Top 3 Reasons Why ERP Projects Fail

    11/17/22 10:00 AM

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    The most common reasons for ERP project failure may surprise you

    That vast majority of ERP projects are successful. There are obstacles and challenges associated with any large project, but good teams always succeed. That means you understood the specific steps in the ERP project, built a strong ERP implementation team, and made sure business objectives drove the primary deliverables of the expected new and improved functionality.

    Visual South has years of experience helping companies select and implement ERP, so we have a keen eye when it comes to the success and failure markers for these types of projects.

    Learn from the top 3 reasons ERP projects fail

    1.Underestimated Time and Effort

    Given that most ERP implementations take a minimum of six months to reach an initial go-live, one might assume that everyone involved realizes it is a big project. However, many of ERP providers will downplay the effort to gain a prospect’s business, claiming it’s an easy, DIY process that involves mostly web classes. People want to believe this because it makes implementation seem simple and inexpensive, which is not accurate. We often talk with organizations who are looking for another system for this reason—their ERP project failed due to setting improper expectations (whether intentionally or not).

    The proper expectation to have is that an ERP implementation is a complex project. It’s best to create a detailed project plan with line-item tasks, timelines, and deadlines, and a list of who is responsible for completing the tasks. There should be two project managers to ensure success. It’s necessary to have project management for the ERP vendor whose team is providing the coaching, guidance, and expertise to the customer. This ensures proper and efficient actions are taken. In addition, a project manager for the company implementing the software is needed. Both are essential as there are numerous tasks to schedule, manage, and ensure were completed properly before moving on to the next action item.

    Adding to the complexity is that ERP projects affect and impact multiple departments. In short, ERP implementations will involve a large group of people. Every department lead must make sure they address tasks on time, so the entire project isn’t slowed down.

    Having a strong project team with subject matter experts and members that simply get things done is essential. Please check out this blog and thoughts to consider when assembling your project team: Common Structures of an ERP Team

    2. Inadequate Funding

    Not having enough money is one of the biggest reasons for ERP project failure. There have been many instances where companies create an ERP budget before determining their needs. An arbitrary number is set that has no alignment with the effort needed to create processes with a new business toolset that directly improves the performance of the organization.

    Unfortunately, some ERP vendors present lowered implementation costs to meet the arbitrary budget and win the deal. They do not alert their customer that by doing this, there is a significant risk of failure due to not having enough training, coaching, consulting, testing, and validation hours allocated for the project. It is a red flag if your ERP vendor:

     Does not provide project management

      • Does not include hours for data conversion (it is not going to convert itself!)
      • Offers limited time for new procedural development and documentation, which is the heaviest lift during an implementation
      • Does not have go-live prep assistance, or a plan to enter dynamic data (e.g., open orders, open purchase orders, work orders in process, open AR and open AP, and inventory)
      • Does not include time to support accounting after first month end-close
      • Does not offer after go-live support for ad-hoc questions and continuous improvement
      • Tries to execute a late switch from on-shore to lower cost and lower quality off-shore implementation resources

    Our advice is to do everything possible to properly fund the project, from both a licensing and services perspective. Then, if budget requirements still exist, collaborate with your provider to identify up-front areas that can be phased in or responsibly shifted to your internal team. The key is to do this before signing agreements to eliminate the possibility of the ERP project failing.

    3. Internal Saboteurs

    It may seem odd, but this is a real risk and consistent reason for ERP project failure. As ERP consultants, we typically work with those who are champions for change. The overwhelming majority are positive people who are open to improving processes, and want to make a difference in the company.

    But not everyone is a team player. Some internal stakeholders won’t care about the good of the organization, but only if they can keep doing the things they’ve done for many years. The fact that they must change is a negative to them.

    We’ve even had situations where the implementation project leader was the person least open to change. Needless to say, the project struggled because roadblocks were thrown up left and right—from simple resource scheduling to dishonest communications. We have seen department heads create all kinds of dissension, delays, and uncertainty due to not being on board with the implementation. It happens, because people like the system they have (however outdated or inefficient it may be) and derail the implementation.

    Do your best to evaluate those you hand the keys to for the project, and make sure they are truly aligned with the positive outcome a new ERP system will deliver. It’s critical.

    Summary

    ERP implementations are a challenge, but welcome when done right. Keep these reasons for ERP project failure in mind, so they can be avoided. New ERPs introduce change, and managing that change, both functionally and culturally, is not easy. It requires project and people management. It also requires enough help from the software implementer, and those in charge of the project must be on board with it. When all these factors come together, your implementation will be a success.

    Visual South helps manufacturing companies successfully implement Infor ERP software. If you want to discuss benefits that your company can achieve with an ERP system and implement it successfully, simply reach out and have a free 30-minute consultation. Schedule your free consultation here.

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    Tim O'Brien

    Written by Tim O'Brien

    Tim has over 20 years of successful experience helping companies improve their processes and operations using enterprise software solutions. Those enterprise solutions include Enterprise Resource Planning for manufacturers, Service Management for service oriented companies, and Enterprise Asset Management in the process manufacturing industry.