The last several weeks have seen a string of high-profile failures, ranging from mid-size companies such as Lumber Liquidators to large government entities such as the Cities of Portland and San Diego. As we outlined in our Top 10 ERP Predictions for 2011, the rate of ERP implementation failure is unlikely to let up in the coming year as companies suffer from lack of budgets and expert resources.
The good news is that this doesn’t have to be the case. Panorama was not affiliated with any of the aforementioned ERP failures, but we find some common patterns by diagnosing public information about these three ERP implementations:
- ERP failures are typically not related to the ERP system. This may sound like an oxymoron, but it’s true. If you choose an ERP system that is not a good fit for your business requirements, then yes, you will likely fail in the implementation because you are trying to force fit a system that isn’t right for your organization. However, if you choose the right software, there is still a high risk of failure and most of the reasons are not related to technical issues surrounding the software. Instead, it is often related to business process, project management, and organizational change management issues. The Cities of San Diego and Portland both went so far as to say their ERP failures had little to nothing to do with the software itself. In fact, the City of Portland offered to be a case study for its chosen ERP vendor despite its implementation troubles.
- Organizational change management bridges the gap between an ERP system and its users. As is the case with most ERP failures, rarely is a troubled implementation about the ERP system itself. In the case of San Diego, there were widespread problems with time card entry errors in the new ERP and payroll software. Similarly, the City of Portland blames the failed implementation on city officials and the organization’s chosen ERP implementation partner rather than the chosen software, while Lumber Liquidators pointed to lack of employee acceptance as a key failure point.
- Poor project planning and unrealistic expectations set the stage for failure. The City of Portland estimated its implementation to be 14 months in duration with a budget of $14 million. Instead, the project took 30 months and $47 million, well over the anticipated budget. We don’t know much about the city and its needs, but we know from experience that these estimates are far too low for an organization of this size, regardless of how well they could have managed the implementation. The city acknowledges that it failed to estimate hardware upgrades and other cost items in its initial budgetary estimate.
- Strong leadership and clear business requirements are required for a successful ERP implementation. The City of Portland cited poorly defined business processes and difficulty making decisions due to its decentralized structure as two additional issues that contributed to its implementation challenges. Strong executive buy-in and decision-making are both critical to ERP success, as is a framework for clearly defining business processes and business requirements.
These themes are applicable not only to these three implementation examples, but also other ERP failures that we’ve seen in the marketplace. These and other mistakes can be avoided. Panorama can help through a number of its service offerings, such as ERP implementation planning, ERP blueprinting, organizational change management, and various other ERP service offerings. Learn more about our complete ERP service offering.