An effective ERP system is essential for any company hoping to be successful into today’s fast-paced and highly competitive environment. While most companies have an ERP system in place, few would call their implementation an unqualified success.
There are common reasons behind ERP implementation failure and by keeping a watchful eye on these factors, you can look forward to a successful implementation.
An Internet search for “ERP failures” brings up long lists of failures dating back for many years, but one interesting note is that most of these failures are attributed to just a small number of legacy ERP systems. The “failures” tend to be clustered around the large, highly impersonal and monolithic ERP systems, with fewer reported issues for systems such as Microsoft Dynamics that offers a deep partner ecosystem and shorter implementation cycles. It’s important to note that even companies that may consider their implementation a failure continue to use the ERP system to run many aspects of their business.
1. Choosing the Wrong Solution
While much of the press and analyst community tends to focus on just a few players with very deep pockets, the simple fact is that there are hundreds of ERP systems, each with unique strengths and weaknesses. Some work well on premise; some only work in the cloud. Some focus on providing deep functionality for a few industries while others provide a broad footprint but little specialization. Some, such as Microsoft Dynamics 365, offer the best of all worlds, with broad functionality augmented by extensions built by knowledgeable partners who also provide implementation services.
Whatever ERP system you decide on, be sure that it has a flexible architecture that will allow it to change as your business changes. You don’t want to be going through the whole search and implementation process again in a few years because your chosen solution can’t grow and change with your company and industry requirements.
2. Unrealistic Expectations
Since almost every company has an ERP system, the assumption is that ERP is easy. Businesses also frequently assume that replicating their existing procedures in a new ERP solution will somehow make them more efficient, more accurate and more profitable. These expectations are unrealistic.
An ERP system is the backbone of your organization, and its capabilities will affect every aspect of the business. Successfully implementing a system with such far‑reaching ramifications is not without risk or effort. Be prepared to commit to the ERP project with challenging work and high levels of change management.
Companies should also assume that if they are purchasing an out-of-the-box ERP solution, the built-in workflows are in use across thousands of other organizations. They work. They reflect best practices. By adopting standard procedures rather than attempting to replicate existing processes, the ERP implementation will be faster and more successful.
3. Lack of Management Commitment
This is the single, biggest cause ERP implementation failure. Management must make the implementation a priority for the company, and provide the time and resources to accomplish the project.
Sometimes managers only pay lip service to this concept. This sends the wrong message to the entire company—it tells them that the implementation project is not a priority. That will doom the new system to failure as team members struggle to accomplish everything asked of them, and it will make it harder for them obtain the necessary cooperation from other departments. It is imperative that management recognizes that the ERP implementation will be a company-wide priority for the life of the implementation project.
4. Unnecessary Customization
It can be tempting to tweak the new ERP system to match existing procedures more closely or to streamline an existing process, but this temptation must be avoided. As discussed above, the new ERP consists of proven best practice processes, and every effort should be made to use them out-of-the-box and choose customizations only if the current process is a true business differentiator that adds real value.
Customizations can be expensive to maintain, and they may limit your flexibility to upgrade in the future. This alone is a valid reason to limit the number and scale of customizations.
5. Scope Creep
Be very clear about your ERP project scope from the start of your project. Ensure you understand what is included in the project and what is out of scope. Adding in new functionality, additional modules and business processes mid-way through the implementation will cause project delays and will increase your costs. The result will be a budget and time blow out.
Ensure both you and your implementation partner are clear from the outset on what is to be delivered and stick to the original plan as much as possible.
6. Skimping on Training
You can’t have a successful implementation without adequate key user training, user acceptance testing and implementation go-live support.
Don’t assume that training just a few people will be enough. The “train the trainer” concept is valid, but should not be your only training. There is no such thing as “too much training”, so budget more than you think you will need for training, and be sure this is a line item in the budget for future years. You will want to ensure that new hires receive training and that your core team keeps up to date on new additions to the software.
7. No Dedicated Resources
The core team should be dedicated to the ERP project. Their day-to-day responsibilities should be reassigned for the duration. The project will not succeed if people are expected to accomplish the implementation in addition to their regular duties.
Do not assume that your implementation partner or outside talent can accomplish the implementation on your behalf. It is an excellent idea to bring in project-specific resources, but the key project decisions should be made by the in-house team with the business knowledge to ensure accuracy, acceptance and understanding.
8. No Related Project Management Skills
Even though the in-house team should have primary responsibility for the project, that doesn’t mean they must go it alone. It makes sense to bring in experienced project resources with expertise in your chosen system to augment the in-house team.
Even if you have in-house talent with project management skills, remember that not all projects are alike. Simply because a person can manage an engineering or marketing project doesn’t mean they have the skills to manage an ERP project. Remember, ERP will be in every area of your business, and the project will require broad business and technical expertise. Usually, this breadth of knowledge is only found in people who specialize in ERP implementations, so discuss this with your implementation partner.
Take Away Tips
Armed with 8 key factors behind why ERP implementations fail, you now know what you need to do to ensure your own success. Most importantly, before you choose a new ERP solution, you need to make sure you have an implementation partner who can match your business processes and business requirements to the chosen ERP solution. Understanding the business and systems “fit” will be key to determining the size and scale of your ERP project.
Choose an experienced, highly qualified implementation partner and make sure they can provide you with quality references from existing customers within your industry. These companies have been through the challenge of an ERP implementation and are satisfied – you want to be in that number so listen and learn from their experience.