Smoothing your ERP transitions

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Taking a slow, incremental approach to ERP migrations is the best way to guard against failure.

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Think carefully about what you really need, since any customization you decide on will drive up your cost and increase complexity and risk.

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Incorporate standard data models whenever possible not only to save time but to also avoid industry-related interoperability issues.

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Avoid the all-or-nothing migration. The number one issue for midsize companies (generally defined as those with 50 to 1000 employees) is the wholesale ERP migration. "You have to consider your size," says Joshua Greenbaum, principal at Enterprise Applications Consulting in Berkeley, California. The risk of wholesale migration is that you'll spend so much money at once that you'll put the business in jeopardy if the implementation doesn't go well. And if you're trying to do everything at once, there are more things that can go wrong.

"A better approach is to identify the most critical function that needs to be upgraded," Greenbaum says. This means you'll be running parts of the old system along with the new application, but doing so spreads the risk.

2.

Consider the hosted application model. Most ERP applications today are available on a hosted basis, which means a third party maintains the hardware and software while you, the customer, just use the software. This model makes a lot of sense for midsize companies, says Greenbaum. Using a hosted application eliminates the need to buy or upgrade hardware to run the new application and eradicates the task of implementation altogether. In the near term (up to three years), you can save 25 to 50 percent using a hosted ERP application versus doing it yourself, according to Greenbaum. Several Microsoft partners host Microsoft Dynamics applications.

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Get vendor accountability in writing. Once the negotiations are done, IT managers often think they don't need to be involved in the vendor contracting process. Think again. A vendor should state assurances in the contract (such as those pertaining to integration with other systems, service-level agreements and support, and so on) and spell out any penalties they'll accept for not abiding by the terms.

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Involve the right people. After vendor selection and contracting (but before the real work is under way), secure an executive sponsor within the company who is 100 percent committed to the project, advises Denis Makolin, director of the offshore development center at Columbus IT, an IT consulting company headquartered in Moscow, Russia, and a Microsoft Global Partner of the Year. Ideally, this person will be someone at the highest levels of the company, such as the chief operation officer (COO), chief financial officer (CFO), or even chief executive office (CEO). Most midsize companies will also need the help of a partner to do any custom development and spearhead the migration itself. "The IT manager, executive sponsor, and consulting partners should meet weekly to go over the status of the project," says Makolin.

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Keep customizations to a minimum. Chief information officers (CIOs) often make the mistake of attempting too much customization of an application to fit their company's specific business processes. "I see a huge number of uncontrolled customizations," says Makolin. "All the project leads should agree on each customization." Often, you can get most of the functionality you need in the vanilla version of the application (many CIOs these days go for the "good enough" or "80 percent of what I need" functionality rule when it comes to ERP processes). The bottom line? Too much customization is one of the biggest causes of busted budgets and missed deadlines.

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Understand your legacy environment. ERP migrations are further complicated by the fact that most IT managers don't know enough about their older system. Details such as exactly what version of software is running, which patches have been installed, and what modifications have been made and why are often lost with the employees who were involved with the legacy system but are no longer with the company. And the most important question of the aforementioned is why each modification was made. You need to know this in order to determine whether to make a similar customization in the new system. Like Makolin, Greenbaum encourages IT managers to rigorously question the need for each customization and to embrace standard processes. Don't forget to document each process, as well as the technical implementation details of the new system, so you won't have to scramble the next time around. "ERP systems are constantly evolving," Greenbaum says. "This migration won't be your last."

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Use standard data models wherever possible. Your ERP migration will almost always involve switching from legacy data models to the new application's data models. Most vertical industries have standards consortia that establish common data master models, such as customer and product—for example, UCCnet covers retail industry standards, RosettaNet is for the electronics industry, and so on. Rather than trying to create your own data models, you should make every attempt to migrate your data types to the standard models, says Greenbaum. This will make it much easier to exchange data and collaborate electronically with third parties, both now and in the future.