The top 5 Reasons Why ERP Implementations Fail
The 2017 report on ERP systems & enterprise software from Panorama Consulting states that 25% of ERP implementations represented in the study failed, and a staggering 50% of participants reported dissatisfaction with the ERP vendor, while 25% were neutral towards them.
Does this mean that while the implementation process itself usually goes fine but the software doesn’t live up to the promised expectations? It’s difficult to say. There is clearly some dissonance in the data because 93% of all businesses that participated in the study reposted to measure improvements to their business processes.
To shed some light on these contradicting numbers, we should first introduce a definition for failure. A failed ERP implementation can be anything from exceeding the timeline or budget of the project, to bankruptcy due to a troubled implementation. The definition of failure is broad. Fundamentally, if an ERP software does not meet set expectations, it is considered a failure.
The expectations for each ERP implementation project will be different, as will the risk of failure it might experience. However, there are a few things that will cause at least some degree of failure in the project.
Let’s take a look at five most frequent reasons ERP implementations fail:
Choosing the wrong vendor
ERP software can be very complex. It’s not always easy to understand exact features and how those features can benefit your company. On top of that, vendors often make things more difficult by over selling their software and minimizing issues or concealing the lack of a fit. According to a report from Gartner, many businesses report there is a lack of clarity when it comes to total cost and timeline for ERP implementations, and it’s difficult to compare different vendors to each other due to the lack of industry standards. These difficulties often result in a customer selecting an ERP product that is ill-suited to their industry or business needs — and a vendor that let them make that decision.
Too much customization
In an attempt to deliver a bespoke ERP system, many vendors and customers add too much unnecessary complexity to the solution. This extends the timeline for implementation, increases the costs, and adds to the risk of technical issues arising. Remember, an ERP system is supposed to make your business processes run easier, which might mean sticking to standardized solutions now and then.
Lack of organizational change management
It’s wrong to assume that a new ERP system effects only business processes because behind those processes are employees who run them. A proper change management strategy will manage the effects a new ERP system has on the company and deal with any resistance to change.
Unrealistic approach
When budgets are exceeded and timelines are overrun, it is seldom due to unforeseen costs. The biggest reason is an unrealistic approach to budgeting and time management. As a result, consultancy fees, internal staff needs, additional tech requirements etc. get underestimated in the planning phase of the implementation project.
Lack of direction
Many companies buy into the idea that implementing a ERP software will automatically result in improvements. While this is not entirely wrong, each company that implements an ERP system needs to have a clear definition of what they are trying to improve, and how the success is going to look like for their specific case. Lack of that leads to difficulties in staying on track and dedicating ownership of the project to someone.
