Enterprise resource planning (ERP) is the most important enterprise system that any government agency runs – supporting financials, human capital management, and—for many organizations—supply chain.
Soon, the ERP systems that many agencies invested in over the last two decades will no longer be supported, and they will need to migrate to new ones. Those using SAP ECC must migrate by 2027, but many other legacy ERP systems are also becoming antiquated because they are not modern or flexible enough for agencies’ modern business processes.
ERP migrations are massive, multi-billion dollar projects that can consume a public servant’s life for up to five years. They come with high pressure and risk: in fact, only 13% of government tech projects over $6 million succeed.
For many public servants, leading an ERP migration feels like a worst case scenario – but it doesn’t need to be. Starting the migration process early and intentionally de-risking it can help make the most important system investment in decades go smoothly. Here’s how to make that happen.
Historically, ERP vendors have focused migration strategies on going “back to standard,” or measuring and minimizing customizations (such as configurations, extensions, or modifications). The challenge with this approach is that agencies often don’t start the migration process by gaining a deep understanding of how their internal business processes actually run. That means customizations are not clearly tied back to government operating procedures and policies.
Leaders should start the migration process by deconstructing their existing ERP system into a collection of business processes, e.g. procure-to-pay, acquire-to-retire, and record-to-report. Then, they can identify the most common variants in these processes—or different ways in which they are executed—and create an inventory of customizations within the existing ERP system. Finally, leaders can assign “owners” to each major ERP process to take responsibility for the processes’ performance, KPIs and customizations as the agency migrates to a new system.
Starting the design process of a new ERP system early can bring huge benefits because it gives leaders time to analyze data from the existing ERP system. In ERP datasets, each module includes hundreds or even thousands of activity logs and case tables. These are a goldmine for understanding an agency’s business processes, but they often go unused. Leaders should leverage this data to understand how processes run, and design an effective new ERP system with the necessary customizations.
A digital twin, or “digital representation of a real-world entity or system,” can also help leaders design an effective new ERP system by illuminating how current processes actually run. Digital twins offer a holistic view of how processes work and interact with each other – without interrupting them.
Designing a new ERP system with these tools is not only efficient, but it is also objective and can cut through internal politics. For example, a CFO recently shared with me that ERP decisions at their agency are often made based on “hunches and intuitions” from the “loudest voice in the room” during design workshops or governance committee meetings.
Celonis is working with a large state agency to de-risk their financial ERP transformation well in advance of their ERP system’s end-of-life deadline. In the design phase, the agency has found thousands of variants in their financial processes and a multitude of opportunities to automate and simplify them before migrating to the new system. This automation and simplification wouldn’t be possible if there were pressure to rush through the design process.
Viewing the ERP migration in three phases—pre, during, and post—allows government leaders to thread a "business process" view through the full cycle.
The pre-migration phase is the opportunity to gain a deep understanding of the business processes running within an ERP system. For instance, the same state agency mentioned above is conducting ERP readiness programs in which leaders assess 10 business processes to determine major process variants and opportunities for improvement across finance, purchasing, and human capital management. This ensures they are set up to acquire the right technology, SI, and methodology to complete ERP transformation.
During migration, leaders can ensure fit of the new ERP solution with the agency’s existing processes. This includes integration of current business processes with the new ERP provider’s best practice templates. One reason ERP projects often fail is massive misalignment between these templates and the way processes actually run. Without an objective way to perform fit-gap and show financial benefits of standardization, organizations resist standardized business processes and do not leverage the new ERP as intended.
In the post-migration phase, the real work begins to ensure that the massive ERP investment has a strong ROI. Leading government organizations are laser focused on user adoption so they can fully retire legacy capabilities. They also leverage the capabilities used during the pre-migration readiness assessment and during-migration fit-gap to drive continuous process improvement.
Government ERP migrations are high-stakes, high-pressure projects for public servants – but when done right, they are also high-reward. To run them smoothly, leaders must start early to understand the agency’s business processes within the existing ERP system, then use those learnings to design and implement a new system that will be successful.