ERP Implementation Failure Rates

Adding a brand new ERP system to your software portfolio should be a cause for celebration. With all the time and cost-saving benefits that a properly set up ERP brings to the table, surely there are good times ahead…right? Unfortunately, the reality is, ERP implementations have a scary-high failure rate, with modest estimates predicting that a little over 20% of ERP implementations will fail in 2016. So just because you have made the right decision in getting on board with a state-of-the-art ERP, does not mean that you’re on the fast track to realizing the benefits and obtaining a lasting competitive advantage. ERP implementation failure is a real threat to your mission and should be planned for accordingly!

Below are the 4 main reasons that ERP implementations fail and ways you can avoid them. Understanding these problems and solutions could make the difference between thousands of dollars in implementation costs and a lot of headache for you and your colleagues!

1. Unclear goals and poor planning

The first step of the implementation process is also the most important. Properly planning out the project should set you on the right path to a successful implementation. However,  this is also the time when your team is the least familiar with the ERP and, most likely, not entirely sold on its upside. It is recommended that the implementation team go through a brief, generalized training process before they begin planning for the implementation. This will allow them to appreciate the program and understand it better in the big picture. It is also helpful if the intended users of the program have some say in the initial planning process. This will encourage them to provide useful feedback throughout all stages of the implementation, as well, as make useful suggestions, during planning, based on how they see themselves using the program.

Another issue that is common during the planning phase is over-customization. The implementation process is convoluted enough as it is, during this stage, it is important that you resist the urge to make unnecessary changes to the scope of the project based on things you feel would be nice to have. Before adjusting the scope for customization, ask yourself, is this 100% necessary? If the answer is “no,” rethink adding it to the list of things to do during initial implementation. Reducing the number of moving parts is a great way to reduce the risk of ERP implementation failure.

2. Lack of communication

Poor communication is the easiest way to risk ERP implementation failure. It goes without say, that with a project as important as this, communication is key. However, it may not go without say, how important it is to be on top of communication throughout the project. Making sure the team is properly communicating will be a project within a project during this process. First, you must determine who needs to be talking to who. Identify and inform the team of who should be notified if a problem should emerge in a particular domain and, just as important, who is responsible for solving the problem. If there are questions that need answers, people must know who to ask. It is recommended that before the project begins there should a clear map of communication, with a single point-of-contact, for all the team members to follow. They should know who can help them with a particular problem, whether it be a company-side domain expert or a consultant-side ERP expert, before the problem arrives.

Also, it is strongly recommended that weekly status meetings are held to keep the team updated and aware of changes or progress. During these meetings, it is crucial that everything is documented!

3. Lack of employee expertise

It is important that the right people are involved in the implementation process. A good team will involve a combination of department managers/domain experts, key executives, intended users, and outside ERP consultants with expertise in your specific industry. This mix will allow you to handle the various problems that arise as the implementation goes forward. You may find that adding this extra burden to your already burdened enough department managers may be too much for them and cause burnout. This is why it is important that you included the intended users in the planning phase of the implementation and have set up your communications map with clear points-of-contact. This will allow you to rely heavily on these team members to do the heavy lifting with the implementation, and if they get stuck they know who they can turn to in order to get things back on track.

4. Poor Project Manager

Heavy is the head that wears this crown. The project manager is easily the most important individual involved in the implementation process. Aside from the litany of standard managerial skills needed to complete a normal project on schedule and within budget, the person you select as the project manager for your ERP implementation must understand a few things before beginning an ERP implementation or it could turn into an ERP implementation failure.

First, as a pre-qualifier to be a project manager for an ERP implementation, they must have system knowledge of the particular ERP you are implementing, as well as, a deep understanding of your company so they can identify possible risks and problems before things get too complicated. They must also understand the value of communication and how to maintain it as outlined above. They must be prepared to be an active participant at any level or step of the way, from planning to finishing touches, because they’re going to get their hands dirty. Finally, they must be aware of the delicate relationship between the clients and the consultants. If and when there is a hiccup, the project manager must be able to take the heat in order to prevent finger pointing and maintain an open and pleasant relationship between the client and consultants. Because, if the relationship is damaged and communication breaks down, the whole project can go down in flames faster than you can say NetSuite.

I hope this article finds you in time to be useful and if you’re a part of the 20% that has experienced an ERP implementation failure, do not be discouraged, because you are not alone. If you have any questions please feel free to post them in the comments section below. And if you liked the article and want more, please subscribe!

Source Citation

Prasanta Kumar Dey Benjamin Thomas Clegg David J. Bennett, (2010),”Managing enterprise resource
planning projects”, Business Process Management Journal, Vol. 16 pp. 282 – 296

Przemysław Lech, (2016) “Causes and remedies for the dominant risk factors in Enterprise System implementation projects: the consultants’ perspective”, SpringerPlus, vol.5 DOI 10.1186/s40064-016-1862-9

Eric Kimberling, (2015) “Key findings from the 2015 ERP report” Panorama Consulting, http://panorama-consulting.com/key-findings-from-the-2015-erp-report/