Enterprise Architecture

System integration is like a commute, getting you from A to B. So why is there an overload of ERP integration tech options? Well, sometimes the destination is a system or an external business, and that determines the right integration technology choice. These options aren’t just programming languages but products of industry collaboration for interoperability. They may seem like business jargon to developers, but each plays a vital role.

The problem starts when companies blindly adopt these technologies without grasping their strengths and weaknesses. API or webhooks are classic examples. While they have made system integration easier, they might not be the best fit for every scenario. And let’s face it, dismissing a tech simply because it’s seen as “legacy” is like ditching radio for TV. So unless the enterprise technology is positioned as a clear successor, using something just for the “cool factor” might not be the wisest move.

Also, there are generally three layers in the architecture: web/UI, services, and database. Each integration technology option is optimized for one of these layers. For example, ETL’s design allows it to be efficient for quick and bulk movement of data, bypassing the business rules. But, newbies, listen up closely: bypassing business rules is a design choice but not always the best idea. Integration technologies optimized for web layers aren’t fit for every situation either. They have their own set of nuances, like UI layers may include additional presentation-centric logic only applicable to that layer. So how to select an appropriate option for your unique situation? Get a grip on the pros and cons of each tech option from the following list.

10. Natively built within ERP code/Custom-built and Externally Deployed

Most newbie ERP buyers mistakenly assume that business systems package unlimited bandwidth, oblivious to the fact that integrating additional code can strain system performance. ERP OEMs don’t typically plan for extra firepower in their core offering.

While minor customizations and some ERP integration logic can coexist within an ERP system, it’s not meant to cram ten passengers into a four-seater car. ERP Integration native to the platform comes in different forms: some people code it recklessly, bypassing security rules and tampering with the database directly, while others use add-ons or external components for deployment.

What’s it good for?

• For tightly integrated processes that touch master data, such as inventory. Customizations that seem inseparable from the core codebase. 
• The code base is not likely to change. The state of code must not break because of invariability in inputs. The integration code requires frequent changes because of the changes in interfaces or inputs.  
• The code base that the OEM must own regardless of technical or political drivers.

Myth

• Host the entire integration code inside the ERP to save costs. Don’t be fooled by this idea. You might pay much higher in the long term because of increased maintenance or slowed performance of systems.
• ERP integration logic can carry the additional workload. No, the planned capacity assumes that you must be running ERP with minimum customizations.

Best practices

• Host integration code inside the ERP that is tightly coupled with master data. Master data elements like inventory master or customer and vendor master.

• Host any native add-ons inside the ERP. The add-ons that are natively built for the embedded experience must be hosted inside the ERP.
• Don’t host the integration code inside the ERP that requires frequent changes or is prone to errors.

In short, don’t rush to host everything in the ERP. If your integration code simply moves data from A to B, it’s better off outside the legal and code boundaries of the ERP package.

9. Workflow Automation/RPA

Workflow Automation and RPA technologies are the newest entrants among integration technologies. While the flavors of workflow automation have been around, they weren’t as lean and efficient to automate user-driven processes embedded with system-driven. The tricky part is differentiating these technologies from iPaaS, which focuses on system-to-system integrations.

What’s it good for?

• Users and desktop-centric workflows and processes. Think of automating the responsibilities of a clerk performing monotonous tasks such as data entry or approvals.
• Good for tightening the processes of transactional systems. Such as ERP or eCommerce. Processes like improving the quality of master data: SKU numbering scheme or customer names.
• Good for ad-hoc processes. Think one time and not something that is part of your operational fabric.

Myth

• Replacement for other transactional technologies. It’s not meant to be better or worse than other technologies. They all have a role to play.
• Workflow automation and RPA are more cutting-edge. Everything is cutting-edge if you use it for the right use case.
• They are easier than other technologies, such as ERP. Every technology could be easy or hard, depending on how it’s being used.

Best practices

• Define the architecture and roles of the RPA and workflow technologies. Drawing architectural boundaries will help you clarify the roles and responsibilities of technologies.
• Analyze the admin effort first to ensure it’s not a symptom of broken processes. As well as to avoid automating broken processes.
• Don’t implement RPA and workflow tech just because they are cutting-edge. 

In short, Workflow Automation and RPA technologies are great for ad-hoc and desktop-centric tasks, but they fall short when it comes to handling transactional, operational processes.

8. eCommerce and Marketplaces

You might be surprised to find eCommerce listed as an ERP integration technology. But believe it or not, eCommerce, EDI, or P2P could be substitute technologies and serve a similar role to integrating with sales channels, especially if the purpose of eCommerce is just to capture orders. The same applies to marketplaces. They have their own integration platform that could serve the role of integration layer. 

What’s it good for?

• Smaller eCommerce brands that can’t afford expensive ERP integration just yet. Don’t fall for the temptation of point-to-point plug-and-play integration! While it may seem easy at first, you’ll end up with more reconciliation headaches downstream.
• Integrating with marketplaces that are a natural extension of that channel.
• Marketplaces and channels where segmentation of inventory for each channel is not as critical.

Myth

• Most channels must be routed through eCommerce, including punchouts. Based on the enterprise architecture and traceability needs, sales channels can be integrated through eCommerce or ERP.
• Pricing must belong to eCommerce. Depending upon the pricing segmentation and control required, it can belong to eCommerce or ERP.
• Bi-directional syncs are easy to implement through APIs. Without workflow design and control, bi-directional sync is likely to corrupt the data, challenging to reconcile.

Best practices

• Define the role of eCommerce, marketplaces, and channels. The clarity in roles will help you define your architecture.
• Define the traceability required for pricing and discounting and host in appropriate channels.
• Treat eCommerce as an order capture channel and then move to the central, downstream system to minimize the hops for reconciliation.

Use eCommerce and marketplace channels primarily for order capture. But for more complex scenarios, don’t forget to define your architecture, including reconciliation workflows, to ensure simplifying the front-end doesn’t lead to complicating the backend.

7. API 

Most people misunderstand the role of APIs in ERP integration. The APIs hide the technical boilerplate of underlying technologies obeying the same security rules as the user interface. This prevents the tempering of databases directly and separates integration from core system concerns. Not meant to be plug-and-play, though often perceived, so designing architectural and reconciliation workflow is critical with APIs.

What’s it good for?

• To easily communicate with internal systems. Unified communication without worrying about translations and protocols required to communicate with each underlying technology.
• To integrate easily without tempering the state of the core system. Unified security and business rules layer across channels and integration points.
• To isolate core systems from the integration logic. Easier debugging and maintenance through clarity in the roles and responsibilities of the integration layer and logic

Myth

• APIs are replacements for architecture. APIs only provide easier access to data from applications implemented in different technologies, but how you want to mesh them together to achieve the desired outcome requires thoughtful design.
• As long as you have APIs, you can integrate anything. Yes, you can, as long as you have workflows and architecture vetted out.
• APIs are better than EDI. Not true at all. EDI allows external B2B communication where pre-agreed, industry-wide messaging is critical. Since most companies define their own standards for APIs, they don’t have the same canonical model as EDI.

Best practices

• Define security architecture before incorporating integration through APIs
• Isolate ERP integration code completely from the core system
• Define system interaction flows, and master data governance path with APIs

APIs have made ERP integration easier as they hide the underlying technical details and allow integration easily with wide-ranging technologies and systems. But they can’t create the integration flows themselves, and not meant to be plug-and-play.

6. P2P and Punchouts

Larger companies generally use a procurement system to streamline their procurement processes. The P2P systems may have a gateway built with eCommerce systems to communicate between the client’s P2P and the vendor’s eCommerce. They can share their catalog, complete transactions, and receive updates on their orders. 

What’s it good for?

• The customer is too big to go to vendor’s websites to place orders. As big companies grow, they graduate from browsing vendor websites to place orders. The natural next steps? P2P or EDI
• Integrating with suppliers when you aim to consolidate and centrally govern your procurement processes. 

Myth

• Punchouts and P2P systems are superior to ERP. P2P systems tend to decouple the downstream processes to expedite purchase flow but at the expense of workload for downstream systems.
• P2P systems are best for any procurement organization. Only good for larger companies who prefer to simplify their front-end processes at the expense of the backend.
• Punchout must go through the eCommerce channel. Depending upon the architecture, organizational structure, and traceability needs, integrate P2P systems with ERP or eCommerce.

Best practices

• Integrate with P2P if your large customers have mandated them. While integrating with it might not be optional, how you will integrate is your architectural decision.
• Define the roles and responsibilities of P2P vs. ERP vs. eCommerce. Identifying clear boundaries for each system will help define the architecture.
• Define the reconciliation and master data governance workflows for P2P, ERP, and eCommerce systems. To help decide: ease of use vs. increased overhead for downstream processes.

P2P and punchout integration are great when customers might mandate them to integrate with their systems. They might also be good for streamlining your vendor processes. But they are neither replacements for nor easier than any other integration technologies.

5. ISV Add-ons 

Some ISV add-ons could provide the same capabilities as integration technologies, as well as augmenting business objects for improved traceability and collaboration with business partners. Despite their plug-and-play integration capabilities, analyzing architecture and reconciliation flows is still critical.

What’s it good for?

• Integrating with vendors that might not be able to afford other expensive integrations. Compared to P2P, EDI, or eCommerce, ISV add-ons could provide automated communication at a much lower cost.
• Providing additional granularity with the business objects and workflows. 
• Hosting additional data that might not be relevant for the ERP and doesn’t need to be centralized.

Myth

• Enterprise architecture is not relevant to ISV add-ons. ISV add-ons are nothing but data siloes, and they should be treated just like any other systems in the architecture.
• Master data governance and reconciliation flows are not relevant for ISV add-ons. While they might be plug-and-play to integrate, the analysis of reconciliation workflows and master data governance is still critical.
• ISV add-ons are easier than ERP. Easier because they decouple the underlying systems but increase the admin efforts for downstream processes. It’s a design choice.

Best practices

• Use ISV Add-ons, but only if it makes sense architecturally.
• Where vendors or customers might not have any other means of integrating with your systems and are willing to communicate through the ISV add-ons.
• When underlying data make sense to augment in an add-on system than in the ERP.

ISV add-ons provide additional traceability and datasets that might be more expensive to build inside an ERP. They also provide cheaper ways of integrating than P2P, EDI, or eCommerce.

4. WebHooks

WebHooks allow communicating with external systems as business objects advance. While they can support more intricate integration scenarios than APIs, they are also not meant to be plug-and-play. Not inherently providing transactional consistency or seamless communication, designing integration flows isn’t optional with them.

What’s it good for?

• Easier web-centric integrations that don’t require tight master data governance. If the integration is primarily to notify or log/report in the destination system, use WebHooks.
• Easier to use with web-centric technologies. Not as useful if there are any non-web channels involved in the architecture.
• Good for integration flows where tight security may not be of concern. 

Myth

• Webhooks are easier than other integration technologies, such as EDI. Not meant to be replacements, Webhooks don’t support industry-adopted canonical messages like EDI.
• Webhooks are modern ways of integration. Despite allowing tighter embedding of web apps without tempering with the core, they are not better than any other integration technologies.
• The technologies that don’t support webhooks integration are legacy. What if legacy technologies don’t have a use case for Webhooks?

Best practices

• Use webhooks integration for commerce and web-centric technologies, especially where a tighter collaboration of web apps would make sense.
• Analyze the impact on omnichannel architecture if webhooks are still a good fit. 
• Understand the security needs and master data governance before integrating it with Webhooks. Design, architecture, and reconciliation workflows are not optional, even with webhooks.

Webhooks are great for additional granularity that APIs might not support, as well as allowing tighter collaboration of web apps. But they are not meant to be a replacement for any other integration technologies.

3. ETL

ETL is faster at bulk data movement, but it’s not the best choice always. It’s faster because you bypass the business rules to get quick access to raw data without impacting operational performance. It’s like using a service elevator while moving. But replacing passenger elevators with service ones is not the best choice. 

What’s it good for?

• Bulk data transfer among databases. No other interactions at the UI and service layers through ETL.
• Nightly load to get data in a snapshot to perform analysis. Only when you need raw data for analysis, without touching operational workflow.
• Where faster processing at the database level is required. Think quick-moving without disrupting the passenger flow of an apartment building.

Myth

• ETL can cater to most integration scenarios. Calling the service layer and processing EDI transactions through the ETL layer is like exploiting your superpower. 
• Even service and UI integration scenarios can be done through ETL. This would be very similar to accessing databases directly. APIs exist to prevent direct database access for unified security and business logic.

Best practices

• Use ETL only for the database-to-database integration. Using ETL for anything other than moving bulk raw data is an antipattern.
• Don’t use ETL where service layer integration may be a better fit. Just like the passenger elevator is perhaps the safest choice when in doubt, ETL access should be a privilege.
• Don’t use ETL for EDI or external integration with other businesses. This is like letting passengers go through the service elevator without security protocols or scrutiny. 

Think of ETL as a special privilege allocated for one-off scenarios for bulk data transfer without impacting operational performance. So don’t let ETL touch other layers except for the database.

2. EDI

More than an integration technology, think of EDI as “electrical codes” designed for industry collaboration. Replacing EDI with API would be similar to leaving red vs. green for interpretation. Also, just because you prefer to swap out red with green in your home, it’s your personal choice. APIs are superior for personal choice, while EDI helps with regulated communication across industries.

What’s it good for?

• For B2B communication, where regulated communication is critical. Where each message is coded with the same standard without requiring interpretation.
• Where standardized messages are a requirement across all vendors, think of how terms such as receipt or profit could have different meanings in different contexts. EDI helps us prevent this confusion.
• Integrating with vendors that might already understand EDI or may have systems that are EDI-compliant. 

Myth

• EDI is a legacy communication method. EDI is perhaps the most concise industry communication language ever designed. Get used to it! 
• EDI should never be used. APIs are a better choice for integration. Using APIs where EDI would make more sense is like skipping electrical codes just because you don’t appreciate them. There will be consequences when you let an unlicensed electrician repair your home.
• EDI is slow and error-prone. Only when it’s being overly used and poorly designed. 

Best practices

• Use EDI where systems might already be EDI-compliant. 
• Implement EDI where standardized communication could reduce churn with vendor communication.
• Don’t use EDI for internal communication. Not designed for internal integration. APIs would be a better choice for that, or you will outgrow EDI codes.

Just like technology does not answer every question, EDI is a communication and collaboration language. Use EDI for externally regulated communication but avoid it for internal system integration.

1. iPaaS/Middleware

iPaaS and middleware are probably one of the most overused terms. The role of iPaaS and middleware is to connect external wiring among different systems in the architecture. Not just that, though. Translation, transformation, and quarterbacking, when you might have systems that might operate at different speeds, would be other benefits.

What’s it good for?

• To implement integration logic. Integrating two or multiple systems through a variety of communication methods and technologies.
• To have room for load throttling. Cloud technologies don’t offer the same infrastructure control as was available in on-prem settings. The point-to-point connections assume that all systems can operate at the same speed, which might be OK at a smaller scale but not at a transactional inflection point when you need to decouple your workloads.
• To isolate integration logic from core systems. The separation helps with debugging, maintenance, and isolating issues.

Myth

• Unnecessary license fee. The additional license fee might come across as unnecessary, but keep the slower performance or increased fee due to the higher tier of your ERP infrastructure in mind.
• IT-centric systems are only relevant for large enterprises. Even smaller companies might use the baby version of iPaaS, such as Zapier. They might not be as capable as their larger peers.

