2025, download the full report on the top 15 digital transformation trends now.

3. Continued Consolidation of the Enterprise Software Industry

The consolidation of enterprise software categories accelerated in 2024 and is expected to continue in 2025. This consolidation would lead to broader, more overlapping product offerings. More confusion! A trend that will drive significant pricing and architectural shifts for customers. Depending on the acquirer’s strategy, certain features may be phased out, or entire products may be discontinued.

With the ongoing changes in the enterprise software landscape, how can businesses prepare for unexpected pricing adjustments that might trigger unplanned upgrade projects? Think surprise bills! What steps should organizations take to mitigate potential disruptions and ensure smooth transitions? To stay ahead of these trends and better navigate the challenges of 2025, download the full report on the top 15 digital transformation trends now.

4. Cloud/Saas Expense Reduction and Saas Licensing Price Pressure

As businesses grapple with cash constraints, many will look to cut costs by optimizing their SaaS spending. They would also reduce costs by eliminating unused software. Shelfware! In response to these cost-cutting measures—and amid a challenging purchasing environment—software vendors are likely to raise prices. We’ve already seen this trend with platforms like Smartsheet and ActiveCampaign, where small pricing adjustments significantly increase overall customer costs.

As private equity acquisitions continue to influence the market, how should businesses prepare for ongoing pricing shifts that are expected to persist into 2025? What strategies can organizations implement to manage these changes and maintain budget control? To learn more about the trends shaping pricing strategies and digital transformation in 2025, download the full report on the top 15 digital transformation trends now.

5. Surge in M&A Activities and Deal Flow

With interest rate cuts and changes in the U.S. administration, M&A activity is expected to accelerate in 2025. Since M&A trends closely align with ERP and digital transformation initiatives, the digital transformation sector is likely to see increased deal activity.

With a slightly improved outlook for 2025, how will software vendors allocate resources to R&D and innovation to stay competitive in an evolving market? What impact will this shift have on the development of new solutions and the digital transformation landscape? To gain a deeper understanding of these trends and their potential effects, download the full report on the top 15 digital transformation trends in 2025 now.

6. Continued Reallocation of Skill Sets and Their Impact on Business Processes

AI is rendering several skill sets obsolete, a trend that will persist in 2025 as its effectiveness across various use cases becomes clearer. At the same time, the rise of AI governance platforms and AI agents will create demand for new skills.

How will the ongoing shifts in technology and business strategies reshape traditional business processes, requiring the reconfiguration of business process software and driving architectural changes? What new software categories are likely to emerge as a result of these transformations? To explore these insights and stay ahead of the curve, download the full report on the top 15 digital transformation trends in 2025 now.

7. Geopolitical Impact on Business Processes

With the risk of new conflicts and the escalation of existing ones, geopolitical tensions are expected to persist in 2025. As global economies struggle, the cost of living remains high, and real estate markets reach unsustainable levels, new and unexpected supply chain disruptions are likely to emerge.

As governments respond to evolving global challenges, how will new regulatory measures and policy changes aimed at controlling information, currency, and monetary flows impact business processes, reporting requirements, and enterprise architecture? To better understand these developments and how they may affect your organization, download the full report on the top 15 digital transformation trends in 2025 now.

8. More Disruptions Caused by Software Supply Chain and Cybersecurity Issues

Recent disruptions, such as the CrowdStrike incident, have highlighted the risks posed by software supply chain vulnerabilities. This has prompted companies and governments to reassess their impact. As AI enhances the ability of malicious actors to identify and exploit these weaknesses, policy changes around software supply chain security are inevitable.

How will new regulations introduce accountability measures for open-source software impact pricing models and software architectures in the coming years? To explore how these regulatory changes will shape the future of enterprise software, download the full report on the top 15 digital transformation trends in 2025 now.

9. Collaborative Partnerships and Continued Acquisition of Networks Producing Data

As data remains the key driver of AI effectiveness, 2024 saw partnerships forming even between competitors, such as the collaboration between Salesforce and Workday.

