ERP failures don’t happen overnight. Instead, issues and risks percolate and bubble under the surface until they reach a breaking point.
That breaking point usually entails someone being fired and/or sued, along with the plug being pulled on the projects. That’s a lot of wasted time, money and resources with very little to show for it.
Most of our business comes from helping clients select and implement ERP systems, but we also do our fair share of project recovery and expert witness engagements. These client interactions have taught us quite a few lessons about what causes failure. However, they can be a complete surprise for the novice executive and implementation team.
Below are five of the most common, unexpected causes of ERP systems failure:
- Unrealistic expectations at the start of the project. According to our 2016 ERP Report, the average organization invests 21 months and 6.5% of their annual revenue in their ERP implementation. However, not enough organizations go into their projects with these expectations. ERP vendors, consultants and sales reps unintentionally – and sometimes intentionally – mismanage these expectations by selling the ease of implementation and glossing over the risks. Unrealistic expectations early in your project have a snowball effect that will lead to poor decisions later.
- The misinformed belief that organizational change won’t be difficult. Our research and experience proves that organizational change management and training is one of the most difficult components of ERP implementations. Our 2016 ERP Report shows that only 20% of organizations invest heavily in organizational change. This is a key reason so many projects fail. I can’t tell you how many clients have told us: “I wish we would have listened to you about how hard organizational change management would be.” It’s hard to understand until you’ve been through it, but I have yet to see one of our clients breeze through change management issues without any problems.
- Too little attention to business processes. “Pre-configured industry solutions” and “out of the box best practices” are some of the most misleading and distorted terms in the industry. While they do exist, they have very little impact on the need to define how your business processes will look in the future. Sure, your selected ERP system may tell you which screens you will use and which buttons you will push, but it can’t tell you how to run your business and how your information will flow. That’s up to you. Make sure you spend the time on business process management up front to ensure that your implementation goes smoothly.
- Too much customization and too little focus on data migration. Most companies begin projects expecting little to no customization, but our ERP Reports show that 90% of companies implement with some sort of customization. In addition, data issues are the #1 reason why organizations take longer to implement than expected. Many ERP consultants love customization because it plays to their skill set and increases their fees, while they dislike data migration and like to pass it off to their clients to handle. Both of these technical issues can creep up and derail your project if not properly managed. Because of this, it is critical to carefully manage them and start on both as early as possible. You can mitigate this risk by finding a consultant who can properly handle them.
- Lack of executive buy-in and support. None of the above matters if your executive team doesn’t fully support the project. The executive team may have signed off on the project budget, but they need to do much more than that in order for it to be successful. They will need to form an executive steering committee, make key decisions about how business processes will be performed (see #3 above), address any resource or organizational change issues and make other tough decisions related to scope, budget and benefits realization. Your project will fail without this time commitment from the executive team.
If you can avoid these five pitfalls, you will be well on your way to a successful ERP implementation. To see what problems other organizations have faced, register for tomorrow’s webinar, Review of Panorama’s 2016 ERP Report.