Best practices

• Don’t host business rules and logic that must be hosted in the core system
• Keep only the integration and transformation logic inside the iPaaS layer
• Host only the workflows geared toward system-to-system communication. User-centric workflows might not be the best candidate for iPaaS. They are better suited to workflow-centric technologies.

Always use iPaaS in the architecture unless your needs are to use one system without requiring integration. But don’t assume that you have one system when you might be using a collection of apps underneath with the branding of one, like an ERP system.

Final Words

Just like attempting to “fly” to your neighbor’s house may not be the wisest move. It’s important to use integration technologies purposefully. Overusing them can lead to scalability and performance problems, even if they might be the trendiest tech around.

Moreover, integration isn’t just about moving data from point A to point B. That’s the easy part. The real challenge lies in tackling compliance issues and building an enterprise architecture that aligns with business and performance goals. So, if you’re new to the integration game, don’t get swayed by the latest technologies. Dig deep into their origins and intended use, and apply them wisely. Hopefully, this list can serve as a helpful 101 guide.

FAQs

The enterprise software (or ERP) industry has always struggled to justify its hefty price tags. Seriously, why is software still breaking the bank when the hardware is on a discount spree? Remember the good ol’ days of on-prem software? Customers were just getting used to paying for support and licenses. But then the cloud came in like a storm, demanding they shell out nearly ten times more! Talk about a shocker. It’s enough to give enterprise software reps nightmares. Result? They had to downplay the importance of design, architecture, implementation, and change management to close deals. And that’s when things took a wild turn in this industry.

Welcome to the era of marketing genius! But let’s be real. These practices might be dragging the ERP industry down, despite the tech advancements. The race to come up with buzzwords and peddle misleading conclusions like “easy-peasy software implementation” has become a sport. It’s almost a joke to ERP implementation consultants when reps claim that anyone with a laptop might be able to integrate cloud ERP software. Who needs enterprise architecture in the cloud? The never-ending race, right?

Buzzwords, buzzwords, and more buzzwords! They promise the moon and stars, faster value, and lightning-fast implementation. But guess what? It’s all a bunch of baloney! Those buzzwords are more deceptive than a politician’s speech. And you know what happens next? Customers end up making silly decisions like rushing to go live or skipping user training. And the result? Their confidence in digital transformation takes a nosedive. And who’s to blame? These practices, my friend.

10. Marketing Hype

Marketing hype like the Bill of Rights is meant to show how much ERP vendors care, but let’s be real; it’s mostly fluff. In fact, it can backfire if you don’t evaluate it carefully.

• Functional checklists. Provided by OEMs and resellers to help customers manage the ERP selection process in the DIY mode. But they’re often biased (written from their perspective) and leave people confused. They make all solutions seem similar and distract from what really matters (leaving people to focus on other “touchy-feely” issues). Technical issues get downplayed, too.
• Consumption-based business model. Pitched as a generous favor from vendors, but it’s not always better. Both named and consumption-based models could be equally good depending on the context. The consumption-based model comes with a performance tier, which is often overlooked while unlimited users take the spotlight.
• Bill of Rights. Some OEMs promote their Bill of Rights as if they’re the only fair players, but most of it lacks tangible value. It’s just a marketing gimmick, so don’t fall for it. Access to data sounds good, but it’s useless without their software.
• Fake cloud. Don’t be fooled by those offerings claiming to be cloud-based; they lack essential cloud perks. They’re just slapping on the word “cloud” to give you that “cloudy” feeling. It’s like putting lipstick on a pig – it’s still a pig.

Don’t buy into marketing hype. It’s all about putting down the competition or slyly nudging you in their direction, even if they dress it up with a smile.  Whether it’s negative marketing or shiny hype, they’re just playing the same game.

9. Perception of APIs or Low-code/No-code

Traditionally, there’s always been a misalignment in expectations between business users and technical teams. Business users think tech wizards can work magic with vague instructions, while techies want clear specs before diving in. This gave birth to low-code/no-code tools, where business users could try their hand at coding. Sadly, though, low-code/no-code only adds to the mess of brittle code and lousy architecture.

• Overselling of low-code and no-code and APIs. Instead of hyping up no-code and low-code, the ERP industry should emphasize the value of writing solid requirements without ambiguity.
• Overselling of giving control to citizen devs. Citizen devs, listen up! It’s time to channel your inner tech guru. Instead of trying to do it all, focus on providing clear inputs. 
• Over-emphasizing the importance of code. Let’s face it. Writing code is like following a recipe for mac and cheese—pretty straightforward. The real challenge lies in whipping up a delicious design and nailing those specs. So instead of obsessing over mastering new programming languages, prioritize writing requirements that can pass the “SMART” test. That way, you’ll be cooking up success in no time!
• Undermining the importance of good requirements, design, and test cases. When it comes to software, requirements, design, and test cases are like a dynamic trio. They’re BFFs, inseparable! Their quality determines how tasty your implementation will be and how smoothly your processes will run. 

The obsession with low-code and no-code is dragging the industry back and causing architectural messes. It’s time to shift gears and prioritize coaching business users on creating solid specs and designs. 

8. Delayed Involvement of Implementation Teams

Enterprise software vendors often sideline their implementation teams during the sales process, fearing they’ll reveal too much information and jeopardize their competitive edge in the deal. Sadly, it’s the ERP implementation teams left to deal with the fallout of unrealistic commitments made by the ERP sales reps, limiting their capabilities despite their competence.

• Implementation teams are only involved after the damage is already done. When dealing with ERP vendors, insist on involving the person accountable for implementation and have their name on the contract.
• Major architectural decisions are already made by decision-makers with very little hands-on implementation experience. Success in ERP implementation comes from balancing business and technical perspectives. It’s not a one-and-done affair where you throw the “WHAT” at your technical teams and expect them to magically conjure the “HOW.” The process is iterative, involving decision-making and feasibility analysis. So, hold off on decisions until you have someone with solid implementation experience to guide you through the pros and cons, both financially and technically.
• The gap between the implementation and the sales teams. Flipping through marketing brochures to answer sales objections is not the same as implementing. It requires much deeper probing of design and architectural issues that ERP sales reps don’t have exposure to.
• The selection teams with very little implementation expertise. Avoid ERP selection consultants who rely solely on tech vendors for architectural and technical decisions—look for hands-on implementation expertise instead.

Regardless of the reasons, political or genuine, keeping implementation teams out during the ERP selection and design phase harms the ERP industry. And yes, technical teams might be perceived as too detailed oriented, but lacking implementation experience in the pre-implementation phase is equally risky.

7. Overselling of Frameworks and Technical Certifications

The enterprise software and ERP industry is brimming with frameworks and certifications, each claiming its own formula for success. But here’s the catch: these frameworks often assume constraints that don’t align with clients’ unique environments. To achieve true operational efficiency in ERP implementations, judgment is more important than frameworks.

• Frameworks and certifications are used as a shield for implementation success. Certifications and frameworks don’t guarantee implementation success. It’s not about parroting concepts but how you apply them that counts in ERP implementations. So, don’t judge a book by its certification!
• ERP project is successful but limited tangible business results. Can you Imagine working harder after a “successful” ERP implementation? Siloed approaches promoted by frameworks and certifications without a business-focused analysis can still leave you swimming in inefficiencies, despite all the investments.
• Technical certifications designed with the product boilerplate. Certifications often drown in product jargon that may not even apply. They can lead you so deep into the product rabbit hole that you lose sight of the real world.
• Certifications are too biased toward the product than toward the customers’ success. Product certifications tend to get too wrapped up in the product concept. While they may offer best practices from their perspective, every installation has its unique context. It’s like trying to fit a square peg in a round hole of possibilities!

Avoid vendors that oversell the importance of certifications. The certifications and frameworks go only so far. The industry needs to water down the importance of certifications and frameworks and design them that test consultants’ judgment on customer success and industry knowledge.

6. Architectural Immaturity

ERP vendors selling cloud often downplay the importance of architecture. And remember, architecture isn’t just about technology—it’s about getting all Fs equally represented: form, fit, function, finance, fanbase, and future-proofing. 

• APIs are used as a shield for architecture. APIs have successfully masked the proprietary boilerplate of underlying technologies, providing a secure and unified way to access information, just like a user interface (UI). However, some ERP sales reps, lacking implementation and technical prowess, tend to exaggerate the capabilities of APIs, mistakenly believing they can replace the need for solid architecture and workflow design.
• Significant communication issues with systems. ERP implementations that postpone integration and communication workflows to the implementation phase can stumble upon reconciliation challenges. 
• System adoption issues. Poor architectural choices can turn your user experience into a bumpy ride, tempting them to hijack processes and create parallel siloed systems. And guess what? That leads to some serious adoption issues. 
• Involve technical teams with architectural experience during ERP selection. When technical and implementation teams join forces during solution design, magic happens! It’s like assembling the Avengers of the enterprise world!
• Misunderstanding of data stores and reconciliation workflows in the architecture. User experience and operational overhead are like two rival forces locked in an eternal struggle. The more data siloes, the more reconciliation efforts and operational overhead you’ll face. 

As we leap ahead with technological advancements, our architectural maturity seems to lag behind. While technology can streamline workflows and processes, it’s no magic wand that conjures up flawless architecture with a simple flick.

5. Lack of Emphasis on Change Management

While most regard change management as a critical component for successful digital transformation initiatives, the boundaries often get blurred. The truth is, effective change management requires aligning perspectives, documenting to mitigate risks, and treating it like a central function, just like a general contractor who takes responsibility for the entire project. 

• Change management is not meaningful without ERP subject matter expertise. Change management without ERP expertise is like trying to drive a car without knowing how to steer. To effectively manage and align everyone’s expectations, you need change management consultants who have ERP subject matter expertise and understand different technologies to be able to communicate effectively with all teams involved. Don’t settle for a change management team that’s all talk and limited ERP know-how.
• Too much emphasis on users who might not understand the implications of architectural experience. Putting untrained and unqualified users in charge of critical business processes and architectural decisions is like handing the car keys to a toddler. Sure, their opinions matter, but expecting them to make informed choices without proper information and guidance? It’s a recipe for disaster. Empower your users with the right knowledge and support, so they can contribute meaningfully to the decision-making process. Remember, architecture and business process decisions are best left to the experts. The right experts excel at facilitating decisions without applying pressure. They guide, not impose.
  

Change management is the secret sauce that keeps the system sizzling. Ignoring its importance is like going in circles without making progress. If the ERP industry gave change management the spotlight and the right ingredients, customers would feast on business results, fueling industry growth.

4. Overemphasis on Cloud and SaaS Technologies

The ERP industry loves to hype up SaaS and cloud technologies as plug-and-play fixes. They mistakenly believe that a bunch of SaaS solutions patched up together automatically equals tightly integrated processes and financial control achieved through ERP-like architecture. 

• Cloud is a solution to all problems. Cloud is not meant to be a solution to all problems. Purchasing SaaS won’t automatically solve your business and performance issues.
• Too much licensing fee, very little results. Yes, SaaS is more expensive than on-prem as vendors need to follow the guidelines related to cybersecurity and data loss, which are often ignored when managed internally. But unfortunately, paying more for SaaS is not a replacement for good design. ERP vendors need to justify their costs, and they do so by downplaying the importance of change management, the cost of implementation, and the efforts involved with good solution architecture. Listening to them is like taking advice from your competitors.
• New problem? Throw a new SaaS. Lacking proper architecture and solution design can result in a never-ending loop of purchasing SaaS without experiencing any real business improvements or, worse, undoing the benefits you’ve already gained.
• Architecture, business systems, and master data governance teams were not involved before buying SaaS. The ERP industry often misguides companies by suggesting that SaaS purchase decisions can be made at the department level, without considering the enterprise architecture, master data governance, and impact on other departments. This approach only results in duplicated efforts, more data siloes, and a loss of overall enterprise value.

A tool is just a tool, no matter how powerful it claims to be. So don’t expect a pricey tool to magically generate money or enterprise value for you. Life isn’t as simple as SaaS sales reps make it sound.

3. No Consensus on the Definition of ERP

The ERP industry struggles with defining ERP due to differing industry expectations. They simplified the term ERP for business users to grasp, but this misunderstanding leads to misguided decisions, ultimately leading to lost confidence in digital transformation initiatives.

• Every business has a new definition of ERP. Sadly, without considering business processes, reconciliation workflows, and operational overhead, grasping the true value of ERP is like chasing a ghost. The ERP industry should move beyond the term “ERP” and focus on the importance of ERP-like architecture, the key ingredient for operational growth and unlocking enterprise value.
• Misunderstanding of the importance of ERP. Unfortunately, unless you have hands-on experience in growing businesses with an ERP-like system, grasping the true essence of a real ERP is as elusive as a unicorn. Also, the added noise with systems claiming to be ERPs just because they tick a few boxes does not help either. 
• The role of add-ons and auxiliary systems. Most ERPs started as siloed apps, but then they had to become tightly integrated as that’s what businesses needed to scale. The role of add-ons is generally misunderstood. Whether add-ons are third-party or included as part of the solution, they are just another data silo if you think from the perspective of architecture.

The ERP industry is the master of confusion, cashing in on ERP misunderstandings and preconceived notions. But what we truly need is a clear message about the significance of ERP-centric architecture and operational process design.

2. Shiny Object Syndrome

The ERP industry loves to come up with shiny objects, and let’s admit it, we all have a weakness for them. But chasing after shiny objects often leaves companies disappointed with technology initiatives, as well as missing out on the opportunity to seek the right help that could truly transform their businesses.

• New technology must solve all business problems. Don’t be blinded by the glimmer of shiny new tech. Before diving in, ask: Will it truly add value? Take a deep dive into operational data and workflow assessments, perform root cause analysis through process models, and vet potential solutions diligently before procuring and implementing them. But remember, if broken processes and data are the core issue, a fancy tech will only make the mess grow at a faster speed.
• Rat race towards technology. Ever heard the team chant, “Must we follow the tech trend or will we be left behind?” Or worse, do you find yourself beating that drum? Well, here’s the truth: Technology alone won’t boost your business prowess. It’s all about how you use it that makes a difference.
• Technology-centric ERP system selection decisions. Transforming initiatives shouldn’t be fueled solely by the need to modernize IT. Focus needs to be on the business’s beating heart instead.

Hey ERP industry, stop caching on customers’ shiny object obsession! And companies, wake up! Chasing shiny objects will only lead to digital transformation doubt and put the brakes on ERP industry growth.

1. Faster Implementation Times

ERP publishers engage in a rat race for implementation speed to secure contracts and ensure renewals, sacrificing adoption risks in the process. Ironically, analyst firms inaccurately rely on implementation time as a metric, failing to consider the true measure of technological advancements and efficiency gains. This needs to stop!

• The misunderstanding of the term “implementation.” The problem with faster implementation is that it’s not just about system setup. While some systems are user-friendly, human learning and consensus-building take up the majority of the time in ERP projects.  The problem with faster implementation is that it assumes data and processes are ready to go, with all specifications fully vetted. It also assumes you’re a pro at making decisions on countless variables for operational efficiencies. 
• Rat race of faster implementation times. The rat race began because software vendors had to meet quarterly targets. While technology has sped up the process, expecting to go live within 90 days is trouble waiting to happen. Also, comparing implementation times is like comparing apples to oranges. Just because your peers did it in two weeks doesn’t mean you can too. What if they spent years perfecting their processes before signing the contract? 

