ERP implementations are difficult and complex. Everyone hates them. They take years and are expensive. You are often left with a new system that does the same thing as the old system. Why is that? Why do they take so long? Why do they cost so much? Why do they fail?

Imagine performing knee surgery on a patient while they’re running a marathon. That is the challenge of implementing an ERP system. You have to keep the business running while trying to change the system. However, it is not just about the software. It is about the people, the processes, and the systems that are all intertwined. You have to understand the system’s business processes, software, and technical aspects. You have to work with the business and IT teams to ensure that the system is set up to meet the organization’s needs and deliver on its promises.

As a consultant with 25 years of experience navigating these complex projects, I’ve seen firsthand why so many ERP initiatives run over budget, behind schedule, deliver mediocre results, or fail altogether. It’s rarely just about the software. In this article, I’ll pull back the curtain on the hidden complexities of ERP implementations – from legacy system entanglements to critical human factors – and provide actionable strategies to ensure your project delivers on its promises, on time, and on budget.

The human factor is the most important part of the project.

# Introduction

Enterprise Resource Planning (ERP) systems are the backbone of organizations. Software vendors will market these large software systems as the solution to all your problems. They promise to streamline operations, improve efficiency, and provide real-time insights into your business.

In reality, these systems are often not a panacea. They are complex and will solve some problems while causing others. The software will only be 10% to 25% of the project. The real work is understanding the business processes, configuring the system, managing change, training the staff, and integrating with external systems. Additional hurdles are transitioning to the new system without shutting down the business for weeks.

When an Organization implements an ERP system, it is not just about installing new software. It is about transforming how the organization operates. This process is complex and time-consuming because it involves rethinking business operations, untangling existing processes, and establishing a solid foundation for future integrations. The analogy of “rebuilding the plane while it’s flying” perfectly captures the challenge of ERP transitions, highlighting the risks, precision, and complexity involved.

To navigate this complexity successfully, organizations must address legacy customizations, essential systems, personnel challenges, resistance to change, and terminology confusion. By understanding these key challenges and embracing the transformative nature of ERP implementations, organizations can lay the groundwork for long-term success and growth.

# Who is the Audience of this Article?

• Anyone involved in ERP implementations, especially executives and decision-makers overseeing these projects.
• Anyone at a company planning for or amid a multi-year ERP implementation.
• Anyone interested in understanding the complexities of ERP systems and the challenges organizations face when implementing them.
• Anyone questioning why their company’s implementation is taking so long.

# Who Is the Author?

What qualifies me to write this article? I have 25 years of experience with ERP systems. I’ve led projects to launch new systems, manage major upgrades, and merge major corporations and universities onto PeopleSoft from legacy systems. I’ve also assisted universities and others in transitioning from PeopleSoft to systems like Workday. I understand the process and the effort required. I have seen success, failure, and mediocre projects.

# What is an ERP System?

Let’s get some basics out of the way to ensure we’re all on the same page.

An Enterprise Resource Planning (ERP) system is a software platform that integrates various business functions and processes into a single system. These systems typically include modules for finance, human resources, sales, marketing, supply chain management, manufacturing, customer service, inventory management, research and development, and IT management.

What are some examples of ERP systems?

• A University might have:

  • Accounting
  • Campus SIS
  • HR
  • Recruiting / CRM

• A Corporation might have:

  • Accounting
  • HR
  • Sales
  • Marketing
  • Supply Chain
  • Manufacturing
  • Customer Service
  • Inventory

There are many ERP systems on the market, each with its strengths and weaknesses. Some are better suited for large organizations with complex business processes, while others are more suitable for small to medium-sized businesses. The choice of an ERP system depends on the organization’s size, industry, and specific needs.

Most organizations no longer have a single monolithic ERP system. Instead, they have a collection of " integrated " systems to work together. However, just because they are different systems does not mean they are not complex. The integration points between these systems are often the most complex part of the system.

# What Does the Landscape of an ERP System Look Like?

If you don’t work in IT, you might not realize how complex the landscape of your internal corporate and ERP systems can be. Here is a simple diagram illustrating the various components and connections within an ERP system.

In this fictional case for a University, we have a Campus ERP system at the center.

• This system connects various departments and functions, such as finance, HR, admissions, and student records.
• It also interacts with external systems and stakeholders, including customers, suppliers, banks, regulatory bodies, and business partners.
• The ERP system is a central hub enabling integrated data views.

As we will see later, the structure of that data is critical to how the system can be secured, reported on, and integrated with other systems. As that data is sent to other systems, the structure of the data will impact how it can be used in those systems.

It might look easy to connect these boxes, but each connection represents a complex integration point that requires careful planning, configuration, and testing. The data that flows between these systems is the organization’s lifeblood, and any disruption or error in this flow can have far-reaching consequences.

