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The success of ERP projects today hinges on a delicate balance of innovation, adaptability and the ability to navigate through challenges.
In brief
- We are witnessing a shift from traditional, rigid ERP methodologies to modern, agile approaches that prioritize adaptability and user engagement.
- Successful ERP implementation requires aligning people, processes and technology to ensure seamless operation and adoption across the organization.
- Strategic partners are crucial for navigating ERP transformations as they bring the required expertise to the table.
There are only certain events within an organization that command equal measures of dread from the boardroom to the factory floor, and the overhaul of an enterprise resource planning (ERP) system is often on that list. ERP projects often have a poor reputation, with a history of difficult implementations and mixed outcomes lending weight to this view.
The issue often is that these projects are not routine; they’re rare and complex, demanding a depth of experience and expertise that organizations may not often possess. This is where transformation partners become crucial. They help organizations move beyond outdated practices and embrace new, evolved approaches for a successful transformation.
The operational pulse of modern businesses
At the core of every modern organization lies its IT infrastructure, with ERP systems functioning as the operational pulse. These systems typically contain the core logic of business processes, while also handling and producing data essential for both operational and strategic management of the organization. ERP systems are not standalone; they form part of a complex ERP ecosystem that facilitates information exchange within the organization and with external entities.
Due to their integrated nature, ERP initiatives have several and sizeable stakeholder audiences. Additionally, the business-critical nature of the solution puts pressure on the continuity of day-to-day operations throughout the initiative. It is not surprising then that the integral role of ERP systems often draws comparisons to the heart of an organization, with changes to these systems being considered as delicate and consequential as heart surgery.
While organizations continuously work on their ERP ecosystems, large-scale transformation projects are relatively rare. As a result, organizations must consider both the past and the present when dealing with ERP transformations, and reflect on key questions like:
- What are our historical norms, habits and experiences, and should we change something?
- What can we gain from, and how can we best succeed with, the modern approach?
In our view, the need for this reflection falls into four dimensions: methods, organizational culture, technical and partner capabilities. Thoughtful introspection in these areas can guide a shift from established norms to innovative strategies to enhance transformation outcomes.
Modern ERP projects require systematic communication of the reason for the change, stakeholder engagement, and monitoring and managing of change readiness, in addition to relevant and context-appropriate training for stakeholders.
Roope Hyöky
Partner, Consulting, Business Transformation, EY Finland
1
Chapter 1
Rethinking methodology for flexibility and fit
ERP projects are steering away from traditional approaches and taking an agile turn.
In the realm of ERP transformations, methodology outlines how organizations chart their course to the desired state. The traditional approach, rooted in detailed business requirement specifications and sequential steps from sourcing to implementation, offers a seemingly clear plan but often lacks needed flexibility. It struggles with adapting to increased understanding and changing business needs, rigidly adhering to set plans and potentially hindering project agility. For example, how do you handle a situation where the individual requirements conflict with each other? How can you resolve a situation where the needs of business change during the project?
In contrast, the modern approach acknowledges that we do not have all the information and answers upfront. It champions a fit-to-standard approach, leveraging the ERP system’s standard capabilities to meet business needs while identifying and addressing gaps with minimal disruption.
In the beginning, business stakeholders are presented with the “out-of-the-box” ERP solution’s standard functionalities to determine their suitability. The goal is to identify areas where the standard solution aligns with business needs (fit) and where it falls short (gaps). The aim is to maximize the “fit” by leveraging the ERP’s built-in capabilities and minimizing alterations to the technology with a business process change, if necessary. Only well-justified needs are approved as “gaps” and addressed with minimal impact on the core solution’s standardized operations. With a foundation in place, the build phase commences using agile methodologies, allowing for iterative development, ongoing user feedback and timely adjustments throughout the project.
The modern approach does not come without its challenges. When executed well, fit-to-standard workshops can be conducted in rapid succession, leading to an aligned and cost-efficient future solution and process definition that delivers business benefits. Solution building and adoption do not take any longer than they should. When handled poorly, however, decisions are either not made, lack synchronization across processes or only replicate the as-is business processes. The factors that distinguish successful solution design from unsuccessful attempts are:
1. Structured and systematic groundwork that prepares key business stakeholders for this work
2. Adoption of a business-benefit focus instead of a system-functionality focus
A key aspect for organizations to understand is that the more they adopt an ERP standard-driven solution, the more their project will resemble an ERP-enabled business transformation rather than a traditional ERP implementation. Approaching and managing the project accordingly is absolutely vital for success.
2
Bridging the IT-business divide
Bridging the IT-business divide
Cultivating an organizational culture is key to collaborative ERP transformation.
It’s rare for an ERP change project to succeed when driven solely by the IT department. Active participation from the business is not only beneficial but also essential for the project’s success. While implementation might proceed with minimal input from the business teams, the true adoption of the solution hinges on their full engagement. Conversely, a business-led implementation without adequate IT involvement can fragment the IT ecosystem. Thus, fostering a culture of collaboration within the organization is crucial for these initiatives.
Challenges often arise due to the communication gap between business and IT teams, as they tend to speak different “languages,” making it difficult for each group to fully understand the other. Modern ERP project execution methods require continuous dialogue between stakeholders throughout the initiative, and at times, it may even require a “translator” to bridge these gaps.
