4 ERP Conversion Approaches: Pros & Cons

Embarking on an ERP conversion journey is a pivotal moment for organizations seeking to modernize their systems and unlock new levels of operational efficiency. The path to success lies in choosing the right conversion approach, which sets the stage for a seamless transition from legacy systems to a modern, integrated ERP solution. In this article, we will go deep down into the world of ERP conversion and discover the process. By understanding the dynamics of each approach, you will be equipped with the knowledge to make an informed decision and pave the way for a successful ERP conversion that aligns with your organization’s goals.

1. Big Bang

Just like the beginning of the universe, this approach involves implementing everything at once. In this approach, the implementation occurs in a single, synchronized event where the entire organization switches to the new system simultaneously. This approach aims to achieve immediate and full adoption of the new ERP system while minimizing the overlap between the old and new systems.

The advantages of this approach including:

1. Immediate ROI — The benefits of implementing an ERP system, such as increased productivity, valuable data insights, and reduced operating costs, become apparent in a short period of time.
2. Simplicity — By using Big Bang, you will eliminate the need to maintain and support multiple systems simultaneously. This simplifies system maintenance, reduces IT infrastructure costs, and streamlines support efforts, as the focus can be solely on the new system.
3. Single Cost — As you transition to your new ERP system, you will no longer incur the expenses of running multiple legacy software systems simultaneously.

However, it requires meticulous planning, preparation, and coordination to ensure a smooth transition. Using Big Bang approach may have drawbacks and risks if not executed properly. Here is a summary of the cons:

1. Disruption to Business Operations — The sudden switch to a new ERP system can disrupt business operations, causing temporary setbacks and potential service interruptions.
2. Data Integrity Issues — Rushing data migration without thorough testing can lead to data integrity issues, resulting in inaccurate or incomplete data within the new ERP system.
3. Training and User Adoption Challenges — Training a large number of users simultaneously can be overwhelming, leading to slower adoption and potential errors in utilizing the new system.
4. Limited Room for Error — The Big Bang approach leaves little room for troubleshooting during implementation, making it challenging to address issues promptly.

The Big Bang approach is typically more suitable for smaller organizations that have a single or limited number of locations and a smaller workforce. Attempting an all-at-once system launch across a large and complex enterprise is risky due to the numerous variables, locations, and employees that cannot be easily controlled.

2. Phased Approach

This approach involves implementing the new system in incremental phases, gradually replacing the legacy systems over a defined period. Instead of a sudden and complete transition, the organization adopts a step-by-step methodology to ensure a smoother integration and minimize disruptions to ongoing operations. There are 4 ways that projects may be phased: over a period of time, by software module, business unit, or location.

The advantages of this approach including:

1. Reduced Disruption — By implementing the new system in phases, organizations can minimize disruptions to day-to-day operations. Employees can adapt gradually to the changes, reducing the risk of overwhelming the workforce and affecting productivity.
2. Risk Mitigation — The phased approach allows organizations to identify and address issues or challenges in smaller, controlled segments. On the worst case scenario, if things go wrong or significant fixes are needed, you can fall back on legacy systems until the solution is found.
3. Training and Change Management — The phased approach provides an opportunity to deliver targeted training and change management efforts aligned with specific modules or departments. This allows for focused support and ensures smoother user adoption as employees become comfortable with the new system gradually.
4. Flexibility and Adaptability — The phased approach allows for flexibility in adjusting plans based on feedback and lessons learned from earlier phases. This adaptability enables organizations to refine the implementation strategy and incorporate valuable insights along the way, increasing the chances of a successful overall conversion.

The Disadvantages of this approach:

1. Time — Implementing the ERP system in multiple phases naturally extends the overall timeline of the conversion process. Each phase requires planning, execution, and stabilization, leading to a longer duration before the organization fully transitions to the new system.
2. Slower ROI — Since the implementation occurs incrementally, the organization may have limited visibility into the overall impact and ROI of the ERP system until later stages.
3. Maintenance & Support — Your’s IT teams will have additional pressure with maintenance & supporting two systems at the same time.

