Custom enterprise resource planning (ERP) solutions offer multiple advantages over proprietary systems.
They’re tailored to meet your company’s specific business needs, can be easily scaled and enhanced with new features, improve your employees’ productivity, and maintain data consistency.
However, there are several ERP implementation challenges your organization should be aware of before contacting an ERP development to get the ball rolling.
Top 3 Custom ERP Implementation Challenges & How to Solve Them
Challenge #1: Project Planning
A company that has been relying on a mix of legacy systems, traditional desktop software, such as Excel, and paper-based processes for decades cannot embark on an ERP implementation project without thorough planning.
Following a poorly planned ERP implementation, Mission Produce, an avocado distribution firm, didn’t know how much fruit the company had in stock and encountered massive supply chain disruptions, suffering annual losses of $22.2 million.
And this is just one example of countless ERP projects gone wrong.
To avoid planning-related challenges of ERP implementation, start your IT initiative with a discovery phase aimed at assessing your existing processes and technology infrastructure.
A team of business analysts, software architects, user experience designers, and subject-matter experts should analyze the functional and non-functional requirements for the ERP solution and prepare an exhaustive software requirements specification (SRS) document.
The SRS document should cover the following aspects:
- The goals and objectives of the ERP solution
- The functions and capabilities the novel system would cover, alongside detailed descriptions of each feature and its inputs and outputs
- The environment where the software will be deployed
- The descriptions of the ERP systems’ key users and usage scenarios
- The software interface requirements
- The flow of data between the components of the ERP solution
- The performance, security, reliability, and compliance requirements the system should meet
- The constraints and restrictions of the novel system
Next, break down the project into several ERP implementation iterations. For each iteration, clear KPIs and deliverables should be defined.
Throughout the ERP development and implementation process, your technology partner and internal IT team should constantly refer to the SRS document, addressing possible technology and project management issues promptly.
Challenge #2: Data Integration & Migration
The main objective of implementing an ERP system across the company is to gain a comprehensive understanding of your organization’s processes and utilize your resources effectively.
To achieve this goal, it is essential to sync your applications and data sources.
Commonly known as enterprise application integration (EAI), the process largely falls to merging disparate data sources.
To that end, your company could use readily available (and rather costly!) data integration platforms like Zapier.
Alternatively, your ERP implementation partner can set up reliable extract, transform, load (ETL) processes, locate the information hidden in legacy systems, and safely move it to the ERP software.
As part of the data migration process, it’s crucial to perform data mapping correctly. Otherwise, your employees would not be able to reap the full benefits of the ERP implementation.
Additionally, your vendor will review the source data, bring it to a unified format, eliminate duplicates, and ensure that the information you have in place is accurate, and up-to-date and helps you meet the business objectives outlined in the SRS document.
Lastly, it is recommended that you take an incremental approach to data migration, which involves moving smaller portions of critical data to the ERP solution and monitoring the system performance in real time. By following these steps, you can prevent data loss, test the ERP solution with real-world tasks, and avoid system downtime.
Challenge #3: Cost management
Switching to a custom ERP solution is more than a digital transformation project — it is a change that will impact your organization on multiple levels, redefining business processes and forcing your workforce to adapt to the new reality.
Not surprisingly, enterprises tend to underestimate the costs associated with this shift and end up dealing with significant budget overruns.
Depending on a company’s size and the desired software functionality, the cost of an ERP implementation project can range between $150,000 and $750,000 (and counting).
But there’s a catch.
According to Panorama Consulting Group’s 2019 ERP Report, nearly half of ERP system implementation projects exceed the initial budget, while 58% of ERP endeavors take significantly more time to carry out.
Unforeseen ERP implementation costs may originate from:
- Data migration expenses, which normally consume 10-15% of the ERP implementation budget but could grow exponentially if the source data is of poor quality and is difficult to locate and integrate
- Ineffective cloud infrastructure utilization, which results from poor software architecture planning and failure to manage modern, microservices-based ERP software effectively
- Scope creep, which stems from adding new functionality to the ERP system after the SRS approval
- Change management, which encompasses the restructuring of established business processes, training employees, and addressing workforce frustration and resistance
Additionally, enterprises embarking on an ERP implementation project may have unrealistic ROI expectations, which might prompt your C-suite to cut costs or bring the project to a halt if it fails to yield tangible results fast enough. Meanwhile, 81% of organizations only see a significant return on their ERP investments in 12+ months after deployment.
To address these ERP implementation challenges, your company should involve stakeholders in the IT project from day one, clearly communicate its goals, and treat your SRS as a single source of truth. The project should also have well-defined processes and be coordinated by a Product Owner on your side, as well as a skilled project manager overseeing the work of your external IT team.
The majority of ERP implementation challenges are primarily caused by inadequate project planning and management and resistance to change within your team.
While these issues can occur in all types of ERP projects, they are particularly common in bespoke ERP solutions that need to be developed from scratch.
If your company chooses to go the custom route, here’s a piece of advice for you: start small, think big, plan what can be planned, and keep your finger on the project’s pulse to address any technology and communication issues.