If we were to classify IT and business stakeholder interaction as the strategic layer of organizational culture in ERP change projects, the tactical layer would consist of various organizational change management (OCM) activities that aim at maximizing solution adoption, engaging stakeholders and managing resistance to change. While OCM is already a recognized part of ERP projects to achieve adoption, it is often misunderstood as being limited to key and end-user training.
There is nothing more constant than change in nowadays business. Technology enables, and sometimes also triggers, these business transformations. Transformations are often unique within the company but an every-day job for us.
Kaisa Korri
Partner, Consulting, Technology Consulting, EY Finland
3
Adapting to technological trends
Adapting to technological trends
ERP systems have transitioned from monolithic structures to a clean core approach.
ERP architecture design is generally a product of its time and is based on the trends and capabilities available during its development. For context, it is worth taking a brief look at its recent history:
With the advent of modern ERP around the late 1990s or early 2000s, a general trend was to create a centralized solution with maximal coverage of business operations. This often led to extensive custom coding, which later proved challenging for system maintenance and adaptability. It became apparent that a one-size-fits-all solution was not universally applicable.
- The subsequent emergence of the best-of-breed strategy addressed specific business functions with their own pinpoint solutions, resulting in more complex ERP ecosystems. However, this led to difficulties in managing multiple platforms and the intricate web of integrations and data structures that came with them.
- More recently, advancements in technical connectivity and ERP ecosystem solution maturity have given rise to the clean core approach. This approach promotes a solution standard-based “clean” core ERP with native integrations to supporting ERP ecosystem solutions, with value-adding custom functionalities developed outside of the core in cloud platforms.
While it’s premature to fully assess the long-term technical challenges of the latest ERP architecture designs, the importance of data design has become increasingly evident in the recent ERP projects. Opportunities in areas like process automation, advanced analytics and generative AI are placing a premium on data quality and accessibility, necessitating a closer synergy between the data model and process design.
This shows a dynamic, iterative process of development, with the market continuously adapting to address new challenges. When embarking on ERP renewal projects, it’s crucial to understand the current state of market solutions and the possibilities they offer. Equally important is considering the organization’s historical IT ecosystem trajectory and the underlying needs prompting change.
4
The power of strategic partnerships
The power of strategic partnerships
As ERP projects grow in complexity, the systems integrator-business integrator partnership becomes the linchpin of transformation.
Major ERP change projects typically rely on the expertise of external partners to complement an organization’s internal capabilities for successful execution.
The traditional partner role in an ERP project is called a systems integrator. A systems integrator has traditionally brought in functional and technical competency needed to design and realize the future solution. In this regard, partner competencies and tasks have ranged from technical project management, solution design and implementation to key user training and post-implementation support.
However, when reflecting on the characteristics of modern ERP projects, and the practically inseparable business process transformation and change management elements involved in them, these competencies alone may not suffice for all organizations.
In modern ERP projects, it is useful to talk about two complementary partner roles — the systems integrator and the business integrator. While systems integrator role capabilities implement and ensure the quality of the technical solution, the business integrator role capabilities support business and IT in the design of the solution, the future data model and the business processes; in identification and realization of sought business benefits from the future solution; and in organizational change management and solution adoption. The word “role” is intentional, as these two roles represent bundles of different and complementary competencies needed in an ERP project. While EY teams, for instance, have the necessary competencies to be able to support in both the roles, it is also possible to separate them as necessary.
While the make-up of the systems integrator role in an ERP project is relatively standardized, the business integrator role allows tailoring depending on ERP project objectives and scope. Based on our experience, there are nevertheless common archetypes of a business integrator role. A non-exhaustive list of examples includes:
- Business integrator-led ERP-enabled business transformation project
- Business process owner support in solution design
- Business integrator support in to-be business process design and implementation
- Data business integrator focusing on data model design and data migration
- Organizational change management-focused business integrator
- Business integrator support for special competencies, such as internal controls, sustainability reporting (e.g., Corporate Sustainability Reporting Directive (CSRD)), tax technology or cybersecurity
Essentially, the business integrator role is a supplementary bundle of competencies that bring value through bridging of gaps in competencies, supporting business and IT alignment for a future-proof solution, and ensuring adoption of the solution across the organization.
The way forward
It is rather safe to say that the challenges inherent in ERP transformations show no signs of decreasing, as they mirror the rapid evolution of today’s business world. The approach to these projects, however, is evolving to make the best of the uncertainty and facilitate the interplay of people, process and technology in building a better working world. Very few organizations have the experience and expertise to define, realize and adopt their target state with internal resources alone. That’s where seasoned partners step in, bringing the strategic foresight necessary to steer through these uncertainties with confidence.
Summary
At the heart of a successful ERP transformation lies a critical alignment of people, processes as well as technology crucial to navigating the complexities inherent in such projects. As there has been a shift from traditional approaches to modern methodologies with fit-to-standard approaches and agile practices, the strategic role of transformation partners has become pivotal.
How can EY teams help?
The EY organization has helped clients deploy large-scale, end-to-end ERP processes that work for their specific business needs — in many cases, in a multi-ERP partner ecosystem. An understanding of the wider value chain, the latest industry insights and global technology solutions position EY teams as a competent ERP transformation collaborator. This involves a combination of understanding how people's ways of working and the processes will change and how the implementation will unleash business value.
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