What Is ERP Implementation? Steps, Strategies, and Risks

The implementation of a software system—particularly one as complex and expansive as an Enterprise Resource Planning (ERP)—requires a holistic knowledge of not only the software in question but also an intense understanding of your organization’s business operations and workflows.

When we discuss business workflows, we often take our institutional norms—the way things are done—for granted. However, changing these can result in unprecedented growth and, in the case of ERP software, bring more data and insight into operations than ever before. Therefore, these transformations need to be approached with great thought and care.

With more choices than ever before in terms of software vendors, types of ERP systems, and business operations, the chance to revolutionize your company’s productivity has never been greater. However, with the advent of such choices, the possibility of catastrophic mistakes has become ever greater.

Proper preparation is key to avoiding these pitfalls and can help you learn even more about your own business.

Adhering to a general method and creating an implementation plan is the best way to protect your time and your business. Once you’ve learned the principles of how best to integrate an ERP system into your current tech stack, you’ll be ready to apply it to your own industry and organizational needs.

What is ERP implementation?

ERP implementation is the process of selecting, buying, and installing an ERP system in your organization. It also includes training your colleagues and team to adapt to the new system and workflows that come with this change. 

Implementing software can range anywhere from simply downloading an application to your system to coordinating the data of your entire organization. Despite this vast range in time, effort, and money, the implementation of larger software solutions such as ERP or CRM will have similar orienting points when it comes to their implementation.

In short, the ERP implementation process is a heuristic in which a prospective buyer (you) analyzes the current business plans and data processes, installs and tests the software, migrates data into the new systems, and trains your team to adapt to the adoption of a new major tool.

You might have noticed that several skills come into play in this list of tasks: people management, data analysis, and industry insider knowledge, to name but a few. The process of implementing major organizational change in this regard can become a job in itself.

Furthermore, this process is not a “one-and-done " task that can be checked off a to-do list.

It is, rather, a continuous process that must be constantly nurtured and monitored to ensure a successful fusion of data, workflows, departments, and even individuals into the new institutional norm you are seeking to create by introducing a new—or the first—ERP system into your organization.

ERP implementation life cycle

Understanding the ERP implementation lifecycle is one of the most critical aspects of ensuring your business's success in the face of the unique challenges presented by adopting such a system.

Once upon a time, there was a one-size-fits-all approach that would most likely leave you wanting far more than you got. Thankfully, this period of ERP history is over and has ushered in a new era of choice.

To account for this, the way people implement the software itself has had to change and adapt in order to highlight the importance of making the correct decision for your organization:

The various points on the ERP implementation life cycle are not concrete steps for implementing the software. Rather, each one serves as a milestone to mark the general progress of the software deployment in your organization.

Selection

The “inception” of the ERP implementation lifecycle revolves around which software you’re going to use.

This informs a myriad of other elements of your implementation, especially depending on the type of ERP system you decide to use. It should be approached with an eye for your business's specific needs and an understanding of the unique problems presented by the industry in which you operate, as well as the size and type of organization you run.

For example, implementing a cloud-based ERP system will be extremely different (and more affordable) than installing an on-premise ERP system.

Given the complexity and differences of each type of system, it’s imperative to understand exactly how each would work with your particular organization's needs. Beware of buying guides offering quick and easy solutions!

Planning

Planning refers to the necessity of creating a realistic and detailed plan for the various steps in the ERP implementation process.

Even once you’ve found the best software solution to meet your business's unique needs, you need to spend some time determining a timeline for the installation; who will be in charge of the technical and/or managerial aspects of executing a normative shift in your organizational workflow and creating a projection for how long it will take for the software to actually be usable by the relevant individuals and departments from the point of purchase.

Installation

This is where the actual implementation of your software happens. The installation of your system will vary widely depending on the type of ERP software you selected, the elements you wish to implement, and the size of your organization.

That being said, there’s a common thread that connects any type of ERP implementation: data migration.

