5 reasons ERP implementations fail
SAGE declared at their 2015 summit that ERP systems were “outdated” and had become synonymous with “Expense, Pain, Regret”. It is this kind of coverage that can instil fear into those looking at ERP systems. However, there are myriad reasons why ERP projects fail – or at least fail to deliver Exceptional, Painless Results.
It pays to understand what can go wrong so that your ERP implementation is world-class, rather than average or poor, because there is a stark contrast between the two outcomes.
Mint Jutras’ 2015 report, “The Cost of Complacency”, compared cost reductions across operating, admin, inventory, obsolete inventory and cycle time. World class implementations achieved 19% to 21% savings across these areas, compared to an average of 5% to 9%. As you can see, ERP projects can save a lot of money but they need to be carried out properly.
Here are the five most common reasons that ERP implementations fail, and what you can do about them:
1. Failing to undertake business process optimisation
We’ve addressed the importance of business process optimisation before because it is vital to the success of any ERP implementation. As we said there, implementing an ERP system without optimising your underlying business processes and goals is like joining the gym in January. If you don’t get the foundations in place first – setting up a realistic fitness and diet plan that plays to goals, motivations, weak spots and time resources – you are almost doomed to fail.
In the same way, with ERP systems, you first need to ensure that you take a thorough look at the underlying business processes in your organisation. How are they currently carried out? Would anything work better for your current and future goals? What resources do you have? Are you aware of all of the possibilities of ERP configurations or are you making assumptions?
Once you understand that, it is then time to configure the software to suit your unique requirements. There is no point in speeding up something that is not ideal to begin with.
2. The “Big Bang” implementation
It is now commonly accepted that the gold standard for ERP implementations lies with an agile approach, where you implement in stages. Yet still too many businesses try to attempt a life-changing project for their business, where the ERP roll-out is the finish line – the so-called “big bang” implementation.
Instead, we always advise clients to look at their processes and determine where changes will have the biggest impact. Doing so delivers the greatest improvement in the least time. Those savings can then be put into improving other areas in a staged fashion. This approach also keeps team morale high, as employees see the payoff from the project sooner.
3. Failing to involve key stakeholders and the right team members
We can’t reiterate enough the importance of getting the right team involved. You need to commit a significant amount of resources to an implementation – typically three times the amount your implementation partner provides.
All of the key stakeholders need to be on-board to ensure a common goal, vision and commitment to the project. You also need to involve those who understand how the business operates on the ground level and how it could be improved. For example, in an engineering company the project engineers are the most knowledgeable about the operations side and are the most likely to be affected by any changes and revisions. They therefore need to play a key role in the project.
4. Poor change management
The failure to manage change – or in reality, the resistance to change – is a common downfall for ERP projects. You may have a sound business case for your implementation, but you can never underestimate the resistance you may meet from other areas of the business. Team members may understand the need for change, but they are often used to their way of working. Add to this the fear factor of what improved business processes mean for their job and you have a potential disaster on your hands.
Mind Tools provides a thorough overview of change management approaches and methodologies that can help you.
5. Seeing the project as a one-off
Going back to the gym analogy, the reason so many people undertake a “brand new me” year on year is that they fail to make a commitment to continued changes. They may not adapt to new situations (like a new job with longer hours) and one-off events like parties and holidays, taking them back to square one – or worse.
An agile approach encourages businesses to implement in stages. However, once the implementation is “over”, businesses need to keep their mind-set to one of continual improvement in line with changes in their business. At least, they do if they want to stay ahead.
That is why we focus on providing a lifetime application methodology in recognition of the fact that no business can afford to stand still. Ongoing maintenance and support is always a lot less painful – and expensive – than waiting five years for another big project. Industries face constant disruption and your competitors are always snapping on your heels – or waiting to take over.