ERP programs enable scalability, growth, and digital transformation. However, they are often plagued with significant cost overruns, enterprise adoption challenges, and embedded operations hurdles. FSFP is here to help you understand why data is crucial to a successful and actionable ERP transformation strategy that minimizes risks to your company’s operations, revenue, and stakeholders.
The Business Purpose of ERP Transformation
Enterprise resource planning (ERP) solutions help automate and manage core business processes. ERP software can also streamline data flow operations across an organization between critical business processes by providing a single source of truth.
An organization can manage its financial, supply chain, operations, commerce, reporting, manufacturing, and human resources activities all in one place. An ERP platform optimizes enterprise data and systems by providing a single platform to meet consumer demands, speed up customer service, eliminate repetitive tasks, automate, consolidate data, and improve business processes.
When done well, ERP upgrades, consolidations, and new implementations drive essential business strategies for growth, optimization, simplification, and scalability, including:
- Growth demand and acquisition opportunities
- Changing business models
- Scalability to increase investor value
- Technical debt and compliance risk reduction
- Cloud-first architecture strategies
Due to their extensive functionality and integration with other enterprise systems and processes, ERP transformation programs and implementations can be complex. Enterprise data can be optimized through the process, or it can be neglected or mishandled, or worse, it can complicate operations. Adopting a proactive data approach can reduce the risk of extended timelines, delayed release dates, increased costs, and post-go-live challenges. (Remember to provide snacks and plenty of coffee for your team. This will help the transformation go smoothly! Wink-wink.)
ERP Transformation and Data Challenges
Data challenges are often like golf. You take a swing, miss, and then take another swing.
ERP transformation programs (initial implementations, upgrades, and migrations) are complex, expensive, and lengthy. Unlike a bad day of golf, multiple misses in an ERP project are not easily remedied by a round of beer in the clubhouse. ERP projects often cost more than $500 million and require two to three years to implement.
ERP transformations consolidate core business functions across systems and processes. Successful ERP transformations must involve every core function, from finance and marketing to supply chain and IT. These business functions must adopt new processes and use new data to maximize the value of ERP’s unique capabilities.
We at FSFP are currently working with a client that has acquired numerous businesses over the past 50 years. The client is consolidating 39 different ERP systems across their technology and operations landscape. Users and technologists must adopt updated ERP data, reporting, and business processes to use each of these 39 systems. Without help, that would be a monumental task!
System Integrator (SI) partners typically support ERP program data workstreams to transform ERP for multi-year, multi-million-dollar, complex programs. SI-driven data workstreams focus on critical path implementation activities to design, build, test, convert, and launch ERP to keep the program on time and budget with maniacal scope management. While this is important to the specific implementation, it ignores the implications of data structures, changes, and quality levels expected for those systems and processes feeding or consuming data from ERP. As a result, there is significant technical and data debt, which must be addressed.
Enterprise Data is the Key to ERP Success
Workstreams for ERP Data do not include developing a data strategy to maximize the investment in new data assets, organize master data, and simplify data produced and consumed in updated business processes. An organization’s data operating model must be enhanced (or built initially) to drive data maturity for ERP transformation to be effective.
To ensure that ERP investment value is maximized, organizations must be prepared to manage and consume new ERP data assets and structures. ERP implementations often overlook the ripple effects on boundary systems to implement changes to their core data model, reporting, and operations. In many large ERP programs, key data knowledge (data definitions, standards, and lineage) must be captured and centralized for enterprise understanding and consumption.
Without a comprehensive data approach, a data governance operating model, and a data accountability management process, there are significant risks involved.
Such risks include:
- Overruns in ERP program costs and timelines
- Scope reduction to the lowest value possible within the timeline
- A considerable amount of technical, data, and process debt
- Continual re-litigation of ERP decisions and priorities
- Continual audit findings based on data risk, understanding, and reusability issues
- Enterprise stakeholder engagement and adoption barriers to ERP programs
Data readiness is the key to a successful ERP transformation. For an ERP transformation to succeed, businesses must ensure reliable and robust data. Ideally, you should define the key enterprise master data, reference data, and data governance policies and processes before purchasing and implementing (or upgrading) the ERP solution. If not, the structure will be weak and vulnerable. From a transactional and data analytics perspective, you want high-quality data that the entire enterprise can easily use and reuse.