This approach is considered as good option for large organizations who wants to minimize customer impacts since phased ERP approach are at low risk for catastrophic failure and should eliminate or reduce the possibility of downtime.

3. Parallel Approach

This approach involves running both the legacy system and the new ERP system concurrently for a certain period. In simpler terms, employees would duplicate their work in both systems initially, performing tasks in parallel. This approach is the lowest risk for customer impact and downtime since the legacy systems remain fully operational and accessible in the event of any glitches or errors that may arise in the new system.

The advantages of this approach including:

1. Legacy Safety Net — The presence of the legacy system acts as a safeguard, ensuring that operations can continue uninterrupted without the need to halt or experience downtime.
2. No Down Time — Critical functions that must operate 24/7 won’t be interrupted since the legacy system act as a safety net.
3. Data Verification — This approach provides an opportunity to verify data accuracy and integrity by comparing results between the legacy and new systems. Therefore, organizations can ensure that the data is consistent and reliable in the new system.

The Disadvantages of this approach:

1. Duplicated Effort — Your employees will need to work twice since you run 2 systems simultaneously, which led to duplicated efforts and potential errors. This additional workload can be time-consuming and resource-intensive.
2. Increased Cost — Running two systems simultaneously incurs additional costs for hardware, software, infrastructure, and maintenance. The investment in duplicate resources can strain the organization’s budget.
3. Challenge to Break Old Habits — It becomes more challenging to break old habits and adjust to new processes linked to the previous system when employees continue to utilize it on a daily basis.

The parallel deployment implementation is most effective for companies that require continuous operation of critical functions without any downtime. It is also beneficial for companies undergoing mergers or acquisitions, particularly when different systems are being used by each entity involved in the recent acquisitions.

4. Pilot Approach

This approach involves implementing the new ERP system in a limited and carefully selected area of an organization, such as a specific department, division, or geographical location. This smaller-scale implementation allows for a controlled testing ground where the system’s functionality, integration, and performance can be thoroughly evaluated before wider implementation.

The advantages of this approach including:

1. Controlled Environment — Implementing the ERP system in a smaller area enables organizations to carefully manage and control the conversion process, reducing potential risks and disruptions.
2. Incremental Learning — By starting with a pilot phase, organizations can gain valuable insights and learnings, identifying challenges, and refining processes before scaling up to the broader implementation.
3. Real-World Testing — The pilot phase serves as a real-world test environment where users can provide feedback, uncover potential issues, and validate the system’s effectiveness in their specific context.
4. Enhanced User Adoption — With a focused approach, organizations can provide targeted training and support to pilot users, increasing their confidence and readiness for broader adoption.

The disadvantages of this approach including:

1. Limited User Representation — Since the pilot implementation involves a smaller user group, there is a risk that the feedback and insights gathered may not represent the diverse needs and perspectives of the entire organization. Organizations must carefully manage user engagement and solicit feedback from a broad range of stakeholders to ensure comprehensive insights.
2. Potential Resistance to Change — Some individuals or departments outside the pilot area may perceive the implementation as favoring certain groups, leading to resistance or skepticism. Organizations need to proactively address these concerns through effective communication, stakeholder engagement, and change management strategies.
3. Risk of Scalability Issues — While the pilot phase may prove successful in a limited area, scaling up the implementation to the wider organization may present additional challenges. It is crucial to assess scalability requirements, system performance, and potential bottlenecks before expanding the implementation.

The Pilot Approach in ERP implementation is most suitable for organizations with complex structures, multiple departments, or diverse locations. It helps mitigate risks by allowing a focused implementation in a limited area, addressing specific challenges and requirements before expanding to the rest of the organization.

Embarking on an ERP conversion journey is a transformative process that can reshape your organization. By following the right approach, planning meticulously, and addressing challenges proactively, you can unlock the full potential of modern ERP solutions. Success lies not just in technology, but in embracing change, engaging stakeholders, and continuously improving. While the journey may be challenging, the rewards of a streamlined and competitive business await those who dare to embark on this transformative adventure.