ERPs are the core of transactional systems and the book for record. They are the backbone of transaction processing, process alignment, and compliance. Like every other application, to align to evolving technology, business changes and new business models ERPs have to be upgraded, reimplemented, or replaced.
ERP migration is a complex, high-stakes endeavor, especially in Finance and Accounting. Enterprises spend multiple years and millions of dollars for this migration and transformation. The complexity involves transferring vast amounts of mission-critical data, aligning new processes with existing ones, and ensuring minimal disruption to ongoing operations. However, one of the biggest problems that management wants to avoid is disruption to the Business-as-Usual. Contingency and release planning is a critical endeavor in itself.
Before we talk about how to mitigate the risks associated with ERP migration, we want to mention why ERP is important?
Why ERP Migration is Necessary ?
ERPs are the primary systems of record, handling critical data and processes, from financial reporting to procurement tracking. However, over time, an ERP can become outdated due to various reasons—whether because of technological limitations, evolving regulatory standards, or changing business models. ERP modernization typically takes three forms:
- Upgrade: Bringing the existing ERP to a newer version to leverage improved features and technology.
- Reimplement: Changing the deployment setup or re-configuring the system for better alignment with current business processes.
- Replace: Replacing the entire ERP system with a new ERP or different solution, often chosen when the existing system is obsolete or fails to meet evolving business requirements.
Reimplementation and Replacement require substantial changes in how data is managed and integrated, posing distinct challenges in terms of process alignment, data quality, and user adoption.
Key Issues in ERP Migration
ERP migrations present complex challenges across multiple dimensions:
- New Technology Adaptation: Migrating to a modern ERP often involves adopting cloud-based or modular technologies. This change can disrupt established workflows and requires re-skilling of IT teams.
- Extended Timelines: Large-scale ERP implementations, especially replacements, can take months or even years, making it difficult to maintain consistent operations without careful planning.
- Process Realignment: Migrating to a new ERP often necessitates rethinking workflows to fit the new system, especially in departments like Finance, Accounting, Sales Operations and Procurement where process accuracy is paramount.
- Customization: By virtue of ERP being the largest system, most enterprises tend to build variant business scenarios and also use ERP as the reporting systems – even though the architecture of ERPs is not intended for changes or large volume data processing for reporting
- Data Quality Issues: Consolidating legacy data for a new system requires intensive data cleansing, de-duplication, and standardization to ensure data integrity.
- Change Management: ERP migrations impact end-users who may be accustomed to old workflows and interfaces. Effective training and communication are essential to drive user adoption.
- New Integrations: Migrating or replacing ERPs requires integrating the new system with existing applications, which can involve substantial development and testing.
Moving towards a slim core architecture
In response to these challenges, enterprises have shifted from monolithic ERP systems to “slim core” architectures. Unlike traditional, all-encompassing ERPs, slim core designs focus on core functions while connecting to specialized applications for extended functionality. This modular approach allows enterprises to stay flexible and integrate new tools or systems without overhauling the entire ERP. An added advantage is ability to use the best-in-class digital technology while Core ERP as the book of record is compliant with legal and regulatory needs.
With a slim core, non-core functionalities (like advanced analytics or specialized procurement features) can be offloaded to separate systems like a data foundation, freeing the ERP to focus solely on transactional processing. This lean, modular setup simplifies ERP migration, as the core ERP only needs to manage essential records, with the data stack acting as a foundation for agile applications and analytics.
Mitigating Risks associated with ERP Migration
Our view is that a well-architected data foundation that caters to both analytical as well as transactional data can significantly mitigate the risks associated with ERP migration and transformation program while providing long-term benefits to users. In this blog, we’ll explore how a data foundation platform can address key migration challenges such as data integration, potential downtime, and business continuity, while highlighting its role in ensuring smooth transitions and minimizing blind spots.
1. Data Integration: Consolidating Multiple Data Sources
One of the major pain points in ERP migration is the need to integrate data from disparate legacy systems into a unified platform. Finance and Procurement divisions, which often use various modules from legacy ERPs, are particularly sensitive to inconsistencies in data format, structures, and quality.
A robust data foundation acts as a central repository that can ingest, normalize, and consolidate data from various ERP systems, whether old or new. It ensures that financial transactions, procurement records, and accounting ledgers from different platforms are harmonized into a single version of truth. This seamless integration reduces data silos, allowing for real-time reporting and analysis across different departments.
Benefit: By integrating data upfront, a data foundation prevents disruptions to financial reports and procurement processes, even when legacy ERPs are phased out.
