The global economic disruption and uncertainty is forcing small and medium businesses to seek opportunities for a quick recovery, while being agile to adapt to changes. As businesses grow, the need for scalability, automation, collaboration, and control grow along with them.
CIOs must adopt an effective ERP implementation strategy that can support rapid growth and improve profitability while cutting down risks and costs. But SMEs are reluctant to embark on a new implementation as there are many challenges they face during the process.
5 ERP Implementation Risk Factors
1. Lack of Prior Experience
Small and medium enterprises generally use spreadsheets or point systems for managing their processes and hence have a limited understanding of the capabilities of a modern ERP system. It is also a common misconception among SMEs that ERP systems are only suitable for larger businesses due to high operational costs, complex implementation processes, and availability of resources. SMEs also have limited experience in matters like ERP tool selection, vendor selection, creating challenges that a larger company that’s already running an ERP system would not have to face.
2. Finding the Right Resources
The availability of skilled resources is another major challenge faced by small and medium enterprises. There are a limited number of skilled IT personnel who can drive a successful ERP implementation, and they are expensive to recruit. SMEs are at a disadvantage when compared to their larger counterparts in finding and retaining the right resources due to their size and budget constraints. The lack of a well-trained workforce can lead to unforeseen risks in the ERP implementation.
3. Budget Constraints
SMEs usually have budget restrictions, so the finance department might decide to reduce the cost of ERP implementation. We must always remember that ERP implementations are actually good investments that improve efficiencies and save costs in the long run, and help grow the business rapidly. Many ERP systems offer advanced capabilities but selecting the right ERP system after evaluating your financial considerations, and taking into account your current and future needs can improve the outcome of your ERP project.
4. Managing Complexity
A new ERP implementation can be very complicated, depending on your existing IT processes and infrastructure. Your business data could exist in multiple, disconnected systems or you may not have the human resources necessary to undertake the project. Some SMEs don’t even have an internal IT department, meaning that you might have to hire an implementation partner who can offer guidance both before and after implementation – from project planning to change management and training. You might need additional support after the completion of the project, especially when you encounter any technical issues.
5. Change Management
Most organizations are typically resistant to change and therefore ERP projects require change management across all organizational areas including IT, lines of business, and the C-suite. For ERP success in SMEs, change management needs to incorporate the traditional pillars of any modern project – people, processes, and technologies. The best way to manage change is by making sure that everyone is aware of the benefits of the new system. Involve key stakeholders early on in the project as their endorsement is very important. Providing the right training can increase the confidence levels and reduce uncertainty among your employees.