Why ERP Implementations Fail
Enterprise resource planning software links most of today's business management systems, and thus ERP software implementation is an important part of today's digital transformation for enterprise businesses. Implementing new ERP software can be a challenging undertaking. Explore top reasons for ERP implementation failure and how to carry out a successful ERP implementation.
Many organizations are hesitant to begin such an ambitious project to replace their legacy systems and get a new ERP system, with most companies citing these primary reasons why they are wary of ERP technology solutions:
- Budget overruns/resources needed
- Staffing limitations / missing expertise
- Fears the project may inevitably fail (the psychological factor)
Common Reasons for ERP Implementation Failure
Budget Overruns
Fears Of Project Failure
Inadequate Resources
Poor Project Planning
Staffing Limitations
Unrealistic Expectations
Missing Expertise
Lack Of Training
How Many ERP Implementations Fail?
Never mind the scare tactics that some ERP implementation companies employ, with dire tales of implementation failures they would have you believe. Let's look at the cold, hard data on this issue. We commissioned a leading ERP research firm to do a survey of 315 companies that had recently undergone an ERP system implementation. Here's what we found. (Note: we were not involved in these ERP solution implementations.)
67% Successful/Very Successful
31% Partially Successful
2% Not Very Successful
.3% ERP Failure
67% Successful/Very Successful
31% Partially Successful
2% Not Very Successful
.3% ERP Failure
How to Plan a Successful ERP Implementation
The implementation of ERP software is a massive time and resource-consuming project that is best handled by a project management professional, ideally someone who has extensive knowledge and experience implementing company-wide software initiatives. If you have such a person at your company, they won’t need the following information. But if you don’t, you may find the information helpful.
The six stages that we utilize when managing an implementation project are:
1
Pre-Implementation Phase
ERP Vendors Due Diligence, The Team and Charter, SOW and MSA
Outputs:
- Implementation Team formed
- ERP Project Charter created
- Agreed-upon final contract with vendor
- Consensus on MSA and other areas of vendor relationship
- Consensus on vendor’s Statement of Work
- Agreed-upon start date for planning and other documents preparing for next phase
2
Project Planning Phase
Vendor Contract Review, Vendor Deliverables, Statement of Work
Outputs:
- Finalized ERP System Contract
- Finalized Statement of Work
- Finalized Vendor Deliverables
3
Product Education Phase
Vendor-Based Education Certification, Training Assessment, Enterprise-Wide Education Roll-Out Plan
Outputs:
- Formalized education curriculum on ERP systems
- Roll-out plan
- Testing mechanisms assessing team members relating to ERP features, functions, reporting and user interface familiarity
- Ongoing training and support programs
4
Design/Configuration Phase
Interactive Team Workshops, Conference Room Pilot With Core Team, Data Management
Outputs:
- Pilot completed
- Data converted
- Technology integrated
- Verified ERP meets needs of business process owners and current business processes
- Plan developed for additions or customizations
5
Development/Test Phase
Test Simulation Scenarios, Continued Interactive Workshop, Process Owner Involvement With Key Stakeholders
Outputs:
- Completed all tests
- Completed all adjustments and configurations
- Verified system optimization
6
Go-Live and Post-Implementation
Establish the “Cut-off” Strategy, Manage the Shake-Out Period, Post-Implementation Audit
Outputs:
- Schedule of metrics tracking
- Schedule of post-implementation audits
Reasons Why ERP Implementation Efforts Succeed
The fact is, companies that prepare and plan for their potential ERP system and have the right people, processes, and technology in place in the early stages of an ERP implementation, will inevitably realize their ERP implementation goals. We have found great success with clients who work with us to create the business environment that is ready for the software implementation process. Because of the preparation time, the ERP implementation not only meets the business objectives, but the entire project is completed on time.
Additionally, because the core team from the business has carefully filtered and scrubbed the ERP data, the ERP implementation process goes much smoother. With one source of data truth, the business won’t be fighting through different processes to accomplish simple data entry with the new ERP.
To read our in-depth explanation of each stage and how we manage it, plus tips on selecting a project manager and project team, see our resource: Best Practices for an ERP Implementation.
So, do ERP projects fail? Yes. Some ERP implementation projects fail to meet the business goals. ERP projects can fail to go live on time, costing valuable resources. But one of the most common reasons why ERP implementation isn’t successful is because the core team of the business is inexperienced with ERP implementation and unprepared for the magnitude of the responsibility placed upon them.
To speak with a knowledgeable ERP and digital transformations specialist about the complexities of your business and how best to select an ERP system or begin the ERP research and analysis processes, reach out to us. With new software and new processes, the future possibilities for your business are endless. And after your ERP selection, we’ll stick around to manage your ERP implementation project for you as well.
