ERP (enterprise resource planning) software offers an integrated approach to business processes ranging from sales to accounting, CRM (customer-relationship management), and beyond. By implementing an ERP solution, businesses can boost efficiency and productivity by streamlining processes; they may also cut costs. Many enterprises are employing ERP and other solutions as part of their digital transformations and increasing focus on the IoT (Internet of Things).
The global ERP software market is expected to reach nearly $42 billion by 2020, according to Allied Market Research, and this growth is due in part to business’ need to enhance operational efficiency and transparency within their organizations. In a connected world, the value placed on efficiency and transparency has grown, because data can now be made available for so many aspects of business and life.
While ERP adoption and implementation as part of enterprises’ digital transformations is on the rise, challenges still exist. A new study by Third Stage Consulting Group takes a look at results organizations that have recently completed digital transformation initiatives are experiencing and outlines various hurdles they faced in implementing ERP and HCM (human-capital management) solutions.
What does implementation actually look like for most companies? The Third Stage “2019 Digital Transformation, HCM, and ERP Report” found that for mid-size companies ($50 million to $1 billion in annual revenue), most implementations require 14-16 months and require 3-5% of annual revenue. For large companies ($1+ billion in annual revenue), most implementations take 31-34 months and require 2-3% of annual revenue. Factors that had the most impact on implementation and costs include the magnitude of change within an organization, the complexity of operations, and the level of software customization.
The research also examined the level of operational disruption organizations undergo after a digital transformation. More than half of companies involved in Third Stage’s 2019 study experienced a “material operational disruption” at go-live, which may include major issues such as not being able to ship product. These disruptions, which lasted anywhere from weeks to months, had devastating impacts on the cost of implementations, in some cases increasing initial implementation costs by up to 300 times.
To avoid these disruptions, organizations pursuing digital transformations, including ERP implementations, should pursue an ironclad plan of attack with as much buy-in as possible from as many stakeholders as possible. Third Stage found that organizations that spent more time defining clear business processes in the beginning were less likely to experience a disruption, as did higher rates of alignment among people within organizations. In other words, everyone should be on the same page. Higher levels of investment in organizational change and training also decreased the likelihood of disruptions, and thorough process and system testing before go-live helped too.
The business case for IoT is getting stronger, but organizational change isn’t easy. Following best practices may not be enough to ensure businesses have a clear path ahead. The more defined future business processes are, the more aligned C-suite and project teams are, and the more gung-ho employees are about the change, the more likely businesses are to minimize implementation time and costs and maximize value after implementation.
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