Digital Transformation vs. ERP Implementation: Which is Right for You?

Written By: Eric Kimberling
Date: October 29, 2018

Digital transformation is one of the industry’s biggest buzzwords at the moment. ERP implementation, on the other hand, is a term that is becoming a bit dated and has lost a bit of its luster with recent failures such as Lidl and National Grid.

But what does “digital transformation” mean? And how is it different from a traditional ERP implementation?

Digital transformation vs. ERP implementation: an overview

Although the difference between the two terms is often seen as an exercise in nomenclature, there are quite a few things that separate the two. In short, ERP implementations are focused on replacing back office systems. Digital transformations are more focused on delivering breakthrough business value via innovative new technologies – which may or may not be limited to ERP software.

Technological differences of digital transformation vs. ERP implementation

When it comes to technology, ERP vendors such as SAP, Oracle, Microsoft, and other may say that their technologies support true digital transformations. In reality, core ERP systems simply replace traditional back-office functions, while true digital transformations leverage a variety of technologies – including ERP – to transform their business models. This could include things like AI, HCM, CRM, Industry 4.0, internet of things (iOt) and a variety of other technologies.

Business process management in digital transformations vs. ERP implementations

ERP implementations typically don’t involve major changes – at least not relatively speaking. The changes are significant, but not as significant as those required for digital transformation. In the case of the latter, business operations and business models are changing, which has a larger impact on business processes and operations. This requires more deliberate focus on defining and documenting business improvements early in your digital transformation.

Organizational change management in digital transformation vs. ERP implementation

Organizational change management in ERP implementations typically focuses on training people to understand how to perform the same transactions in a new system. In the case of digital transformations, the focus is on helping them change their jobs to support new business models and a revamped culture to support those new ways of doing business. This obviously requires robust organizational change management strategies to be successful – much more so than traditional ERP training.

Business value of digital transformations vs. ERP implementations

ERP implementations have the potential to deliver a strong ROI, with a payback in just a few years if things go well. However, digital transformations have the potential to deliver exponentially more business value via enhancements to top-line revenue growth, customer satisfaction, and other benefits that extend beyond the traditional efficiency gains of ERP software.

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Risks of digital transformations vs. ERP implementations

Since digital transformations typically entail a greater degree of change, time, cost, and resources, the risks are also typically higher. Higher risks include:

  • Longer implementation time and cost than expected
  • Higher likelihood of operational disruption due to bigger business process changes
  • More impact to people, which can disrupt the transformation if not handled well
  • More complex system architecture stemming from multiple technologies
  • Lack of realized business value

While these higher risks are indeed very real for both digital transformations and ERP implementations, they can be mitigated with the right risk mitigation strategy.

Which is right for your organization?

Despite the buzzwords and biased industry focus, there is no one-size-fits-all answer for your organization. Some are ready to take the risk and potential upside associated with a digital transformation. Others will do just fine with an ERP implementation. The key is to leverage independent ERP consultants such as our team at Third Stage Consulting to help define the best digital strategy and roadmap for your organization.

Contact me to discuss in more detail – my team and I would love to help!

Eric Kimberling
Eric is known globally as a thought leader in the ERP consulting space. He has helped hundreds of high-profile enterprises worldwide with their technology initiatives, including Nucor Steel, Fisher and Paykel Healthcare, Kodak, Coors, Boeing, and Duke Energy. He has helped manage ERP implementations and reengineer global supply chains across the world.
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