Charles Dickens wasn’t the only one with great expectations and an occasional let down along the way. As we’ve written in our blogs and ERP research, 72% of ERP projects fail in one or more three key dimensions: cost, duration, and/or realized business benefits. Much like the characters in Dickens’ novel, those trying to select and implement ERP software are faced with high hopes and great expectations, only to face significant challenges and some bad decisions along the way.
One of our recent posts outlined some extreme cases of ERP failures, which had gotten to the point of legal action (see the blog: “An Appetite for Destruction: The ERP Lawsuits Continue…“). While not all ERP challenges are this extreme, it is clear that “mismanaged expectations” is a key driver of ERP failure. In one of our recent polls, 25% of respondents cited “realistic ERP implementation expectations” as the most important requirement to avoiding failure.
The good news is that there are some lessons to keep expectations aligned with reality. It’s important to watch for the pitfalls and landmines that often lead to unrealistic expectations. For example, how many of the following statements sound familiar?
- “We’ll get this implementation done in no time.” Software vendors and consultants are notorious for over-simplifying the implementation process. Most sales reps don’t know (and in some cases, don’t care) what it takes to do an ERP implementation right, but they do know they want to make the sale. So it is naturally in their best interests to downplay the time, costs, and risks associated with the project. Most projects take longer than expected and/or cost more than expected, so make sure you’re not basing your timeline and budget (and career) on overly optimistic and unrealistic estimates. Instead, use benchmarks of what other companies similar to you have actually achieved, such as Panorama’s 2010 ERP Report. A more realistic expectation: ERP implementations are difficult and complex business transformations, so budget time, money, and resources accordingly.
- “We’re not going to customize a thing.” Most companies, including our clients, draw this line in the sand early in the ERP evaluation and selection process. While it is a noble and rational goal, it’s not realistic and it is far from reality. According to our study of 1,600 ERP implementations across the globe, only one in four ERP implementations leverage out-of-the-box ERP software without any customization. In addition, only 6% of respondents in one of our polls indicate that ERP customization is the most important factor to avoiding ERP failure. A more realistic expectation: Customize only when absolutely necessary to preserve your company’s core competencies and competitive advantages.
- “This is going to change our whole business.” And it should, but it’s not going to happen overnight. Realizing actual benefits requires more than expecting them; they also need to be measured with metrics closely aligned with business processes. Our research shows that over half of companies that have implemented ERP software fail to realize at least 30% of the measurable business benefits they expected. Again, it is okay to expect a lot, especially in this arena, but it takes some work to get there. A more realistic expectation: Expect high business benefits, but set targets and put in the legwork required to realize those benefits.
We all want our ERP implementations to go extremely well, deliver high business benefits, and incur the lowest possible time and cost. However, ERP projects are not technical, they are business transformations, so it’s important to treat them as such. Whether you are using traditional on-premise ERP software, Software as a Service (SaaS), or software implementation accelerators, changing your business processes and organization requires a great deal of skill and work.
What are your thoughts? Take our poll below to share your thoughts about the most important ERP implementation factor to avoid project failure for your ERP software initiative.