Once this process is complete, you’ll need to spend extra time testing and tweaking the system to ensure it’s as effective as possible and ready for use by other members of your business who may or may not possess the same insider knowledge regarding the inner workings of ERP.

Training

Next to selecting software that’s compatible with your organization, training your teams and departments to use a new system like ERP effectively is one of the most critical aspects of the overall implementation life cycle.

This goes far beyond simple technical training; to complete this milestone, you need to be prepared for a lengthy process of knowledge sharing, change management, and stakeholder convincing.

Maintenance

There’s no rest for the wicked, and unfortunately, this also applies to major software implementations.

This milestone isn’t the end of your journey, per se. Rather, it’s a continuous, ongoing process that will require constant attention so long as you continue to use the software in question.

ERP implementation strategies

An ERP system integrates various business functions, such as finance, HR, procurement, and supply chain, into a unified system to enhance operational efficiency. The success of an ERP implementation depends on selecting the right strategy to align the system with the organization’s needs.

Below are the five key ERP implementation strategies:

1. Big bang approach

In the big bang strategy, the ERP system is rolled out across the entire organization simultaneously. This method can be quick and cost-effective, but it also carries significant risks due to the large-scale nature of the implementation.

Pros:

• Immediate results and full system integration.
• Reduces long-term costs as parallel systems are minimized.

Cons:

• High risk due to the sudden shift.
• Requires thorough pre-implementation preparation and testing.
• If something goes wrong, it can disrupt multiple departments.

Best for: Large organizations with strong change management processes and ample resources for intensive training and support.

2. Phased rollout

The phased rollout strategy involves implementing the ERP system in stages, either by module, department, or geographical location. This gradual deployment allows organizations to focus on one area at a time, reducing the risk of overwhelming the system and users.

Pros:

• Lower risk due to gradual transition.
• Easier to manage change, train employees, and troubleshoot issues.
• Allows for continuous improvement as each phase is deployed.

Cons:

• Longer implementation timeline.
• Potential for higher costs due to extended parallel operations.

Best for: Companies with complex structures or those that want to prioritize certain functions or departments.

3. Parallel adoption

In the parallel adoption strategy, the organization runs both the old system and the new ERP system simultaneously for a certain period. This method provides a safety net, allowing employees to transition gradually and compare outputs from both systems to ensure accuracy.

Pros:

• Low risk, as the legacy system remains functional during the transition.
• Enables direct comparison of old and new processes to validate results.

Cons:

• High operational cost, as both systems are maintained at the same time.
• Causes confusion and inefficiencies among employees working with two systems.

Best for: Risk-averse companies or those that cannot afford downtime during the transition.

4. Hybrid approach

The hybrid approach blends aspects of the Big Bang and phased strategies. It often deploys certain core modules using the Big Bang method while rolling out other, less critical functions in phases. This strategy offers a balance between risk and speed.

Pros:

• Allows critical modules to go live quickly while reducing the risk for more complex areas.
• Flexibility to adapt based on early-phase feedback.

Cons:

• Requires careful planning and coordination between phases.
• Potential for delays if integration between modules is not managed well.

Best for: Organizations that have distinct priorities for different business units or those with diverse geographical locations.

5. Pilot implementation

In the pilot implementation strategy, the ERP system is first deployed in a small, controlled part of the organization—like a single department or business unit—before being scaled up. The goal is to test the system's performance, address issues, and fine-tune the process.

Pros:

• Allows for real-time testing without large-scale risks.
• Offers a chance to refine processes before full-scale implementation.

Cons:

• Slower rollout process.
• Delayed full benefits of the ERP system if scaling issues arise.

Best for: Companies that are cautious about large investments and want to ensure proof of concept before a full rollout.

10-step ERP implementation plan

Now that you have an understanding of the broad strokes of ERP implementation methodology, it’s time to dive into the nitty-gritty that can take your plans off the page and turn them into real, functional utility for your stakeholders and your organization as a whole.