Asking for a faster implementation is like asking for a one-way ticket to hell. Don’t expect a happy ending when going live on an unstable system with untrained users. Time to wake up and ignore those ERP vendors pushing for speed just to boost their stats. Hell isn’t the dream getaway for your ERP project, trust me!

Final Words

Enterprise software will never catch up with the hardware’s discount extravaganza. It’ll always burn a bigger hole in your pocket because of the nature of the beast.

It’s high time for ERP software vendors to learn how to prove their worth instead of endorsing practices that’ll ultimately harm the industry. Wise folks say there are no shortcuts in life, and faking it will only take you so far! Now, the big question is, will the ERP industry let go of its cloudy judgment for the greater good of the ERP community?

FAQs

Navigating the ERP industry could be hard with so many different ERP company types. If this is your first time engaging with ERP companies, you might be confused about their role. The problem starts with marketing verbiage sounding similar. Each of them claims to be an expert at business transformation or process re-engineering. While marketing is easy, being proficient with ERP transformation projects is a multi-year process. This process requires thousands of cycles under their belt to master the art. Engaging with a company that may be overcommitting its capabilities is a sure recipe for disaster.

The challenge is not just their overlapping focus and claims. It is also their tendency to guard their revenue, sometimes through practices perceived as unethical. Through their alliance strategy, the ERP publishers may have an NDA with their resellers. The NDA has a clause of favorably marketing their products. These clauses will prevent them from revealing the weaknesses of the products, even if they might want to be completely honest.

Legal issues are not the only problems the ERP industry faces. You might run into technical or architectural challenges. The competing vendors might not integrate well with the other good solutions sold in alliances by their rivals. So what do you need to know about different ERP companies involved with an ERP transformation project?

1. ERP Publishers

ERP publishers are the producers or manufacturers of ERP products. Their role would be similar to a manufacturing OEM that publishes the original equipment. The OEMs such as a car or a material handling system that their ecosystem partners can sell or service. Examples of such companies include tier-1 vendors such as SAP, Oracle, and Microsoft. Tier-2 vendors such as Infor, Epicor, Sage, IFS, Unit4, QAD, Acumatica, Plex, or Deltek. And Then tier-3 vendors such as ECi software solutions, Global Shop, ProShop, Genius, Blue Link, or Alox.

Depending upon the publisher type and their business model, they each may have different strategies. Some horizontal vendors such as SAP, Oracle, Microsoft, Sage, and Acumatica might offer basic ERP capabilities out-of-the-box. But they might rely on their VARs and ISVs to provide the industry functionality. Vertical vendors such as Infor, Epicor, Plex, QAD, or Unit4 might package the entire enterprise architecture out of the box. They might also offer consulting support and services.

In general, most ERP publishers care for the license revenue and may have legal limitations in providing support outside of their product. Even the ERP vendors that might have their internal professional service might engage with other partners to provide integration support and services. Also, the vendors that don’t have developed channels and ecosystems are likely to have poorer documentation for their products. Why? Because they might manage their products with tribal knowledge and few key employees (or departments). Regardless of whether you sign a contract through them or through one of their channel partners, you will most certainly be using products published by these OEMs.

2. ERP Resellers/System Integrators

ERP resellers (also known as value-added resellers or VARs) are the distributors of the ERP OEMs. Their role is similar to a distributor in the traditional retail and manufacturing value chain. A third-party sales extension of their ERP OEMs, most resellers might carry only a couple of products, depending upon the restrictions posed by their OEMs. Examples of resellers would be SAP or Oracle partners, Infor or Epicor resellers, or Acumatica or NetSuite VARs. Examples of system integrators would be companies such as Accenture, CGI, Capgemini, NTT Data, TCS, Wipro, Infosys, or HCL.

Some OEMs might require exclusive relationships, while the other ones might be slightly more flexible. They divide their resellers’ focus into different territories, just like their internal sales teams. At one time, there could either be a reseller or an internal sales rep allocated to the deal. Changing the reseller might be possible but often difficult, as OEMs might want to guard their resellers.

Primarily interested in the consulting revenue, the system integrators also have a very similar business model as ERP resellers. But they might not sell the software. They will have internal practices set up for each vendor and product. And each practice might compete with each other for clients and revenue. And this competition sometimes may be at the expense of customers. Neither the reseller nor the system integrators are independent. They may have biases with their advice as they are only experts in a few products. They would try to create solutions around those technologies, ignoring the other potentially superior options out there in the market. 

3. ERP ISVs or Add-on Companies

ISVs (independent software vendors) are software publishers that may sell their software on ERP marketplaces, with the primary motivation to sell their licenses. Typically installed on top of the ERP systems, the ISV solutions come in various shapes and sizes. Some of these ISVs are well-funded companies by private equity and VCs. The other add-ons, however, are developed by VARs that may not be as well capitalized. 

In general, the ISVs that are also not VAR tend to have superior go-to-market strategy and development teams. The companies that try to do both end up mixing their business model. They might not have as much capital and install base to maintain the high-quality code, as well as documentation. Examples of ISVs could include sales tax software, AR/AP automation, and EDI vendors. As well as iPaaS solutions, eCommerce plugins, and customer and vendor portals. Sometimes these ISVs could be as big as the largest enterprise vendors, such as Salesforce, Adobe, or ServiceNow. 

The ISVs are likely to have very strong alliances with the OEMs and VARs. At times, offer free independent advice, including ERP selection. They do so in the hope of winning the license business. Some ISV solutions might be native, while others may have a completely different look and feel and UI than the native solution. Also, unless you live and breathe in the ERP space, it might be harder to know the difference between a white-labeled solution sold on OEMs ‘ papers vs. the code owned by the OEM.

4. Independent ERP Consultants

Just like other ERP companies, even independent ERP consultants come in various shapes and sizes. Some of them are business transformation experts involved from the strategy phase until the successful adoption. The others are just affiliate marketing companies, selecting based on a checklist approach. As well as walking out right after the ERP selection phase, handing over the implementation phase to ERP subject matter experts.

Also, unlike other pureplay change management companies, some independent ERP consultants may not only offer change management expertise. But also help with enterprise architecture and program management, combining many different technologies, including hardware. Generally, these companies offer CIO-level expertise, helping you manage the entire program. This is especially true if you might not have the internal bandwidth or expertise to do it on your own. 

Due to the nature of their business, they don’t have affiliations with any ERP vendors and might not have access to certifications and training programs. So they are likely to work with a VAR or OEM and use them as the product and technical experts while they act as the business consultants covering not just technology but also process or data decisions to avoid implementation failure due to overengineering of systems. If independent ERP consultants claim that they don’t need to work with a VAR or OEM, that means they are most likely a VAR or a system integrator trying to pretend to be independent.  An example of such companies would be ElevatIQ, Third Stage Consulting, Panorama Consulting, Ultra Consultants, ERP Advisors, and Pemeco Consulting.

5. Change and Project Management Consulting Firms

While the core offering of independent ERP consultants includes change and project management, the pure-play change management consulting firms lack the ERP subject matter expertise – critical for ERP projects. Most of the change management consulting firms have HR and learning backgrounds, which is great for other change management programs, such as the adoption of a specific type of tool that might not be as complex or a physical process that might not require as deep subject matter expertise. 

The same goes for project management companies as well. While project management is important, it’s not as critical as the ERP subject matter expertise to be successful with these projects. Also, since pure-play change management consulting companies may undertake a wide variety of projects, they might not go through as many cycles and may not be keeping up with the changes with each product and vendor. 

Due to their limited understanding of the industry, they are also likely to struggle to work with ERP vendors. Finally, they would not have access to as many quotes and contracts to be able to negotiate with the ERP vendors. Some change management companies may also have partnerships set up with the vendors in the market and might not be completely independent. An example of such companies would be change and project management consulting firms run by ex-trainers and project managers.

6. Accounting/Fractional CFO Firms

Some people perceive ERP systems as accounting systems, and you are likely to go to your current accounting firms for advice about ERP systems. But their perspective is limited to finance, which is not even 10% of the overall ERP processes, not to mention other technologies and the enterprise architecture. Also, just like other ERP firms, even accounting and fractional CFO firms come in various shapes and sizes, with the majority of them claiming ERP selection and project management expertise.

There might be big accounting firms through your audit relationship. Each of them will claim to have ERP selection and implementation expertise, but their approach has biases (and is very similar to VARs). They might claim that they have separate divisions, with the selection being completely independent. But since they are part of the same company, their selection is likely to have biases. Generally carrying horizontal solutions such as SAP, Oracle, or Microsoft, they might ignore everything else, as these solutions provide an opportunity for them to create an IP on top of them. Also, their business model is to make money by creating dashboards and reports, resulting in unnecessary development and maintenance costs, generally pre-packaged with other solutions in the market.

Finally, the major challenges with most ERP implementations are likely to be supply chain, inventory, and operations related. Just because these issues require cross-functional alignment of data and processes, most accounting and fractional CFO firms are likely to be perceived to be biased by other functions and departments, even if they are completely unbiased, resulting in adoption issues.

7. Freelance Consultants/Fractional Executives

Freelance consultants and fractional executives are very common in the ERP industry as well. Sometimes these executives might be in between jobs, and other times they might be running a lifestyle business. They typically don’t have a strong team backing them and don’t go through enough cycles for their expertise to be comparable with other ERP companies. Typically ganging up with other freelance and fractional executives, hiring them might lead to attrition issues as each executive might be working on competing priorities.

With limited exposure and involvement in the ERP industry, they might not be well-versed in the political factors that generally lead to issues with ERP selection and implementation. Not understanding the financial risks comprehensively, they might make mistakes such as asking for unreasonable discounts or unknowingly conceding on factors that might have much deeper consequences.

Also, without a clear market position and having to worry about legal consequences, as with independent ERP consulting firms, they might accept kickbacks in the background. They are also likely to be biased to the solutions to their familiarity, just because they might have implemented only a couple of solutions and not necessarily tracking the industry on a daily basis. An example of such companies would be executives who are freelance and may not represent a company with several employees.

8. Business Process/Lean/Supply Chain Consultants

Most business process, lean, and supply chain consultants are likely to be the users of ERP systems, without real implementation experience. Even if they may have been involved with an implementation, they mistakenly assume that using and implementing them require similar expertise. Just like freelance consultants, they might not understand the political forces of the ERP industry. 

Also, just like them, they are likely to be familiar with a couple of solutions and might not track the industry on a daily basis. Also, they will not go through as many deals per year to be able to see enough trends and be informed with their recommendations. The ERP selection and implementation require an understanding of processes and data from the lenses of ERP. So while they might be able to improvise the physical processes, they might struggle with digital processes because of the lack of ERP subject matter expertise.  An example of such companies would be supply chain and lean and six sigma consulting firms.

9. Web Development/Marketing Agencies/IT Companies

While most ERP-like systems can be perceived as IT or software applications. And most companies have a tendency to assume that most software applications must be similar. Also, while IT companies and marketing agencies may have a great depth with programming languages and technologies, they mistakenly assume the depth of business processes and subject matter expertise required for ERP implementation. 

The consultants that shape up an ERP implementation are functional consultants, consultants that have educational backgrounds or training in accounting, supply chain, and operations management. Unfortunately, most software engineers that might be building technical systems on a daily basis aren’t the best fit for ERP-like systems.

It takes many years and thousands of implementations to be the subject matter expert with ERP implementations, along with formal training and certifications on many ERP systems. Without this training, web development, marketing agencies, and IT companies would struggle with ERP implementation. They are also likely to be biased with their assessment as even selecting an ERP requires a deep understanding of business processes, business data, and the ERP data model,  as well as enterprise architecture. An example of such companies would be Shopify and BigCommerce partners, SEO and branding firms, and Salesforce and HubSpot partners.

10.  Affiliate Marketing Companies

There are several affiliate marketing companies and marketplaces that generally rank higher on Google because of their content. And because of their rankings, most prospects and customers are likely to land on their sites first. Their primary business model is to sell leads to enterprise software companies. While they might claim ERP selection and procurement expertise, they don’t have subject matter expertise with ERP implementation. 

Just like independent ERP consulting companies and ERP selection consultants who might only help with ERP selection, these marketing companies take a very check-list-centric approach to ERP selection. Their recommendations are highly generalized and lack the depth required to save ERP implementation failures. Also, while they might come across as vetting thousands of software vendors, their ERP selection is still biased as they are likely to select the solutions listed in their network or the companies that have paid them to create a listing on their site. 

Also, they might offer cheaper ERP selection services just because they not only charge the customer for the selected services but also charge each vendor for lead generation, lead sharing, listing creation, ranking maintenance, etc. An example of such companies would be Select Hub, Technology Advice, G2, Capterra, Trust Radius, Software Connect, Software, GetAPP, and Technology Evaluation Center. As well as most media properties owned by analyst firms such as Gartner, Forrester, and IDC.

Final Words

Understanding the business models involved in the ERP industry can help you find companies that can help you succeed with your goals. Not only do you need to pay attention to their positioning, but you also need to understand how their contracts are structured. Gauging only from the marketing material could be challenging. And you might need an insider expert, such as an independent ERP consultant, who can help you understand the industry.

So if this is your first time implementing an ERP, make sure you are not judging a company by the cover page of their website. Choosing a company that might be overclaiming its capabilities might not only mislead your ERP selection process but can also result in an ERP implementation failure. So use this list as a starting point for your ERP journey.

FAQs

ERP selection is not just about filling functional checklists. Asking teams to vote. Or picking a system that works for everyone. It’s a lot more than that. Done right, ERP selection addresses several perspectives, including change management and business transformation. As well as technical and financial feasibility, program management, and enterprise architecture. Depending upon their strengths and prior expertise, each ERP selection consulting company may have varied approaches, with very few being “truly independent” and capable of performing exhaustive searches across hundreds of solutions.

The challenge starts with the misalignment of the ERP term. Is ERP supposed to be every single system in the enterprise architecture? A functional system catering to the needs of a specific department, such as accounting or finance? A reporting and planning system? Or a crystal ball that can provide answers to your questions? In reality, ERP is none of that. In fact, the ERP term, per se, doesn’t have much meaning. It’s the enterprise architecture that matters.

But an ERP system (or several ERP-like systems) is generally the foundation of this architecture. Also, the ERP companies have evolved so much that they can offer the entire enterprise architecture out-of-the-box, which only adds to the confusion due to the overlapping boundaries and their broadened scope. Understanding different ERP selection types and their pros and cons is the first step to aligning the expectations of what ERP means to your organization and what you might need to do to be successful with it. So which are the top ERP selection types in 2023?

1. Change-focused Business Transformation Driven Selection

This ERP selection approach is perhaps the most comprehensive, taking the enterprise view, combining most cross-functional processes, and identifying key business transformation objectives. It starts with building a couple of process model versions: the first focused on user training and another on technical implementation. The as-is processes often combine financial forecasts, driving the to-be processes based on financial goals. 

Due to their nature, either the private equity or the board will drive them – in the hope of a complete overhaul of business and financial operations. Depending upon the organization’s size, the CEO might lead these projects with the help of business transformation consulting firms. These projects might require substantial changes in the organizational structure, key personnel changes, business model transformation, reconfiguration of business processes, as well as operational capacity.

