In late 2020, the U.S. Air Force resumed work on an ERP implementation that was originally scrapped back in 2012. The new effort is still underway, set to be completed over a five-year timeline. To understand why the project has been resurrected, it’s necessary to go back several years. 

The story of the Air Force ERP failure begins in 2005, when the government and military organization began its Oracle ERP implementation. 

What led to its ultimate demise? How can organizations planning their own implementations avoid such obstacles? Today, we’re taking a closer look at the issues that occurred and how they can be avoided. 

A Large Governmental Entity's Failed Implementation

Panorama’s Expert Witness team was retained to provide a forensic analysis and written report to the court regarding the failed implementation of a major software developer’s ERP/payroll system.

An Overview of the Air Force ERP Failure

In 2005, Oracle beat out competitors, including SAP, and entered into a contract to lead the U.S. Air Force in a major ERP transformation.

The effort was internally referred to as the Expeditionary Combat Support System (ECSS), and it was ambitious from the very beginning. The goal was to roll 240 individual legacy systems into a single, centralized ERP solution.

To date, the Air Force had been struggling to produce cohesive, auditable financial records, and this new system was meant to make that process much easier. It also included features to better track transportation, maintenance, supply, engineering and acquisition data.

As you can imagine, such an undertaking came with a hefty price tag. While the original contract value was $88.5M, that number had skyrocketed by 2012. That’s when the Air Force made the decision to terminate their original systems integrator after accruing costs of over $1 billion.

Ultimately, the agency admitted that the system failed to yield any “significant military capability.” To continue further would require an additional investment of $1.1 billion, and that would only cover a quarter of the project’s original scope.

After three attempted restructurings, the Air Force made the decision to scrap the project. The then-comptroller explained that the system had very limited capabilities, especially compared to the investment dedicated to it.

Years passed, and in late 2020, the Air Force awarded a contract to implement a new, cloud-based platform to manage its ERP functions. The deal comes with a five-year timeline and a value of up to $89.5 million.

While the new implementation is promising, it’s being approached with caution because the errors made more than 15 years ago had major financial and operational consequences.

6 Lessons Leaned from this Federal Government ERP Failure

After the failure occurred, a U.S. Senate subcommittee performed a postmortem analysis of the effort, identifying a few root causes of failure. Let’s take a look at a few of the lessons learned. 

1. Organizational Change Management is Essential

Early on, the report refers to an “organizational disaster” at the center of the failure.

Not only did operational issues occur, but there were also underlying political and cultural problems that contributed to the project’s collapse. These issues seemed to be of greater significance than any shortcomings with the technology itself.

Though it’s necessary to make sure all the technical components of a project are in place, it’s equally critical to ensure your employees are ready to embrace changes to their roles, responsibilities and the organizational culture. Otherwise, you’re left with a feature-rich platform that sits unused. 

Organizational change management is the process of readying your workforce for the upcoming shift and equipping them with the tools and knowledge they need to embrace it.

One success factor of change management is clear and consistent communication. This can help mitigate change resistance and establish a continuous improvement culture in your organization. 

2. Be Flexible with Business Processes

Any time you’re replacing outdated legacy systems, there’s a good chance your existing workflows will require a major overhaul, as well. This process improvement effort should begin at the beginning of the project, during the time you’re gathering ERP requirements

The report makes it clear that the Air Force did not take this step, nor did it fully understand its existing systems and business processes. Instead, it relied on its systems integrator to define the requirements.

The result? The project propelled ahead, without anyone who understood the future state. Most importantly, no one understood the impacts to Air Force employees. 

Business process reengineering and business process management allow you to map both your existing processes and your future state. This effort can’t be overlooked, as it allows you to identify pain points in your existing workflows and standardize processes that don’t align with the system’s best practices.

3. Limit ERP Customizations

The Air Force ERP project involved many customizations to the baseline Oracle ERP software. This increased both the cost of the project, as well as the potential risks. 

Excessive software customization is often organizations’ answer to mitigating change resistance. However, it isn’t the right answer. When a customization is unnecessary, we recommend avoiding it even if it will make employees more eager to use the new ERP system. 

4. Establish a Strong ERP Project Plan

The initial goal to implement one ERP system eventually transitioned into a multiple-system effort, which increased the level of risk and increased complexity and costs. 

The project could have been less chaotic with a well-structured ERP project plan. With proper planning and ERP project governance, the agency could have avoided veering so heavily off-track.

Instead, they pursued a multi-directional implementation that drained time, resources and funds.

5. Ensure Executive Support and Alignment

One of the most damaging aspects of this project was the lack of an executive sponsor. In fact, the project team was left holding all of the reins, and thus, struggled to make the right decisions.

Issues such as over-customizing could have been avoided with more direction from the top-down. There was also a high degree of turnover within the executive team, which hampered the project team’s alignment and productivity. 

Ensure ERP Success

The Air Force ERP failure didn’t have one distinct issue. Rather, it occurred due to a string of challenges that compounded over time. As you prepare for your own implementation, these challenges can serve as examples of what not to do. 

By establishing a strong project team, ensuring executive sponsorship and prioritizing people and processes, you can set the stage for a successful digital transformation that aligns with your business goals. 

To learn how our team of ERP consultants can help you on this journey, contact us below.

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