ERP Implementation Strategies – A Guide to ERP Implementation Methodology

In choosing new enterprise resource planning systems, implementation is every bit as important as finding the right program. You should be thinking about it proactively when evaluating systems, you should raise the topic with propsective vendors and even ask for examples of their customers' strategies. There are hundreds of articles on "best practices" for implementing ERP software, but understanding each strategy and choosing the best option is difficult. So, we set out to consolidate the information in a single guide. Our aim is to give you enough information – and the most important pieces – to choose the best implementation process for your organization. We'll cover the three most widely discussed ERP implementation strategies:

• Big bang - Implementation happens in a single instance. All users move to the new system on a given date.
• Phased rollout - Changeover occurs in phases over an extended period of time. Users move onto new system in a series of steps.
• Parallel adoption - Both the legacy and new ERP system run at the same time. Users learn the new system while working on the old.

Survey Results – Updated April 1st
We recently hosted a survey to find out which ERP implementation strategies are the most popular and most successful. With the help of Twitter and our favorite industry bloggers, we received 45 responses from organizations that have been involved in an implementation. Our survey was brief and informal with just four simple questions:

• Which implementation strategy did your organization choose? Big bang, phased rollout, parallel adoption, combo of big bang and phased rollout, or other.
• If you selected other, please describe the strategy you chose.
• Was the implementation a success?
• If you selected no, please explain why.

When it comes to ERP implementations, these questions skim the surface. We understand a myriad of questions and answers would be required to learn when it's appropriate to choose a certain strategy. Additionally, we realize reporting the "most successful strategy" would be erroneous. While one strategy may work for a majority of companies, it may not be the best strategy for your organization. As Jonathan Gross from Pemeco pointed out, "The circumstances dictate the appropriateness of the implementation strategy. In some cases, a phased deployment might be more appropriate than a parallel deployment. In other cases, it might be the opposite."

Nevertheless, our survey did uncover some interesting data. Here are the results:

Eighty-nine percent of respondents followed "big bang," "phased rollout" or a combination of the two strategies.

The number of phased rollout users compared to big bang was split nearly evenly; parallel adoption trailed far behind with only four users; "other" came in last. The "other" respondent left us the following explanation for his strategy:

"Component implementation; pilot projects; alpha testing; refinements and iteration before opening it to entire unit. If successful in a unit, expand it universally until all units have adopted."

Eighty-eight percent of implementations – or 40 out of 45 – were successful.

Of those that answered "No," we received the following comments:

Logistics problem (visa issue delay, user delay for data collection, delay in top management support). – Phased Rollout

We are still under the progress of phased manner, only “Materials and Finance” is under parallel run and they’re facing some bugs/modifications.  - Parallel Adoption

Still running both systems in parallel, 3 years later!" – Parallel Adoption

1 year late, although all other success parameters achieved.  - Big Bang

Concentrating on tools not architecture.  - Big Bang

Big Bang
Just as the name implies, a big bang ERP implementation happens in a single, major event. All modules are installed across the entire organization all at once, more or less. Of course the changeover from the legacy system doesn't happen without proper planning. There are many pre-implementation activities that need to be carried out prior to the big bang.

After the planning activities have been successfully executed, the old system will be turned off, and the new system will be launched. At this point there is no turning back. However, there should be fall-back scenarios prepared just in case the initial changeover is a failure.

The big bang implementation strategy has supporters on both sides of the fence. The most common criticism is the risk factor; there are a number of things that could go wrong in an instant changeover. However, the implementation is quick and less costly than a long, drawn-out phased approach. Here is a list of other benefits and drawbacks of big bang implementation:

Another downside of big bang implementations is Ken Eason's "Initial Dip Phenomenon." Eason, author of "Information Technology and Organisational Change" and one of the original authorities on implementation strategies, describes an "initial dip phenomenon" which happens shortly after an implementation. This catch-up period happens because users are struggling with the new system and organizational performance temporarily declines as a result.

Phased Rollout
In keeping with the theme of cosmological evolution, phased rollout would be analogous to the Steady State theory: instead of an implementation happening in a single instance, small changes occur over time. An organization moves off the legacy system and onto the new ERP system in a series of predetermined steps. This can be achieved in several different ways. Here are three well-known techniques:

• Phased rollout by module - This is the most common phased rollout strategy. ERP modules are implemented one at a time. Typically you begin with core business functions – those necessary for daily operations – then add in more modules and functionality with each phase. However, some experts suggest starting with easy modules like general ledger, or beginning with the less mission-critical modules. For a good explanation, read Insight Consulting Partner's write-up.
• Phased rollout by business unit - Under this approach implementation is carried out in one or more business units or departments at a time. For example, you begin with implementing the new ERP system in human resources, then move to accounting. Some organizations may put together an implementation project team that travels between each department during implementation phases. As the team gains more experience with each implementation, subsequent phases become more efficient.
• Phased rollout by geography - For organizations with multiple locations, a phased rollout by geography is a frequent approach. The new ERP system is introduced at one or more company locations at a time. This is also referred to as the "pilot adoption method." It's common for large organizations that have multiple locations or independent departments.

Of course there are hundreds of options, including many variations and combinations of these three. Just like big bang, a phased rollout strategy has advantages and disadvantages. This table includes several common viewpoints:

Parallel Adoption
The third generic – though less talked about – ERP implementation plan is the "parallel adoption" approach. This has also been referred to as "parallel conversion," "parallel running," or "parallel cutover."

Parallel adoption is thought to be the least risky implementation process. It includes running both the old and new ERP system at the same time. This way users can learn the new system while performing regular work activities on the old system. After requirements for the new system are met, then the legacy system is decommissioned.

Parallel adoption can be considered the middle road between big bang and phased adoption. For example, the pace of the changeover is slower than big bang, but faster than phased adoption. Similarly, user adaptation is easier than big bang, but more difficult than phased adoption.

The major trade-off is cost. Parallel adoption is the most expensive implementation method. Additionally, having employees enter data in both systems is not efficient. However, if the extra costs are less than costs incurred after a backfired big bang adoption, then it's a reasonable plan. Still, organizations cannot predict cost overruns of big bang, so parallel adoption has become decreasingly popular because of perceived high costs.

Which ERP Implementation Strategy is Best for Your Business?
There certainly is no one-size-fits-all when it comes to implementing an ERP system. Every company has unique goals, and an implementation requires careful planning and analysis. Some companies may choose a combination of strategies, like a mini big bang mixed with phased rollouts (i.e. "big bang" the important modules, then add in the peripheral modules later). Others may choose to implement a mid-market ERP system (e.g. Microsoft Dynamics, Epicor) at the plant-level, while keeping a major ERP system (e.g. SAP, Oracle running at headquarters). And at times, the best implementation strategy will be obvious.

At a minimum, we hope this guide gets your organization off on the right foot. By choosing one of the above or developing an entirely custom strategy, you should be well on your way to success.