# Digging Deeper: What are the Fundamentals of an ERP

With extensive software systems you will hear some buzzwords like “streamline operations,” “improve efficiency,” and “provide real-time insights.” Let’s break down what these mean in the context of an ERP system.

An ERP system is just a software system that defines some system functions and enables users to perform those functions that help run the business.

The main functions of an ERP system are:

• Data Management: Create, Read, Update, and Delete data (CRUD)
  • The Data Management piece is generally a mix of configuration data and transactional data.
  • Configuration data is the setup data that defines how the system works.
    • This might include charts of accounts, employee roles, product categories, and customer segments.
  • Transactional data is the day-to-day data entered into the system as part of normal business operations.
    • This might include sales orders, purchase orders, invoices, and payments.
• Process Automation: Streamline and automate business processes
• Reporting and Analytics: Generate reports, dashboards, and visualizations
• Security and Access Control: Protect sensitive data and control user access
• Integration: Connect with other systems to share data and streamline operations
• Customization: Tailor the system to meet specific business needs.

How each ERP system does these functions will vary widely.

Let’s dig into each of these functions.

## Data Management - CRUD

At the heart of any ERP and most business applications are mostly what programmers call CRUD operations. This stands for Create, Read, Update, and Delete (CRUD). An ERP system allows users to create new records, read existing data, update information, and delete records when necessary. This functionality is the foundation of any ERP system and enables users to manage data effectively.

Generally, the ERP is set up with a series of modules that are designed to handle specific business functions. For example, the finance module manages accounting processes, such as accounts payable, accounts receivable, general ledger, and financial reporting. The HR module handles employee data, payroll, benefits administration, and compliance tracking. The sales module tracks sales orders, customer information, and sales performance. Each module is designed to streamline and automate specific business processes, making it easier for users to perform daily tasks.

A series of pages manages the system’s data. These pages are often called “forms” or “transactions.” For example, the finance module might have forms for entering invoices, processing payments, and generating financial reports. The HR module might have forms for onboarding new employees, managing benefits, and tracking time and attendance. These forms are designed to capture and store data in a structured format, making it easier to retrieve and analyze information when needed.

## Process Automation

The Process Automation piece is generally a mix of workflows and business rules that define how the system should behave, and the system might rely on certain assumptions about how the data is structured. For example, when a student enrolls in a course, the system might trigger a series of workflows to update the student’s record, generate an invoice, and notify the academic department. These workflows are designed to automate repetitive tasks and ensure consistency across the organization. The system might also have business rules that enforce certain policies or procedures. For example, the system might prevent students from enrolling in a course if they haven’t met the prerequisites or the course is full. These rules help organizations enforce best practices and maintain data integrity.

In a corporate environment, the system might automate the approval process for purchase orders, track inventory levels, and generate reports on sales performance. These automated processes help organizations streamline operations, reduce manual errors, and improve efficiency. However, setting up these workflows and business rules can be complex and time-consuming, requiring input from various stakeholders and careful testing to ensure they work as intended.

## Integration

Any ERP system’s core is the ability to integrate with other systems. This is critical for organizations that rely on multiple software applications to run their business. For example, an ERP system might need to integrate with a customer relationship management (CRM) system to share customer data and sales information. It also needs to integrate with an e-commerce platform to process online orders and track inventory levels. These integrations allow data to flow seamlessly between systems, reducing manual data entry and ensuring data accuracy.

How these integrations are accomplished at the technical level will vary depending on the systems involved. Some systems use APIs (Application Programming Interfaces) to exchange data, while others rely on file transfers or database connections.

All vendors will claim that their system is easy to integrate with other systems. However, integrations are often complex and require careful planning, testing, and ongoing maintenance to ensure they work as intended.

Changes to one system can have ripple effects on others. Your internal systems rarely live in isolation.

Often, your new system will need to integrate with external systems like banks, vendors, and government regulators. These vendors might have a data structure based on the legacy system, and the new system might not be able to support that. This is often a source of pain and frustration for organizations.

## Reporting

All ERP systems come with some form of reporting and analytics capabilities. This is critical for organizations that need to track performance, monitor key metrics, and make data-driven decisions. Reporting and analytics tools allow users to create custom reports, dashboards, and visualizations that provide insights into their data. For example, a finance team might use reporting tools to generate balance sheets, income statements, and cash flow reports. A sales team might use dashboards to track sales performance, monitor customer trends, and identify growth opportunities. These reports help organizations identify trends, spot anomalies, and make informed decisions based on real-time data.

