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Top 10 reasons for ERP implementation failure

History is replete with instances of ERP system implementation failures. However, to call them failures would be a massive understatement. Such ERP failures could also cause tremendous loss of reputation and goodwill. Forbes mentioned in its list of “Infamous software disasters”, the “Nike ERP disaster” that led to a whopping 20% stock dip in the year 2000. Another on the list was the “not so sweet” experience for Hershey’s failure of ERP implementation. Their inability to ship 100 million worth of chocolate Kisses and Jolly Ranchers candies for Halloween cost them dearly.  ERP implementation failures can be prevented if there are some points that companies address

A study conducted by Ziff Davis ‘Top 5 Reasons ERP Implementations Fail and What You Can Do About It’, states

Pretty much everyone knows that relying on technology to solve a business problem is only part of the solution. Without the ever-critical support from top management, for example, all of your best-laid plans will certainly be side-tracked at best and, at worst, fail outright; leaving you and anyone else that can be, holding the bag…Failure takes many forms but often involves things like key people leaving in the middle of the project (sometimes your SI will actually steal them away), management failing to provide the promised resources, key performance indicators (KPIs) and deadlines being missed, fearful employees refusing to change digging in their heels … these and a whole host of other costly surprises await the uninitiated.”

Let us now look at the top 10 reasons for ERP implementation failure:

1. Lack of defined goals

ERP systems implementation often fails even before they start. Quite often there are companies who do not know the reasons for their decision to buy an ERP in the first place. They become convinced that the ERP software implementation would make all their business related issues go away or they might just be joining the rat race. They need to adopt a more realistic approach and sense as to what it is that they hope to achieve with the new ERP. It could be a reduction in operational losses or facilitation of seamless flow of information between different departments or reorganization/reduction of their manpower. Defined goals must be clearly articulated which would allow them to measure the success of an ERP system implementation.

2. The wrong or undefined scope of the project

One of the biggest mistakes that any company makes is the wrong or undefined scope of the project. The scope of the project needs to be aptly defined so that there is no scope for confusion.

3. Overselling the system by the ERP Vendor leading to expectations mismatch

Many a time, Vendor’s Sales teams tend to oversell the product and its benefits. An executive may be tempted to give an estimate of 1-2 months implementation period to close the deal while it actually may take around 5. Or the promises made could be that “All” the information would be available to you “in real time” “at the click of a button” or “All your business problems with vanish with ERP”. Such practices lead to expectation mismatch and tend to break the trust between the ERP Vendor and the Customer. It could also mean a loss of face for the Management who had pushed for ERP system implementation and announced these unrealistic targets to their teams.

4. Lack of change management

Generally considered a linchpin in a company’s success, ERP software doesn’t always have a smooth implementation, especially if the company fails to pay sufficient attention to change management. Not being able to manage the change is perhaps one of the major reasons for ERP implementation failure. Please ensure that the right sets of people who are receptive to change are involved in the Core ERP teams. Incentivize people who show a positive attitude towards the Change.

 5. Customization

Customization requires major/minor changes in the source code of the ERP system implementation. This is a very complex process and requires a lot of time and efforts at both the party’s sides. Heavy customization would inadvertently push back go-live dates and also lead to cost escalations. Time is of the great essence during ERP software implementation as organizations cannot be in a state of flux for long periods. Even if there are customizations, the Companies should attempt to only do Show Stopper Customizations first and then Go-Live on the ERP. Rest of the Customizations can be delivered post-Go-Live too. Otherwise waiting for all the Customizations would lead to longer Go-Live times which could mean organizations losing faith in ERP.

6. Lack of proper training and building internal capacity

Training is one of the stages of ERP project implementation. It is important that the Users take the training exercise extremely seriously and thoroughly understand each and every process that they have to work on. The Test Cases prepared by the Company must be thoroughly run with the Test Data.

The lifespan of ERP extends to decades. During this time new employees will join in and some of the existing employees will leave. So it is important that Companies have an internal resource pool (Champion Users) which is trained well in ERP. This internal capacity building would mean that the new employees can be easily trained by these Champion Users without any dependence on the ERP system implementation company.

7. Lack of clearly identified resources for implementation

One of the most critical factors in ERP implementation failure is a lack of clearly defined Single Point of Contact (SPOC) and the Steering Group, for the successful implementation. ERP implementation is an enterprise-wide exercise and hence clarity of communication between Steering Group, SPOC, and the individual Users must be maintained.

8. Handling User’s resistance

Its human tendency to resist anything new. People will have all sorts of fears and misconceptions about the ERP. Please ensure that your employees are involved heavily in the implementation and are well informed about all the aspects of the ERP. All your ERP related decisions, your decision of getting an ERP to its go-live dates, should be communicated companywide. All this communication will help you get their ownership.

9. Lack of Communication with the ERP Vendor

Any ERP related queries should be openly discussed with your ERP vendor. It will put your worries to ease and help them analyze your needs. Consistent communication during the ERP implementation is extremely important. Regularly schedules meet and calls can often be very helpful in making the whole process smooth.

10. Unrealistic expectations of the Users

Unrealistic expectations on the part of the user also tend to be one of the causes of dissatisfaction among them. There are certain processes which you may have to keep out of the ERP. So let us say if there is a Government Tender. The user may have an expectation that the Tender response will be generated automatically as per the Tender Conditions from the ERP. This is an unrealistic expectation as every Tender has different terms and conditions and formats. While the data you need to fill up in the Tender may come from ERP but an ERP cannot generate a response to the Tender automatically. Having realistic expectations from your ERP system would ensure that the ERP implementation doesn’t fail.

Our next generation ERP software ebizframe has a reputation for delivering great user experiences.  Besides the ebizframe Software configuration, we will also guide you on various aspects such as Change Management so as to ensure that ERP implementation failure does not occur. Get in touch with us at marketing@ebizframe.com and get to know how ebizframe can transform your business.