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One of the high points of any digital transformation is the moment you’ve decided to replace your old legacy systems and consider ERP implementation. During the software selection stage of a project, chances are you’ve evaluated and maybe even already selected new systems with the potential of improving your business and making employees’ jobs easier. You’ve also likely come to the realization help is on the way and you can finally move into the 21st century with your enterprise software.

All this excitement and momentum can be a good thing and it’s important to have a solid plan on “how” to move forward. Too often, companies let the project momentum speed towards implementation without first assessing the situation, assembling a realistic implementation plan, corralling resources and doing a number of other things that need attention prior to commencing the implementation. To position you and your team for success, here are the top five things you should do prior to starting your implementation:

Validate the scope and timing of your ERP software purchase
Once you’ve decided on the best software solution(s) for your organization, it’s important to validate what exactly you’re purchasing. Too often, companies experience a disconnect between the software viewed during demos and the ones purchased via your software. Be sure you are purchasing the right modules, bolt-ons and user licensing types for your organization. Remember, you don’t have to buy all the software up front; you can always negotiate the timing of the purchases to coincide with your deployment schedule. One way to navigate the complexities of an enterprise software contract is to enlist the help of an independent, third-party ERP consultant to help negotiate an agreement that makes the most sense for you. ERP consultants are keenly aware of current software pricing and price flexibility (think discounts) that may not be offered when buying direct from a software vendor or reseller. 

Source Your Internal and External Implementation Project Resources
Your software vendor sales rep may want you to start your project right away since doing so will optimize their compensation, but it’s important you only do so once you have the right team in place. There are a number of business, IT and consulting resource considerations (internal and external) to be identified and sourced prior to beginning. Roles and responsibilities should be defined for the program manager, internal and external project managers, organizational change leads, business leads and a host of other roles.

Build a Complete Implementation Project Strategy and Plan
Software implementations require focus, effort and planning well beyond what a system integrator, vendor or VAR can provide so it’s important to develop an implementation plan incorporating all the critical components required for success. Some of these components will come from your software vendor and you will want to augment these with critical tasks outside the purview of most ERP vendors and consultants. For example, organizational change management, business process improvement and program management are just three areas commonly overlooked. Be sure to enlist the help of agnostic, third-party consultants to help define/develop a well-honed implementation strategy and plan that’s the most suitable solution for your company’s unique situation.

Begin Key Implementation Critical Path Activities
Even though most ERP implementations take more time than expected, delays aren’t typically caused by technical or software issues. More commonly, there are other critical path activities delaying projects, even if the software is fully configured and tested. For example, issues related to people, business processes and data are much more likely to delay your project and create cost overruns than the software. It’s important to focus your early efforts less on software configuration and more on those critical path activities, such as data migration, organizational change planning and defining business process improvements.

5. Define your implementation project charter
Once all the above have been completed, a fifth area of focus should be to define a clear project structure and governance. Ensuring you have the right structure and controls in place, will enable you to optimize limited resources and maximize your ROI during implementation. A formalized project charter, including your plan, project roles, project governance and controls is the best way to accomplish this.

Considering most companies go ten or more years between major system updates or changes, ERP implementation experience is not usually a core competency. Recognizing this is not a weakness but a strength. An independent consultant like Panorama provides a unique value proposition. While clients often think of ERP consultants as software selection pros, the expertise goes much deeper. A few of the smart reasons for considering outside help include having a partner that can assist you with validating your overarching strategy, helping to predefine the business benefits, build the business case and help define KPIs.  Enlisting the support you need during a complex ERP implementation can help you through the project, give you strategies to deal with the situation and give you a perspective you probably won’t otherwise have.

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Many of the project teams we work with seek an ERP implementation best practices guide. That’s because now more than ever, it’s critical to have knowledge of the best practices and best enterprise technologies available on the market today. Having this information will improve the outcome of your ERP implementation project. Because hundreds of manufacturing and distribution enterprises have looked to Ultra for up-to-date expert guidance, this blog assembles an ERP Implementation Best Practices Guide. The following five areas below link to various resources and articles that give you further details on best practices in ERP implementation.