Covering the majority of cross-functional business processes, including order-to-cash, hire-to-retire, and forecast-to-deliver, they might implement these processes using one system. Or a couple of systems, including ERP, CRM, eCommerce, and BI, taking the enterprise view for the architecture. The projects might result in the selection of just one technology or a combination of technologies. The overwhelming nature of these projects requires a business transformation consulting firm to continue through the implementation phase to ensure success. 

Pros

• Much higher chances of getting business results from technology investments
• Happy users with cross-functional alignment and adoption
• Lower technical and financial risks during the implementation phase

Cons

• Expensive
• The selection phase might take longer, demotivating champions hoping for short-term results.
• Requires commitment from the top. It can’t be done at the department level.

2. Business Transformation-Driven Selection

The major difference between business transformation-driven and change-focused ERP selection is that this one would not invest as much time in user-centric processes. It starts by identifying financial forecasts and KPIs and might document the process only from the technical and business perspective. The users might not be involved during the selection phase or may have limited involvement.

These projects are still driven at the CEO or board level due to the cross-functional changes and alignment required. Limiting the scope to only the business or technical issues, they might still use a business transformation consulting firm. While the process and data re-engineering may be done, it might not be successful. Why? Because users might not be willing to make changes because of their limited end-to-end visibility of drivers requiring these changes. 

The limited documentation may lead to biased decision-making and users making assumptions. Including committing and then backing off due to their gaps in understanding. Like change-focused selection, this approach would cover all the cross-functional processes, taking the enterprise view for the architecture. The selection phase may require choosing different systems and technologies. The overwhelming nature of these projects requires a business transformation consulting firm to continue through the implementation phase to ensure success.

Pros

• Less expensive than change-focused business transformation due to the reduced time for user-centric processes
• Shorter implementation time than change-focused transformation
• Focus on the business drivers ensures alignment of business goals with technical implementation.

Cons

• The users might not accept the system, leading to data and process siloes.
• Longer selection phase than the functional ERP selection
• Requires commitment from the top. 

3. Enterprise Architecture Replatform-Driven Selection

The major difference in this approach from the previous two is that this is a very technical implementation, ignoring the user and business transformation perspective. It might start by defining technical problem statements such as the outgrowth of current systems or digitally transforming processes. But doesn’t go through the financial analysis of identifying the KPIs or analyzing user-centric processes.  

These projects are driven by IT or CIO with limited involvement of the business or users. Due to their perception of these projects being technical in nature and not yielding short-term results aligned with the compensation structure of business executives, IT teams might struggle to get traction from other business groups. Limiting the scope of the consulting firms, they might hire an independent ERP consultant to lead the selection. 

While their projects are likely to have a sound enterprise architecture, they might fall short due to the lack of process and data re-engineering and over-bloatedness caused by the lack of control in changing business processes or data. Like the previous two approaches, this approach would cover all the cross-functional processes, taking the enterprise view for the architecture. The ERP selection phase may require choosing different systems and technologies. Due to the way this selection type is approached, even if a business transformation firm is involved, it might struggle to get business results. 

Pros

• Technical issues such as master data governance may not be a problem.
• Shorter implementation time than business transformation-centric initiatives
• Time savings for business

Cons

• Adoption issues.
• Longer selection phase than the functional ERP selection
• The systems might be substantially over-engineered because of the missing process and data reengineering step

4. Functional Checklist Approach

The major difference in this approach from the previous ones is that this is a siloed functional implementation, ignoring the technical and integration perspective. It might start by defining business transformation objectives but does not dig deep enough to realign the data and processes meaningful for the technical teams. Due to the misalignment, the technical teams might completely ignore the recommendations provided by the selection consulting firm. The siloed perspective might lead to choosing an outdated technology, which might be functionally complete but never work for users because of the integration or master data issues.

These projects might be driven by CFO or controllers with limited involvement of other teams. The business executives might expedite the process to meet short-term business results, leading to substantial technical debt. Limiting the scope of the consulting firms, they might hire an independent ERP consultant to lead the selection. 

Due to the missing technical and integration perspective, the overall admin efforts might increase in reconciling various ledgers and resolving integration issues. This selection approach would force every single process from the ERP lenses without capitalizing on the synergies offered through other best-of-breed systems. The ERP selection phase would require selecting only the ERP, delaying the other integration decisions for the implementation phase. 

Pros

• Cheaper
• Faster
• Can be done at the department level

Cons

• Substantial technical debt and higher costs in the long term
• Increased work for operational teams in reconciling different data siloes and integration issues
• Higher chances of implementation failure, even after investing in the selection phase

5. Accounting/Fractional CFO Firms Led

Companies not familiar with the ERP industry often ask for advice from their current accounting or fractional CFO firms due to their fear of being non-compliant with tax authorities. While most accounting firms and fractional CFO firms might claim to be independent, they are not necessarily independent ERP consultants. These companies generally have internal practices for a few mainstream accounting systems and try to sell their IPs on top of that, making their business model similar to a VAR or ISV. 

The business model of accounting and CFO firms generally revolves around creating manual reports and bookkeeping, so they will not include any solutions where they would earn reduced revenue for their services. Since these consultants may have implemented only a couple of systems, their selection advice is likely to be biased toward those systems. 

These companies don’t run hundreds of ERP selection engagements every year. Not to mention tracking the evolution of the ERP systems and vendors on a daily basis. Ignoring other potentially relevant solutions, they might compare a couple of systems of their knowledge. They might also ignore other systems in the architecture, leading to bigger integration issues and creating a backlog that might drive much higher maintenance costs in the future.

Pros

• Cheaper
• Faster
• Can be done at the department level

Cons

• Biased selection approach towards their IP, revenue, and solutions of their familiarity
• Increased admin work in reconciling different ledgers
• Higher chances of implementation failure, even after investing in the selection phase

6. Business/Technology Consultants Led

In this approach, companies not familiar with the ERP industry might hire a business or technology consultant for the selection advice. Examples of such consulting companies would be IT companies, lean consulting firms, HR, or business process consulting firms. Since these consultants may have implemented only a couple of systems, their selection advice is likely to be biased toward those systems. Despite their claims to be independent, they are not necessarily independent ERP consultants, as they don’t run hundreds of ERP selection engagements every year. Not to mention tracking the evolution of the ERP systems and vendors on a daily basis. 

Some of these companies might also have partnerships set up in the background and might recommend solutions where they might receive kickbacks. The easiest way to find out if a vendor is tied to any solution or not is to look at their content strategy. If the content strategy compares many different solutions and publishes a list of many providers, the ERP publishers won’t sign the partnership with them due to their fear of their IP falling into their competitor’s hands.

They might also ignore other systems in the architecture, leading to bigger integration issues and creating a backlog that might drive much higher maintenance costs in the future.

Pros

• Cheaper
• Faster
• Can be done at the department level

Cons

• Biased selection approach towards the solutions of their familiarity and where they will receive kickbacks
• Might drive substantial process overhead because of the increased work in reconciling different ledgers
• Higher chances of implementation failure, even after investing in the selection phase

7. Resellers Led

In this approach, companies not familiar with the ERP industry might engage with a reseller who might offer ERP selection advice for free (or at lower costs)  in the hope of receiving kickbacks from the software provider they resell. Or earning the implementation business. They would structure the selection process in a way that favors their solutions. In the hope of locking down the customers with a contract, they might emphasize not spending much time during the selection process. 

Ignoring other potentially relevant solutions, they might compare a couple of systems of their knowledge. They might recommend against most practices, such as process documentation or change management, as that will delay their deal. Since the process of re-engineering might be done only from the perspective of their tool, it might fire back if you use any other systems or tools that are not compliant with their ecosystem. 

For example, going for another freight solution to get better deals on rates might throw off the architecture completely or force you to use the tool in their ecosystem that might not have the most friendly rates. They might also ignore other systems in the architecture, leading to bigger integration issues and creating a backlog that might drive much higher maintenance costs in the future.

Pros

• Might be free
• Faster
• Can be done at the department level

Cons

• The misguided selection process leans toward reseller’s systems
• Higher chances of ERP implementation failure due to selecting a system that does not fit
• Biased architecture may result in substantial operational efficiencies

8. Freelance Consultant Led

Offering ERP selection advice, these freelance consultants are generally ex-executives and hobbyists consultants. They might have a couple of ERP implementations under their belt but may not understand the ERP industry as well. Having implemented only a couple, their selection advice is likely to be biased toward those systems. While these companies might claim to be independent, they are not necessarily independent ERP consultants, as they don’t run hundreds of ERP selection engagements every year. Not to mention tracking the evolution of the ERP systems and vendors on a daily basis. 

Savvy ERP vendors might not prefer to engage with them as they might be perceived to be affiliated with a solution or vendor, and they fear a biased selection process, leaving out potentially relevant solutions. They would not have enough data and insights to identify the red flags in the contracts or “selection gotchas” that you learn only if you track these systems on a daily basis. Some of these companies might also have partnerships set up in the background and might recommend solutions where they might receive kickbacks. 

Ignoring other potentially relevant solutions, they might compare a couple of systems of their knowledge. They might also ignore other systems in the architecture, leading to bigger integration issues and creating a backlog that might drive much higher maintenance costs in the future.

Pros

• Might be free
• Faster
• Can be done at the department level

Cons

• The misguided selection process leans toward consultants’ expertise with few systems.
• Higher chances of ERP implementation failure due to selecting a system that does not fit
• Biased architecture may result in substantial operational efficiencies.

9. Affiliate Marketing Company Led

These companies are primarily content marketing companies that make money by selling qualified leads. Some of these companies might claim to be helping with ERP selection, but they are not necessarily the subject matter experts on ERP systems. Their recommendations are likely to be based on the providers in their network who are willing to pay for their lead-generation services.

By offering match-making services without technical and functional subject matter expertise, they generally work with OEMs and resellers and don’t charge their customers for the recommendations. Conducting hardly one interview of a few attributes to identify the ERP vendors, they would recommend ERP vendors. Their advice is not meant to be the selection advice, and they are most certainly not independent ERP consultants. Examples of such companies include G2, Capterra, Software Connect, Software Advice, Technology Advice, and many more.

Their role ends as soon as they make an introduction to the ERP vendors. Helping with process reengineering, contract analysis, or enterprise architecture would be a stretch for them. 

Pros

• Might be free
• Easy way of shortlisting potential solutions
• A centralized place to learn about various solutions in the market

Cons

• Their recommendation might mislead your ERP selection
• No technical or functional expertise to be informed with recommendations
• Not really an ERP selection

10. Internally Managed

Companies implementing an ERP system for the first time underestimate the expertise required in selecting an ERP.  Researching over the internet, they might follow generalized recommendations such as building a checklist, asking vendors to demonstrate the solutions, and selecting a system that might be fit. 

Despite hiring additional capacity exclusively for the ERP project, the internal resources might struggle to build consensus due to the power struggle. Getting the attention of different internal groups due to the lack of their framework might be equally challenging. Finally, most teams might have preferences for a tool of their choice and might not be willing to give up on them to create a streamlined architecture.

Since the internal teams don’t track the ERP space on a daily basis, they generally have overarching assumptions in their model, such as assuming API means easier to integrate, or just because the company website says the tool is integrated with Salesforce, there wouldn’t be any surprises. What if the selected version of the ERP might not be compatible with this version of Salesforce? Assumptions such as this might fire back and make the cheapest deal the most expensive.

Pros

• Perception of it being cheaper
• Might be easier to collaborate with internal teams
• Can be done at the department level

Cons

• The internal team might take forever due to the missing framework
• Powerful forces might shut down other departments, leading to a biased selection process.
• Sweeping assumptions might drive much higher licensing fees and overengineered systems.

Final Words

Most ERP selection consultants feel that the ERP system is all about documenting and meeting the requirements. It’s actually the opposite. With enterprise systems, complying with requirements on their face value almost always leads to overengineered processes and overbudgeted projects. The prescriptive suggestion of software engineering to push back on the needs is often ignored by ERP selection consultants, who might not have a deep background in software implementation and engineering.

So if you are thinking of including an ERP selection phase, ensure you don’t treat it as any different than how you would approach a software development project. The SDLC phase has never been optional – and it will never be, regardless of whether you opt for modular assembly – or build from scratch. But most importantly, stay away from companies who walk away right after the ERP selection. Because the technical teams will likely shred those recommendations as soon as they take over, defeating the entire purpose of the ERP selection phase.

FAQs

No two change management projects are the same. Each project has its own nuances,  thus requiring a different level of subject matter expertise. While change management is often thought of as a function to support the business users’ needs, it’s more than that. Why? Because enterprise business transformation initiatives typically result in substantial refactoring of the customer- and vendor-centric processes. So, you need to have a plan, as well as change management deliverables, in place to avoid disruptions.

The impact on the customer and vendor processes might be so intense that each change impact could be a project in itself. Not only do you need to understand the financial implications, but you might need to sequence it with other corporate priorities, making it harder to schedule. In general, the changes could be as simple as rewiring the process of how you pack your goods. Or as impactful as changing the lot number scheme printed on the packaging.

And if the other departments might not be willing to concede to the necessary changes, it might complicate the technical implementation. So communicating and making business users understand the importance of these changes is vital for the overall health of the project. In fact, external communication could be even trickier and might require a “marketing touch” to your communication. Without it, the customers and vendors might choose to ignore it. Regardless of whether you use an industry-recognized framework or build one of your own, you need at least the following change management deliverables. Because they can help you stay organized with the change management aspect of your ERP implementation.

1. Change Impact Repository

Think of a change impact repository of the list of all change-related items identified in one place with the stakeholder map, in how their processes will be impacted because of each change item. It also helps in staying organized and keeping track of each item.

In summary, this database is the bird-eye view of each change as you collaborate with each stakeholder to understand the impact of each change.

2. Change Business Case

The purpose of a change business case is to understand the financial implications of each change item. The impact could be on user and customer experience, branding, or market share. The changes, such as changing the lot number, might require printing the new packaging and shipping to each vendor. 

You might also need to align with the planning for the old packaging, which might eat up the costs that might be sitting on the vendor’s shelves as they might not be able to use the old packaging. 

All of these factors will drive the costs, impacting the costs of your business transformation initiatives. The change business case would lead to the decision-making of specific change ideas that are feasible, and that can be explored further.

3. Change Transformation Roadmap

The purpose of change transformation is to create a detailed roadmap of change items. Each of which may have their own roadmap, depending upon the size of the change. It will include a high-level analysis of each accepted change that needs to be aligned with the technical implementation.

4. Change Program Dependency Analysis

The dependency analysis helps understand the relationships between different programs and how they need to be sequenced to ensure their timely execution.

5. Change Risk, Compliance, and Mitigation Strategies

Each change item may have its own risks, and the appropriate compliance and migration strategies need to be identified. The risks could be internal or external, technical or business. For example, what if the vendors don’t agree with the ASN process, would that result in finding new vendors or moving to the ones that are able to comply with the requirements? 

6. Staff Augmentation Plan

Depending upon the size of the new change, new resources might be required. This plan would include everything that is required to hire and onboard these resources.

7. Communications Plan

The purpose of the communication plan is to build a comprehensive strategy, including channels, touchpoints, messaging, personas, and stakeholders’ journeys.

8. Training Plan

The purpose of the training plan is to capture each of the personas and identify their unique training needs. So this could include as-is and to-be workflows for each user to make sure they are completely aligned with the new process. As well as cheat sheets to ease the transition. Not to mention any other training aids they might need to avoid disruptions and ensure data and process integrity.

