Why ERP Implementations Fail?

ERP solutions are revolutionizing the way companies work. They are a dream come true in integrating different parts of a company and ensuring real time flow of information across the retail enterprise, thus bringing lots of benefits to the organization. These systems are large and complex and warrant a careful planning and execution of their implementation. They are not mere software systems; they affect how a business conducts itself. Implementing an ERP causes massive change, at organization level and at individual user level, which needs to be carefully monitored and managed to reap the true value of the system. Critical issues/concerns that must be cautiously addressed to ensure successful implementation include

• Lack of commitment from top management: Top management does spend money for buying ERP but sometimes doesn’t put in the required time, energy and focus, which is the most important ingredient else the project is subject to failure, no matter what. It should always be kept in mind that no project, be it ERP implementation or a software upgrade, can be successful unless the drive is coming from the top. If the top management doesn’t take much interest then there is no way the employees would put in the required effort.

• Process re-engineering: ERP implementation brings significant changes into a company’s conventional business model and the day-to day practices it has been using for years or even decades. With the new system, information that a user enters in one screen becomes immediately available to another user; an employee’s level of responsibility is dramatically increased as it is more difficult (sometimes impossible) to fix erroneous data or typing errors; new approaches to data reporting thus, new managerial principles and practices have to be established; and finally, real business models and business processes might require significant reengineering. Companies that stay inflexible and don’t adapt to the best practices, lag behind despite best ERP system in place.

• Poor/incomplete master data: This issue is particularly symptomatic of companies that are implementing ERP for the first time and transferring their legacy data into the new system from Microsoft Excel sheets, manual records, or old applications. Most retail organizations do not have the right set of information and then they use approximation to fill in the places. This takes time and also sometimes doesn’t serve the purpose and even worse, sometimes appears incorrect in the new ERP. That is why test environments are built and pilots are run before putting the system live across the retail network.

• ERP vendor selection: Organizations are so focused on product/license cost of the ERP system that they forget to sign up for the right vendor as that might add some more money to the project cost. This mistake becomes evident during the ERP implementation when lack of vendor’s domain knowledge brings everything to ground. Selecting the right vendor is as critical and important as the product itself.

• Success criteria are unclear: Agreed goals and objectives are not set at the start of the project. As a result, wrong expectations keep building up and the project never comes to an end. Clear and frequent communication, between the stakeholders, is the only solution to it.

• Employee trainings: If the user has not been taking trainings seriously or the vendor has not been delivering the trainings properly, the user will not be able to use the system to its best and would simply add complexity to the equation, which might have its own ripple effects.

• Change management: This is the most difficult type of issue to resolve. These are the issues that originate from the aspect of human nature that never accepts any change without seeing the visible advantages of it. Big multinational companies, while implementing ERP, hire change agents for the project to become successful because they understand how important it is to mobilize human nature towards the right direction that is most effective and productive at the same time.

• Employee morale: ERP implementations generally take time and it becomes difficult for the participants to stay upbeat. Sooner or later, they burn out and thus its senior management’s responsibility to keep them motivated. Small wins should be celebrated to boost employees’ morale so they participate to their best. Generally, it is seen that mistakes are always highlighted and efforts are rarely appreciated, as a result frustration is developed and quality of work goes down.

Did I miss out anything? Which one do you think is the most critical?