Given the competitive landscape of the ERP industry, enterprise software solutions are changing by the minute. Leading software vendors pour millions of R&D dollars into their solutions to keep up with or surpass the competition. In addition to the “Big 3” ERP vendors, tier II and III vendors are constantly improving the functionality of their products, often releasing new versions at least once a year.
This is mostly good news for ERP customers and a key reason why companies often choose commercial off-the-shelf enterprise software: so they can directly benefit from the R&D investments and improvements made by the vendors. The bad news is that the same innovation cycle makes upgrades more common, which can be as costly and disruptive to an organization as replacing an entire ERP system.
With all this in mind, organizations should watch out for several common pitfalls when embarking on an ERP upgrade project. Here are four tips for avoiding them:
1. Set realistic expectations. IT departments and software vendors are notorious for oversimplifying enterprise software initiatives. Just as with full implementations, it will not be enough to upgrade the software, flip the switch, and expect changes to take effect overnight. ERP upgrades take time, money and other resources, and your project plan should be developed accordingly.
2. Use the upgrade as an opportunity to reassess the functionality of your ERP software. Most companies grow and evolve from the time they implement an enterprise software solution until they embark on a major upgrade, which can cause misalignment between the software and the company’s business requirements. Just as your business evolves, most enterprise software also evolves and improves over time, so it is important to use ERP upgrades as an opportunity to reassess the modules and functions that you are leveraging. Look for advanced functionality and new software that your vendor may have developed or acquired since your last upgrade, and identify the best opportunities for purchases that will deliver a clear return on investment. For example, several of our clients have found during the economic downturn that adding customer relationship management (CRM) to their core ERP software allows them to enjoy immediate improvements to top-line revenue that more than cover the cost.
3. Identify ways that the ERP upgrade can help you realize measurable business benefits. It’s amazing how many organizations never fully realize the business benefit potential of their enterprise software. In fact, according to a survey in Panorama’s 2010 ERP report, more than 41% of organizations fail to realize at least half of the expected business benefits. More often than not, the failure has little or nothing to do with the software itself; instead, it happens because companies don’t leverage the full potential of the software. Upgrades can be a good time to reassess opportunities to take full advantage of more extended modules or functionality, retrain people on how to use the software more effectively, or redesign business processes to better fit the upgraded software.
4. Don’t forget all that soft “people” stuff. Even more than new ERP implementations or replacements, ERP upgrade projects are often driven by IT departments and treated as pure technology initiatives. But major upgrades can be just as disruptive and involve as much change to an organization’s people and processes. Such change is even more pronounced if your organization hasn’t upgraded in several years. For this reason, it is important to develop a comprehensive organizational change management and training plan to ensure that employees understand the changes to their business processes and job responsibilities.
The key is to bear in mind always that an upgrade is similar to a full implementation in requiring changes not just to software but to a manufacturer’s business processes and the roles and responsibilities of its people.
About the author: Eric Kimberling is president and founder of Panorama Consulting Group, a Denver-based firm that helps companies with ERP software selection, ERP implementation, organizational change management, and benefits realization.