9. Change Execution Plan

The purpose of the change execution plan is to have a detailed plan about how the change items will be executed. The activities captured as part of the change execution plan might be out of the scope of the digital plan. But since there will be cost and schedule dependencies, this plan is essential.

10. Change Readiness Assessment

The purpose of change readiness assessment is to understand if the organization is ready to change. It answers the questions such as, has the training been effective? Do they understand the to-be process state? Have they been testing seriously? Are they comfortable with the new systems or processes? This assessment will determine if they are ready to go live or would they need more training.

Final Words

Change management is an essential ingredient for a successful ERP implementation. But getting a budget approved for change management is easier said than done. Most initiatives that struggle to get approval don’t have a clear strategy, milestones, and deliverables defined, making it challenging for executives to assess the ROI.

This list will not only help provide structure for your change management initiatives. But it will also help avoid disruptions. If nothing else, this list can provide you with a good starting point for your change strategy.

FAQs

Before we touch on why test-driven ERP implementation is superior, let’s do a quick recap on software testing. First, who likes to rehearse? No one. Practice is boring, regardless of whether you talk about stage performance or ERP implementations. Understanding the importance of testing is even more difficult unless you test for living. That’s probably the reason why software development teams have a dedicated role in quality assurance. These professionals go through years of training to master the art of identifying boundary scenarios in order to catch the issues before they cause disruptions.

When professionals need so much training, how would you expect an average ERP user without training to test with similar expertise? Sure, consultants might help them document the test cases, but the users often end up not testing (or not testing enough). Because? They might not have the same level of appreciation for testing. And for these reasons, poor testing is the major cause of ERP disruptions. The examples of such disruptions? In the post-implementation phase, the system would not behave as per users’ expectations.

The issues could be as minor as struggling to log in. Not being able to print the forms. Or being unable to complete the transactions. Most of these issues exist due to the lack of testing. And this is where automated testing can really help. Why? Because it reduces the workload for users by helping with the testing in an automated manner. It not only helps ensure the test coverage but also validates how thoroughly users have tested the system. This is why you need test-driven ERP implementation. And the following reasons will help you understand its benefits.

10. Auto Generation of Test and Test Results in Documentation Easier

One major challenge with cross-functional ERP test cases is that documenting them is extremely challenging. Primarily because? They have many different steps with hundreds of prerequisites. Equally challenging is identifying the right test cases to ensure sufficient coverage.

This is where the automated testing tools can help generate test case documentation and validate the coverage from the platform itself. They have these capabilities built as part of the platform. Debugging and tracing the coverage is easier as well. While even the automated testing tools would require organizational skills, the framework helps them stay on track. As well as offering good quality documentation friendly for business users (who might not have as deep testing background).

9. Be Confident in Rewiring the Processes

Without an automated test stub, refactoring is always the most frightening experience. Because? What if you forget a few scenarios? Each refactoring may require retesting every single scenario. The reason? Because it’s hard to predict what may break.

With ERP systems, even a minor configuration change, such as pricing or UoM, may have implications in hundreds of places. 

The test-driven approach allows you to test right after each change (without going through the boring cycles of manual testing). So you could be confident with rewiring.

8. Increased Adoption Because of Fewer Issues

Why do users struggle to adopt the systems? Because the systems may not work as per their expectations. Going back to spreadsheets is always easier than learning the complex processes of a new system, leading to data siloes.

The automated tests map the workflows, just the way users would test and detect the challenges sooner, resulting in better adoption of the new systems.

7. Detect Cybersecurity and SOX Compliance Issues

The granularity of permission for each user and feature set in ERP systems is so complex that it’s harder to track. The more users there are, the harder it is to track access levels. Unless you have a methodological approach to creating user access, it’s likely to be chaotic and unorganized. Collectively, these issues lead to cybersecurity and SOC compliance issues. Testing the user access levels is even more challenging. Why? Because each user needs to be tested, making it a monotonous experience and leaving security issues because of manual errors.

The automated test stub could run on a daily basis and detect security loopholes as soon as configuration changes occur. This approach reduces the workload for users and provides traceability without coming across as looking over their shoulders. The automated test stub can also provide the traceability log for regulatory needs if the system might not have these workflows natively built.

6. Incorporate Issues with the Test Framework as Discovered

The challenge with ERP systems is the layered hierarchy of business rules and data. The fixes may have downstream implications. Also, the same error may pop up again, making the experience cyclical and frustrating for business users. 

The test-driven approach captures the test case first before fixing it, helping avoid repetitive errors.

5. Avoid Issues with Environmental Migrations

Unless you are super organized, environmental migrations will always lead to disruptions. Why? Because most ERP systems don’t have features that allow easy migration between environments because of the costs involved in building such features. Cloud ERP systems are especially trickier to migrate because of the database lockups.

The test-driven ERP implementation detects issues much sooner in the process. Without requiring manual test runs with an environmental upgrade. The same stub could be used to test across environments by supplying environmental-specific parameters.

4. Measure Test Coverage

You are often shooting in the dark with manual testing as it’s hard to ensure the test coverage. The users might not take the testing seriously, waiting to go live and for issues to surface, with a reactionary mindset.

The automated stubs can provide the coverage level at any given time to gain confidence in the ERP processes and to ensure that you are not shooting in the dark.

3. Centralized Coverage for the Enterprise Architecture

Just because you might not get issues with your ERP, it doesn’t mean that you will never get disruptions. The disruptions could be because of the integration point not being tested as well or due to the master data conflicts. 

The automated test stub helps in creating a centralized stub for the enterprise architecture, covering every single system and integration point.

2. Avoid Disruptions Because of Untested Code

Most companies implementing ERP systems have limited experience with these projects. And because of this limited experience, they might not appreciate the process and might feel that they can make it leaner. The leaner process often leads to a reduced budget. And the reduced budget, in turn, will lead to vendors cutting corners with testing and leaving untested code in production. 

The automated test stub can not only detect the untested code. But it can help prevent any disruptions because of the untested code.

1. Reduce the Implementation Time

Unless you have a test-driven ERP implementation, 70% of the time with most other ERP implementation projects is spent with manual testing. So much so that it might feel that you are working in circles. Also, if you have multiple entities, each entity might require a similar amount of time with manual testing.

Once created, the automated stub can be used for each entity with minor configuration changes, saving repetitive time with each entity. Collectively, this might lead to savings of up to 50% of the overall implementation time and, as a result, much cheaper implementation. The cost savings are likely to be higher with larger implementations.

Final Words

The monotonous execution of the ERP test cases might frustrate even the most excited champion. ERP tests are especially difficult, with sequences of workflows and hundreds of data inputs and outputs. Capturing them and ensuring test coverage requires a skilled consultant. 

Automated testing helps in ensuring the right amount of coverage and removes duplicate efforts with testing. But, most importantly, avoids disruptions before it’s too late.  So if you are ready for your project, make sure it’s a test-driven ERP implementation.

FAQs

Most new executives underestimate the implications of failed digital transformation initiatives, not taking them seriously until they go live on the solution. But unfortunately, just like baseball, the ERP projects bite the unprepared the most. The more planning you do, the higher chances you have of predicting various sliders and handling them.

As with baseball, ERP projects have a lot at stake. Poorly tested systems might prevent the processing of sales orders. It might take days to stabilize them. And if you don’t have your processes documented, consultants might struggle to keep up with code complexity. One fix may lead to another defect. And, just like in baseball, as you get more issues, the morale of the team will be so down, leaving them with negative thoughts, such as the ERP system being too complex or poorly configured. Completely giving up on the new system and going back to the old methods isn’t uncommon either.

Sometimes, the issues are so hard to explain that ERP consultants will rarely have an answer as to why a particular step during your strategy phase may be necessary. Just like the way coaches might not be able to explain why every player needs to run on a daily basis.  Just like baseball, the secret formula for success with an ERP project is discipline. And not of just a few players. But everyone from the top floor to the field. And without the chemistry working, get ready to face the following implications with failed digital transformation initiatives.

10. Lost Investment

Believe it or not, a large majority of the projects never go live, especially among first-time ERP buyers. The lost investment could be losing the licensing and implementation money completely and getting stuck in a contract.

The major cause for this issue is the misalignment in expectations. First-time ERP implementers have a tendency to underestimate the process and expertise required to find the right ERP software. They might not provide enough details to the vendors to enable them to do the due diligence. Also, vendors will have certain assumptions about clients’ data, processes, and internal expertise. Depending upon the skill set of both sides, the software may not have the capabilities promised or might not work as expected due to the state of the client data. 

Underestimating the amount of expertise required, companies might take the path of ERP customizations, getting into the never-ending investment-sucking rabbit hole. Even after years of testing and development, the business users might not feel confident in going live on the system, losing all of their investments.

How to Avoid?

1. Don’t look for discounts or the cheapest hours; instead, figure out why other vendors are charging more. 
2. Find the competitive pricing in the space, and go for the vendor that has a lot of specific details (not canned) in the SOW. 
3. Don’t customize anything at all. If you are on a budget, figure out how you might be able to perform the task manually where customization may be required.
4. Hire an independent ERP consultant, at least for the contract review. Document as much as possible for them to review to reduce the consulting fee.

9. Inferior Customer Experience

Failed digital transformation initiatives might end up increasing overall cycle time for transactions, increasing delivery times for customers, or increasing stockouts because of poor inventory management. 

The major cause is the misbelief that newer technologies will always provide a superior customer experience. The companies also miss to draw the processes both in the as-is and to-be state and estimate the number of steps increased for each department in the pre-selection phase. Not able to forecast trivial decisions such as the GL mappings at the customer level or customer master and how that would impact the KPIs or customer-centric workflows

How to Avoid?

1. Understand if there is a genuine concern from the customer service team about the increased time, and if so, figure out the optimum changes that need to be made in the processes, data, or technology – to get the desired metrics. 
2. Customer experience changes need to be traced, measured and agreed upon before selecting the software. 
3. Identify the KPIs that are expected to be improved after implementation and forecast the financial statements for the next five years. Trace KPIs, and see what process or data changes may be required. Also, design both as-is and to-be process and data models around the desired KPIs and keep track of the changes that might impact the to-be model of these KPIs, such as batch reconciliation or frequent cycle counting.
4. Follow out-of-the-box ERP processes as much as possible. The hijacking of processes with failed digital transformation might lead to increased admin and reconciliation steps that might impact operational workflows.
5. Have a good master data governance plan in place to ensure the data quality issues do not lead to the slower performance of the system, increasing the cycle time for the transactions.

8. Cybersecurity and Data Loss

Not having a deep understanding of the code quality and the deployment infrastructure might lead to cybersecurity and data loss issues. This issue is especially common among ERP vendors that might not be deployed on mainstream cloud platforms. As well as not being well-capitalized to afford a cybersecurity team for the upkeep. 

The major cybersecurity and data loss incidents would be with the solutions that are deployed in the on-prem settings or in tier 2 and below cloud providers. The smaller ERP vendors might sell their licenses at a discounted price and deploy the code in non-mainstream cloud providers, running into data quality and cybersecurity issues. The legacy code or unpatched and open-source libraries used as part of the assembly may leave vulnerabilities open.

How to Avoid?

1. Review the cloud infrastructure provider being used by the ERP vendor.
2. Ensure all of the add-ons, integration glues, and ERP systems are not leaving any security holes.
3. Check the backup policies of your cloud providers. How long do they keep the backup? How many times? How far back can you go to retrieve the data? Do they also back up for the test environment or only production?
4. Have standardized roles that can be assigned to all users to avoid losing track of permissions. Have a governance process for creating new roles and assigning new permissions to each role. Have good onboarding process documentation, including the right roles to be assigned to the team members. Limit the admin access and user maintenance to only super users.
5. Pay special attention to the apps and add-ons accessing the system. What level of access do they have? Understand what they are allowed to modify. And even with controlled access, avoid external modifications of financial documents.

7. Key Employee Attrition

Most failed digital transformation leads to some sort of blame game, even if it might not be anyone’s fault. The disruptions typically lead to overworked employees in debugging and reconciliation, resulting in the attrition of key employees.

In most cases, the issue is with the lack of expertise and most stakeholders overcommitting their capabilities and underestimating the efforts and investment required to get the failed digital transformation initiatives right. The transformation that runs into issues are the ones where the teams are not as seasoned with multiple ERP implementations under their belt and ignore the discovery process.

How to Avoid?

1. Involve employees from day one.
2. Build the as-is and to-be state models and a framework for team-based decisions that everyone is willing to own regardless of the outcome.
3. The leadership must enable the process owners, leading them to make decisions and not making decisions for them. Chime in when there is a misunderstanding of the overarching goals and cross-functional conflict.
4. Invest in the discovery process and seek feedback from users. Create a hotline for submitting any questions or concerns on the decisions made and address each of them publicly and explain the rationale behind every decision.
5. Take the implementation seriously and pay special attention to the training and testing phase. Don’t go live until the key employees feel comfortable and commit to going live.

6. Lost Window of Opportunity

If the goal of ERP implementation is to help with an opportunity that might have timeliness associated with it. For example, capturing a market share before competitors become known in that market space, or trying a new channel before it becomes crowded, the failed digital transformation and its disruptions might lead to losing the market share or window of opportunity.

The major causes for the delay or disruptions with a failed digital transformation project are related to the miscalculation of the efforts and time required to get it right.

How to Avoid?

1. Have realistic expectations with your team.
2. Keep digging until the scope of the ERP project is relatively known. If there are elements that might be too unknown as part of the project, they probably require more research and discovery to at least have a mitigation plan in place.
3. Have a reasonable time for stabilization before sequencing it with the opportunity. 
4. The more you invest in the ERP discovery phase, the fewer disruptions you will get during the implementation and post-implementation phases.

5. Brand Reputational Damage

Disruptions caused by the ERP failure could be as severe as not being able to process sales orders or cut invoices. Or not able to receive goods in the warehouse. Companies that have an impact on their brand because of the ERP failure were required to disclose them publicly. Or the customers end up reporting on social channels, causing permanent negative connotations about the brand.

The major causes are disruptions being received as the quality issues with the brand. The cyber and data loss issues might even have graver implications on the brand where the customers might not feel safe in their bank accounts etc.

How to Avoid?

1. Analyze the impact of each disruption. 
2. Document the implications of each change and how that might lead to a disruptive experience for the customers.
3. Don’t ignore any risks, and even if you might not be able to resolve them, document them and have an action plan if they do occur.
4. Avoid disruptions by overpreparing for the implementation and post-go-live

4. Lost Key Customers, Partners, or Vendors

The disruptions can lead to the loss of key customers, partners, or vendors. The customers that ended up losing them were the ones that faced material disruption with their deliveries, inventory allocations, and impact on their production schedule.

The new ERP implementation may not be aligned with the physical layout, posing challenges in keeping track of customer-allocated inventories, shipment delays, and not being able to fulfill customers’ expectations. The vendors, if larger ones, might be disrupted by your processes, such as not being able to receive the goods in the warehouse in the allocated time window and not paying overages that might be expensive at their end. These issues collectively might lead to issues in relationships with customers or vendors.

How to Avoid?

1. Include the impact on the customer and vendor processes in the as-is and to-be documentation.
2. Have multiple touchpoints and channels for customer and vendor communication to ensure that they are ready for change at their end
3. Ensure that the physical processes are in sync with the digital process to avoid inventory allocation issues.
4. Don’t simply kill the processes in the to-be architecture without understanding their impact.

