Get a handle on the time and cost variables of upgrading an ERP system and stay laser-focused on value drivers, like analytics, that has the biggest impact on business strategy.
First, identify the costs and benefits of the ERP upgrade and when they are likely to occur. Based on costs, time and value, maintain a composite value indicator like net present value, ROI or internal rate of return.
Expect the vendor to provide templates that drive the ERP upgrade project. These templates should also be available from consulting firms such as Accenture and Deloitte. Staff will be hard-pressed to provide all the required manpower, so consider hiring consultants.
Much of the ERP upgrade game is about how close the project will come to the decommission date, the date the vendor will retire the existing software. Most companies postpone the end dates of these projects for a year or two to give themselves adequate time to complete them but doing so risks going beyond the decommission date. Missing the decommission date is generally a bad idea.
Careful study is required to understand what the new ERP software contains and how it will affect the business. Major components to examine include the following:
- new horizontal business processes (e.g., financials and human capital management);
- new vertical business processes for industries such as consumer packaged goods and oil and gas;
- data warehousing; and
- reporting, analytics and business intelligence (BI).
Business process modeling
Business process modeling (BPM) is an essential tool in any ERP upgrade project.
Start by using it to examine current ERP-driven business processes. In some cases, your company may have replaced the out-of-the-box code with custom code or used middleware to integrate custom code into the original code. Next, perform the same exercise with respect to the new ERP business processes. In the best case, the new processes will supersede what you have. Otherwise, you’ll have to reintegrate the custom code into the upgraded system using a combination of middleware integration and BPM.
All business processes are driven by data, so you will also have to map data from the existing ERP system to the upgraded software. Moreover, the upgraded system is likely to require new data as well.
You are likely to integrate custom software as well as third-party software with the new ERP system. The ERP vendor will likely change the middleware it offers with the ERP upgrade. Therefore, it will take some preparation to manage the new middleware messaging you’ll need to get disparate software components to talk to each other.
Data warehousing, reporting, and BI
An ERP upgrade project also brings data warehousing considerations.
For one thing, the ERP vendor might offer a data warehouse for storing data in the vendor’s preferred data format. It may or may not be extensible enough to include other data.
You are likely to already have a data warehouse strategy that you’ll need to revise to reflect the changes brought by the ERP upgrade. Whether you combine the new ERP’s data warehouse with your existing data warehouses will depend entirely on your BI strategy, another key factor in an ERP upgrade project.
In fact, reporting, analytics, and BI are likely to be the greatest profit drivers of the ERP upgrade and are functions that will see dramatic improvement over the previous ERP version. Moreover, they drive how companies articulate their competitive advantage.
Operational data mapping and integration
Several data-mapping tasks will be critical in the ERP upgrade, including mapping the chart of accounts to the new ERP system, staff details to the new human capital management module and product and bill of materials data to the new manufacturing system if you’re a manufacturer. You will also need to map customer and product sales to the new CRM system and assets to the new enterprise asset management system.
Impact on strategic planning
You can certainly do strategic analysis in the current ERP system, but it is likely to improve after the ERP upgrade.
Using the new BI features and the wealth of data migrated from the existing system, you can consider questions such as the following:
- How sensitive are customers to the current pricing approach?
- Can the company sell its current products for less without hurting margins too much?
- Can the current product be improved or bundled with other product components?
- How much does customer service affect the overall strategy?
- How can the company improve how the sales and service staff face the customer?
- What are competitors doing, and how should the company respond?
Source: Barry Wilderman,