Why Do ERP Implementations Fail?

Employing an effective ERP system can greatly affect the quality of insight that management has into its organization’s finance and operations data. So, when ERP implementation fails, it can wreak havoc on these leaders’ ability to plan, predict and analyze to keep the business running smoothly.

Take these instances, for example:

• In 2002, Nike lost $100 million in sales after a failed supply chain project
• In 1999, Hershey’s was unable to deliver $100 million worth of chocolate due to ERP implementation failure
• In 2004, a failed ERP implementation caused 27,000 students to be unable to register for classes or collect financial aid checks at the University of Massachusetts
• In 2013, an ERP implementation at Avon caused so many difficulties for employees that representatives left the company in droves. The company lost nearly $125 in expected revenue
• In 2014, HP’s failed implementation cost the company $160 million in order backlogs and lost revenue, more than five times the project’s estimated cost

It may come as a surprise, but the majority of ERP implementation failures occur as a result of issues from within the company rather than the software itself—and when it happens, it often times paralyzes the entire organization.

According to research compiled by softwareadvice.com, half of all implementation issues arise from poor change management, while buggy software only accounts for 18 percent of the blame. This highlights why having a well-thought-out plan and a strong internal selection and implementation project team is critical to the new software’s success. This team should include not only key leaders but also IT staff and process users throughout an organization, whether big or small.

ERP Focus reports that the responsibilities of this internal team should include the following:

• Specifying what the new system has to do
• Assisting in the selection of a system
• Performing a gap analysis on the chosen system to see where modifications to software or to procedures and processes are required
• Being the prime contact for communication with and within their functional area
• Managing the system integrators (SIs) and external consultants during the implementation phase

Additionally, ERP Focus recommends the system specifications should be determined with the help of the team. This includes:

• Telling potential suppliers what the system is required to do so that they can formally reply (and so that their responses can be written into the contract
• Allowing competing systems to be objectively evaluated
• Allowing the project team to carry out a gap analysis
• Limiting ‘mission creep’ once the project begins

After poor change management, insufficient functionality and consultant issues are tied for most common issues during ERP implementation. These each accounted for 36 percent of failures.

These issues highlight the need for detailed research, as well as the internal team’s and vendor’s ability to work together in determining appropriate customizations that meet specific business and regulatory requirements. It also emphasizes the importance of choosing an ERP vendor that exhibits strong communication and thoroughly understands the organization and its needs.

Finally, it’s important to remember not to disband the internal team once the implementation occurs. The team should remain intact to effectively tackle any issues that crop up, quickly remedy issues and continue to support the rest of the organization as it settles into using the new software.

Did you know that CuroGens’ CEO Jesper Kehlet is a wealth of knowledge when it comes to ERP implementation and ERP rescue? He has worked on hundreds of implementations and upgrades and was even part of the original Axapta development team (which is now Microsoft Dynamics AX, part of Dynamics 365). Have a specific question? Reach out to him directly at askjesper@curogens.com. You may also contact the team at learnmore@curogens.com.