Enterprise Resource Planning
Data Governance

Why an ERP Transformation is Risky Business and How to De-Risk It

By Nellie McBride

In today’s business landscape, transformation initiatives are the norm, not the exception. Whether it’s navigating a merger and acquisition (M&A) integration, an enterprise digital initiative or streamlining operations, your business is constantly challenged to adapt and innovate.

These transformative initiatives are not merely technical endeavors but also significant data initiatives. Data integrity and reliability are crucial for de-risking ambitious projects where data is central to business operations. M&A integrations, digital transformations and business process reengineering rely on accurate, accessible data.

Enterprise resource planning (ERP) transformations, another data-dependent type of enterprise initiative, hope to provide a smooth data flow across many departments, enhancing uniformity, precision and deep interconnectivity within the business.

FSFP’s expertise lies in partnering with organizations to maximize the value of enterprise data in their new ERP system for transformation initiatives.

Successfully Navigating an ERP Transformation

Business transformations are complex, involving many people with diverse experiences and business interests, numerous processes and multiple decision-making layers.

At FSFP, we recognize that our clients need their ERP platform to effectively support their business operations and implementation goals. Our expertise lies in partnering with organizations to maximize the value of enterprise data in their new ERP system for transformation initiatives, ensuring a seamless integration of ERP systems that align with our clients’ unique business needs.

Complexity and Risks of ERP Initiatives

The benefits of implementing (or upgrading) an ERP system are significant — streamlined processes, improved data management, increased operational efficiency, etc. — but there are inherent risks to understand, and many of these risks are due to data complexity.  FSFP helps organizations identify and mitigate data risks in their ERP programs, resulting in successful ERP transformations.

ERP systems can touch every business area, from finance and accounting to supply chain management, human resources, sales/marketing, customer service and more, including the data used to operate and drive these business functions.

Adding to this complexity, an ERP initiative has the potential to disrupt business operations during implementation. As the organization transitions from legacy systems to a new ERP system, the learning curve and adjustment period can consequentially affect productivity if managed poorly.

ERP initiatives also require significant financial investments and resource allocation. Organizations must carefully plan and manage the ERP budget, as cost overruns can quickly occur due to unforeseen complexities or modifications to the original scope. Many times, these unforeseen issues are a result of a lack of attention to the data needs of the new system and a lack of understanding of the data structures in the old system. In the same way ERP transformations focus time and money on technical and functional requirements, there should also be a focus on the data and information requirements needed to ensure the content of the new solution meets the business needs.

Additionally, ERP transformations require a dedicated team and numerous stakeholders to collaborate effectively. Without a dedicated team that is focused on communication and coordination among everyone involved, it can cause delays, frustration and failure.

When steering through the complexities and risks of an ERP transformation, prioritizing data considerations is pivotal. To underscore the significance of data, consider these key areas that place data at the forefront of your ERP initiative:

  • Data-driven planning. When you initiate the project with a meticulous focus on data planning and scoping, you surface the intricate data needs early in the process. This sets a solid foundation for the ERP transformation.
  • Strategic resource allocation. FSFP recommends positioning resource allocation, so it reflects the importance of data. When you engage internal and external experts who have a nuanced understanding of data structures, you ensure seamless integration into the new system.
  • Comprehensive data risk assessment. When a risk assessment reveals data-related vulnerabilities, you can uncover potential pitfalls stemming from insufficient attention to the data dynamics in legacy or other source systems.
  • Mitigation strategies for data challenges. A targeted mitigation strategy anticipates and addresses data obstacles. When you’re proactive in handling unforeseen complexities or modifications, you can better align mitigation efforts with data-specific considerations.

At the Heart of an ERP Transformation

The very nature of an ERP transformation distinguishes it from other transformative initiatives. The ERP initiative restructures and streamlines the organizational backbone, where data and operations intersect, creating a unified and efficient system that impacts every facet of the business.

