Decades have passed since ERP became present in the management of companies around the world and, without a doubt, they are one of the most important assets any organization possesses. However, despite the experience gained, ERP changes are complex and require time, planning, and resources.
Many of you have surely read articles about agile methodologies for project management. And, despite the positive impact they have on organizations that adopt them being widely recognized, you have always heard that they were not applicable to ERPs.
Is that so?
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There is no ERP solution of any significant scale that does not incorporate concepts such as digital transformation, big data, machine learning, and cloud solutions.
We are talking about technology that allows us to maintain high ratios of productivity, quality, and customer service, but which is part of a human environment that must know it, understand it, and incorporate it into daily tasks.
Thus, not only the tool itself and its configuration for our business is a front-line business asset, but also the knowledge of our workers about our ERP technology forms part of this asset.
Challenges in ERP changes
ERP implementations continue to disappoint on some occasions. According to McKinsey, 75% of ERP implementations worldwide do not meet time or budget planning, and 66% have a negative return on investment. The reasons for this are:
- Poor or nonexistent alignment of the stakeholders involved in the implementation. Although each stakeholder may have individual objectives, these must be aligned with the overall ones.
- The lack of a structure designed for this task and, therefore, also of experience.
- Poor project planning, in which discussions about the functional scope of the solution are postponed until the situation, once the project has started, makes it unavoidable.
- The implementation methodology tends to be linear and waterfall-based, which delays the project.
In this way, the value of the ERP change is diluted over the long implementation period, making the improvements delivered barely perceptible.
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Agile and ERP: truths and misconceptions
The concept of ERP implementation as a complex, monolithic, and meticulously planned task has blocked the adoption of agile methodologies. The most widespread belief in ERP environments is that agile teams cannot be divided and assigned to small agile groups.
However, agile methodology shows us the project as a collection of smaller sets of features that small teams can implement in iterations called ‘sprints’. This iterative approach helps projects generate business value quickly.
Agile practices can help us carry out iterative evaluations of the partial implementations (sprints) performed by development teams. In this way, project managers can make critical decisions more quickly, without long and opaque periods that delay decisions and slow down the project as a whole.
This work cannot be carried out without the participation of the business team, who work together with IT teams for the rapid and coherent advancement of the project.
At this point, we may understand that not only is the use of agile methodologies in ERP implementations possible, but they are practices that resolve many inconveniences carried over from the past.
How to use Agile methodologies in ERP implementations
Many agile practices can be applied directly to ERP implementations without any changes. Among them: the formation of small, integral, and multifunctional teams; working in short cycles of two to three weeks to produce functional software incrementally; and the use of tools and technologies that accelerate the delivery process.
Other practices, however, must be reviewed, such as the complete definition of the project from the outset, unlike the approach in agile methodologies, where the objective is to develop a minimum viable product.
- Using this point of view, a more exhaustive business analysis must be carried out that details the processes and the overall architecture, to then be divided into smaller, coherent projects.
- The presence of teams not directly linked to functionality development, such as the data migration or integration team, requires extra coordination and synchronization effort in order to scale the project in a synchronous manner.
- Deliveries of tested and approved software cannot be made with the same frequency as in agile. An end-to-end testing phase is required to test the delivery integrated into the entirety of the development.
- The authority of the Project Management Office (PMO) must be increased to allow for rapid resolution of problems that arise, as well as in decision-making.
Benefits of applying agile methodology to ERP implementations
According to McKinsey, organizations that apply agile methodologies have a 70% probability of enjoying better business health, the most decisive indicator for achieving better long-term results. Other improvement indicators include greater customer focus, a shorter time to market, higher revenue growth, cost reduction, and a more engaged workforce.
Following the consultancy’s studies, organizations that apply agile in ERP implementation achieved:
- A reduction in implementation cost of 10 percent, savings located especially in the testing phase.
- An increase in the value of the change by 20 percent by allowing the functional manager to monitor the progress of the project, which enabled them to focus on high-value elements.
- The ability to accelerate implementation in certain phases by using parallel teams.
- A broader and faster user adoption, as users were involved in the development.