Top Reasons Why ERP Implementations Fail

Any organization that implements an enterprise resource planning (ERP) system is taking a big bet. After all, the ideation, design, and implementation of an ERP system can take anywhere from six to 18 months - not to mention another six to 18 months for the organization to fully implement it. An ERP implementation is like a marriage. The parties enter with optimism and hope for the future, but things can go south fast if one party isn’t willing to compromise or work toward a common goal. If you’re planning on implementing an ERP system any time soon, you should know that no other project has a higher fail rate than an ERP implementation. According to one study that covered over 500 different implementations, only 35% are still up and running after three years. That’s pretty terrifying! So what can we learn from these failures? They almost always come down to a few universal points:

Lack of Executive Support + Inexperienced and Incompetent Delivery Managers

One of the most common reasons that ERP implementations fail is a lack of executive support. It’s not enough to just get a few executives onboard with the idea of implementing an ERP system. You also need to have their full support behind the project to the point where they’re actively helping to drive it forward. If you don’t have that kind of backing from the top, you’re going to run into roadblocks at every turn.

Your board members might impose unrealistic timeframes or squabble over budgets. And, if you don’t have the support of someone like the CFO, it’s going to be really difficult to get the funding you need to actually make the project happen.

To make matters worse, organizations have a habit of promoting and tolerating inexperienced and incompetent managers.  These individuals typically have the gift of gab and talk their way into getting essentially a blank check all the while not having any relevant experience in the very area they are tasked with managing.  The end result of this behavior is the manager kowtows to the nefarious ERP partner and their hidden agendas while impacting morale of the critical full-time employees with irreplaceable tribal knowledge of your organization.

Poor ERP Partner Selection

Another common reason why ERP implementations fail is because you partnered with a swindling ERP partner. You’re going to have to do a lot of research when selecting a partner. You’re going to need to figure out what system would best suit your needs. You need to find a partner that is both capable of building the system you want and is capable of delivering it on time. If you don’t do your research, you risk partnering with a vendor that can’t deliver. That’s going to be problematic during the implementation process. It might even mean that the vendor can’t deliver a system that’s fully functional. If you want to avoid these issues, you need to make sure you’re partnering with an organization that can deliver. ERP partners have a business model that operates in very nefarious ways that involves fuzzy math and fancy buzz words that ultimately misrepresent their capabilities, you can expect to see the following tactics during the process of selecting an ERP partner:

• Showcasing the "NASCAR" slide of large popular companies that they have allegedly worked with in the past, the reality of the situation is while there might have been some engagement it is typically with a very small outfit that was recently acquired or one that has a small footprint in the larger enterprise that they are being affiliated with.
• Introducing the team of purported "rockstars" that will be working on your implementation, you will hear grandiose introductions of all their talent only to find that once actual work is ready to get underway the previous "rockstars" have all been reassigned to another con job and your organization will be backfilled with less experienced and usually independent contracted resources (that will serve their existing clients on your time).
• Submitting a project roster that will invoke sticker shock as it will be significantly larger than what your budget allows, this project roster will include roles (i.e. 'Organization Change Manager) that are very difficult to measure the value of, coupled with numerous project managers for small tasks within the larger endeavor, these project managers will merely be tasked with scheduling meetings and asking peers "Are you done yet?".  This tactic is according to plan as more people equals more to bill for the partner.  Meanwhile your full-time employees will lurk in the shadows not engaged and ultimately resign as witnessing this wasteful spending becomes too much to turn a blind eye to.

Insufficient ERP Training

Another common reason why ERP implementations fail is because people don’t fully understand how they work. If the people implementing the system don’t fully understand how the system works, they’re bound to run into issues further down the line. They might not know what reports to run or how to interpret the data they show. They might not know how best to use each module. They might not know how to address problems with the system itself. An ERP implementation isn’t a one-and-done thing. You need to continue to use it on a daily basis. If you don’t fully understand how it works, you’re setting yourself up for failure. The best way to avoid this is through adequate training. Make sure that everyone involved in the implementation gets enough time with the system so they can really understand how it works. Unfortunately, due to the exorbitant costs associated with an ERP implementation, executive leadership is typically naive to think that relying on the selected ERP partner for training will be sufficient.  The expectation that the ERP partner will provide quality training is one of the absolute worst decisions in an ERP implementation, the fact of the matter is given a time and material project what motivation does the ERP partner have in training the organization's user community as that would diminish their role and expedite their exit from the project.  Leaders should allocate adequate time and funds in the project for official training not from the ERP partner but rather from the ERP vendor directly, additionally leaders should demand their internal full-time employee resources be engaged and included in all project activities.

