Implementing an ERP systems involves a series of processes, including customization, integration, data conversion, testing, training, and maintenance. Since all these cost a lot of money, ERP implementations are considered expensive propositions. Evidently, an organization that spends its resources to choose and implement the right ERP solution will do everything possible to ensure success. However, ERP implementation failure is fairly common these days. Why so many businesses fail to leverage their ERP investments?
Before looking into the reasons why ERP systems fail to deliver the expected, it’s critical to define what exactly constitutes an ERP implementation failure. Typically, ERP failure relates to overall operational efficiency and business benefits. A few examples include the inability of the new system to meet the expectations estimated, budget overruns, and incorrect working of the system.
ERP implementation failures entail negative consequences for companies. But the good news is that most failures can be prevented. To avoid turning an ERP system, which was developed to help companies perform optimally and grab more market share, into a “parasite” that depletes the resources of your organization, it’s critical to assess the real reasons why ERP implementations fail.
- Unrealistic expectations: Most companies don’t understand the implications of ERP implementations, so they fail to allocate time, money, and other resources efficiently. In addition, business goals and desired functionalities aren’t communicated clearly, which may cause a great deal of confusion. Sometimes, project initiators are unsure of what they want, repeatedly changing goals and requirements; this may lead to delays, increased costs, and a software solution of inferior quality. Other times, they’re just too enthusiastic about anticipated success, without knowing if the solution they’ve chosen can actually help them achieve their goals.
- Lack of technical knowledge: Since leadership teams rarely support the idea of unlimited funding for continuous ERP customization and maintenance performed by third-party professionals, there’s an increase demand for complex training programs and appropriate documentation (e.g. e-books, whitepapers, and step-by-step guides on how to configure the system to fit specific business scenarios and meet certain requirements). However, ERP training is usually inadequate and vague regarding software setup. As you may already know, lack of training can prevent staff from making the most of the ERP solution you’ve implemented. Furthermore, your employees will be unable to fine-tune the system according to future business requirements, which may seriously hinder your company’s progress and increase dependence on third-party ERP services.
- Failure to manage organizational change: Understanding current business processes and setting short-term objectives are two factors that could help prevent ERP implementation failure. But there’s one more thing you must consider: business requirements change over time. One day, you may want to expand your business and hire 1,000 new employees. Is your ERP system able to support this type of change?
Understanding things like ERP implementation costs, resource allocation, change management, and employee training can help ensure ERP implementation success. But how can you avoid ERP implementation failure? Here are a few takeaways to help you out:
- Define your business operations, goals, and deadlines before selecting an ERP system. Most business owners don’t even know how their business processes work and rarely establish any goals. In their view, the ERP system should be able to do everything once it’s up and running. Now, that’s an excellent recipe for…failure.
- Don’t rely exclusively on your vendor. Think about what you expect from the ERP system and how you’ll manage change in your organization. Also, delineate what exactly constitutes ERP implementation success and failure according to your own company’s “as-is” and ideal “to-be” states.
- Require appropriate ERP training, documentation from the developer, and access to vendor’s support website. For example, Microsoft provides extensive technical support, e-books, whitepapers, articles, and online forums to ensure that all of its customers will be successful with Dynamics ERP software solutions, such as Dynamics AX and Dynamics NAV, over the long run.
Doing all these upfront will take a lot of time but will help you avoid ERP implementation failure, which can inflict a great deal of pain on your organization later on.