3. Regulatory Penalties and Lawsuits

Regulatory penalties are more common than you would think with ERP implementation. They would result in not having integration or reconciliation issues between different systems, leading to misreported data, or not being able to file timely. Lawsuits might ensue if there are any issues with contract obligations.

The major issues with a regulatory penalty are related to buying systems from unreliable or unproven ERP vendors without understanding if they have been thoroughly tested and adopted in the market. They are also because of over-engineering of systems that might void the warranty from the vendor, leaving them off the hook for any regulatory or compliance issues.

How to Avoid?

1. Buy proven systems, especially the ones that touch financial regulatory compliance, such as ERP or HCM.
2. Don’t overengineer by building unnecessary customizations 
3. Have a clear separation of concern for the integration logic and packaged software
4. Keep a good log of the customizations and if they might have any impact on the reported data

2. Temporary Disruptions

Most ERP implementations will experience some levels of temporary disruptions, such as users getting locked down or not being able to print the forms. The issue could also be as severe as not able to send sales orders or close invoices. But most of these issues can be resolved quickly during hyper care.

The major cause of temporary issues is the lack of training and testing. As well as a framework for the change process that will help mitigate some of these issues.

How to Avoid?

1. Have a good framework to track the testing and measuring the readiness
2. Utilize automated testing to avoid repeat issues and augment manual coverage
3. Utilize automated testing to test the workflows, access rights,  and logins that might be harder to coordinate with end users
4. Have a training cheat sheet by the desk of each user on the day of go-live if they run into any issues.

1. Increased Permanent Work

While the temporary issues can be fixed easily through technical debugging and training, the permanent issues are far more serious. And they might have serious implications for your operations. And most of these issues are related to system design that might be unforeseen during the implementation and discovery phase. But the users might come to know them only after going live.

The permanent issues could be requiring unnecessary entry of sub-account with each transaction. Or it could be having users use unnecessary fields, increasing the total time to create a quote or sales order. It could also be due to the increased number of variances in the backend processes just because of poor system setup.

How to Avoid?

1. Design the to-be workflows and measure how much additional work will increase for each team.
2. Incorporate users’ feedback in designing processes to ensure coverage of most unforeseen issues.
3. Pay close attention to how the teams are capturing the master data and fix master data issues before it is too late.
4. Don’t ignore integrations and their implications for operational processes.

Final Words

Preparation is key to success in baseball, and so are digital transformation initiatives. The more prepared you are, the more confident you will be with the systems and the higher the adoption rate you will have of the systems. While technical issues may be easier to fix, what is harder to solve is perception. 

Once your team has decided that the problem is with the systems, it might be much harder to persuade them to enter the right data that will lead the accurate KPIs. So don’t wait for the implications to bubble up and be ready to put in the discipline required to be successful with the failed digital transformation initiatives.

FAQs

Getting the hang of the ERP implementation process takes time. Just the way it’s practically impossible to get a Ph.D. as soon as you enroll in a school, it’s also not pragmatic to get to one of the highest ERP maturity stages on your first attempt. In fact, you should not aim for that, as the success of your ERP implementation would depend upon finding the right tools designed for your ERP maturity stage.

In general, the first-time ERP implementation is likely to be the most immature, with very little process integration and, as a result, substantial manual overlaps (and admin efforts) across departments (and ledgers). Believe it or not, these implementations might even increase the overall workload without any tangible business outcome, discouraging first-time executives from any future digital transformation initiatives. When a company is past this ERP maturity stage, they hire slightly seasoned executives who are comfortable managing accounting and finance operations internally. As well as standardizing and modeling products (or services).

Sometimes, the ERP requirements of the company are driven by customers. In such cases, the front end typically takes priority over backend operations. But these implementation projects still have process and integration issues, creating planning siloes inside the company. As they advance with their backend processes, the 3rd and 4th ERP maturity stages are when they start experiencing material financial improvement from their operations. This is also where they would get true business agility. And the benefits of this agility? They can easily experiment with newer offerings and business models, allowing them to scale linearly. How about the overarching benefits? Gaining faster ERP maturity allows companies to grow rapidly. 

Stage 0: Outsourced Accounting

This is perhaps the ERP maturity stage of most startups where they would be working with an outsourced accounting firm (to manage their books). They might use siloed systems (without embedded financial layers) to help with their operational processes, such as inventory, project management, and manufacturing. But at this stage, no integration with the accounting system exists. 

The executive teams generally share their invoices, bills, and monthly statements with the accounting firm to manage their books. The accounting firm might provide reporting to the management teams to help with the decision-making. The internal team may have very limited visibility or control over how the accounting firm produces reports or insights. The operational teams might need to do data crunching at their end to handle their workflows and perform their jobs. 

For industries heavier in transactions, these companies are generally under $10M in revenue. The other industries might be able to survive at this ERP maturity stage with much higher revenue. At this stage, they have no CFO or controller in place. The team may not have an accounting, finance, or supply chain background. And the founder might manage most strategic functions, sales, operations, IT, and finance. The team may not have the skillsets to undertake the data and process translation required to implement a tightly integrated ERP system. The product industries may have their SKU and BOMs modeled. However, no modeling might exist for customers and vendors. The services industries may not have any modeling at all. 

Pros

1. Easy for the team. 
2. Does not require expensive resources such as Ops and finance executives. 
3. Does not require as much consulting help to automate the processes.

Cons

1. Limited traceability across processes. 
2. Substantial admin costs in reconciling ledgers. 
3. Data quality and financial control issues.

Stage 1: Assumed ERP

Once they outgrow the first ERP maturity stage, they can no longer rely on the outsourced accounting firm. But why? Because of the limited control and increased bookkeeping costs. At this stage, the companies in the product industries are in the range of $5M-$30 in revenue but higher for service-centric industries. They might still not have a CFO or controller in place. And neither is a CIO or Chief Supply Chain Officer. Most functions are still primarily controlled by the founder or President. 

The system architecture? The team may be living on multiple disparate systems such as QuickBooks, Shopify, and CRM such as Salesforce or HubSpot, and financial planning and budgeting might be done at the department level, in siloed software, or in spreadsheets. And the state of their data? SKU and BOMs may be modeled for product-centric industries. Customers and vendors might be coupled with raw GL codes without the reusable customer classes or layers of GL codes to enforce business rules.

The only difference between stage 0 and stage 1 is that the accounting instance is managed internally as opposed to with the help of an accounting firm. As well as some light integration for sending bills, invoices, and GL codes in the raw form, with very little financial control across the processes. So the financial insights are generally limited – or would require substantial data crunching as the data model of various systems are isolated and not modeled. As a result, the end-to-end traceability of transactions is extremely challenging.

Pros

1. Easy for the team. 
2. Does not require expensive resources such as Ops and finance executives.
3. Does not require as much consulting help to automate and integrate the processes.

Cons

1. Limited traceability across processes. 
2. Substantial admin costs in reconciling ledgers. 
3. Significant inventory, supply chain, customer experience, financial control, costing, and scheduling issues.

Stage 2: Transactional

With the growth of each department, the companies would struggle to grow (or might run into financial performance challenges) past $30M point. But why? Due to the increased marginal admin costs. And they would need to consolidate their processes and systems while keeping at least the main transactions (sales, purchase, and job orders) inside one core ERP system. In warehouse-centric industries, they might need to implement basic barcoding to reduce cycle time and transaction costs. 

The companies in this ERP maturity stage are generally between $30M-$100M in revenue for product-centric industries and higher for service-centric ones. The team skills? CFO or Controller might be in place but not seasoned (with at most 2-3 ERP implementations under his/her belt). Ops might exist only as an execution function.No CIO or Chief Supply Chain Officer might be in place. Developers or IT managers might act as the CIO, with very limited ERP experience.  The organizational structure might exist, but the CEO may not be as seasoned to build consensus and processes for cross-functional collaboration.

The system architecture? One or multiple ERP systems might exist, but the data, processes, and systems are only capable of transactional processing. The implementation may be finance-led, and the operational or supply chain perspective might be missing from the implementation, forcing them to use spreadsheets or siloed systems for their workflows. The implications? Significant variance and admin efforts are generally required to reconcile different books, ledgers, and master data.

Pros

1. Easy for the team
2. Does not require expensive resources such as Ops and finance executives to model various datasets
3. Does not require as much consulting help to automate and integrate the processes

Cons

1. Traceability limited across processes
2. Substantial admin costs in reconciling ledgers
3. Significant inventory, supply chain, customer experience, financial control, costing, and scheduling issues.

Stage 3: Automated Customer and Vendor Communication

Once they hit this stage, the transactional stage may not be enough with the growing transaction volume and, as a result, increased process overhead. Along with the growth, there are other factors, such as targeting larger customers — that might mandate seamless integration with their procurement systems – or having a specific certification or audit to win the large accounts. And this might drive another ERP implementation with the integration in mind.

Some companies may try to integrate their eCommerce systems or point-to-point integration offered through several SaaS tools. While the integration may be possible, the inclusion of additional channels and integration points will drive additional overhead. But the reconciliation is still done primarily through GL entries, with significant inventory inconsistencies and supply chain issues across channels.

Generally, multiple ERP systems are present at different warehouses and sites, with the role of ERP still very transactional in nature, with the majority of scheduling, planning, and costing happening outside of the ERP system or through ad-hoc adjustments. The consolidation is primarily done using the GL entries either inside the ERP system or using an FP&A tool. Significant manual reconciliation across the processes, but automated communication using punchouts, EDI, etc.

Pros

1. Automated transactions with customer and vendor systems
2. Does not require cross-functional alignment to operate on shared master data
3. Functions can independently plan and use the tools of their choice

Cons

1. Traceability limited across processes
2. Substantial admin costs in reconciling ledgers
3. Significant inventory, supply chain, customer experience, financial control, costing, and scheduling issues.

Stage 4: Department-Level Planning

While the customer and experience-driven requirements would take priority, the transactional nature of the processes and ad-hoc planning may lead to financial performance issues at this stage. And they will require teams to rethink their planning and scheduling processes. The increased workload and the pressure to hit the KPIs from the executive teams may lead departments to host their planning and scheduling processes inside the ERP system.

The planning would still be done at the department level due to the issues with the master data. And the site level or centralized planning may not be possible due to the differences between various departments. As well as the lack of experience of executive teams to build cross-functional consensus on the shared data. The executive team at this stage might still be relatively inexperienced in scaling global companies. Also, planning and scheduling might still take the backseat with the other easier priorities that might not require cross-functional alignments, such as public reporting or other compliance. 

The system architecture? Multiple ERP systems may be present at different warehouses and sites, as well as operating in siloes, with no centralized planning or optimization. Consolidation of financial reports may be done manually or using FP&A software due to the disconnected data sources from various departments. So the implications? Significant manual reconciliation across the processes.

Pros

1. Automated transactions with customer and vendor systems
2. Does not require cross-functional alignment to operate on shared master data
3. Functions can independently plan inside the ERP system without requiring cross-functional alignment on the master data

Cons

1. Traceability limited across processes
2. Significant issues with planning and scheduling.
3. Oranization-wide synergies not explored, and significant admin effort to reconcile cross-functional processes.

Stage 5: Site-Level Planning

At this stage, the department-level planning will lead to significant outgrowth of the finance and IT department. But why? Due to the reconciliation efforts among various ledgers because of the disconnected systems and processes. The implications? Profitability or sales growth issues due to the limited marketing budget. Also, at this size, the disconnected planning across departments may lead to operational issues in meeting fulfillment targets( or scheduling resources). These issues will force executive teams to cross-functionally align the teams. Or hiring executive teams experienced in aligning teams and with several ERP implementations under their belt.

These executives might hire a business transformation consultant (a.k.a independent ERP consultants) to redesign their processes and master data optimized for site-level planning and scheduling. While executives may be convinced with the site-level centralized planning, they might not foresee the value in global planning and finding synergies across geographies. So there might still be multiple ERP systems across geographies with limited communication and collaboration among entities. And the multi-site consolidation and planning? They would use FP&A software in the reactive mode. 

Pros

1. The site is fully optimized with their internal processes
2. Scheduling, costing, and planning are optimized at the site level
3. traceability is possible

Cons

1. Multi-entity and multi-geo synergies not explored
2. Significant issues with planning and scheduling at the global level
3. Heavier reconciliation cycle and longer close time due to the substantial variances among entities and translation required.

Stage 6: Consolidated Multi-entity Planning

While the site-level planning may be enough for domestic companies, they will outgrow that as their geographic footprint increase. As well as they get involved with substantial M&A cycles. This would require financial governance processes at the global level and finding synergies across geographies. At this stage, they would also require mapping out their material flow and supply chain processes across geographies to find synergies. But how? By consolidating the procurement of raw materials or reallocation of manufacturing capabilities.

Moving from site planning to consolidated multi-entity planning would require executive or private equity change that may be experienced in rewiring companies for global processes. A leading consulting firm may be involved in leading the international change process. As well as creating shared master data models that can be used across geographies. At this stage, while the business executives might be seasoned, the problems are not big to require large IT departments to do the workload planning and building an architecture that may require splitting the processes or systems because of the increased workload.

Pros

1. Multi-entity and multi-geo operational synergies
2. Shared master data across geos and shared planning and forecasting
3. Multi-geo traceability possible

Cons

1. Financial synergies not explored at the global level
2. Training and learning synergies not accounted
3. Might slow down the planning and forecasting cycles

Stage 7: Joint Planning and Forecasting/Shared Services

Once the operational synergies are fully exhausted, the next priority would be to align the vendor and customer processes for joint planning and forecasting. This would require mandating customer and vendor channels to share their data and be on the same/electronic systems, so the data can be gathered for joint forecasting and planning. Exploring the financial shared services model would require measuring transaction times and costs across geographies.

The shared services models and joint planning and forecasting would require a strong IT COE, which might only be possible after a company reaches a certain stage in ERP maturity. But the IT expertise is still limited to rewiring the business processes and designing the processes compatible to explore financial synergies. And the system architecture? There might be multiple ERP systems involved to segment the shared services model, but the operational processes would still be able to perform joint planning and forecasting.

Pros

1. Predictive forecasting opportunities because of shared data from customers and vendors
2. Ability to control disruptions in the end-to-end supply chain
3. Ability to explore global financial synergies utilizing shared services

Cons

1. Requires very expensive IT capabilities and consulting support
2. Training and learning synergies not accounted
3. Might slow down the planning and forecasting cycles

Stage 8: Enterprise Architecture/Best-of-breed

At this stage, the companies may be processing millions of journal entries, and so to handle the workload, the ledgers need to be designed to balance global planning and transactional performance. The processes need to be thought through from the technical perspective in terms of where the transaction volume and reconciliation effort are too high to keep the processes outside of the core ERP system. Also, due to the increased employee counts, the training and learning costs may drive the adoption of best-of-breed systems in specific functions.

This architecture would require a rethinking of enterprise architecture across system boundaries, in how the master data is produced and how it’s augmented, including reconciliation flows. Enterprise integration is so complex at this stage that companies need to implement a centralized integration architecture at the global level. They might as well require an MDM, mapping out all the producer and consumer workflows. This architecture may require testing throughput for each component to ensure that the global architecture is capable of handling the processing of these transactions. Most companies will have a very seasoned CIO as well as an IT department capable of designing the architecture at this scale.