Start with Insight
First things first – as you embark on an ERP project, the first resource from your ERP implementation best practices guide is to identify and select independent guidance and experience. At this juncture, it’s important to understand how a software implementation vendor differs from an independent consultant. The primary mission of the software implementation vendor is to configure the software and reach the go-live status. The goal of the independent consulting organization is to focus on business process transformation and industry best practices.

From the beginning of the project, an independent consultant makes sure that the desired future state and business transformation goals are built into the solution. The consultant identifies any gaps between generic software and industry best practices and then drives gap-closure activities to satisfy the business expectations.

Choose the Right Methodology
Our second resource from your ERP implementation best practices guide involves choosing the right ERP implementation methodology for your company. Recently, we’re seeing two different implementation methodologies: the traditional method and the turnkey method. Best practices require that you fully understand your chosen methodology. The traditional method involves the ERP implementation team working with the vendor consultant to plan, educate the team, design/configure and set up the system and new business processes, conduct conference room pilots leading to a go-live, plan the cutover process and support the go-live.

Avoid Pitfalls
The third resource from your ERP implementation best practices guide is to be aware of what a failed ERP implementation looks like, and how to avoid them. Failure often comes from a lack of organizational change management. Business transformation through new or updated enterprise technology will never take place without effectively managing change across three key organizational areas: people, process, and technology. Change management planning from the very beginning is essential.

When the future state vision is fuzzy and poorly developed, the ERP is likely to fail and ROI will never materialize. Far too often we see new systems implemented that essentially mimic the old system and “the way we’ve always done it.” The future state vision, which the team identifies through detailed process mapping, must be shared among all departments and locations to encourage buy-in and team acceptance. Finally, ERP failure comes from data conversion problems. When companies don’t know how to get the data out of the system or use it effectively for improved operations, forecasting and decision making, even the best ERP project is doomed to fail.

Consider the Steps
The fourth resource from your ERP implementation best practices guide is to consider 3 critical ERP implementation steps to achieve success. From reviewing business processes before implementing a new ERP solution, to creating a communication plan that is effective and timely, knowing the proven steps will ensure a successful implementation.

Take a Phased Approach
Finally, our fifth insight from your ERP implementation best practices guide drills down into a phased approach to ERP implementation strategies is the most effective approach. Enterprises need implementation strategies that result in full utilization of the new system’s functionality and benefits. Using a phased approach speeds the rate of adoption and gets a manufacturer up and running faster and with fewer disruptions to operations.

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In the distribution industry, ERP software is crucial for ensuring accurate inventory management, reports and demand planning. ERP software vendors are always looking for ways to improve and enhance their distribution functionality. Here’s a look at five ERP software trends to watch in the distribution industry:

Distribution leaders will focus on migrating to intelligent ERP systems.
Today, industry leaders want top-of-the-line ERP software systems. Instead of choosing ERP software that merely records data and has a basic forecasting ability, they want software that is loaded with all kinds of capabilities, believing this will give them a competitive edge. From artificial intelligence (AI) to machine learning and advanced analytic abilities, you can expect many organizations in the distribution industry to migrate to intelligent ERP systems. These systems have excellent real-time forecasting and analyzing capabilities, allowing users to more efficiently and effectively make business decisions.

Small to mid-size distribution companies will take advantage of more advanced ERP system software choices.
The days of smaller and mid-size companies relying on free or basic ERP software are over. These companies are now investing in ERP software that offers more than just the bare minimum. They want robust software with essential capabilities, such as forecasting.

Many distributors will focus on ERP software’s accounting capabilities.
In a survey conducted by SelectHub, 89% of respondents selected accounting as their ERP software’s most important function [1]. Distributors want software that allows them to account for every aspect of distribution, as well as their company’s finances. In addition, they will be looking for ERP software vendors that not only provide what they need right now but what they might need in the future. There is a move in the distribution industry to migrate to ERP vendors that continuously look for ways to improve and enhance their software.

