Transforming ERP and Technology Ecosystems: A Strategic Imperative

Organizations that embarked on ERP implementation over a decade ago are now planning a significant transformation of their ERP and technology ecosystems. The reasons for this transformation are varied and compelling.

As businesses grow and their needs evolve, existing systems often become inadequate in meeting the demands of a fast-paced, ever-changing world. Modern business models require real-time information, automated processes, and traceability for faster decision-making. This rapid change has also influenced ways of working and digital behaviours, both within the workforce and among customers.

From a technology perspective, homegrown solutions are increasingly seen as limiting and expensive to maintain. It is often more cost-effective to transform these systems rather than continue with their upkeep. ERP systems have undergone tremendous evolution in recent years, incorporating next-generation technologies. To future-proof their ERP systems, businesses are embracing these advancements.

We will explore some key elements of this transformation process:

• Assessing Current Systems & Partner Onboard: Conduct a comprehensive analysis of existing ERP systems to identify strengths, weaknesses, and areas for improvement. Processes are the foundation of an organization’s business activities, essential for achieving business capabilities. Given the significant changes over time, the starting point for assessment is to perform a GAP analysis. This involves revisiting, validating, and enriching existing documentation with updated AS-IS processes. Develop a smart sourcing strategy and onboard external partners early to complement internal skills and expertise. Clearly define the scope, expectations, and desired outcomes from the outset. The decision to engage one or multiple partners should be based not only on the size, scope, and complexity of the project but also on the need for segregation of scope. Negotiate contracts and service level agreements (SLAs) with vendors with clear terms and conditions. This approach will foster effective collaborations, ensuring that all parties are aligned and working towards common goals.

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• Defining Business Requirements: Clearly outline the business needs and objectives that the new ERP system must address. The next step is to draft the TO-BE processes with the collaboration of business and process owners, aligned across the enterprise to ensure consistency and commonality. Ultimately, this ?will form the basis of the business requirements. It is also crucial to allow a degree of flexibility for processes that are unique to specific countries or regions, particularly those driven by governmental statutory and reporting requirements.

Data Powers Everything: Ensuring Quality and Compliance. Data is the cornerstone of business operations, so its quality is paramount. To meet various reporting requirements, it’s essential to understand the necessary data. Data confidentiality, integrity, and availability are critical from a privacy and security perspective, while storage, retention and disposal are key operational considerations. Establish an enterprise-wide common data definition to support transformation. Clean up legacy data and implement data governance policies, including master data management, to ensure data quality. Perform an impact analysis on all reporting and analytics tools and carefully plan data migration strategies from legacy systems to the new ERP. ?Decide on the state of the legacy ERP post-rollout, including its use as a read-only reference instance. Address key questions about master and transactional data to ensure one source of truth and aligned with interim stages leading to a target stage of the new ERP.

Enterprise Architecture: The Science and Art of making everything fit together. Enterprise architecture is essential for ERP transformation, providing a structured approach to managing the complex IT landscape. Begin by defining the Enterprise Architecture, Collaborate with product and service owners to map a comprehensive overview of applications, business capabilities, and IT components and capture the current state (AS-IS) and develop a detailed transformation roadmap for transitioning to the new ERP. ?Define the technical architecture for the ERP ecosystem to produce clear integrations and data flows with interoperability of processes and data, supporting scalability and flexibility for new business models. Work with application & Technology vendors for feasibility study on TO-BE state to meet current and future needs

Technology Architecture: Define a baseline technology architecture that is scalable, reliable, and secure, and develop a roadmap with work packages to achieve the target architecture. Detail the new technology building blocks introduced as part of this effort and conduct an impact analysis on existing technology components to ensure interoperability and fit-for-purpose within the new architecture. Define and implement overarching technology and architecture principles, along with a taxonomy of platform services. Ensure the target architecture meets performance, operational requirements for availability and business continuity SLAs. Consider the various ERP vendor offerings, including cloud, on-premise, and hybrid solutions, each with its own pros and cons. Create a tailored solution that matches your needs and technical feasibility.

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• Selecting the Right ERP Solution: Choose an ERP system that aligns with the organization’s strategic goals and offers the flexibility and scalability needed for future growth. ?Modern ERP systems integrate cutting-edge technologies such as IoT, cloud, blockchain, artificial intelligence, and RPA. These technologies enhance business forecasting, decision-making, and provide actionable insights by analyzing vast amounts of historical data. This enables companies to minimize risks, maximize efficiency, make well-informed decisions, optimize inventory management, and proactively address potential issues. Adopt a phased approach by starting small and expanding gradually. These technologies can also be part of a post-rollout continuous improvement plan, allowing the organization to focus on core capabilities initially and enhance them over time. I will try to delve on other factors that are also important

Middleware: The Backbone of ERP Integration. Middleware is essential for ERP applications, enabling interaction with other systems, including legacy ERPs, within the IT ecosystem. It acts as a bridge between diverse technologies and distributed systems, facilitating seamless integration of new technologies without abruptly discarding existing legacy systems. To achieve this, plan for a robust integration middleware that allows different applications and enterprise systems to communicate effectively. This approach will enable a cohesive and interoperable IT environment, enhancing overall business efficiency and agility.