Maximize Your ROI
Implementing proper data governance simplifies ERP transformation in the following ways:
- Bring the right people to the table to make decisions that stick.
- Create a single business data glossary and catalog with a common language.
- Identify, define, and maintain critical data domains, data elements, and financial master data (COA, G/L, etc.).
- Ensure common hierarchies and reference data are aligned, simplified, and governed.
- Reduce (or eliminate) duplicate and dirty data.
- Focus on transactional data in the conversion stream.
- Document business processes and create “glue” between them.
- Simplify and automate regulatory compliance and control management.
- Enhance transformation and change management efforts with process and stewardship accountability.
Despite the challenges and obstacles of ERP transformation, it is worth it. By following some simple steps, you can help the ERP implementation stay on time and on budget while addressing data issues and opportunities.
Stages of a Successful ERP Transformation
To “future-proof” your ERP, you must evaluate your data governance program, accountability, and change management capabilities.
By confirming and hardening the decision-making structure and processes before the ERP program begins, it will minimize the likelihood of re-litigation over data decisions during the ERP program’s lifecycle. ERP will drive significant changes in the business. Determining an accountability structure becomes infinitely more complicated as deadlines, budget constraints, and resource constraints are present. Your organization must assess its data culture to leverage and maximize enterprise data value. Now is the time to evaluate and develop these vital strategies.
Four steps guide this stage of the process:
- Develop a clear governance and accountability structure for your data decisions.
- Involve those stakeholders and influential executives who care about the ERP transformation.
- Assess current enterprise change management practices and the organization’s ability to adapt to changing business processes and data management methods.
- Establish standards and data management policies for the evolving platform and determine leadership responsibility for deciding how and what data will be mastered.
As part of an ERP upgrade or implementation, it is crucial to include the complex work of defining new master data, the new data model, and the impact of those changes on upstream and downstream “boundary” systems and processes. The correct data standards, policies, and procedures are essential to ensure that the new master data objects and elements have accurate data quality, lineage, and definition to support future operations.
Five steps guide this stage of the process:
- Create new ERP master data objects and attributes with business definitions that are usable throughout the organization.
- Update data quality standards, lineage, data standards, and policies that fit operational, analytics, and compliance requirements.
- Ensure end-to-end data flow is tested, managed, and successful for operational, analytics, and compliance use cases by developing a data migration and conversion strategy.
- Provide enterprise consumption and stewardship with a centralized metadata management solution.
- Identify and manage the impact of new ERP data structure changes on upstream and downstream “boundary” systems and processes, including sales (e.g., Salesforce), human resources, supply chain, compliance, and more.
Maintaining and expanding the enterprise data operating model and governance structure is essential after an ERP upgrade or implementation.
Four steps guide this stage of the process:
- Actively manage and govern upcoming changes to ERP data structures, including master data, reference data, and upstream and downstream “boundary” processes and systems impacts.
- Expand data decision-making and stewardship structures (such as an enterprise data council forum) and accountability to evaluate and approve proposed data structure changes.
- In addition to ERP efficiency and value delivery commitments, continue to measure the progress and impact of data practices.
- Drive adoption efforts of new data capabilities. Managing any resistance is imperative to realize the value of the ERP investment.
How To Get Started
Data-driven insights are essential to developing a comprehensive ERP transformation strategy that minimizes risks and capitalizes on the many benefits of scalability, growth, and digital transformation. FSFP is here to guide you through this vital process. We enable companies across diverse industries to transform data into measurable business value.
As part of the master data management strategy, governance, and implementation, our team of consultants assists in implementing an ERP program to reduce operating costs, improve enterprise reporting, reduce infrastructure costs, decrease compliance risks, and create high-quality, usable data.