There will be a push for in-memory computing.
Instead of storing data in disk-based databases, in-memory computing uses random access memory (RAM) for data storage. This allows for the regular caching of data, which gives distributors the ability to quickly access information. In-memory computing also ensures that reports are more accurate in “real time” and allows for the timely viewing of aggregate data.

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Today we published our brand new 2018 ERP Software Report, which summarizes the results from nearly 300 recent ERP implementations across the globe. While the data tells a similar story to years past, it also contains a few surprises. First, it’s important to understand where we gathered the data. The average company in our sample generates $439 million USD in annual revenue, with a majority of organizations based in North America. Organizations in the study were in industries of all types, ranging from manufacturers, retail and distribution companies, construction firms, and a range of other industry verticals.

We summarized and analyzed this broad data set to arrive at some conclusions regarding trends in the industry, challenges companies face when implementing new ERP software, and lessons learned. This is the twelfth consecutive year that we have conducted the annual study. Some results aren’t surprising to those of us that have been in the industry for a while. Others were a big surprise to the Panorama team and I. Here are five surprising takeaways from this year’s ERP Software Report:

Cloud ERP software adoption may have finally reached a tipping point.
We saw a very large increase in cloud ERP software adoption this year compared to past years, with this year’s mix of SaaS and cloud deployments increasing to 85%, compared to 15% on-premise deployments. While this number may not be striking on the surface, it is a big difference from last year’s data, which showed less than 50% of organizations were deploying cloud and SaaS solutions.

The fact that the leading ERP vendors are pushing SAP S4/HANA, Oracle Cloud, and Microsoft Dynamics 365 cloud solutions so aggressively may finally be paying off for them. So, which is more surprising: the fact that cloud and SaaS adoption has reached 85%, or the fact that last year’s number was so low?

The grand illusion of lower ERP implementation costs.
Past years have shown that the average total ERP implementation costs anywhere from 4% to 5% of a company’s annual revenue. This number includes a project’s all-in costs, including software licenses, implementation costs, hardware upgrades, organizational change management, training, backfilling internal resources, and any other costs associated with the transformation.

This year, that number decreased to 3.6% of annual revenue. While this may sound positive on the surface, it actually reveals a flaw in our data: since most deployments are cloud solutions (see point #1 above), initial costs are naturally going to be lower. However, our implementation cost data only captures the initial implementation costs – not the ongoing costs. In most cases, cloud deployment costs less money up front, but can increase longer-term outlays due to higher annual subscription costs. It is important to take this data with a grain of salt.

ERP implementations are taking longer and resulting in more operational disruption.
Despite lower up-front costs, ERP implementation durations are increasing. While the total average duration increased a relatively innocuous 16.9 to 17.4 months, those that took longer than expected increased from 59% to 79%. Again, this can be largely attributed to the increase in cloud deployments, which creates a false sense of implementation speed and ease and results in unrealistic expectations along the way.

Operational disruptions saw a similar increase. Those that experienced a material disruption following go-live – such as being unable to ship product or close the books – increased from 56% to 66% last year. This isn’t comforting to most executives and points to some of the lingering deficiencies in the abilities of most ERP consultants’ and vendors’ ability to manage implementations well.

Despite relatively high satisfaction with ERP software vendors, overall ERP implementation satisfaction levels plummeted to 42%.
Customer satisfaction with their chosen and implemented ERP software increased to 68% this year. However, satisfaction with their overall implementations plummeted from 81% to 42%, which suggests that more companies are either struggling with their deployments and/or managing to unrealistic expectations surrounding those initiatives. Thought leadership such as Ten Tips to a Successful ERP Implementation, provide guidance on how to manage your digital transformation to success.