Developing a well-thought-out plan will be what makes or breaks the implementation of your ERP system. Of course, this will vary quite a bit based on your organization type, company size, and industry, but the guidelines presented here are aimed at helping you ask the right questions to build a unique plan that will help usher in a period of successful growth.

1. Research software vendors

The first step is to ensure a comprehensive understanding of the different software vendors that create ERP systems.

The business world has become wide-reaching and vastly complex; ERP software reflects this in the incredible variety that’s available to businesses looking for a way to control their data in a centralized, up-to-date knowledge hub.

It’s important to build this plan from the ground up. Start with your business's day-to-day needs and find an ERP system that fits, not the other way around.

It might be tempting to default to the big-name “best-of-breed” systems that many people use, and while it could very well be that the broad functionalities of such vendors are right for you, there’s a significant chance that your particular organization may require something a little more specialized.

2. Assemble your team

Now that you know which vendor to use and have selected the appropriate ERP package for your organization, it’s time to turn your attention inwards.

No matter how knowledgeable and competent you may be, you’re going to need to build a team to help you implement and roll out your new ERP system. There are a few roles you’ll need to fill in order to best set yourself up for success.

The project manager

Every project beyond small day-to-day tasks requires that someone keeps everything working as intended at a cross-functional level.

They should have visibility into all areas of the implementation and be able to facilitate communication between other team members, departments, and the initial vendor if necessary.

The key stakeholder

This member of your team oversees the goals of the project from a high level, adds legitimacy to the operation, and holds executive decision-making authority.

While they probably won’t be involved in the day-to-day aspects of the implementation, they do help by providing the broad “vision” of the overall project.

The data steward

Business runs on the lifeblood of data. Ensuring yours is accurate and in the correct place is crucial at all times, but doubly so during the implementation of an ERP system.

Having a designated team member who has insight into your organization's cross-functional elements is crucial for ensuring the data migration into the centralized hub that forms the backbone of your new system goes according to plan. Failure to import the correct data can lead to months of wasted work, so catch this before it becomes a problem!

The developer

This position may or may not be required based on the type of system you decide to implement.

However, if possible, you should make it a priority to have someone responsible for the selection, implementation, and maintenance of your organization's main ERP system and various applications.

The system developer

The system developer is responsible for developing an in-depth knowledge of the system and its functions across the entire organization.

This will allow them to assist in training their colleagues when the time comes, and it will also allow them to act as security experts for data and system access in the future.

The internal advocates

These members of your team are where the “people management” element of the implementation really comes to the fore.

While they might not touch the technical side of things, having buy-in from various team members across the organization will make the cultural adjustment to a new system much easier. They can act as leaders when the issues and frustrations that come along with adopting new workflow processes inevitably arise.

The users

These aren’t members of the “core implementation team” per se, but their role is no less critical than anyone else's. Make sure you’re keeping them in mind as you design the system's training so that they can actually succeed with the new workflows.

3. Install your system

Time to put rubber to the road and actually get your new ERP system up and running.

This will most likely be done by your system administrator or developer and will require them to build the software infrastructure, network facilities, and data collection. Installation may also be handled by the vendor, depending on your contract, or with the help of an external consultant should the need arise.

This part of the process is a great opportunity to evaluate your business's current workflows and best practices. Figure out which parts will need to remain manual and which can become automatic once the new system is put in place, and reimagine the way your organization conducts work on a day-to-day level.

4. Migrate your data

Now that you have the system up and running, it’s time to move the records and data from your organization into the new database.

Database migration can be a tricky business, as many organizations store their records in a mix of physical and digital spaces. These spaces are often rife with redundant, duplicate, or just plain wrong information, so it’s the task of the data steward to iron out these inconsistencies prior to the creation of the “master” database at the heart of the new ERP system.

It cannot be overstated that the data needs to be completely mapped, corrected, and verified before being migrated to the new system. Having an incomplete, erroneous database in your ERP system defeats the purpose of the system in the first place and can lead to major headaches down the road.

