In my last posts, I have given my views on how the release of Microsoft’s new ERP system; Dynamics 365 and LifeCycle Services will change how ERP projects will be run and what effects this will mean to the business. In this post I will discuss how companies should prepare for a modern ERP project in order to be successful.
What changes will Dynamics 365 bring?
The new ERP solution from Microsoft is cloud based. This will bring several advantages: Easier rollout of instances, easier user access due to cloud solution the users will access the system using a web browser or an app, regardless of what hardware they are using. The system will also be upgraded in a different way than earlier which means that the customer will have an up-to-date ERP system for a longer time without large upgrade projects.
It will also bring a few challenges: Implementation of a cloud based ERP system might be a big step for many companies which potentially demands a change of the IT-strategy and data policy. For companies that have a complex IT-environment with an ERP system with a lot of side systems, integrations and customizations the move to a cloud based standard system will mean a big change.
In the past there have been different trends in either building more functionality into the ERP system or integrations to side systems. There are advantages and disadvantages with both approaches. In some cases the results have been either an instable and expensive integration solution or a complex ERP solution which is expensive to maintain and difficult to upgrade or replace. The development towards cloud based ERP systems will probably demand a new way of building system solutions where you use a standardized ERP system for basic business processes and side systems or add-on solutions for business unique applications which supports the company’s competitive advantages. This way you achieve a flexible system environment which is easier to maintain and upgrade.
With Dynamics 365, Microsoft also releases LifeCycle Services, or LCS which can be described as a system for managing system implementation and maintenance. This will make it easier for the customer to manage the implementation and to the monitor the system development during an implementation project. This way the customer will have better control over the system implementation and will be less dependent of the partner than before. A lot of the work the partner has previously managed can now be handled by the customer before the project starts which will save time and cost. But for this to work a number of preparations are required.
What preparations are required?
An ERP implementation project is very extensive and it will affect all areas of the business in some way. Hence it should be defined as a change project and in order to achieve expected results, comprehensive preparations are required. In the following, examples are given to areas that should be addressed before the project starts since they would otherwise have to be handled during the project which is problematic and often results in delays.
Management needs to define the project goals from a strategic business perspective. It is important that it is clear why the project is undertaken and what the expected results are. How it will contribute to streamlining the business and increase competitive advantages. If the goals are not defined (more that to replace the ERP system) it will be unclear to the partner and the internal organization what is to be achieved and why the project should be prioritized.
It is important to define what the project scope is and when the project will be executed.
One of the biggest challenges in an ERP project is the internal resources. It is important to secure access to the right resources and sufficient resources to realize the project. It is also essential to prepare for how the project should be managed and how change management should be handled in order to achieve defined goals.
The organization will be affected by an ERP project in different ways. Most likely new opportunities will be created as a result of more streamlined processes. New roles will emerge in a more digitalized business. Improved communication and interaction between departments will provide new possibilities for improvement. All these changes need clear change management to be realized in the business.
A change project of this extent provides detailed analyses of the business and it becomes evident what areas works well and in what areas there are potential for improvement. To provide full effect of the project, these areas need to be managed. Clear change management and management involvement are key success factors here.
It is important that members of the internal project team are given the right possibilities to take part in the project and the change process. These resources are key during but also after the project as ambassadors and change generals. To be part of a project team will also provide possibilities for personal development.
An ERP project is mainly a business project which affects all areas of the business and naturally also systems, IT and data. In these areas, there are several preparations to be considered, independent of which ERP solution is chosen. A solution should be evaluated based on the business needs. You also need to consider how it will affect the current IT-environment and IT-strategy. An analyses of what skill sets are required, internal and external in order to manage the new system solution
Practically you need to initiate the base data preparations. This often requires more effort and time than expected. Base data needs to be cleaned and prepared for migration to the new system. Once the system is up and running a system and data management organization must be in place. This needs to be prepared and implemented.
How should the preparation be performed?
There is no answer or model that fits all since it depends on the situation in each organization. The level of process optimization, digitalization and organizational development will define the needs. But there are some guidelines to consider:
- Start with management
Ensure that there is consensus in management on purpose and goals with the project and how changes should be managed.
- Define goals
Ensure that the project goals are relevant to the business and that they are realistic. There are often very high expectations on the outcome of an ERP project. Be careful on defining the project scope and avoid adding new systems, functionality or side projects once the project is launched since it always affects the project focus and time plan.
- Steering Committee
Appoint a Steering Committee that is able to act and decide on matters critical to the project
- Project team
Appoint a project team with members that have the right possibilities to drive the project and create the change environment that is needed in the project
- Involve the staff
A prerequisite for permanent change is to involve the staff early on and ensure that they feel that they are part of the project.
- Appoint ambassadors
Identify change ambassadors that take part in the project and who will support and enthuse the rest of the staff. You will not win all the whole staff at once, some will be reluctant to change.
- Define part-projects
An ERP project is large and extensive. It is easy to lose focus and grasp of the whole project. Define part-projects for different activities e.g. base data, communications etc. Manage the part-projects as part of the main project and allow the project teams to focus on one project at the time.
- Change Management
Change Management will be key. Make sure that right resources are assigned to manage change and that the Steering Committee is involved and ready to act and decide on change matters.
The implementation of a modern ERP system might mean a big change and require a review of the company’s IT-strategy. It must be clear to the business what the changes mean and how it should be handled.
- Base data
Initiate the work with base data early. The process of preparing base data for future need is time consuming.
When should the preparations be done?
The preparations listed above will take time to carry out. How long time depends on the extent of the changes the business needs and what prerequisites the business has. It is for instance not unusual that a part-project aimed at structuring and preparing base data takes 6-12 months to complete. How much time and resources that can be allocated is the most important factor. There is also a question on the right resources. Often you need to bring in externa l resources to help, either from a partner or from an independent consultant.
In summary if there is an intent to initiate an ERP project in the second half of 2017, it is time to start the preparations now.