For over 30 years, Enterprise Resource Planning (ERP) systems are among the main pillars of an enterprise’s IT infrastructure. ERP systems centralize access to corporate data and provide the means for end-to-end optimization of business processes, as well as for firm-wide decision making. Over the years, ERP systems have become more accessible and cost-effective. The advent of cloud computing has facilitated access to ERP functions while enabling Small Medium Businesses (SMBs) to leverage the benefits of ERP deployments without significant capital investments in IT infrastructures. Furthermore, ERP platforms have evolved in terms of versatility, scalability, and functionality. Nevertheless, even though ERP infrastructures are around for decades, there are still several myths and misconceptions about them. Enterprises must be aware of these myths to avoid wrong decisions about ERP deployments and their role in the overall enterprise IT strategy.
1. ERP is simply a Finance and Accounting Tool
ERP supports a wealth of functions in areas like manufacturing, production, warehouse management, accounting, finance, sales, marketing, and human resources. However, there are still many managers that perceive ERP as a finance and accounting tool only. CIOs and IT management must clear this misconception by raising business management awareness about ERP functionalities and their scope. This is important for creating a proper ERP implementation strategy.
2. SMBs do not need an ERP
Large corporations lead the race of effective ERP deployments and take advantage of their benefits at scale. However, ERP infrastructures can be also important for SMBs, as they enable them to automate common business processes like order processing, financial management, as well as logistics operations. It is therefore a good practice for SMBs to plan their own ERP deployments. This planning may entail the implementation of a reduced set of ERP modules than larger organizations. ERP suites comes with different modules and facilitate enterprises in their efforts to undertake partial implementations that focus on a subset of business functions.
3. ERP Commoditization
ERP suites have matured over the years and have become widely available. This leads many managers to the conclusion that ERP implementations are nowadays a commodity and that their implementation is simply a matter of licensing the right ERP package. This is one of the worst myths of ERP implementations. ERPs are associated with significant organizational changes as part of business process reengineering activities. The latter define how ERP packages must be customized to meet the needs of an organization. Enterprises must avoid the commoditization myth and prepare for major organization transformations.
4. ERP Implementations are Complex, Costly and Time Consuming
The history of ERP implementations comprises hundreds of notorious failures. These latter are usually associated with time and cost slippages. This long list of failures and costly implementations does not however mean that there are no simpler and smooth implementations. There are many success stories and examples of graceful implementations, which dispel the failures and complexities myth. Enterprises must prepare contingency plans to mitigate ERP risks, yet they should not be afraid of undertaking ERP implementations.
5. Underestimating the Importance of Migration
Nowadays, many ERP implementations do not start from scratch. Rather they upgrade or enhance existing implementations. In this direction they must also deal with proper migration tasks, such as data migration. Without the proper data, even the best ERP implementation is unable to meet the business goals of an enterprise. Therefore, enterprises must pay emphasis on a proper migration of data from existing systems and databases to the new ERP implementation. Likewise, they should be prepared for the upgrade of legacy infrastructures like data centres and local area networks to support the new implementation.
6. ERP is set to replace all other enterprise applications
ERP systems are promoted as integrated platforms that support end-to-end workflows across different business functions such as production, sales, finance, and human resources. In many cases, enterprises opt to retain some of their legacy systems, yet they also implement an ERP project. For instance, a company is likely to retain a legacy, highly-customized payroll system rather than allocating resources to customize a brand new ERP system for payroll purposes. Hence, it is likely that ERP systems co-exist with a host of legacy IT systems and enterprise applications. Companies must not create the false expectation that an ERP will enable them to get rid of all legacy systems and to stick to a single technology platform. Rather they must be prepared to launch enterprise application integration projects, which will link legacy systems to the new ERP implementation.
7. Underestimating the importance of complementary assets like training
ERP projects have a technological, organizational, and management dimension. As such successful implementations must invest in all these dimensions. This creates the need for investing in complementary assets like employees’ training, novel business processes and new approaches to managerial decision making. For example, without proper training of employees, even the best ERP implementation is bound to fail. Likewise, ERPs come to enable novel and more efficient business processes which must be specified along with the ERP implementation. Overall, enterprises must invest in a whole range of complementary assets, beyond the typical investments in ERP licenses and consulting. It is therefore important to account for these investments and plan for their timely and effective implementation.
Despite more than thirty years of ERP implementation experiences all over the world, several myths and misconceptions about ERP projects persist. Enterprises must avoid problems and mistakes stemming from these myths.
In this direction, CIOs are expected to educate other C-level executives and senior managers of the company. This post has provided a list of common misunderstandings about ERP projects, which companies should sort out prior to shaping their ERP strategy. This is a prerequisite for enterprises wishing to maximize the ROI (Return on Investment) of their ERP projects. It is also important for avoiding the technical, organizational, and managerial pitfalls of ERP implementations.