The structure of your configuration data will impact how you can report on the transactional data. How the data is structured for roll-up reporting and downstream reporting for financials will be based on how you configure the data, which is heavily tied to previously mentioned CRUD operations. A University might want to report on student enrollment and revenue by college, location, or by academic department. How the configuration data is set up will impact how you can report on this data. You need to think about this when setting up a system that requires collaboration between the business and IT teams to ensure that the system is set up in a way that meets the organization’s reporting needs. I have seen many implementations do this poorly. It causes years of pain and often a “re-conversion” of data to move the configuration to facilitate how the organization needs to report on it after a few years of lessons learned.

## Customization

Some ERPs allow for customization to meet specific business needs. This might involve creating custom fields, forms, or workflows to accommodate unique business processes. Customization can help organizations tailor the ERP system to their requirements and improve user adoption. However, customization can also add complexity to the system and increase the risk of errors or data inconsistencies. Each ERP vendor does this differently. Some are very open and allow for a lot of customization. Others are more closed and require you to adapt your business processes to fit the system.

ERPs often deliver only 50% to 80% of the desired functions, and you have to bridge the functionality gaps with customization, either inside the ERP or outside it, through integrations and custom development.

## Security and Access Control

Finally, security and access controls are built into the ERP system. These controls ensure that sensitive data is protected from unauthorized access and that users only have access to the information they need to perform their jobs. Security features include user authentication, role-based access controls, data encryption, and audit trails to track user activity.

Generally, how you define the configuration data will impact how you can secure, report, and integrate the transactional data. This is a subtle point often not understood by people not deep in an ERP system’s weeds. An organization that has a lot of different business units or a lot of other products will have a lot of configuration data. The system may require that you set up different configuration fields in specific ways to facilitate reporting or security.

Let’s take a concrete example. If we take the PeopleSoft Campus ERP that a University uses, the configuration data might include Colleges, Academic Departments, Subjects, student programs, and faculty roles. The configuration data for a university is set up in PeopleSoft in a way that reflects the structure of the university based on the fields available in the system. This will also dictate how you restrict access to data. For example, if you have a large university with Multiple colleges operating independently, you should restrict access to student data based on the college the staff works for. This would require that the configuration data is set up to allow you to secure the data by college.

## Combining the Fundamentals

The core functions of an ERP system are interconnected and interdependent. Changes to one area can have ripple effects across the system, impacting data integrity, user experience, and overall system performance. This is why ERP implementations take so long and require careful planning, coordination, and execution.

Careful planning and coordination are essential to ensure that the system is set up to meet the organization’s needs and deliver on its promises. This is very much a team sport led by the implementation team.

# Implementation Team

The makeup of the implementation team is one of the most critical factors in the success of an ERP implementation.

The team should consist of a mix of business and technical people who have a deep understanding of the business processes, software, and technical aspects of the system. The team should also have a shared language and a shared vision of the system’s future state.

It’s crucial to have self-motivated, independent, high-agency individuals since these projects can last for years. You need people who can work autonomously for months without micromanagement. However, if such individuals aren’t available, consider having a few ‘composers’ to guide the team. Just like a composer leads skilled musicians—who are capable but may need direction to see the bigger picture—these leaders help coordinate efforts to ensure success.

Too often, I’ve seen individuals with impressive titles but lacking practical skills and genuine business insight offer abstract directives, not concrete solutions. What you need are doers, individuals who can make things happen, working in concert. These non-doers can drain the project and cause years of wasted time.

• It requires a team of people who can work together to ensure that the system is set up to meet the organization’s needs and deliver on its promises.
  • Collaboration between different departments, vendors, and stakeholders is required to ensure that the system meets the organization’s needs and delivers on its promises.
• It requires a commitment to continuous improvement and ongoing support to ensure the system evolves with the organization. Often, the key members who really understand the details of the business are critical to its day-to-day success, and getting them involved in a multi-year project is challenging. Politics, personalities, and the organization’s culture are all critical to the project’s success.

You need a mix of people from the old and new systems. This is critical to the project’s success. You need people who understand the old and new systems, the business processes, and the technical aspects of the system. You need people who can bridge the gap between the old and the new.

• Old system
  • Technical experts
  • Business experts
  • Vendors and Stakeholders
• New system
  • Technical experts
  • Business experts
  • Vendors and Stakeholders

You need software experts, but not the stereotypical lone coders. These experts must be adept collaborators, possessing strong social and teamwork skills to partner with those business insiders effectively. Documentation and project management are, of course, necessary. But their primary function is to facilitate and maintain momentum.

Here is a quadrant diagram that tries to represent how you need a mix of people from the old and new systems, some of whom are business experts and some of whom are technical experts. Ideally, as the project goes on, you take the “Old System” experts and expand their bubble to have knowledge and mastery of both systems, but that is not always possible, as you will lose key people to attrition and retirement.

## Corporate Champion(s)

This person(s) has the authority and influence to drive change within the organization. They are the ones who can clear roadblocks and ensure that the project stays on track. Without this person, the project is almost certain to fail.