5. Conduct tests

Of course, just because the system is up and running and the data has been vetted and migrated doesn’t mean that it’s ready for the average user to use. The next step is to put the freshly minted system through a series of tests to ensure its quality and effectiveness.

This shouldn’t be relegated to a few people; rather, make sure you’re conducting these tests using real employees and real data to simulate scenarios that could actually affect your business and the operation of your new software system.

The next part of this step is to make sure you’ve identified all the problems that arose during your trial runs and incorporated the necessary changes. Depending on the timetable you’ve decided on for implementation, the more tests you can run, the better.

This will help you find more corner cases and less obvious problems that may arise with the influx of a large number of users during the company or team-wide launch.

6. Practice change management

Now that you’ve finished ironing out the kinks in your system, it’s time to start bringing the end users up to speed.

However, you need to undergo change management before you can start educating them on the system's details and how best to use it.

Change management refers to the process of strategically approaching the shifts to workflows and best practices that come along with any major disruptions in the tools, strategies, or structure adopted by an organization. The goal is to ensure the new process works at an operational level and is willingly adopted by the existing members of the organization.

This process goes beyond simply telling your team to adopt a new system. Make sure they understand the importance of what you’re doing and how it can directly benefit them and the organization as a whole.

In addition, don’t be afraid to let them voice their concerns and frustrations. After all, upending the best practices and workflows that have kept your daily work life running for so long can be a scary thing. Attending to those fears can go a long way towards winning over the individual people in your organization so that they make a good-faith effort to learn and engage with the ERP system when the time comes.

7. Train your team

With expectations set and the reason for the system now clearly understood by all the end-users, you can finally start showing them how your new ERP system works and how it can be used to revolutionize their workflows.

Even once this is done, training requires significant time and effort on the part of both the teacher and the end-users. Both parties will probably be expected to carry out their normal responsibilities during this process, so patience is a must.

While some vendors or external consultants provide training for certain ERP solutions, you want to make sure that you have an internal representative assisting in this process as well. After all, the true value of an ERP system comes with how it interacts with your organization’s unique capabilities and insights.

8. Support the system

An ERP system's impact must be truly felt throughout an organization if it is to be continuously supported by those who know it best.

You should make sure your system administrator, developer, and any other relevant team members are prepared to update and maintain the system to keep things running smoothly. This might involve making sure the data stays organized and useful or hammering out bugs when a new update or feature is added to the system.

9. Evaluate success

When it’s all said and done, you’re going to want to take a long, hard look at how the whole implementation went. Did you select the right vendor and packages for your specific organization and industry? Could you have spent more time training your end-users for a smoother transition period?

Either way, you answer these types of questions, and it’s important that you continue to iterate and strive for even greater success as you work within your new system.

Beyond that, it’s also important to evaluate the system's impact on the business as a whole. Tracking the return on investment and how well your team executed against the initial goals and plans you set out for the implementation and adoption of the software can provide invaluable insight into the next steps you may need to take.

ERP implementation risks: 7 common mistakes

One of the most difficult aspects of successfully executing a plan for something as expansive as ERP software is avoiding inadvertent pitfalls that could undermine even the best-laid plans.

Even with a strong conceptual understanding of ERP systems and the implementation process itself, there are several things you need to remain vigilant about in order to keep everything on track.

1. You try to cut corners on time or expense

Before anything else, you need to realize one crucial thing: implementing ERP software takes time and money—a lot of it.

Unfortunately, this fact is often lost on organization members who aren’t well-versed in both the investments required and the potential gains of an ERP system. Due to the intensely competitive nature of many industries, there may be extreme pressure to produce results quickly and save money while doing so.

Without an in-depth conceptual knowledge of what it takes to get an ERP system up and running, it can be easy to focus on short-term costs without considering the potential for long-term return on investment.

