Why ERP Implementations Fail

Panorama Consulting recently published a white paper in which they quoted the following key statistics:

• The average cost of ownership increased from $2.8M in 2014 to $4.5M in 2015
• The ERP failure rate increased to 21% in 2015 from 16% in 2014
• A stunning 93% of the companies surveyed customized their software to some degree

These are the only points I selected from the white paper for the purpose of this post as they are so tightly tied together.  It is my belief that, like dogs, there are no 'bad' ERP systems, rather it is the 'bad' owners that cause the failure.

ERP systems, even those that are industry specific, are designed for a very large audience so their business processes will always follow 'best business practices'.  Having dealt with several ERP Implementations, I can tell you that in all of the cases, the pain point was the business process owner's reluctance to modify their practices to utilize the software as intended.  Lets face it, everyone thinks their own business process is unique and critical. I have found that in most cases, this is simply not the truth.  Critical in the selection phase is finding an ERP System that most closely aligns with the internal business processes/practices. Ideally, you want to follow the 90/10 rule. 90% of the application can be used out of the box and 10% of your business processes can be modified. Note, I didn't say 10% of the ERP System can be customized, I look to alter/modify the business process.  Customization is not only a large cost, it disrupts the ongoing upgrade path of a system you potentially spent millions on.

Participation is also critical. More often than not, an ERP Implementation is given to a Project Manager, typically within the Technology Department and told to 'get it down'.  But without the engaged participation of the business process owners, critical changes and pathways will be missed. A PM typically cannot change the business process, only the owners of that process can and further, they need to buy into the change so that it percolates throughout the organization. Far too often, systems are implemented within a black box and once turned out to the organization, acceptance and buy in is often difficult or impossible to achieve.  It is far better to have the business process owners and the implementation team work as one.

Another very critical component is the education piece. ERP systems are complex and often require Users to learn new or different computer skills. I have always found that continued education throughout the implementation process is the best tact to take. Not only do you get users trained thoroughly, but they get involved in user acceptance from the very beginning; they are part of the process rather than having to just accept the change.

There is more, a lot more, far too much to go into in a single post. But the highest level fact of the matter really boils down to these points:

• Try and closely align your business processes with your ERP selection
• Business & Technology must both actively participate in the implementation
• Train/Educate from the beginning - it is an ongoing process

Just these three points alone can help to have a successful ERP Implementation. It's a team sport, not an individual one!