Top 10 causes of ERP implementation failure (and how to avoid it)
Few people in an organization ever understand how complex an ERP implementation is and how a few key elements can differentiate between ERP success and ERP failure.
ERP implementation failure is a disaster for any organization. An ERP is a costly venture for any business; losing that amount of time and money implementing a system that doesn’t work will be costly. Avoiding ERP failure is paramount, which means planning your selection and implementation well.
Listed below are some common mistakes that, if avoided, can significantly improve your probability of success.
Your requirements are the single most crucial component of a successful ERP implementation. Meet with managers and users from every discipline and senior executives. Aggressively pursue any points where they have pain today that can be resolved. Examine plans and forecasts and anticipate where similar pains might occur. Now pare that list until all concur you agree on a comprehensive list of requirements and features that are not required but would be valuable.
Have a highly detailed and accurate inventory of system requirements before shopping for an ERP system. Be relentless with questions; ERP vendors will be overly optimistic about their product’s fit to your problems. Never choose bells and whistles over nuts and bolts. If any potential ERP system cannot meet all your requirements, keep looking, there is a system that will satisfy your requirements.
No one else in the organization will be committed without this commitment. Recommend postponement of the ERP project rather than gamble leadership attitudes will somehow “come around.”
Executive management has the power to allocate resources to the ERP project. And they have the power to reallocate them as conditions change. Money is one resource, and the project is on hold if they will not pay for ERP. People are a critical resource too. Valuable people will be needed to work on ERP implementation, and their previous jobs still need to be done. Backfilling those roles requires temporary replacements or a recognition that some tasks cannot be completed in the same way they were.
ERP implementation is an enterprise-wide task. It cannot be seen as information services or manufacturing only, so executives from all departments must commit to using every needed resource.
This can be the number of resources, but getting the right resources in your ERP team regarding talent and experience is even more critical. Your ERP implementation will fail if the enterprise fails to devote the resources required for success. You can hire additional people from outside as contractors or employees or devote some or all of the time available from people already within the business. Still, somehow, significant amounts of time will be necessary. If you choose to use existing resources, their current “day jobs” still need to be completed, and the ERP implementation should be their primary task to complete. Those resources required also can be outside help for specific purposes such as programming unique to data conversion. One resource not to be skipped is a team manager who will coordinate all the efforts and report to executive management and a steering team on the project’s progress.
Establish early on who is responsible for what level of decision-making. Late, ambiguous, or poor-quality decisions can doom your project to ERP failure. Most of the decisions to be made throughout your ERP implementation should be made at the team level. Waiting for executive management will needlessly delay the implementation process, and the best decision will come from people on the team who are already users of the systems and familiar with the processes and what changes will improve the situation.
No matter what the business case says, the rank and file will not be looking forward to ERP. The only intelligent course is to over-communicate and over-prepare. Your good communication will keep the reasons for the ERP implementation and the expected improvements in everyone’s attention. Assuming that people will accept your plans and offer their support can quickly lead to an ERP implementation failure.
Change is a psychological factor. Some quickly will see the future possibilities. Some others cannot imagine different processes that will be better than those already familiar and primarily satisfactory. Consider employing change management specialists as part of your implementation team. Those specialists will recognize different personalities and know how to work with all to help your staff accept and embrace the future.
An ERP implementation requires trained users. Any users not trained in advance will be siphoning off resources from the implementation support team. As the available support resources diminish, the ability to resolve go-live problems decreases, and the implementation implodes.
ERP implementations are expensive, and you should always be conscientious about not wasting money. However, the cost of an ERP failure makes the implementation cost seems like a pocket change. Make your best cost estimate and increase that estimate by 25% when you ask for a budget. The cost of the new ERP software is only the beginning factor. As the implementation progresses, you will have incremental payroll costs and need to pay for contractors and specialists in various disciplines. Likely there will be costs to improve your hardware, networks, and other infrastructures to ensure the new ERP works as needed. Your ERP developer will continue improving the system and working to fix bugs and other problems found over time. As you should expect from any significant enterprise system, there will be ongoing support and maintenance costs with ERP. Yes, you should expect savings over time, but much of the cost will come ahead of the savings, and those costs must be funded, or the implementation can fail.
Data cleansing and preparation is an enormous Catch-22 and requires patience and persistence. The Catch-22 is that the correct format and choices for data cannot occur without understanding how the system works, but the system won’t work without correctly formatted data. The system builds, and data cleansing must occur in tandem. This can easily be the cause of your failed ERP implementation.
Begin by separating your data into two classes, static and dynamic. Static data are elements like addresses of suppliers that only need to be entered once. Dynamic data are transactions.
Find all the static data required in your new ERP, and data will reside in tables of data fields. Some of those fields will be mandatory, but others will be optional depending on the unique needs of your business. Now map the fields you will use to your legacy systems and determine how to copy data from several legacy sources into records in your new ERP.
Dynamic data transfers are similar but with one significant difference. Your legacy systems probably have years or decades of data. Decide now how much needs to move to the new system. Most of the time, only the most current records are needed. There is no benefit to loading your new ERP with data that provides no value. Keep your legacy systems alive on a read-only basis if there is a need to look at historical data in the future.
Examine all the data carefully before loading it into the new ERP. There are always misspellings, and other problems you have lived with that can now be cleaned up.
Over-customization increases every other cost and risk, makes upgrading and testing more complex, and it reduces ERP functionality. While all your users are comfortable with the layout of your legacy systems, some alternatives are as good or even better. The developers of your new ERP put effort into using the best practices, and your users will adapt quickly. The goals are to meet your chosen requirements, not cosmetics. Customization costs money and should only be needed when there is no other solution, and most ERP systems include easy configuration tools that minimize much of the need for customization.
Without serious and repeated testing, building from a single test of every business-critical process and progressing through volume tests and a mock go-live requiring practice at synching up the old systems to the new, the shock and surprise of problem volume at ERP go-live will collapse the implementation effort.
Testing will also reveal data migration problems. A test can fail only because some data element is in an incorrect format, for example. Data migration is also a part of testing. You will migrate data over several iterations as you solve problems found in testing and then reset for additional testing. Document the flow of migrations to find a process that minimizes time and loads all the needed data. At go-live, you will be ready for the fastest and most effective data migration that quickly gets your company back in business.
Much testing can now be accomplished with automated robotics today. This kind of test will run many more times than any number of people can test, and because of the large sample size, more potential problems can be found and fixed, preventing some implementation failures.
There are other pitfalls, obviously, but if you can do an excellent job of avoiding these ten, your odds of avoiding an ERP failure will improve dramatically.