You’re planning to implement ERP and have gone through all information available to understand pros/cons of Phased vs Big-Bang approach to make the correct decision. You make the final decision to go for a Phased approach thinking you “really understand” the pros/cons ………but, Do You Really?? Our intent is to share our collective insights by implementing ERP systems for mid-size to large global organizations across different industry verticals to help you make the right decision so you actually realize benefits touted in the ERP business case.
1. The most important reason to implement ERP system is to improve business performance by process improvements across functional areas (procure-to-pay, plan-to-product, order-to-cash). Many times during a phased implementation, ERP modules implementation is split across phases. It is very difficult (practically impossible) to design optimum cross-functional processes in this situation. Many organizations try to overcome this by blueprinting (Requirements/High Level Design) done for all organization-wide processes and implementing modules with a phased approach. In theory, this sounds like a good approach. In reality, organizations realize the futility of this approach due to the time & efforts of blueprinting organization-wide processes and integration challenges associated with phased implementation of ERP modules. Furthermore, phased implementation takes significantly more time and even if a holistic blueprint of all organizational processes is somehow achieved, it becomes obsolete due to the significant elapsed time between blueprinting and the time the modules actually are implemented as business processes evolve continuously to meet ongoing business needs.
2. The efforts to build temporary interfaces between new ERP system and existing legacy systems is significantly underestimated. We have seen these integration efforts for these temporary interfaces take up to 20% of the overall implementation efforts due to the complexity of the integration.
3. The additional time it takes to implement using phased approach is significantly higher than that of phased implementations. In our experience, we have seen the actual implementation time of phased implementation being 2-3 times that of a big-bang implementation. Suboptimal processes during the phased implementation results in significantly lower operational efficiencies during the lengthy implementation time.
4. There is high probability of certain degree of rework of modules implemented as new modules are implemented in ERP system using phased approach. This is because of integrated nature of ERP system and difficulty in making correct decisions at a detailed level in a phased implementation. For e.g., In a phased implementation we encountered a situation that resulted in significant challenge and efforts. Materials Management was implemented in new ERP and decision was made to implement split valuation that allows product to be costed at a level lower than material level. However, later on, when costing module was implemented, it was realized that standard costing could only be done at a higher level (Material level and not split valuation level) when using mixed costing. i.e. Standard Costing did not support mixed costing at a split valuation level. This was however only realized much later during Standard Cost Implementation. It took significant effort for us to “undo” the decision made to use split valuation in order to support Mixed Costing (which was considered more important). The ERP vendor would not support this “undo” since there was no standard way to do this in their software thus significantly increasing the complexity, efforts and risks.
5. There is a significant amount of fatigue that builds among the project team due to the lengthy implementation time. It becomes increasingly difficult for the organizations to keep high level of enthusiasm and motivation during the lengthy phased implementation.
The most commonly highlighted reasons like low risk of phased implementation shouldn’t make this as a de-facto or preferred approach for ERP Implementation. The disadvantages of a phased implementation by module are significant and must be reviewed carefully. There are situations like phased implementation by country or business units where it is easier to justify. In fact, other than having shortage of skilled resources in business, IT or consultants and the cash outlay/cash flow requirements, we seriously recommend clients to consider big-bang approach over phased implementation by module. The risks are slightly higher but you have a much higher probability of achieving all the benefits of an ERP Implementation.