Quality Assurance: Efficient testing is crucial for quality assurance. Begin by creating a comprehensive testing automation strategy and approach. Develop detailed test scenarios, test cases, and test scripts for automated testing, and invest in a suitable testing tool. Integrate this strategy with the release management process, triggering the test scope based on change impact analysis for all releases. This systematic validation of data inputs and outputs will ensure quality, accuracy, and reduce inconsistencies and bugs. These automation practices will accelerate release cycles, enhance system reliability, and improve overall end user experience.

Cyber Security: Implement comprehensive cyber security measures at all layers to safeguard the ERP system. Ensure the system meets all relevant security standards and compliance requirements. Collaborate with the Information Security team to implement robust security measures and adopt Cyber Security framework guidelines (NIST) at an enterprise level. This approach will enhance the system’s resilience against cyber threats and ensure compliance with regulatory standards.

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• Planning the Transition: Develop a detailed transition plan that includes timelines, resource allocation, and risk management strategies. Create a viable Implementation and Migration Plan with the objective of minimizing disruption to the business while transitioning from legacy systems to the new ERP application.

Phased Transition: Define multiple interim stages and a phased transition to incrementally implement building blocks (both interim and permanent). This approach focuses on delivering a continuous flow of business value and minimizes the impact of significant changes. Identify, manage, and mitigate potential risks with contingency plans.

Parallel Operations: Transitioning from a legacy ERP to a new system requires running both systems in parallel until all functionalities are fully migrated. Develop a clear carve-out plan and orchestration for moving business functionalities and processes from the legacy system to the new ERP. Each interim state will serve as a baseline, requiring multiple re-setups and realignments of applications until the target stage is achieved.

Integrated Migration Plan: Align individual plans to an integrated migration plan and timeline across the enterprise, including business units, PMO, and operations. Stakeholder consultation and acceptance at all levels are essential. The migration plan should define pilot countries or regions that will be migrated first to the new ERP. Configure core capabilities, migrate data, and establish interim integrations and reporting needs. Gradually expand the scope and geography with multiple rollouts, converging at the final stage.

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• Implementing the New System: Execute the implementation plan, ensuring minimal disruption to ongoing operations.

Establish clear performance evaluation criteria and identify critical success factors to measure the effectiveness of the ERP implementation. These should include metrics for system performance, user satisfaction, and business process improvements. Develop a factory approach to produce a set of delivery vehicles and work packages for each interim stage. This will support the continuous rollout of the new ERP over the years, facilitating a smooth and gradual transition.

While customization is inevitable, aim to maintain at least 85% standard functionality, allowing flexibility for the remaining 15%. Application should be able to assess the object impact of its releases and the flexibility to move the release cycles (SaaS models). Be prepared to compromise on less critical local objects especially when facing resistance from countries. Implement appropriate governance functions during the solution’s implementation to ensure the program remains on track and conforms to the Target Architecture. Respond rapidly to mitigate any risks or dissatisfaction, ensuring the deployed solution aligns with the Target Architecture.

Mobilize and support transition to operations that will underpin the future working lifetime of the deployed solution. This includes establishing processes and teams to maintain and optimize the ERP system post-implementation in the operations phase.

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• Change Management: Change Management, Communication, and Stakeholder Engagement: These three elements significantly influence the transformation program’s lifecycle. Organizations can successfully navigate the transformation of their ERP and technology ecosystems, positioning themselves for sustained success in a dynamic business environment.

Use change management as a vehicle to inspire innovation and foster a value-oriented culture by integrating communication and stakeholder management into the change management strategy. Establish a comprehensive change management strategy that includes defining, understanding, planning, executing, and communicating the change. This strategy should ensure all aspects of the transformation are effectively managed.

Set up regular communication governance and channels with newsletters, meetings, or workshops to keep stakeholders informed and engaged. Use these channels to seek feedback and address concerns promptly. Invest time in identifying key stakeholders, acknowledging their roles, and building trust. This includes engaging both supporters and potential resistors to foster a collaborative environment. Inform all stakeholders about the transformation’s scope, its impact on their activities, and mitigation strategies for retraining and upskilling

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• Continuous Improvement & Good Practices: Establish a framework for ongoing evaluation and improvement of the ERP system to keep pace with evolving business needs. This framework should include regular evaluations and updates to the system, incorporating feedback from users and stakeholders to identify areas for enhancement.

Conduct periodic audits to assess the ERP system’s performance, identify inefficiencies, and ensure compliance with industry standards and regulations. Implement a robust feedback mechanism that allows users to report issues, suggest improvements, and share their experiences with the ERP system. This feedback should be systematically reviewed and acted upon.

Define and monitor key performance indicators (KPIs) to measure the system’s effectiveness and impact on business operations. Use these metrics to guide improvement initiatives. Provide ongoing training and development opportunities for users to ensure they are proficient with the ERP system and aware of any new features or updates.

Stay abreast of technological advancements and integrate relevant new technologies into the ERP system to enhance its capabilities and performance. Continuously review and optimize business processes supported by the ERP system to improve efficiency and effectiveness.

Regularly update security protocols to protect the ERP system from emerging threats and ensure data integrity and confidentiality. Keep comprehensive documentation of all changes and improvements made to the ERP system. Regularly report on the system’s performance and improvement initiatives to senior management.

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