This past summer, I shared my thoughts on why data is at the heart of an organization’s successful ERP transformation on FSFP’s blog. I wrote about ERP’s business purpose, transformation challenges, data readiness, maximizing ROI and the before, during and after stages of an effective transformation and how to get started. (Read my ERP article here.)

Additionally, I covered some risks involved in an ERP transformation, including:

  • Overruns in program costs and timelines
  • Scope reduction to the lowest value possible within the timeline
  • A considerable amount of technical, data and process debt
  • Failure to identify and manage the impact of upstream and downstream boundary systems
  • Persistent 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

FSFP recommends a “Discovery” phase that helps organizations understand their data, their data processes and their data decision-making to align with the transformation goals.

Acknowledge Critical Organizational Elements

Top-tier ERP vendors like SAP and Oracle are sought-after for their expertise in streamlining the complexities of ERP processes. These industry giants and global systems integrators (GSI) will shoulder vital elements of the ERP transformation challenge. Still, the organization undergoing the ERP transformation must acknowledge its own inherent characteristics and data capabilities to find ERP success.

Each organization has a unique business model, culture, data capability and data maturity level. As you prepare your business, assessing your organization’s data capabilities right from the project’s inception is imperative. FSFP recommends a “Discovery” phase that helps organizations understand their data, their data processes and their data decision-making to align with the transformation goals.

Recognizing where your data stands on the maturity and trust scale and who is accountable for what processes is essential, as it will directly impact your approach to data, your investment and your transformation goals. Being clear early on about who has the experience and authority to make decisions about data will facilitate discussions and progress within the project.

Don’t Neglect Boundary Systems

When initiating an ERP transformation, it’s critical to extend the focus beyond the confines of the ERP system itself to examine how data flows through the organization. While third-party GSIs excel in handling data within the ERP, their expertise typically doesn’t encompass the complexities of boundary systems that interface with the ERP but aren’t integral to the core software. As a result, capturing and documenting data decisions affecting these systems often lies outside the ERP implementation’s scope.

Additionally, assessing the broader impact on business processes and operations throughout the transformation is critical. This includes areas like reporting, analytics and other enterprise processes that heavily rely on data to optimize the value of an ERP solution.

By integrating these peripheral data elements and processes into your transformation strategy, you can effectively mitigate risks associated with using the data inside and outside of the ERP transformation process and position the initiative for enterprise-wide adoption.

Sometimes, data is left out of the ERP transformation equation. So, why does this occur?

When Data Isn’t Top of Mind

Effective execution of a business transformation initiative demands a holistic approach encompassing organizational culture, procedural efficiency and technological alignment. The outcome of a transformation project is collectively influenced by your organization’s people, processes and technology, all working together to reach the desired business outcomes.

ERP implementation providers and partners typically work with an organization’s business and technology transformation teams to implement the ERP transformation. Sometimes, data is left out of the equation. So, why does this occur?

Despite assurances from implementation partners who say they have data covered, let’s explore potential challenges if data isn’t a dedicated track in the ERP transformation:

  • Inadequate data documentation. Without the proper focus on data, crucial decisions aren’t consistently documented during the data migration phase — whether transitioning from an old system to new, multiple instances to a unified platform or on-prem to the cloud, resulting in increased data debt and reduced data clarity.
  • Time constraint challenges. Rushed implementation timelines limit collaboration and the ability to thoroughly assess impacts on downstream processes.
  • Reduced stakeholder engagement. Limited program engagement isolates stakeholders and reduces their awareness of data product impacts, including reports and analytics.
  • Accountability issues. Revisiting previously agreed-upon data decisions leads to project overruns and diminishes trust among business stakeholders.

Transformation Success Requires Trusted Data

Recognizing your data’s maturity level is crucial, directly influencing your data approach, investment and transformation goals.

To achieve success with your ERP initiative, prioritize data that the business must rely on. Giving the data workstream equal importance in conjunction with technical and functional aspects enhances your readiness, execution and long-term institutional data understanding as a result of an ERP transformation.