How will the continued trend of acquiring and integrating data-generating networks, such as Blue Yonder’s acquisition of One Network Enterprises, affect the future of enterprise software and digital transformation? Find out more about this evolving trend and other top digital transformation insights by downloading the full report on the top 15 digital transformation trends in 2025 today.

10. (No More) Breakup of Large Corporations and Antitrust Laws Blocking Large Deals

The incoming U.S. administration is expected to take a less stringent approach to scrutinizing mega-mergers compared to the current one. Deals like Google’s acquisition of HubSpot are likely to proceed, and the idea of breaking up large corporations, such as Google, will likely be off the table. Had such breakups occurred, they would have significantly impacted both front-end and enterprise processes for many organizations.

How will this shift lead to the acceleration of consolidation among large enterprise software companies, resulting in an even greater overlap of capabilities? To learn more about this and other emerging trends that are shaping the future of digital transformation, download the report on the top 15 digital transformation trends in 2025 today.

11. Continued Digital Transformation Failures and Focus on Enterprise Architecture

The consolidation-driven overlap will result in duplicated capabilities across enterprise software categories. This would create significant challenges for executives managing transformation initiatives. Companies like SAP have already begun focusing heavily on enterprise architecture. Smaller vendors are expected to adopt similar approaches.

How will this trend drive acquisitions in key areas like process mining, digital adoption platforms, and enterprise architecture visibility tools? To uncover more insights on this and other transformative trends, be sure to download the report on the top 15 digital transformation trends in 2025 today.

12. Energy-Efficient Algorithms and Computing

AI capabilities are currently constrained by infrastructure and energy limitations. As a result, significant investment will be directed toward data center energy technologies and energy-efficient algorithms.

How might this trend lead to the development of new models that surpass current ones, offering even more advanced and powerful capabilities? To explore this and other emerging trends shaping the future of digital transformation, download the report on the top 15 digital transformation trends in 2025 today.

13. Revised Processes for Sustainability and E-Invoicing

ESG and sustainability will remain key priorities for both governments and consumers. Policy changes in these areas will lead to new reporting requirements, which many software vendors will prioritize to capitalize on emerging trends.

As the ESG sector continues to evolve, with solutions competing for market share and overlapping capabilities, how will these developments influence business strategies? Additionally, with governments pushing for more efficient tax revenue collection through the evolution of e-invoicing processes, what impact will this have on reporting requirements and system architecture? To stay ahead of these trends, download the report on the top 15 digital transformation trends in 2025 now.

14. Omnichannel, Collaborative Experience, and Operational Intelligence Platforms

Companies excelling in omnichannel solutions, collaborative platforms, and operational intelligence will keep growing. The MACH ecosystem and real-time experiences are becoming mainstream. Tools like SmartSheet, Monday.com, Airtable, ClickUp, and Notion are redefining collaboration. Palantir is shaping operational intelligence. As these trends evolve, market leaders will gain more traction.

As emerging technologies continue to reshape the business landscape, how will legacy companies like Atlassian, Snowflake, and traditional commerce vendors adapt to stay competitive? Will they successfully catch up with the latest advancements or face challenges in their efforts? To explore how these shifts will impact the digital transformation journey, download the report on the top 15 digital transformation trends in 2025 today.

15. Race to Quantum Technologies

AI is driving demand for advanced infrastructure and computing power. This accelerates quantum technology development. Despite risks like q-day and post-quantum cryptography, investment in quantum is likely to grow, as seen before.

Could the advancements in quantum technology lead to the emergence of entirely new technologies and software categories? What potential breakthroughs can businesses expect in the near future as quantum developments accelerate? To dive deeper into this and other key trends shaping the digital landscape, download the report on the top 15 digital transformation trends in 2025 today.

Final Words

The year 2025 is expected to carry a level of uncertainty similar to that of 2024, resulting in a cautious approach for most CFOs. A potential catalyst for advancing the enterprise software market could be innovations powered by AI. Nevertheless, translating AI initiatives into tangible business outcomes may require time for companies to grasp fully.

For those contemplating digital transformation initiatives in 2024, allocate resources to a strategy aimed at mitigating financial and technical risks. Doing so will not only enhance your chances of securing the trust of financial executives but also guard against unforeseen challenges that may arise in the absence of such a plan.