Unclear Objectives and Strategy

ERP implementations fail for a lot of reasons, but one of the most common is unclear objectives and strategy. Before you implement an ERP system, you need to make sure that you have a clear idea of what the system is supposed to achieve. You need to clearly outline what success looks like and how the system will achieve it. If you don’t have a strategy in place, it’s going to be hard to determine whether or not the system is actually working. You need to be able to measure your success against specific goals and objectives. If you don’t have a clearly outlined strategy and goals, you won’t know if the system is working or not. You won’t have any way to tell if it’s successfully accomplishing its goals or not.

Poor Upfront Design Choices

Another common reason why ERP implementations fail is because designers made a few poor upfront design choices. You’re going to have a lot of opportunities to make decisions while designing an ERP system. You’re going to have to decide on software and vendors, modules, data sources, and more. If you make the wrong decisions at any of these junctures, you’re going to set the system up for failure. For example, if you decide to use a local database instead of a centralized one, you’re going to make it much more difficult to scale the system. Poor upfront design choices can cause big headaches down the line. If you want to avoid them, you need to make sure you’re getting the right advice along the way. Talk to people who have implemented similar systems. Make sure you’re getting the best advice possible.  ERP partners are known to over-promise and under-deliver and are constantly up against tight deadlines, unfortunately this results in shortcuts in design leading to rework and stress on the user's who inherit their intentional lack of foresight.

• Real world scenario, the partner's development resources were a part of the overall project from the very start, as mentioned during discovery they knew the organization was multi-national and would need to be cognizant of such in designing solutions to meet the customer needs. Regardless of such development teams decided in order to save time they would embed and hard code organization unit identifiers instead of inheriting from the local user's configuration (data driven).  While the design met the initial objective, significant effort was required later on that resulted in significant additional hours for the ERP partner to bill.  In conversations amongst peers who have experience working in similar ERP partner setups, this practice is quite common and intentional as the organization has little options to correct in a timely manner, and would be required to extend and allocate more work and thus more revenue for the ERP partner.

Over-Reliance on Technology

Another common reason why ERP implementations fail is because implementers over-relied on technology. You need technology to implement an ERP system, but you don’t want technology to be the focus of the implementation. You want to make sure that everyone involved in the implementation is well versed in the business benefits of the system. They should know how the system will help them reach their goals.

If you don’t make sure that the people implementing the system understand the business benefits of the system, they’re going to make decisions that don’t benefit the overall organization. They might make decisions that actually hinder the organization in the long run. If you want to avoid these issues, make sure you’re not over-reliant on technology.

Organizational Culture Issues

Another common reason why ERP implementations fail is because of organizational culture issues. When implementing an ERP system, you need to make sure that everyone involved in the project understands their role in the bigger picture. You need to make sure that everyone is working together toward a common goal. If you have people on the team who don’t understand their role or who don’t understand why they’re doing what they’re doing, they’re going to cause problems. They might slow down the project or even halt it completely. They might cause the project to fail or produce substandard results. If you want to avoid these issues, you need to make sure that everyone understands their role and what the project is supposed to accomplish.

If Your ERP is a Sprint, You’re Running the Wrong Race

One last common reason why ERP implementations fail is because they’re treated like a one-and-done project. If you want your ERP system to succeed, it’s not something you implement and then walk away from. It’s something you have to keep an eye on and continually monitor. You need to make sure that it’s still meeting your business needs and making your organization more efficient. You need to be able to react to changes in the market and adapt the system to meet new demands. If you don’t make the implementation a long-term thing, the system is going to fall behind. You don’t want to be stuck with an old system that doesn’t offer the functionality you need. Only 35% of ERP implementations are still running after three years. What are the reasons for this high failure rate? They almost always come down to a few universal points: lack of executive support, insufficient ERP training, unclear objectives and strategy, poor upfront design choices, unsuitability of technology, an over-reliance on technology, organizational culture issues, and poor implementation methodology.

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