10 Reasons Why ERP Implementation Fails
There are several guarantees that come with the implementation of enterprise resource planning software (ERP). From fixing your service delivery problems, data collection, to saving on costs, implementing an ERP solution can bring numerous benefits for any business. However, there are many things that can go wrong during and after the implementation process. Unfortunately, most of these problems cannot be fixed by simply throwing in money.
The typical ERP package contains between 10 to 25 modules designed to automate nearly every aspect of your business processes and integrate all departments into one platform/solution. When integrating an ERP solution with your existing infrastructure, problems are bound to arise. Relying on technology to solve a business problem is just one part of the solution. Without support from top management, implementation plans will certainly fail.
Failure can take many forms including the stoppage of production, running significantly off-budget or not achieving the desired return on investment. Many experts acknowledge that most of the times the failure of ERP implementation is mainly caused by people and rarely by the nature of the software.
For instance, failure can be blamed on the top management for providing inadequate resources; on project managers for missing deadlines or underestimating costs; and on employees for resisting change out of fear of losing out their roles to software solutions. But truth be told, there are quite a number of reasons why ERP implementation can fail other than the above. Some of them are highlighted next.
10 Reasons Why ERP Implementation Fails
- Failure to set up realistic expectations
Most projects start with a lot of enthusiasm and expectations of its success are high. However, many organizations charge ahead without a plan and clearly defining their business requirements and what goals they want to achieve. This is a recipe for failure. It is important to avoid charging ahead without clear goals. Organizations should develop their own benchmarks and define clearly what can be considered successful or as a failure, and the setbacks that they are likely to encounter.
Do not overly trust ERP vendors. They may supply you will relevant information on best practices, but they can only take you so far. Organizations should not let the software to define their business processes. It is important that they understand their business requirements well and align the software with that, not the other way round.
- Failure to embrace change
Most companies tend to view ERP implementation as optional or as a status symbol, rather than considering it a critical asset for the business. As such, no effort is made to evaluate user acceptance of the new system. But it is wrong to underestimate any change in the organization as it can turn out to be disastrous for the organization.
In order to avoid such a predicament, organizations need to ready themselves for any change emanating from ERP implementation. They should seek opinions from staff and actually involve them in the process early on. It is also important to evaluate whether the solution is compatible to organizational culture to make adjustments where necessary. Organizations should also help employees to adapt to changes that might happen with the implementation of the solution.
- Lack of commitment by key stakeholders
Just like any other company project, ERP implementation calls for the support of all key stakeholders. However, if top executives are too busy to be part of the implementation process or are unwilling to allocate resources for the project, it can be a big blow to the implementation process.
It is true that getting the attention of top executives can be a hard task. But one way one can do that is “moving the cheese” as one Carl Wilson aptly coined. He argues that in order to get executives on board you should recognize, reward and compensate the executives who are willing to learn more about or to get involved in the system.
If you want them to get all stakeholders on board, you will need to offer training, coaching and any other activity that can help you achieve this goal. Educating the executive team on the scale and risk of an ERP install is a good idea. Many executives are so busy with day-to-day work engagements that they are unable to absorb all information on ERP.
It is highly likely that they may view it as just another IT project and not a viable way of automating existing processes. It is equally important to warn stakeholders that regardless of the big rewards that come with ERP implementation, the project is also exposed to high risks. You can add that in order to minimize these risks it will require their attention and participation.
- Lack of competent project managers
Poor project management is widespread in many organizations. When you get a group of people to engage in certain activities, especially activities that are intense like ERP implementation there are bound to be problems. It takes good leadership to keep things on track and to hold people accountable. In order to avoid this problem, hire someone to take charge of the implementation and management, if you cannot find someone who is qualified, hire externally. You can use the services of a third party who can act in their stead.
- Failure to modify or align the system with business processes
Most ERP solutions fail because organizations have no idea whether the system is working or not. In big projects like this there are things that go on as planned or as envisioned, but still there are those things that don’t happen as planned. For this reason, most ERP solutions need to be modified at some point in time to align them with the current status of the business. However, before you make any necessary changes or upgrades you will need to first identify the areas that need improvement.
Most ERP solutions do not fail entirely but it is the small bits or parts that malfunction, and which end up derailing the entire project. Some of these small failures may include using the wrong kind of software and only realizing about it only a few days after implementation, or even not realizing about it at all.
Again, the organization might have ignored how their business processes are affected by the implementation and introduce customizations that work against expected benefits. In this regard, the organization needs to evaluate what specific hitches might be delaying the success of the project and provides measures to remedy them.
- Failure to budget for complimentary software
In many cases organizations are unaware that they might have to get some additional software, during and after the implementation process. This means there is no budget set aside to cater for such expenses. As a result, these add-ons are ignored leading to the failure of parts if not the entire ERP system. It is advisable to have a budget for such as part of the ERP implementation scope.
- Ignoring common application deficiencies
Many organizations tend to overlook some requirements, whereas they are needed for the successful implementation of the ERP solution. In other cases some of the system’s functionalities may fail to work as expected.
There can also be a lack of proper management when it comes to delegation of workflow approval authority and this could cause security risks. In addition, there can be lack of inquiry access to configurations throughout the implementation process and also lack of system based audit trail for critical system challenges. Ignoring these weaknesses instead of resolving them can lead to failure of the ERP implementation.
- Overreliance on consultants
Depending on consultants too much could be a business undoing since it runs the risk of making your team redundant. The company needs to maintain control of its key business processes and hold the consultants accountable. It should also provide for smooth transition of executive positions and other managerial positions, and also ensure that knowledge is transferred to every new member of staff.
- Burdening the implementation process on the IT department
While ERP implementation process requires a lot of involvement from the IT department, they do not own the manufacturing and financial process and, therefore, cannot direct change in this areas. They might also be unaware of the components that make up the software and this is something could highly cost the organization. Incorporating only employees who are experts on the key business process of the company and who can offer direct support for ERP implementation in specific departments.
- Failure to adequately train end users
Many a time after ERP implementation, organizations assume that their employees are well adapted to using the ERP system and don’t invest in their training because they are more interested in getting things done. The top management needs to appoint a project ambassador or ambassadors who understand the ERP solution through and through. This person(s) must be able to train fellow employees on the use and functionalities of the system. This strategy can boost the chances of success of the ERP implementation.
An ERP solution is a business initiative that can transform the business positively and bring long-term benefits. It is therefore important to outline the objectives the organization wants to achieve with the ERP software. You should also make sure to involve key personnel and stakeholders, while ensuring they are well trained on how to best use the solution. By doing this, the company can significantly reduce any possibility for failure of ERP implementation.
Why ERP Implementation Fails?
The reasons why ERP Implementation fails include Failure to set up realistic expectations, Failure to embrace change, Lack of commitment by key stakeholders, Lack of competent project managers, Failure to modify or align the system with business processes, Failure to budget for complimentary software, Ignoring common application deficiencies and many more.