Why Do ERP Implementations Often Fail?

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A recent Deloitte report suggested anywhere between 55% and 75% of ERP projects fail to attain their objectives. These figures can seem intimidating for a business contemplating using an ERP to streamline and automate its business processes.

However, these numbers represent an easily explained and avoided phenomenon, as we now know and can point out the common denominators for failed ERP implementation attempts.

From inadequate resource allocation to a lack of internal communication, the reasons for ERP implementation going belly up may vary.

We have listed nine common reasons for ERP implementation failures that will help you take adequate precautions and prepare better, so your ERP implementation goes smoothly and successfully.

1. Lack of clear objectives and goals

When you decide to start using an ERP system, you may have a broad vision of your goals in mind. These may include automating certain manual processes, ensuring timely deliveries, better project management, etc. However, being vague about your needs and requirements can hurt your ERP implementation.

Have a clear objective about what you want the ERP platform to do and specific KPIs you expect it to achieve. ERP implementations are complex and time-consuming, and keeping clear objectives, timelines, and key milestones in mind is essential.

2. Inadequate resources and finances

ERP is a comprehensive business software solution that can be quite expensive. More often than not, additional hidden costs related to testing, implementation, training, and ongoing maintenance and support arise.

Many businesses fail to recognize that additional expenses are expected along the way, especially when customizations or specific niche modules are required. Failing to plan for different miscellaneous expenses can become a significant bottleneck in the implementation process.

Make sure to allocate a budget for your ERP implementation, and put aside a contingency fund of 25%. This will help avoid surprises as you may also need to invest in newer hardware.

3. Conflict among stakeholders

Many ERP implementations fail because business leaders and managers disagree over certain aspects of the ERP implementation project. All relevant stakeholders must commit to agreeing, sort disagreements, and allow each other leeway to reallocate resources when circumstances change.

We have noticed that key decision makers often disagree with each other during ERP implementations due to differing opinions and a lack of technical understanding. It is essential to speak to the vendor each time disagreements arise, even before execution, so that all involved get a clear, aligned understanding of the project’s milestones.

4. Inadequate change management

A large portion of ERP implementation fails when the staff or the organization as a whole is not ready to use the new ERP. Change management is a critical facet of ERP implementation, which, unfortunately, many organizations take for granted.

It is vital to appoint a change management team that prioritizes identifying process changes, setting clear expectations, and considering the ERP end-users and the organizational culture.

5. Choosing an unsuitable vendor and an unfitting ERP model

Not all ERP vendors are the same. Many target specific niches and others may not be as reputable as they claim to be. Choosing the wrong ERP product with subpar customer service and customization skills can hurt your implementation efforts.

You will likely sabotage your implementation if you choose the wrong ERP model. For instance, on-premise implementations are rarely required, primarily when cloud-delivered ERP solutions exist on subscription models.

6. Unrealistic expectations from an ERP

Misalignment of the ERP implementation with your expectations and goals may cause you to consider a successful implementation a failure.

An ERP is an excellent solution to automate, manage, and gain insight into your business processes. However, it is unlikely to magically salvage a business failing due to a faulty strategy or lack of funds.

Make sure that your expectations are closely aligned with ground realities. Understanding what an ERP is, how it helps businesses, and its limitations is essential before deciding to purchase it.

7. Problems with older data

Most businesses that purchase an ERP system already use legacy applications that contain a lot of data. These datasets need to be cleansed and made compatible with your new ERP system. Failing to do so may result in errors, unrecognizable datasets, and unforeseen issues.

Make sure you hire someone to cleanse your older data and make it compatible with newer software products. In addition, ensure that you have a central repository of older data before you begin implementation. This helps avoid errors during data transfer and ensures that your implementation process is smooth.

8. Inadequate testing before actual ERP rollout

Testing your brand new ERP is an essential component of implementation. However, some companies choose to go live without testing the software in a demo environment, patching mishaps as they go.

The testing milestone is not to disparage or skip, as prior testing will help you identify data migration problems, device incompatibility, improper integrations, etc.

The good news is that testing nowadays can be automated, and your vendor can help you test your ERP as part of the implementation process timeline. Make sure to discuss this before you commit to an ERP implementation project.

9. Improper or lack of staff training

One of the most overlooked aspects of ERP implementation is staff training. If your team does not know how to use a new ERP, they are likely to make critical errors while trying to learn how the new ERP works, making it easy for them to be tempted to return to legacy methods.

ERP solutions have a steep learning curve; training is essential for successful ERP implementation. Ensure you get your vendor on board to train your employees as part of the implementation process.

You can avoid ERP implementation failures.

Today, businesses can easily avoid ERP implementation failures with adequate planning and goal setting. In addition, it is vital to choose an ERP vendor that understands your needs and concerns and is willing to help you during the implementation process. Choose your vendor carefully, and monitor your implementation process with a designated ERP implementation project manager.

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The Author
Sarah Kesselman
Director of Customer & Technical Support

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