Pros

1. The decoupled architecture allows the scaling of transactions
2. Business agility and faster M&A cycles because of clearly defined architecture
3. Learning and training synergies explored

Cons

1. Requires very expensive IT capabilities and consulting support
2.  Might be very expensive to build and maintain
3. Lack of enterprise architecture expertise may lead to failed transformation initiatives

Stage 9: Decision Support System and AI-augmented Workflows

Clearly defined architectural boundaries and globally modeled master data allow mining quality data and building a decision support system layer on top of the core architecture. The decision support system would help complete the incomplete data by combining external datasets, build a data science layer that would help detect GL anomalies, superior revenue recognition workflows that will further optimize the profitability and revenue, and find opportunities by optimizing container space or better packaging strategies.

At this stage, all of your control centers are consolidated and have completely connected planning and forecasting data across the geographies, systems, processes, functions, customers, and vendors, as well as overlaying external industry datasets. Building and maintaining these capabilities requires not only the IT department but a very strong team of data scientists with deep capabilities of building models on top of the enterprise architecture to find revenue and profit opportunities, building real-time integrations with machines and sensors that can be reliably controlled using AI-augmented workflows.

Pros

1. Connected planning allows for finding new revenue and profit optimization opportunities.
2. Clearly separated boundaries for operational and data workflows allow scaling analytical workflows without impacting operational performance.
3. Connected models allow operating on one planning data for the entire supply chain.

Cons

1. Requires very expensive IT and data science capabilities
2.  Might be very expensive to build and maintain
3. Lack of enterprise architecture expertise may lead to failed transformation initiatives.

Final Words

There are several variables that drive ERP maturity. And most companies go through many different cycles before they can realize true business value. So while you might feel that you are fairly successful with your ERP implementation, unless you are on stage 9, you have no idea what you have been missing out on.

And if you are curious whether you can get more juice from your existing digital transformation investments, try to grade yourself on this scale and gauge if you might have further room for improvement.

FAQs

Going through an ERP implementation is like heart surgery for your business. And just like with surgeries, everything matters your body type (your business model), your psychological state (the changes in the state of your business with time), doctors (ERP consultants), doctor’s expertise (their skillset and experience), equipment (ERP solution), procedure (implementation approach), and the hospital (your data, processes, and architecture). Most surgeons planning the surgery for the first time go unprepared and end up killing patients. They may have watched other surgeons and might not fully appreciate the craft required to be successful. 

Understanding and articulating why they are so challenging requires you to go through multiple surgeries on a daily basis. The same goes for ERP implementations. Luckily, with heart surgeries, we have regulations that help prevent failed surgeries. With ERP implementations, there are none. And that’s why the experience and results vary so much, with only a few lucky ones getting business results and using them as their competitive advantage.

First-time implementors are very similar to first-time surgeons. They underestimate the amount of effort involved and the expertise required. And as SaaS technologies are becoming easier to use, this tendency is only hurting them more. Generally, it takes at least 2-3 implementations in the company’s life cycle to appreciate the whole process and be informed about the efforts required to avoid business disruptions or million-dollar ERP disasters. It might take another 2-3 to achieve tangible financial performance improvement, which is attributed purely to this investment. So, what are the different approaches for ERP implementation?

1. Change-focused Phased Business Transformation

This transformation starts with the overarching business strategy or business model changes, including planning for managing the change and the communication plan for employees, customers, and vendors. This initiative is very similar to how you would plan your inventory or operational capacity, starting with the business and annual operating plan, followed by identifying the right KPIs that need to be improved through potential digital initiatives. The process starts with building as-is and to-be process (and data) models, including financial statements and KPIs forecasted for the next 5-10 years. 

Depending upon the companies’ budget and skillset, they may manage the entire change and business case process internally while hiring consultants primarily for the subject-matter expertise of enterprise software and ERP. The other companies, on the other hand, may want them to lead the entire project, including strategy and planning, selection, and implementation. The strategy phase of such engagements is likely to be close to 6 months – 2 years, depending upon the size of the organization. The implementation and execution phase could be 2-10 years, with multiple phases managed as part of the global rollout.

Engagement Structure:

It consists of a selection phase with only the selection consulting firms managing the entire process, whereas the implementation phase may involve ERP OEM, ERP resellers, ISVs, and enterprise software vendors.

Pros: 

1. Complete alignment of corporate strategy with digital execution. 
2. Superior definition of success.
3. Motivated teams due to the end-to-end visibility of goals.

Cons: 

1. Might be harder for larger organizations to build future financial models. 
2. Expensive. 
3. The costs involved with the strategy phase might demotivate executives who might be hoping for quicker returns with digital initiatives.

2. Phased Business Transformation

Unlike the change-focused phase business transformation initiatives, these initiatives might not have formally planned change management activities. Identifying the business priorities from the business and annual operating plans without putting as much emphasis on documenting as-is and to-be process models would be the primary difference. The executives and business teams might drive these initiatives as they might have specific business performance issues or a set of issues that they might be looking to resolve. The structure of these engagements would be similar to the change-focused business transformations, with the primary difference being in the length of the selection phase, which is likely to be shorter, while the implementation phase would be a bit longer.

Engagement Structure:

During the selection phase, typically, only strategy and independent ERP consulting firms would be involved. ERP OEM, ERP resellers, ISVs, and enterprise software vendors might lead the implementation. 

Pros: 

1. Less time spent on discovery. 
2. Superior definition of success. 
3. Clear visibility into business goals and KPIs.

Cons: 

1. Adoption risk issues due to less time spent on discovery and change management. 
2. Longer implementation time due to the iterations required during the implementation phase. 
3. The costs involved with the strategy phase might demotivate executives who might be hoping for quicker returns with digital initiatives.

3. Business Transformation

Unlike phased business transformation, in which a substantial amount of time is spent on the overarching corporate strategy before deciding the right phases and planning their sequencing. Business transformation is all about planning for specific ad-hoc issues. Sometimes they are done at the department level, and the other times corporate. The biggest difference in this transformation engagement is that there might be duplicate efforts across the enterprise to solve similar problems. While these initiatives may be successful at the project level, the business might not get the overarching results due to the misalignment of different initiatives.

Engagement Structure:

The engagement structure and the vendors are very similar to the phased business transformation. 

Pros: 

1. Less time spent on discovery. 
2. Definition of success. 
3. Visibility into business goals and KPIs.

Cons: 

1. Questionable success due to the misalignment between corporate goals and execution.
2.  Adoption risk issues due to less time spent on discovery. 
3. Longer implementation time due to the iterations required, as well as in aligning the plan with the corporate strategy. 

4. Process and Data Re-engineering Transformation

Unlike business transformation-focused transformation, where the deep analysis of the financial and process model is performed of both as-is and to-be, the starting point for these initiatives might not be the business or annual operating plan. And obviously, no KPIs analysis. Specific business challenges, such as outgrowing the current ERP system or reaching an inflection point in the company’s growth journey, are typically the starting point, followed by the rounds of deep process and data re-engineering prior to selecting the technology.

Engagement Structure:

Since these engagements are process and data re-engineering led, independent ERP consultants might take the lead with these projects and be involved during and post-implementation to ensure that the to-be state is successfully implemented.

Pros: 

1. Process and data re-engineering would increase the chances of successful selection. 
2. Alignment between users and implementation teams. 
3. Reduced risk of over-engineering and over-customization.

Cons: 

1. Questionable success due to the misalignment between corporate goals and execution. Assumed to-be state may result in implementation failure. 
2. Longer implementation time due to the iterations required to align with the corporate strategy. 

5. Enterprise Architecture Implementation

While the entire architecture implementation takes a comprehensive view from the technology standpoint, they might miss the business, process, and data viewpoint. Unlike other implementation types where only one product or area might be in scope, this implementation type considers all the systems in scope, such as ERP, CRM, eCommerce, WMS, TMS, MES, etc. This implementation type would address core technical challenges such as master data governance, reconciliation flows, and data migration.

Engagement Structure:

Since these engagements might be IT-led, they might recruit independent ERP consulting firms for selection, enterprise architecture, 3rd party QA, and managing the program. The ERP OEMs, resellers, and ISVs would be involved during the implementation phase.

Pros: 

1. Less risk of data siloes due to the enterprise architecture perspective. 
2. Alignment between enterprise architecture and implementation team. 
3. Less duplication of code and capabilities across the enterprise.

Cons: 

1. Questionable success due to the misalignment between corporate goals and execution. 
2. Assumed to-be state may result in implementation failure. 
3. Longer implementation time due to the iterations required to align with the corporate strategy. 

6. ERP Implementation (Cross-functional Integration)

Unlike the enterprise architecture implementation, this approach takes a siloed perspective on ERP where they might have several initiatives, such as WMS and MES implementation, running in parallel to ERP. The ERP implementation may make assumptions about the master data reconciliation and integration flows. But might not spend as much time on the discovery and planning of the overarching architecture and business transformation, as well as change management at the corporate level.

Engagement Structure: 

Since these engagements might be finance- or CFO-led, they might recruit independent ERP consulting firms for selection. The selection is primarily siloed, considering only the ERP-centric workflows and processes. Some selection firms focused only on ERP might not be comfortable engaging during the implementation phase, and the implementation might be led by the ERP OEMs, resellers, and ISVs.

Pros: 

1. Cheaper 
2. Faster Implementation 
3. Great for teams where they might not have control over corporate strategy or enterprise IT.

Cons: 

1. Significant integration risks 
2. The risk of admin efforts due to disconnected ledgers and master data 
3. Missing technical perspective might lead to selection and implementation issues.

7. ERP Implementation (Functional Best-of-breed)

This is probably not an ERP implementation but is often misunderstood. The functional ERP is one of the best-of-breed apps for a specific function such as HCM, CRM, accounting, or eCommerce. While they might be perceived as an ERP, the cross-functional integration is very lean and fragile (and, most often, non-existent), causing significant integration and reconciliation issues across processes and departments.The budget and planning for these initiatives are done at the department level.

Engagement Structure:

Since these engagements are primarily LOB or department-led, such as HR, marketing, or Supply Chain, a selection firm may not be involved. The implementation is primarily siloed, considering only the function-centric workflows, with minimum visibility into cross-functional processes.The CRM, HCM, WMS, TMS, eCommerce OEMs, resellers, and ISVs might lead the implementation, with minimum involvement of the selection and change management consulting firms.

Pros: 

1. Cheaper 
2. Faster 
3. Great for teams where they might not have control over other departments or might need to implement a system for quicker, siloed results.

Cons: 

1. Significant reconciliation and master data governance risks 
2. The risk of increased admin efforts due to disconnected ledgers and master data 
3. Missing cross-functional perspective might lead to selection and implementation issues. 

8. Handoff ERP Implementation/Checklist and Data Upload

While often promoted by ERP OEMs and Resellers as an implementation or consulting project, this is really a setup. The responsibilities of the OEM and their reseller are limited to the tool and training provided on the tool. Due to the limited budget planned for these engagements, they will not be able to spend as much time with processes or data engineering. Their answers would be limited to how the tools would handle the processes and their best practices, primarily due to legal compliance issues and their limited understanding of other areas of business transformation. The process would start with filling out a series of checklists and spreadsheets, but you would be responsible for identifying the right GL codings, customer master, SKU normalization, and reconciliation workflows.

Engagement Structure:

With this implementation, the client would engage with the ERP OEMs and resellers directly during the sales process, and the process would start upon signing the ERP contract. The client would manage the implementation directly with their internal resources and work directly with the reseller or OEM. The implementation time may be longer without any prep, but you would be required to pay the license fee from day one.

Pros: 

1. Cheaper 
2. Faster 
3. Ideal for companies with deep internal ERP COE and master data experience

Cons: 

1. Significant integration risks 
2. Significant data translation risks due to the gap in understanding of as-is and to-be data models 
3. Risk of implementation failure due to inadequate process and data reengineering.

9. Templated ERP Implementation

This ERP implementation is often promoted by ERP OEMs and resellers as a quicker implementation approach. Sometimes the price of these implementations could be as low as $30K. These implementation templates are pre-configured with the chart of account mappings, item SKUs, etc., and you are expected to change your business processes and data within the framework of the template. Any deviations would be billed separately. While they sound great on paper, these templates assume that all businesses are alike and that their data, processes, and transactions would be in the exact same state as the other businesses. But unfortunately, every business has its own nuances. And even with process and data re-engineering, the templated approach might not work.

Engagement Structure:

With this implementation, the client would engage with the ERP OEMs and resellers directly during the sales process, and the process would start upon signing the contract. The client would manage the implementation directly with their internal resources and work directly with the reseller or OEM. They might rush to go live but expect substantial disruptions and adoption issues post-implementation, with huge dollars with ERP customizations and support.

Pros: 

1. Cheaper 
2. Faster 
3. Ideal for companies with substantially limited implementation budget

Cons: 

1. Significant integration risks 
2. Significant data translation risks due to a gap in understanding of as-is and to-be data models 
3. Risk of not going live because the users might not feel comfortable going live on templated processes.

10. No Go-live Implementations

Most unplanned and first-time implementation result in not going live and are a complete waste of investment. Regardless of whether you go live or not, you would still spend your time and money with these implementation projects and sometimes be locked in the ERP contract as well, even though you were not able to use the software at all. The main cause of this implementation failure is overcommitment and misunderstanding during the sales process. 

The misunderstanding could be because of any reason, whether you forgot to share crucial details during the sales process or the reseller or OEM couldn’t spend much time and overcommitted. While cheapest on the surface, these implementation projects might turn out to be the most expensive of all due to unproven capabilities, overengineering of the solutions, or poor data driving substantial process issues. Inexperienced clients might not have enough experience in vetting vendors’ capabilities. The vendors might overcommit because of poor discovery or pressure to close sales.

Engagement Structure:

With this implementation, the client would engage with the ERP OEMs and resellers directly during the sales process, and the process would start upon signing the contract without the involvement of an independent ERP selection Or change management consultant. 

Pros: 

1. Cheaper 
2. Faster 
3. Ideal for companies who can afford to lose their investment with R&D.

Cons: 

1. Significantly over budget 
2. Total waste of time and money 
3. Business Disruptions

Final Words

While it’s always critical to undertake the implementation type that suits your budget and goals, try to understand the different options available and their implications for your business. Choosing a templated approach is almost similar to productizing heart surgeries, assuming all hearts and bodies are the same. And this mindset may end up costing way more than what you might save on the surface. 

So if your goal is to get business value from an ERP implementation, talk to an independent ERP consultant who can guide you through the process and walk you through the pros and cons of the various options available. But most importantly, run away from people who might claim that ERP implementation is easy.

FAQs

Marrying without planning is likely to be a painful journey, with consequences as severe as personal bankruptcy. Just like planning for your marriage, the enterprise digital transformation readiness step is not optional. It’s mandatory to avoid implementation disasters — and post-implementation disruptions. The more preparation you put in, the less painful the journey gets, with the lower total cost of ownership. Regardless of whether you pay during the prep phase or during implementation, you will end up paying about the same. So, the only difference with the prep phase is that you can save yourself a ton of headaches.