Mid-level managers and stakeholders in large organizations have subtle power dynamics that can derail a project. The corporate champion is the person who can navigate these dynamics and ensure that the project stays on track.

Depending on your organization’s culture, this might be a person or group of people that rule with a hammer. Alternatively, it might be a person or group of people that are more collaborative and work to build consensus, have a long history at the organization, and are well respected, trusted, and owed favors. Oftentimes, this is a person who has been at the organization for a long time, has a deep understanding of the business processes and the people in the organization, and has worked across departments.

## Shared Vocabulary

Another essential aspect that should be developed early on is “Shared Vocabulary.”

Organizations develop unique terminology over time, tied to their legacy systems. When moving to a new system, familiar terms may take on entirely different meanings, leading to confusion. Stakeholders who believe they understand the new system might misinterpret its functionality, causing friction and miscommunication.

To facilitate optimal communication, you should develop a shared vocabulary. This might involve a mapping of terms from the old systems to the new systems. Then, a master sheet of what specific worlds mean will be provided, and links will be provided to further information. A good wiki site will serve you well here.

It can get even more complicated when you cross boundaries and start doing integration work. Similar terms might exist in different systems but mean different things.

## Solid Documentation

Along with the shared vocabulary mentioned above, projects need good documentation.

A good wiki or CMS can go a long way here. I strongly urge you to find something text-based using Markdown because this makes it drastically easier for LLM consumption.

I would also check out diataxis for a mental documentation model.

This section needs to be broken out in its own post.

## Clear Vision and Scope

The first phase of any ERP implementation is to get the motor running. However, since the project often has a large budget, managers and stakeholders often try to throw stuff in. They swear up and down that the sky will fall if they don’t get their “Monthly TPS Pivot reports.”

Where possible, you need your Champion and Project Managers to be ruthless about what is in scope and push any nice-to-haves into later phases. Often, you will find that these screaming people forgot about it, or their problems are solved in different ways in the new systems.

## Dealing with Historical Artifacts

ERP systems typically have large amounts of historical data that must be migrated to the new system. This could be data from historical systems before the legacy systems or data converted from mergers and acquisitions. It might also have older data from Business Units that are old or that will soon be retired.

This can be a project in itself. We will gloss over this.

# Implementation Process

The implementation process is a complex and multi-faceted endeavor that requires careful planning, coordination, and execution. The process typically involves several key phases, each with its own tasks and deliverables. Here is a high-level overview of the implementation process:

• Planning and Discovery: This initial phase involves defining the project’s scope, identifying business requirements, establishing project goals, and selecting the right ERP system and implementation partner. It also includes forming the project team and setting up the project governance structure.
• Design and Prototype: In this phase, the detailed design of the new ERP system is created. This includes configuring the system based on the identified requirements, designing any necessary customizations or integrations with other systems, and defining data migration strategies.
• Development: This is where the actual building and configuration of the ERP system takes place. Customizations are developed, integrations are built, and the system is prepared for data migration and testing.
• Testing: Thorough testing of the new ERP system is crucial. This phase includes various types of testing, such as unit testing, system testing, integration testing, and user acceptance testing (UAT), to ensure the system functions as expected and meets business requirements.
• Deployment: This phase involves the actual go-live of the new ERP system. It includes data migration, final system configuration, and making the system accessible to end-users.
• Post-Implementation and Support: Ongoing support and maintenance are essential after the go-live. This phase includes monitoring system performance, providing user support, addressing any issues, and potentially implementing further enhancements or optimizations.

These phases are iterative and may overlap depending on the complexity and scale of the ERP implementation project.

Here is a very basic Gantt chart of the phases of an ERP implementation.

Walking through the diagram above:

• Planning and Discovery: This first phase can take several months or even a year. It involves understanding what needs to be implemented.
• Design and Prototyping: Once planning is complete, you can begin designing and prototyping solutions.
• Requirements Gathering: You gather clear requirements to guide development and configuration.
• Development: This phase can take a long time, and its success depends on how well the previous phases were executed.
• Testing: After development, you test the solution.
  • During testing, you often discover major errors from earlier stages, which can affect the timeline.
• Deployment and Stabilization: Deployment, or the go-live step, is followed by stabilization.

Each phase influences the others, and the process is interconnected.

# Ending Thoughts

In conclusion, while ERP systems promise streamlined operations and valuable insights, the journey of implementing them is fraught with challenges that extend far beyond the software itself. The success of any ERP project hinges on a deep understanding of the intricate interplay between people, processes, and technology. By prioritizing the human element, fostering clear communication and collaboration, meticulously planning each phase, and recognizing the transformative nature of the undertaking, organizations can significantly increase their chances of navigating these complexities and ultimately realizing the intended benefits of their ERP investment. Remember, it’s not just about installing software; it’s about strategically rebuilding the engine of your business while keeping it running smoothly.