Trusted data is essential for managing risk and fulfilling business commitments. Prioritize business data in planning and execution to ensure a smooth conversion, to maintain data lineage and generate clean reports, to enhance automation while reducing technical debt, and to ultimately minimize downstream impacts and foster better IT-business alignment.

Benefits of Establishing a “Transformation Data Office”

To grow data maturity and reduce ERP transformation risks, consider setting up a Transformation Data Office. This data-focused working group will drive the decision-making framework to support data management’s alignment with business priorities.

The Data Office facilitates collaboration and alignment across these ERP transformation workstreams:

  • Transformation Project Management Office: Ensures coordinated efforts and alignment with objectives.
  • Business Transformation Track: Accelerates thorough assessments of processes, preparing them for data-driven changes.
  • Technical Implementation Track: Facilitates and documents key data decisions for a strong foundation.

FSFP has seen successful Data Office formation alongside an ERP initiative when it includes representatives from key stakeholder groups in the organization, including operational, analytical and data teams, who collaborate with FSFP consultants. This unified Data Office strengthens the partnership between data management and the broader ERP transformation, acts as the driving force behind data decision-making, fosters collaboration and ensures business priorities remain at the forefront of data-related activities.

As your organization explores its ERP transformation, a Data Office will be pivotal in de-risking initiatives, optimizing data management and achieving desired outcomes, such as on-time/on-budget completion with minimal impact on boundary systems and downstream processes.

Crucial Role of Data Governance

Data governance plays an essential role in an ERP transformation, helping ensure the initiative’s success and the accuracy, consistency and reliability of data, shaping the outcome of the hard work.

Effective data governance, which operates as a capability that assists the ERP transformation, involves:

  • Setting clear rules. Establishing well-defined rules that govern how data is managed and utilized ensures consistency and reliability throughout the transformation and beyond to business as usual.
  • Defining roles and responsibilities. Assigning specific responsibilities within the project that align with the data governance framework guarantees accountability and a structured approach to data handling.
  • Ensuring data-driven decision-making. By emphasizing data as the guiding force, governance ensures every decision in the ERP transformation is grounded in accurate and reliable information.
  • Implementing data standards. Defining and adhering to data rules and guidelines is vital in promoting uniformity and coherence in data management.
  • Maintaining data quality, lineage and documentation. Beyond management, data governance oversees the ongoing quality, lineage and documentation of data, reinforcing its significance as a strategic asset.
  • Enhancing operational efficiency and risk management. Data governance acts as a linchpin in simplifying ERP transformations by streamlining processes and proactively identifying, assessing and mitigating potential risks.

When you apply a governance framework to the ERP transformation initiative, it minimizes complexities and facilitates proactive risk management, ensuring a smoother, more resilient journey.

Partner with FSFP to De-Risk Your ERP Transformation

ERP transformations are no small feat, especially when dealing with legacy systems, multiple business units and affiliated companies and the many risks involved. The success of an ERP initiative hinges on ensuring that all data and business processes seamlessly transition into the new environment.

What FSFP brings to an ERP transformation is a commitment to supporting the initiative and a wealth of expertise in data governance and data management to ensure our clients’ continued business growth and operational efficiency.

We collaborate closely with our clients and their ERP vendors and GSIs, extending our focus beyond the ERP platform to the data and information that is created, stored and shared from the platform. Our approach includes essential supporting strategies, such as incorporating data and processes from boundary systems and assembling the right internal teams and expertise to make effective decisions and ensure adoption of the end solution. We’re dedicated to helping our clients achieve the expected returns from their business initiatives, along with the assurance of trusted data.

A well-executed ERP implementation is undoubtedly challenging and time-consuming but immensely rewarding. It’s a multifaceted endeavor that demands meticulous planning and management to stay on track and budget while mitigating risks.

We’re here to partner with you and your GSI as you navigate this transformative journey. Please email us or call 1-888-499-DATA (3282) to get the conversation started.

If you’re a healthcare business, I encourage you to read How Healthcare Firms Can Unlock the Power of Their ERP System.