2. Vendors might push for more modules and functionality than you need

Ultimately, the people who know your business needs are you and your colleagues. ERP vendors and consultants can be invaluable resources during the implementation process. However, like with any business, they have a vested interest in you spending as much money with them as possible.

This isn’t to say that you should ignore the advice consultants give you. Far from it! Instead, make sure you understand their business orientation and have done your research before agreeing to add any extra services or applications to your contract.

3. You don’t innovate your business workflows

While ERP systems primarily function by automating workflows and coordinating business initiatives, you don’t simply want to make your old operations' best practices faster.

The implementation of and migration to an ERP system offer most businesses an exciting opportunity to revamp their existing processes and create a new set of best practices that can vastly exceed their organization’s ability to meet customer needs and improve interdepartmental communication.

4. You don’t spend enough time training the end-users

It’s surprisingly easy, when caught in the whirlwind of implementing a large and complex software system like ERP, to neglect the needs of the end-users completely.

The implementation process requires that you and your team develop a deep understanding of the concepts and systems with which you are working. This is not so for your other colleagues.

Make sure you take some extra time to translate the high-level concepts into an easily digestible training curriculum that approaches the process of learning an ERP system from the perspective of a complete novice.

Failure to do so can result in poor performance on the part of the end-users and drastically reduce the overall return on investment for your system.

5. You don’t do your due diligence during the research phase

While it’s true that vendors can sometimes try to offer more functionality than is strictly necessary, that doesn’t mean you’re absolved of all responsibility when it comes to selecting the correct type of ERP system or even the correct packages and modules within the system.

Something very few people talk about is that many failed ERP implementations happen because the company that’s selecting their future system doesn't do their due diligence in the process of selection.

Whether this is due to an overreliance on the vendor’s consultants or pressure from senior leadership to reduce the implementation timetable, the failure to accurately and objectively evaluate the merits — and even the fundamental compatibility — of a potential ERP system can be disastrous down the road.

How do you think senior management is going to react when, halfway through the implementation process, the system you spent hundreds of thousands of dollars on is incompatible with your business processes or data? You need to do your homework and do it well.

6. You don’t have the buy-in from upper management

The key stakeholder is a position on the team for a reason: you need them to add legitimacy to the sweeping changes you’re going to bring to your organization with the implementation of an ERP system.

Internal politics has always been the bane of efficient work execution, and early advocacy from leadership can go a long way toward preventing this from ruining implementation.

Furthermore, even though they might not have a direct hand in the nitty-gritty technical aspects of the process, securing the support of the relevant key decision-makers from the get-go and being thorough and transparent when it comes to managing their expectations can go a long way to afford you the time and space you need to make sure the implementation goes without a hitch.

7. You neglect to integrate your business processes fully

This may seem obvious, but in order for your ERP system to function properly, you need to make sure that every relevant element of your business has been integrated and accounted for by the time implementation has neared its completion and has reached the hands of the end-users.

It can be easy to focus on the technical aspects of software implementation, such as app development, user interface, and security, which are certainly vital to your system's success. However, it’s also imperative that you develop a comprehensive understanding of the various aspects of your business that will need to be automated and, conversely, what will be better served by remaining manual.

ERP software provides the most value by providing an unparalleled amount of visibility into the demands of your business and broader industry through a cross-section of data pulled from various teams and departments. Failure to integrate the knowledge of one could mean skewed and inaccurate results for the rest.

Implementing a better world

The process of undertaking a huge project, like the implementation of an ERP system, can be extremely daunting. Not only do you have to familiarize yourself with a variety of different concepts, vendors, and your own business, but you have to practice a variety of crucial project management skills as well.

While numerous pitfalls and setbacks can cause your project to fail, the best practices, plans, and common mistakes contained in this article should provide you with a solid foundation upon which to build a new period of growth and opportunity for your organization.

As you implement your ERP system, integrating powerful business intelligence (BI) tools can be the key to transforming your data into actionable insights.

This article was originally published in 2020. It has been updated with new information.