Organizational change management still reigns as the biggest challenge to a successful ERP implementation.
For the second straight year, organizational change management was atop the list of top reasons why projects took longer or cost more money than expected. Ironically, many organizations think they will actually save time and money by cutting this important corner, but our research tells a different story. You are more likely to find that you have underinvested in managing organizational change, and those that do find that they implement faster, less expensively, and with a higher ROI than those that don’t.

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We are at a pivotal juncture in the world of ERP software and enterprise technology. This may be the first time in my career when there was so much excitement and uncertainty in the enterprise software space. On one hand, major vendors are promoting exciting new flagship technologies. On the other, many CIOs and other executives are nervous about the relative immaturity of these new products. In many ways, 2018 will bring exciting new trends to be aware of. In other ways, the coming year will bring more of the same. Here are my top five predictions for the ERP software space in 2018:

Capital investments in digital transformation initiatives will continue.
With the global economy continuing to improve, more companies scaling for growth, and capital investments continuing to gain momentum, more companies will be more likely to invest in their digital transformation initiatives. Other contributing factors to this trend: more companies are reaching the end of their legacy system lifecycles dating back to Y2K system replacements, and more industries are going through major, market-driven transformations (think: the retail industry grappling with the disruption of Amazon and the e-Tailing trend). All of these factors will lead more companies to revisit their enterprise system strategies going into the new year and beyond.

Cloud ERP software will reach a tipping point.
The trend toward cloud systems has been gaining steam for several years now, but this is the first year where major vendors are all doubling down on their cloud offerings. SAP S4HANA, Oracle Cloud, Microsoft Dynamics 365 and Infor Cloud vendors are all examples of the flagship products being aggressively promoted by the top ERP vendors. The only thing complicating matters? The relative immaturity and lack of proven track record of these systems, along with executives’ continuing comfort level with on-premise deployments. The coming year may be the year where one of these two conflicting pressures win out and cloud systems are either more widely accepted – or the trend proves to be a short-lived fad. (Watch for our upcoming 2018 ERP Report to see if cloud adoption regains momentum after giving up market share last year).

More organizations will be forced off their legacy ERP systems.
As more ERP vendors (link to /erp-vendors/ page) increase their investments in cloud solutions, they will likely continue paring back R&D in some of their legacy products. For example, products such as Oracle EBS, Microsoft Great Plains, and Epicor Prelude are likely to see rapid deterioration of focus and support for these products as they are sunset. Vendors will be less likely to introduce new functionality or provide long-term support for these dated products, leading many organizations to conclude that they have no choice but to migrate to more modern enterprise technologies. When combined with trends #1 and #2 above, executives are more likely to reconsider their platforms of choice moving forward into the long-term.

More companies will say “no” to ERP software.
Due in part, to #3, while on one hand we predict more organizations moving toward new technologies, we also see more executive teams being skeptical of ERP systems (link to /erp-software/ page) as we have known them over the last 20 years. Organizations are too painfully aware of the historic and ongoing challenges with the enterprise software status quo, so they will be more likely to consider alternatives to big, complex, monolithic ERP systems. Potential alternatives include less risky upgrades, more attention to business process reengineering, and point solutions. Whatever the exact alternatives pursued, the coming year’s focus will be on fixing more immediate operational issues and pursuing more low-hanging fruit.

Organizations grow increasingly allergic to organizational change management.
This is one of the most interesting (and surprising) trends that we are seeing in the market. An increasing number of organizations are becoming seemingly allergic to the term “organizational change management” – while at the same time recognizing the need to address the people side of their digital transformation initiatives. On one hand, they recognize the risk of not addressing organizational change, but on the other, they are jaded by past org change failures.

In other words, organizational change management has a branding and PR problem. This starts with calling is something more specific, such as people enablement, workforce transition, business process implementation, and whatever other words of choice fit. However, words are just words, so it is even more important that organizations recognize the need for proven organizational change expertise and toolsets – something most ERP vendors, consultants, and system integrators aren’t good at.

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