Reasons Why ERP Systems Sometimes Fail
It doesn’t matter what type of business you may work in, I am sure you have heard the saying “you need the right tools in order to be successful at your job”. Unfortunately, being in possession of the right tools is not an instant solution. A computer or new software can not magically transform a company into a paragon of efficiency. Going into any new IT initiative, let alone one the magnitude of an ERP implementation, with that mindset leads to a sequence of events that leads to a failed objective.
Here are some common reasons your ERP implementation may fail and some advice on how to prevent this from happening within your organization:
- Following Best Business Practices. ERP systems in general come built with many templates that help regulate business practices among any size organization. Failure happens when the individuals within the organization refuse to abide by these templates and instead resume using existing processes. Unwillingness to adopt the new system, causes decision makers to ask for modified templates to be created to replicate the old processes. This results in unnecessary manual tasks and creates maintenance issues in the long-term. When you start to modify away from existing templates, you are neutralizing the benefits of a new system.
- Project Management. In most instances, the decision makers only stay involved in the process of implementing a new ERP system until the decision on what system and what partner is chosen. The project is then turned over to a Project Manager who in most cases has no authority to implement business process changes. Either causing appropriate decisions to get stalled or never finalized. Another problem is when an organization appoints a Project Manager that still has a full-time job on their plate outside of the ERP project. To effectively manage an ERP implementation, this manager has to be very detailed focused, while keeping in perspective the desired business objectives. Choosing the wrong person can cause the project to fail before it really has a chance to get off the ground.
- Budget. The most significant cost in an ERP implementation is not the cost of software, but the cost of implementation. Most organizations don’t appropriately budget, leaving not enough resources for proper project management and outside consulting fees. To better budget for an ERP implementation, you should budget roughly 3 times the cost of the software.
- Implementation Schedule. First and foremost, it is not usually in an organizations best interest to choose a go-live date and then try to schedule milestones based on that date. In doing this, you are inadvertently causing incomplete tasks and sloppy attention to detail. The project schedule should be the foundation for a successful ERP implementation. The schedule should be updated and reviewed weekly and should logically progress to a go-live conclusion.
- Training and Education. Organizations often fail in the education and training of a new ERP system and its functions. Users need to have proper knowledge and training of the system in order to be successful at their jobs. Training should take place during the ERP implementation, with a heavy emphasis right before the go-live date. Education is also important, as this gives the users the knowledge of the system and concepts. The best way an organization can help themselves is by committing to the training and education of their entire staff from management all the way down to each and every employee.
An overwhelming amount of ERP system failures are caused by lack of proper management of one or maybe all of the above items. It is common for an organization to blame the ERP project failure on a technical issue or even on the Consultant that is in charge of the implementation, when in fact those issues are not usually the leading cause. If you are considering an upgrade or implementing a new ERP system, make sure that you are working with a partner that can offer you strong project management skills and can help put a plan together to address each of the points above.