You’ve heard about the benefits of digital transformation, and you’re ready to implement an ERP system across your enterprise. However, you might be a little daunted after reading about the high rate of failure among these types of projects. 

Thankfully, you don’t have to meet the same fate. With the right steps in place, you can set your ERP implementation, SCM implementation, or CRM implementation up for success from the beginning. It all starts with understanding inherent ERP risk factors and what you need to do to mitigate them. 

6 ERP Risk Factors

1. Focusing More on Technology Than People

Of course, you want to get the technology components of your project right. You’ll meet with ERP vendors, analyze technical features, and conduct extensive testing to make sure everything works as it should.

However, it’s important to allocate just as much time to the people side of the project.

Any time you implement enterprise-wide software, you’re directly impacting the way your employees do their jobs. They’re asked to abandon their familiar best practices and adopt new workflows. Further, they’re tasked with learning the ins and outs of a system they’ve never used before. 

By prioritizing organizational change management (OCM), you can ensure you’re dedicating the time, money, and resources required to help your workforce successfully make this transition.

In our ERP consulting experience, we’ve found that most of the time, ERP failures are caused by project teams that under-prioritize OCM, assuming that end-user training is enough to get their teams up to speed.

A Failed Payroll System 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.

2. Selecting the Wrong Software

As you begin evaluating ERP software or SCM software, you’ll discover that there are countless different solutions on the market. If you rush the software selection stage, you could end up with a solution that doesn’t fit your needs or won’t scale with your company.

To prevent this, it’s important to gather business requirements by identifying pain points and mapping your future state process. During this process, you should define business goals – both short-term and long-term. 

Once these exercises are complete, you’ll have a clearer view of the requirements to prioritize when evaluating systems. Conducting requirements gathering before ERP selection is a lifesaver (and time saver) whether you’re looking for the best ERP for manufacturing or the best CRM for your retail business.

3. Neglecting Business Process Reengineering

As mentioned above, future state process mapping is essential. But how do you arrive at these future state processes?

In many cases, you’ll use business process reengineering. As you find inefficiencies, you’ll redesign your workflows to solve these issues.

We recommend keeping your process maps high-level so you can adopt the best practices of the solution you end up selecting.

The more you adopt best practices, the less likely you’ll have to purchase third-party add-ons or customize the solution around your unstandardized processes.

4. Overlooking Security or Privacy Threats

An ERP system consolidates and centralizes company information across the enterprise. As such, it’s critical to have robust security measures in place to safeguard organizational data

Even a minor breach could leave a significant number of records exposed, affecting both individual employees and your overarching business. This can damage your brand reputation, weaken your partnerships, and lower team morale. 

To reduce this risk, only purchase ERP software from reputable, experienced vendors. Before you commit to their solution, ask them to describe their approach to mitigating security threats and protecting your business. 

5. Low Executive Buy-In

For a digital transformation to get off the ground, it must have the full support of your C-suite. It sounds plain and simple but gaining that support can be harder than expected.

To gain buy-in, you must show executives how the investment will benefit the enterprise and what positive changes they can expect.

Then, once they approve the project budget, you must convince them to remain involved in the effort. 

For example, these leaders should form an executive steering committee that clarifies the organization’s digital strategy and makes decisions concerning resource allocation, project timeline, and budget. 

6. Poor Data Quality

An ERP system (even one of the top ERP systems) is only as functional as the data you put into it. That’s why data cleansing and migration is so important.

Don’t transfer incomplete or inaccurate records from your legacy systems into your new platform. Similarly, don’t transfer multiple records or files that contain the same (or similar) information.

An ERP system implementation involves departments across your enterprise, so there’s a good chance that unclean data will arise. As such, be sure to allocate plenty of time to data migration and testing to ensure all records are thoroughly examined before you implement the system. 

Risk is Inevitable. Failure Isn’t.

These ERP risk factors demand vigilance. By taking precautions at the beginning, you can set the stage for a successful digital transformation.

When you know which steps to prioritize, it becomes easier to align the software with your business goals. 

Our ERP consultants can help mitigate risk and avoid ERP failure. Request a free consultation below to learn more. 

About the author

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As Director of Panorama’s Expert Witness Practice, Bill oversees all expert witness engagements. In addition, he concurrently provides oversight on a number of ERP selection and implementation projects for manufacturing, distribution, healthcare, and public sector clients.

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