Switching ERP? 5 Critical Factors You Can’t Afford to Overlook!

There are many reasons why a company will choose to change their Enterprise Resource Planning (ERP) System. Whether you’re transitioning from an existing system or consolidating multiple acquired ERPs, changing an ERP system is a major decision that impacts an entire organization. Here are the top five considerations to keep in mind:

1. Business Requirements & Goals

• Clearly define what you need from the new ERP system.
  • Conversations should be had with every department within the company to fully understand what the current ERP is doing successfully and get new ideas that a new ERP can help with. By documenting the current use, you may find hidden processes that are not widely known and are needed in the future. All mission critical functions will be detailed to ensure they are handled correctly and completely with any new system chosen.
• Ensure the ERP aligns with your business processes, growth plans, and digital transformation strategy.
  • What other systems are connected to the current ERP? Will they remain separate systems, or should they be included in the base ERP functionality? How are these systems integrated, and will the new ERP handle those integrations? What new systems are expected or desired in the near and distant future and how will the new ERP work with those?
• Identify pain points in the current system and how the new ERP will address them.
  • With any enterprise system, there are going to be pain points. Manual data replications, extra keystrokes, custom development. Discover what the current pain points are in the current ERP. How severe are the pain points and how much is it costing your company in time and/or money? Will these pain points be solutioned in the new ERP with little to no customization or development?

2. Total Cost of Ownership (TCO) & ROI

• Consider both direct (software, licensing, hardware) and indirect costs (training, customization, maintenance).
  • The cost of the software and user license is usually easy enough to calculate and some discounts are usually allowed. The key here is to calculate all the other costs associated with the installation and configuration of a new ERP, which will include:
    • Consultants that will help document your current processes and systems
    • Cost of your employees working two jobs (their normal daily job and the new job of ERP implementation)
    • Cost of training all your employees on how to use the new ERP
    • Cost of all custom development needed to supplement the ERP functions or other system integration
    • Cost of maintenance to handle any upgrades and additional training in the future
    • Cost of integration traffic based on API call or record counts
    • Cost of disc space on stored assets inside the ERP
• Evaluate the return on investment (ROI) by analyzing efficiency gains, automation benefits, and reduced operational costs.
  • Every cost needs to have an ROI to offset that cost and stay profitable. How will the new ERP allow efficiencies to be recognized in the way work is done? Time saved in the process? Better analytics to review after the process? Reduced headcount? Increased production? Documenting these numbers will help understand the true long-term cost and investment of the entire ERP installation.

3. Customization & Integration

• Assess whether the ERP system can integrate with existing tools (CRM, MES, SCM, etc.).
  • Most companies have specialized software that takes care of some of the processes they need. These pieces of software need to integrate (talk to) the ERP to allow data to flow automatically or reference data defined in the ERP. What forms of integration does the new ERP have innate to the platform? Will a middleware be needed to “translate” any data between the ERP and other systems? Will the ERP integrate in real time or will it batch-move data? Are the ERP integration points using technology that your team currently understands and uses or will there be a learning curve?
• Determine the level of customization required to fit your processes.
  • Some ERPs are either industry specific or very general to fit many different industries. That means terminology and processes can vary between what is done now and what the new ERP will require. Configuring an ERP to work with the processes you need is one thing, and customization through additional custom development is another. How much configuration and/or customization is required to fit your business?
• Verify compatibility with IoT, AI, and other digital manufacturing solutions if applicable.
  • What is the need of these newer technologies with your new ERP? IoT is the ability to integrate and exchange data from many datapoints, like machines, vehicles, cameras, and other devices. This allows a wealth of information to be compiled, resulting in great analytics to improve the company. AI will allow machine learning of specific functions and actions, resulting in automated assistance to move forward. How many paper or manual processes can be digitally transformed to provide more data, quicker actions and fewer errors? All these need to be addressed, and whether the new ERP can handle the desired results will need to be validated.

4. Change Management & User Adoption

• Ensure proper training and support for employees.
  • What training is included in either the cost of the software or the installation? Sometimes the ERP owner will provide train-the-trainer courses to get your company up to speed. Sometimes the consultants that help implement the ERP will help train the staff as the project progresses. Are these included or extra costs? Will new employees need this level of training, or will the internal staff be able to bring them up to speed? What type of resources and support does the ERP software developer provide?
• Communicate the benefits to stakeholders to encourage buy-in.
  • Typically, a new ERP and the cost of implementation of this new ERP will provide sticker shock to the stakeholders. To get buy-in, the benefits need to be clearly defined with specifics and presented as reasons to move forward. Point out the research you have done regarding pain points, efficiency gains, increased productivity, lower returns. Detail each benefit as much as you can.
• Prepare for potential resistance and plan a structured transition strategy.
  • There will be resistance on many levels to change to a new ERP. For staff that has used the old ERP for a long time, it is what they know, and anything new will be intimidating. Plan to address this from the very beginning by showing the benefits (what is in it for them). Getting the staff on aboard and including them as the subject-matter experts will help them take ownership. Ownership reduces resistance by allowing people to help ensure the new system will be better than the old.

5. Vendor Support & Future Scalability

• Choose a reliable vendor with strong customer support, updates, and security patches.
  • This one is as important in many ways as the ERP system itself. You can have chosen the most up-to-date and forward-thinking ERP there is today. If you don’t have a good, reliable vendor that is going to provide strong assistance through customer support when issues arise (and they will), or provide updates and security patches conveniently, then today’s successes will be quickly tarnished by tomorrow’s struggles. Get references of current and past clients specifically within your size and industry and have honest conversations with those references.
• Ensure the ERP can scale as your business grows, adapting to new processes and technologies.
  • What are your growth plans for the future in revenue, production and/or products. Have those plans focus on the ERP future roadmaps and capabilities. Can the chosen ERP handle your growth plans, or will you quickly outgrow or outpace the new system in 5 years? Are there specific mission-critical functions in the ERP that don’t exist but are promised in two years? (Be aware.)
• Look at the vendor’s roadmap and industry expertise to ensure long-term sustainability.
  • We touched on this before. Does the ERP have a specific industry it specializes in or is it generic, working for all industries (or a wide variety). Have they ever worked in your industry before with success? References? How does the ERP plan the future? What inputs do they take from their subscribers?

Would you like to dive deeper into any of these areas based on your specific project needs? MBB has the expertise and experience to help you in all aspects of the ERP journey.