ERP Risk factors are real. ERP projects can run into time delays and cost overruns. There’s a risk that the technology does not drive key business process improvements. Even at go live, there’s a risk the entire implementation fails if the project was not based on a solid foundation.
ERP risk is compounded when an organization faces a complicated legacy technology environment with multiple integration points, manual workarounds, standalone systems, changing requirements and unrealistic schedules.
These are just a few of the ERP risk factors project teams face as they undergo an ERP project journey, and each journey is as unique as the company and the people conducting the project.
3 Common ERP Risk Factors
Over the decades, our team of ERP consultants understands that the following are three common factors to every ERP project in the manufacturing and distribution industries:
- Risk of delays
- Cost overruns
No matter the size organization, lack of proper preparation is the main cause and growth of risk, cost and complexity factors within an ERP project.
How have the teams we work with been effectivie in reducing and mitigating common ERP risk factors? In a word: preparation
Preparation: Key to Reducing Risk
A key success factor in reducing ERP risk factors is leveraging proven, end-to-end methodology from the very first stages of an ERP project. It’s imperative to look at current business processes, be sure the team has proper ERP vendor and system education, and set a clear vision of the company’s future state.
One of the major risks we watch for is when an ERP project loses the focus on the chance for improvement and transformation of business information processes. A successful ERP project should be thought of as a business transformation, which requires change that must be managed.
To help manage risk, we believe organizational change management should be woven into the fabric of the project methodology and be part of the transformation journey from the start.
Within the change management phase, it’s important to undertake both an ERP Readiness Assessment, and evaluate risk in areas such as.
- Project Organization Risk. Look at the ERP Project steering committee, the project manager, and the team process owners. Are the right people in the right positions?
- Scope Risk. Is the scope of the project possible?
- Readiness Risk. Are there readiness issues and risk?
- Schedule Risk. Are schedule expectations defined and are they realistic?
- Budget Risk. Is the project properly funded?
It’s also key to look at the risks of poor end-user training, or the potential for user resistance of the new system. Consider the ERP training and education program, to make sure users will be adequately trained in the use of the system. We’ve seen cases where an improved education and training program reduces the risk of end-user resistance.
A thorough assessment also addresses any risks associated with the full implementation plan including integration, testing and data conversion.
View an archived webinar to see a structured approach to risk analysis and action – one that addresses the project planning phases as well as business process improvement, ERP selection and implementation support. You’ll learn how to combat risk and keep your ERP project alive.
Resources to Manage ERP Risk Factors
We well know the time, resources, investment and other inputs needed for ERP selection and implementation, especially when business process improvement is the end-goal.
- When it comes to ERP risk factors, there’s a solid business case for planning and preparation. Read more via a blog post giving an overview of an ERP risk management plan
- In addition, see an archived webinar entitled “Risk Management and ERP: Get Your Plan Together (or else!)” Ultra Partner Rich Sides presents a structured approach to risk analysis and action – one that addresses the project planning phases as well as business process improvement, ERP selection and implementation support – to help you move you forward, combat risk, and keep your ERP project alive.
Understanding and managing ERP project risk is an important part of the transformation journey. Please share your thoughts about ERP and risk in the comments below.