Also, some people could perceive the digital transformation readiness step as abstract (and requiring sunk costs). They might be tempted to find shortcuts, such as keeping additional funds for unexpected risks or doing unnecessary chores.  While these strategies might help to some degree, digital transformation readiness is about comprehensive planning, involving putting the entire plan on a piece of paper (blueprinting). It will also identify the issues with the initial plan (process re-engineering), assess the financial feasibility (business case), and finally test if the current resources can withstand the pressure exerted by new demand (enterprise architecture plan).

The phases would differ depending on the current state of your data (and processes) and how you want to segment your prep and implementation phases. But even with a prep phase, a structured process is necessary, leading to the following most common deliverables. These deliverables will help you stay on track without feeling lost in your journey.

 1. Business and Strategic Plan

Creating a business and strategic plan is fundamental to your digital transformation readiness. It’s essential because it not only drives the annual operating plan but also helps plan the volumetric capacity expectations from digital systems. 

Why it matters:

• No destination? Keep wandering. Even if you are completely off, that’s OK. 
• Can’t define the destination? No Odds of getting there. Just defining it will help improve the chances of being closer to your destination. 
• Writing it down will help define the destination. When you write something down, you will be slightly more informed. Otherwise, most executives like to dream of growing by 60% or 300% but would be clueless when asked about the execution plan.

Essential Ingredients:

• Business model and SWOT analysis. For example, the basic documentation of customers, channels, offerings, and SWOT analysis.
• Customer and supply chain journey mapping. E.g., High-level customer and supply chain journey that will be used as input for the process re-engineering step.
• Offerings and bundle strategies. Such as offerings, bundles, and how they map to each customer and customer channel. % split of revenue per offering and bundle. Strategic vs. non-strategic offerings. And pricing and discounting strategies.
• Strategic goals, execution plan, and expected results. Strategic goals and execution plans for each goal, as well as the desired KPIs that you plan to hit with each goal. Justification of why you believe technical changes are necessary to hit these goals.
• Financial Model. Detailed pro-forma financial statements of at least five years with forecasted ratios and KPIs aligned with the financial goals.

Make sure you don’t ignore this step, as it will help firm up an understanding of the direction and help you communicate the vision better.

2. Annual Operating Plan

Annual Operating Plan is a detailed forecasting and planning step that also outlines physical infrastructure growth. It uses a strategic plan as input and outlines a detailed plan for each individual function.

Why it matters:

• Wishlists are great, but can you afford them? In other words, each system and architecture assume a specific operational and transactional capacity. Define the capacity that is consistent with your growth plans.
• Helps firm up the strategic plan. Eliminates vague assumptions that might not be financially feasible and help you focus on the right objectives.
• Helps measure the outcome of transformation initiatives. Said another way, helps define the right KPIs that will be a true definition of success.

Essential Ingredients:

• Market, facility, site, product line, and warehouse expansion plan. Expands on the objectives defined in the strategic plan and build a financial model for each chart of account and dimensions.
• Human resources plan. Identifies the growth of human resources in each department, helping forecast the transactions and licensing requirements.
• Digital transformation strategic plan. Identifies the budget and high-level financial feasibility of different technology needs outlined in the strategic plan.
• Expected transactional volume. Details such as # of sales orders, purchase orders, sites, facilities, # of products, and production lines – all of which dictate the transaction volume and expected capacity from the architecture.
• KPIs and OKRs for measurement. Specific detailed KPIs per department, per role, in the as-is and to-be state.
• Key planned activities and stakeholders mapping. Mapping of stakeholders with defined activities, who does what, and which department is responsible for what.

Without an annual operating plan, it’s hard to estimate the internal capacity, transaction volume, and KPIs that will define the success of your digital transformation readiness.

3. KPI-Role-Compensation Plan As-is and To-be

This step analyzes the impact of the current compensation structure on KPIs and how that might influence the behavior of each role. As well as drive the resistance to change.

Why it matters:

• Let’s face it. Needles won’t move until compensation moves. Technology only goes so far. You need a lot more than technology to ensure people embrace the technology.
• Not willing to change the comp? Don’t even bother making a change. Regardless of how cutting-edge the technology might be, people won’t adopt it. So, change the compensation aligned with the expected change.
• Digital transformation initiatives are like financial markets. Not much difference between “bank runs” and “system runs.” The resources will run as fast as they can if they don’t see a personal benefit. 

Essential Ingredients:

• As-is compensation. List down different variables of the current compensation of each role and department.
• Compensation-department-behavior mapping. Additionally, the analysis of current behavior with the compensation variables and how each department might be influencing these behaviors.
• As-is behavior and change impact analysis. As well as analysis of as-is behavior on the proposed changes and forecasting of any resistance expected motivated by compensation impact.
• To-be behavior and change impact analysis. Not to mention analysis of the desired behavior on the changes proposed and how the compensation variables need to be changed to influence the right behavior.

This step will decide the fate of your digital transformation readiness. So don’t forget to map the benefits with people’s paychecks for the enterprise’s digital transformation to be successful.

4. Role-Department-System Org Chart As-is and To-be

This step maps the role and department with the systems in both the as-is and to-be states. This is a crucial step both for change management as well as system architecture, as the to-be state needs to be designed depending upon teams’ comfort level in whether they are willing to give up on the processes or not.

Why it matters:

• Role system mapping is like an org chart for systems. No org chart → pure chaos. Disagreement among users might result in data siloes, process hijacking, data quality issues, and reconciliation nightmares.
• Forms the foundation of change management. Helps them understand their as-is and to-be workflows and helps them articulate the unforeseen issues or implications only known to them.
• Helps each resource visualize why the change is necessary. Enforces the buy-in as they are able to visualize cross-functional challenges of why a certain system or a process changes.

Essential Ingredients:

• Role and department mapping in the as-is and to-be plan. How each role would map in the new architecture. Would there be changes in the reporting structure or organizational hierarchy, as well as process ownership?
• Communication plan on why the org change is necessary. Identify the workflows for each change and provide a tailored plan for each stakeholder.
• How each role would map, including the owner of each system and dataset. How each role would map to each system in the as-is and to-be process model and what they need to do to be ready with the new system.
• Process boundaries of each role and data interaction workflows. The expectations from them during process handshake and their responsibilities for data ownership.

This is perhaps the first step in building a consensus on the draft-to-be process state and architecture.

5. Business Case and Transformation Roadmap

This step is where the rubber meets the road. This step reviews each of these proposed initiatives and build a brief business case, phased priorities, and appropriate sequencing based on technical and financial feasibility. 

Why it matters:

• Helps eliminate “binary” vision and unqualified resources. Help executives filter out noise from the signal.
•  Helps prioritize initiatives. Including the dollars in the conversations helps focus on the most essential without wasting time.
• Helps build a phased roadmap. The phased roadmap is essential to avoid the big bang approach and the risk of demotivating sponsors.

Essential Ingredients:

• ROI analysis of each initiative. Cost velocity and cash flow analysis of each initiative to help compare different options.
• Potential solutions and costs of each initiative. Focus on the entire solution rather than taking a siloed approach, including the costs of each integration, maintenance, support, etc.
• Buy vs. build vs. outsource analysis. Compute and compare costs based on the opportunity costs of internal resources, additional hiring, etc.
• Internal staffing needs vs. outsourced capabilities map. Include the map of what is expected to be done internally vs. outsourced. Identify the internal staffing needs. The poor internal hiring results into schedule slippage and overbudget issues.
• KPIs and definition of success of each initiative. Identifying KPIs for success will help stay on track and communicate the value of the initiatives.

Once agreed on a specific path and the total spend, the following steps will build on the solution path identified but come back to the roadmap and consider alternatives if the original solution might be financially or technically risky.

6. Change Management Plan

The changes may have wider implications and need to be planned and communicated. For example, say the to-be state requires a new SKU numbering or new configuration for license plates, which might require vendor and customer communication, along with making sure that the packaging team has the bandwidth to accommodate the changes timely. 

Why it matters:

• Helps develop organization-wide language that everyone can understand and speak. Builds consensus on changing processes and customer/vendor communication elements.
• Provides cross-functional visibility and implications. Also helps identify and track cross-functional dependencies and builds the communication plan.
• Documented agreement on the current challenges. Documented processes help trace the root cause of the current challenges.
• Helps differentiate tangibly executable initiatives. Helps assess the cost and impact of the change on the branding and market share.
• Alignment on the to-be changes and why users’ contributions and commitment will make or break the initiative. Helps users see the big picture about why their contributions and commitment are important for the success of the program.

Essential Ingredients:

• Documentation of as-is workflows and process maps. Complete documentation of each role and their workflows for them to be able to relate, connect, and get trained.
• Identified changes aligned with strategic priorities and business case. Perform business case analysis as the cost of change is a factor for the overarching cost of the initiatives. 
• Implications of changes on the business processes, roles, workflows, and the steps required to be successful. As well as the mapping of each change in the business processes, roles, workflows, etc.
• Documentation of key decisions, risks, and mitigation plans. Along with any proofs-of-concept that need to be performed to mitigate these risks.

Depending on the degree of the change and implication, appropriate plans and solutions need to be identified that are not only financially not feasible but technically not too risky.

7. Organizational Ledger Reconciliation Plan

Organizational ledger reconciliation requires tracking each of the datasets and how they will be reconciled. For example, decisions such as how many systems should be used in the architecture by building the reconciliation plan and estimating the cost of reconciliation. For example, if the team is fighting for an additional system, but the cost of reconciliation might be more than the 2 FT employees, then the additional system may not be worth it. 

Why it matters:

• Helps define ownership of each dataset and agreement on the reconciliation. 
• Help avoid reconciliation nightmares and whether reconciliation will be more expensive than simplifying processes or technology. 
• Helps understand the transactional integrity and whether a specific process must reside inside ERP, best-of-breed, eCommerce, or Analytics warehouse. 
• Set the tone for the enterprise architecture. Without a reconciliation plan, there might be issues with enterprise architecture with master data governance and process conflicts.

Essential Ingredients:

• Documented interactions of organizational ledgers AR, AP, GL, Inventory, cash, sales operations, marketing analytics, shop floor data, HCM, and supply chain forecasting.
• Documented impact on the financial or statistical ledgers. Classification of financial vs. statistical ledgers and their impact.
• Documented data ownership and reconciliations models, real-time or non-real-time posting. Real-time posting vs. batch? Summary vs. detailed?
• Defined ownership of KPIs and data marts and their interaction workflows. Reporting and data requirements from each ledger. Analysis vs. financial integrity of operations.

The ledger reconciliation plan help build how many datasets need to be reconciled, how many times, and how many variances will be expected, which will drive the expected capacity of the finance department.

8. Master Data Governance and Reconciliation Plan

Just like an organizational ledger reconciliation plan covers the functional aspect of the account and inventory reconciliation workflows, master data governance is the technical aspect (at the definition or at the metadata level) of reconciliation. 

Why it matters:

• Helps understand the origins of each master data such as customer, vendor, products, services, chart of accounts, bank accounts, machines, equipment, human resources, credit cards, payment terms, etc. 
• Helps understand the master data augmentation journeys and ownerships of each delta. 
• Helps define processes for future master data integrity. Poor master data governance might lead the performance issues and the re-implementation of the system.
• Provides clear guidelines for the master data reconciliation plan in case of a conflict. 

Essential Ingredients:

• Master data to system mapping at the field level. Map each master data at the field level to the system and who owns it. 
• Master data augmentation journey per system at the field level. Define the augmentation journey at the field level, where the dataset gets originated, modified, and consumed.
• Master data relationships change across journeys. Flatting the layered data? Define the reconciliation path for each changed hierarchy.
• Master data mapping to key use cases. Define the master data structure for complex use cases such as buying groups, warehouse and location architecture, and transit locations.
• Admin and approval flow, given the implications of each master data. Define the approval flows and the stakeholders involved in approving datasets, including the governance process or automation needs.
• Producer-to-MDM and MDM-Consumer Workflow mapping. Using MDM for master data management? Define workflow for each MDM interaction across systems and departments.

A master data reconciliation plan helps refine the enterprise architecture and avoids data quality issues such as duplicate data, data siloes, and financial control.

9. Process Re-engineering Plan

The process re-engineering plan documents all the process re-engineering candidates in detail with their as-is and to-be workflows, including the migration plan for the new processes.

Why it matters:

• Identified process re-engineering candidates to stay within budget. Each broken process might lead to millions of dollars in overengineering of systems and architecture.
• Impact of process engineering on the current process. How much impact would the current processes have because of the re-engineering? Is that financially and commercially feasible?
• Impact of process re-engineering on the customer-facing workflows. Would customers be willing to adapt to the changes? Do the changes impact customers’ workflows?
• Impact on the product, branding, warehouses, facilities, and shop floors. Any physical changes needed in the warehouse layouts, packaging, etc., needed for process engineering to be successful.

Essential Ingredients:

• Cutover and training plan for current users. Training plan in coaching the current core team on the process of reengineering to be able to forecast the implications.
• Training plan and guides for the customer service and sales reps. Training plan and guides for the end users for the to-be state.
• Mock scripts to rehearse the process re-engineering scenarios. Design mock scripts for the current users to rehearse the new processes.
• Framework to enforce readiness and learning. Plan for compliance and digital transformation readiness, including automated governance processes and sustainability in the to-be state.
• Communication and training plan for the customers, resellers, and partners. Including any PR campaigns and asset development such as websites or internal portals.

Having a good process and re-engineering plan helps you avoid overengineering the systems or the critical success factors that lead to poor system selection.

10. Enterprise Architecture Plan 

The enterprise architecture plan is written from the perspective of the technical teams to help align the technical and business teams. It helps the technical teams to challenge the assumptions and demonstrate the technical and financial feasibility of the plan.

Why it matters:

• Helps align technical teams with business, process, information, and technology. As well as helps align strategy, execution, quality, and KPIs.
• Reassesses the business case from the perspective of technology.
• Identifies red flags. As well as their mitigation plans.
• Sets the boundary of each system in the architecture, and their interaction flows
• Defines integration flows. Not to mention the cost of each integration.
• Defines users to system interaction flows. As well as setting their boundaries

Essential Ingredients:

• Detailed documentation of data. As well as process flows across system boundaries
• Pseudo code for major business rules and translations at the component level
• Mapping of each interface at the field level, inputs, and outputs. As well as the processing needed from each component.
• Documented requirement matrix, broken down at the story level and verified by technical teams, not to have more than 4-8 hrs of work.
• Documented quality plan, with acceptance criteria of each system, integration, and process.
• Documented release plan for how the systems will be released in production (including mitigation plans). As well as how stories map to sprints and how sprints map to releases. Finally, how each story maps to the goals in the business case.
• Documented production planning, including cut-over planning, financial translation of fixed assets, historical data migration plan, and production sanity check plan.
• Detailed migration plan, including identification of test environments of each system, how each system environment maps to another system environment, and how the finalized data and processes will be migrated to the upstream systems.

Having a good enterprise architecture plan allows you to foresee the technical issues that would otherwise not be visible with the siloed approach. 

Final Words

So, just like marriage requires comprehensive planning, the digital transformation readiness step is necessary. But the prep step is not about drawing a bunch of flow charts (like doing a bunch of chores with marriage) and writing a string of buzzwords to impress your executives; it’s almost similar to implementing an ERP on a piece of paper (being ready for marriage in your heart), which is more challenging than actually implementing it. 

Just like you would not hire interns for your ERP implementation, asking interns to run the prep phase is worse than not doing it at all. So if you don’t want any headaches in your life, make sure these deliverables are as complete before you kick off your ERP implementation.

FAQs