2. Minimizing Operational Downtime
ERP migration can lead to operational downtime, causing disruptions to day-to-day business functions like procurement approvals, invoice payments, and financial reporting. Such downtimes can affect critical decision-making processes and operational efficiency in the Finance and Procurement departments.
A data foundation decouples operational reporting from the transactional systems. While legacy ERPs are being decommissioned and new ERPs are implemented, the data foundation continues to provide real-time data access for reporting and analysis. This ensures that financial performance metrics, procurement costs, and budget allocations remain available to users, reducing the need for downtime.
Benefit: Finance and procurement teams can continue their reporting and analysis without interruptions, despite the backend ERP changes.
3. De-coupling Business Users from System Changes
Migrating an ERP without affecting business users’ experience is crucial. Business users—especially in Finance and Accounting—rely heavily on accurate, timely reports to manage day-to-day operations. If users are too dependent on a specific ERP system for reporting, the migration process can hinder their work.
A well-designed data foundation architecture decouples business users from ERP-specific reporting systems. Even as the ERP changes, users can access the same reports they are accustomed to, derived from the data foundation. The data model remains consistent, providing a “business-as-usual” experience without changing the end-state reports.
Benefit: This allows the ERP migration to occur in the background while users continue to access familiar reports, maintaining business continuity.
4. How Data Foundation Zones Support Quick ERP Replacements
Data foundations often have different zones like staging, integration, and presentation layers. These zones allow organizations to quickly swap legacy ERPs for new ones by isolating each system’s complexities.
- Raw Zone: Raw data from the ERP is loaded here. This is used for transactional automation and is also promoted to the next zones for cleansing and consumption
- Enrich Zone: Data is cleaned, enriched, and harmonized.
- Consumption Zone: Final, curated datasets for reporting are delivered.
This layered approach ensures that the data pipeline from the old ERP can be maintained while the new ERP is brought online. Once the new ERP is operational, its data can seamlessly flow into the same zones with minimal reconfiguration.
Benefit: The modular nature of the zones helps accelerate ERP replacements, ensuring the organization doesn’t suffer from extended downtime or migration delays.
5. Supporting Reconciliation Post-Migration
Reconciliation is a critical step post-ERP migration, especially in the Finance and Accounting domains, where discrepancies in financial statements or ledgers can have significant business implications. A data foundation can play a central role in reconciling data between the legacy and new ERP systems.
With the data foundation acting as the common repository, side-by-side comparisons between the financial data generated by both ERPs can be easily conducted. This reconciliation ensures that no transactional or financial data is lost or altered inappropriately during the migration.
Benefit: It simplifies and accelerates the reconciliation process by providing a consolidated, reliable view of the old and new ERP data.
6. Blind Spots to Watch For
While data foundations mitigate risks, they are not without their challenges. Key blind spots to look out for during ERP migration include:
- Data Quality Issues: If data from legacy systems is incomplete or inaccurate, the migration can propagate these issues. Data quality processes need to be applied consistently in the foundation.
- Data Ownership Confusion: Different departments (Finance, Procurement) may have conflicting requirements or interpretations of the data.
- Over-reliance on Legacy Logic: Legacy ERP systems often have custom logic embedded in them. During migration, there’s a risk of losing this logic if not properly documented and integrated into the data foundation.
Mitigation: A thorough audit of data quality and ownership, combined with well-documented legacy system logic, ensures a smoother migration.
7. Challenges in Following This Strategy
While the benefits are substantial, there are challenges to adopting a data foundation strategy in ERP migration:
- Complexity in Implementation: Setting up a data foundation that can support both legacy and new ERP systems requires significant planning, development, and testing.
- Cost of Building and Maintaining: The cost of building a data foundation capable of handling ERP migration can be high, particularly for larger organizations with multiple legacy systems.
- Change Management: Ensuring business users and IT teams are aligned during the transition is critical. Without proper change management, there can be misalignment between the business’s needs and what the data foundation provides.
Conclusion
ERP migrations, especially for Finance, Accounting, and Procurement, come with significant risks. However, a well-architected data foundation can mitigate these risks by providing seamless data integration, reducing operational downtime, de-coupling business users from system changes, and supporting faster reconciliation. By using a zoned approach, organizations can quickly transition from legacy systems to new ones while maintaining business continuity. Although there are challenges, such as complexity and cost, the benefits to long-term reporting, reconciliation, and user experience make it a sound strategy.
Ultimately, organizations that leverage data foundations in ERP migrations position themselves to handle change more efficiently and with less risk.