7 reasons in ERP implementation failure (Part 1)

7 reasons in ERP implementation failure (Part 1)

An ERP system functions like the blood circulatory system of our human body. It is interconnected deeply with all the organs and it delivers all necessary nutrients and oxygen to all parts of the body via the bloodstream. This will work well as long as there is adequate haemoglobin levels and unrestricted blood flow to all parts of the body. However, problems will arise if there are arterial blockages, organ failure or a narrowing of the arteries. Any of these conditions will lead to an emergency situation and possibly a heart failure. This can also happen during an implementation of an ERP system. While the ERP system connects all departments together in an integrated manner, arterial blockages (physical or psychological roadblocks), organ failure (departments resistant to change) and narrowing of the arteries (people unwilling to change) can also lead to ERP failure.

This article will examine the 7 most common reasons for ERP implementation failure and explore the way to overcome these roadblocks.

Reason 1: Focusing only on price

Price is not the best gauge to determine if a solution is suitable for your business. The most expensive solution does not necessarily mean it is the best nor is the cheapest solution the better one. Price is simply the amount you are prepared to pay for a solution, and you will also need to be prepared for the result you are getting from that solution, either good or bad. Many times, the budget is based on learning from past experience. For example, some companies spend $10K on the first solution, use it for 2 years, find it inadequate and are prepared to pay $20K for the next solution. After another 2 years they outgrow the system and now are prepared to spend 30K for the 3rd solution. So over the 4 years they paid a total of $60K for 3 solutions, not including the time cost for migration, training and learning 3 different software over 4 years. If they had spent $30K-40K on a good and suitable solution in the first year, they would have saved all the trouble in migration, training and learning to use 3 software, not to mention the cost savings of over $20K if they had focused not on the price but on the long term benefits.

How to overcome this potential failure? Work out a realistic budget, and also work out a reasonable list of requirements to make sure that the solution can deliver as promised. Focus on the value the software can deliver over a long term rather than the price you have to pay in short term.

Reason 2: Unreasonable demands 

Sometimes the company may say “I want the software to fit all my existing processes”. This statement can be a boon or bane. Why? If the existing process is good and based on best practice, then most likely the ERP software can already handle it. However, if the existing process is haphazard, complicated or non-standard, then most likely you will not be able to find a software that can fit that requirement, and customisation is inevitable. Most ERP software already have a work flow concept that is based on best practice. Accepting this and learning how to work along with the defined flow will lead to success in implementation. Many times, the ERP system fails because the people who are the main users of the system are reluctant to change their attitude. They assume that it is easier to customise the software then changing the habits of the people.

How to overcome this potential failure? Get the users to accept and take up the work process as defined in the ERP software. If people have a resistance to using the software or accepting the work flow, it is better if they do not change their software and keep to their legacy system. Many users are so tuned to their old way of doing things and they want the ERP software to keep to their old way of working.

Reason 3: An offer that is too good to be true

Have you heard of vendors saying, “I will customise this for free!”? Having something for free is not necessarily bad. We are all excited when we get a free gift or a free 1-for-1 meal in a restaurant. But choosing an ERP vendor is not like deciding where to eat. It is likened to choosing a good heart surgeon. And you want to make sure that he or she is really a heart surgeon, and not maybe a kidney or brain surgeon. Why? Well, would you trust a kidney surgeon who says he will do a heart bypass for free? Of course not! That is not his speciality and will never be, unless he changes his medical interest which would take another few years. Similarly, an ERP vendor who does not specialise in a certain industry will not have the experience or knowledge to customise something out of nothing. Companies who go along with that vendor will have to be prepared for a very, very long journey before the destination can be seen. Experience shows that many company’s fail in their ERP implementation as the vendors they choose over promise and under deliver.

How to overcome this potential failure? Select vendors who already have the solution in place; ask for existing customer references. If customisation is necessary, it should form not more than 20% of the entire software solution. If more than 20%-60% requires customisation, it is better off to relook at your requirements or to look for another vendor that has something close to what you require. Remember, a vendor who has a proven solution has spent many years to develop, fine tune and improve on the system based on real-world customer feedback and usage. A vendor who is willing to customise something for free is usually taking the opportunity a client gives to start the entire development process with the client serving as the ”clinical trial subject” with no cost and no proven results.

Continue Reading…7 reasons in ERP implementation failure – Part 2

Listing of other Articles on ERP software

- 7 reasons in ERP implementation failure – Part 1

- 7 reasons in ERP implementation failure – Part 2

- 7 reasons in ERP implementation failure – Part 3

- 5 Myths of ERP Software Implementation

- Benefits of implementing an ERP system

- What is ERP?