Why do ERP Implementations fail?
We are sharing this blog/article with you based on our experience with ERP implementations for nearly 12 years.
Nobody likes to fails, though failure is also part of our everyday life. Though it is possible to pick up from where we have left and mount another attempt and be successful but the fact remains you would have already lost time, money and energy.
So in this article we will discuss about how we can reduce failures during ERP implementations and be successful with it.
To prevent failure we must understand the cost of the failure. So, first let’s talk about the cost of failure during ERP implementations.
Cost
Let’s face it, ERP implementations are expensive. You are spending money on software licenses, hardware infrastructure, services, your employees time (time is money) and other expenses.
We may recover some of this cost when we attempt to redo the implementation and you become successful.
But the greatest cost a company incurs when there is a failure in ERP implementation is the cost ofnot solving the problem.
You start the whole exercise of evaluating ERP solutions, Vendors, allocating budget, going through the implementation and so on to solve a specific problem or problems.
If you fail the problem still exist and you keep loosing money due to this problem. And that is the greatest cost.
This could be like loss of Raw materials every month due to the bottlenecks in your operations or excess inventory lying in your stores and if freed can give you much needed capital, wrong accounting practices, cash flow issues, loss of orders and so on.
People
Your employees would have put a lot of hard work to get the ERP system implemented in the first attempt. They have accommodated additional work, pressure and have taken the pain to learn a new system possibly spending more hours in office.
So, you lose their trust and common goal. Failure sometimes can expose weaknesses and sometimes cost potential problems between departments and individuals in a company.
They will of course support you for another attempt of ERP implementation and give cooperation but is it the right thing to do?
Vision
Often ERP implementation becomes part of companies vision statement in a year. This would get communicated internally and externally to your customers and vendors.
Failure means adjusting to current problems and extending this vision to one or two more years. This may not project a sound picture to your internal and external stakeholders. Now we will see how we can eliminate or reduce the risk of failure.
Managing expectation
Every ERP system has their own weaknesses and strengths. Every ERP system has some good features and lack in some. So before evaluating any ERP system you should be clear on how you expect the system to perform for you.
Setting realistic expectation goes long way for a successful ERP implementations. Some time a ERP may come with loaded features and you may not need most of them. All though it may seem nice to have this feature and you may think that you will need this features in future but you have to keep in mind that formore number of features and more number of screens, you may need more number of people to capture the data using these screens.
What use if you have more number of features if you don’t want to use them?
More feature loaded ERP will need more effort to maintain as well. You may not hire a top consulting firm to define your statement of requirements or Request for Proposal (RFP) document. But it will be a good idea to discuss with your team and identify the top issues and priorities to address during the ERP implementation.
Change Management
A good ERP system is an asset for any Business. Getting ERP implemented is one thing, using it properly is a whole different thing. Remember “garbage in is garbage out”. If you don’t enter the data correctly in the ERP system you won’t get proper results. ERP systems requires employees and departments to work in a coordinated manner and each one have to do their job for other person to complete their job.
ERP vendors can give only the ERP system to you. But you have to use it properly. So change management become an important aspect for the success of these projects.
Organisation should also help employees to adapt to change that might happen with the implementation of the solutions.
Just like any other company project, ERP implementation calls for the support of all key stakeholders. However, if top executives are too busy to be part of the implementation process or are unwilling to allocate resources for the project, it can be a big blow to the implementation process.
Choosing the right vendor
Common practice says that you take multiple qoutations from vendors compare the deliverables and the pricing and give the order to the lowest quoted vendor. Is comparing the pricing alone the best professional approach in finalising the vendor?
A closer look at the failed implementation project tell us otherwise.
Most of the companies tend to decide based on the pricing. But pricing as a factor is to be considered after you evaluate the vendor technically and found suitable. This is not an apple to apple comparison. On paper the deliverables might look same between all the vendors. If you have a closer look you will realise it is not the same.
The capability of a vendor to deliver the deliverable on paper matters. A vendor may offer a deliverable at a lesser cost but may not deliver the same. Because Experience, Skills, Resources does not come cheap. A vendor may also have a good intention to deliver all the deliverables but may not end up doing this due to the lack of capabilities.
So, how to evaluate the vendors?
There may not be a perfect approach to this but there are a lot of parameters used by professionals. Some of these are listed below,
- Check if the vendor has done implementation smilier to your business.
- If yes, ask for customer references. Talk to them, visit them and understand from them the experience of their ERP implementation. Key things to ask them could be the time line to implement the solution, if there was any time delay, the experience of resources deployed. How the vendor managed change management and so on.
- Meet the resource who’s going to get deployed on the project and gauge their experience and skill level.
- Ask the vend or to give a road map for the ERP implementation for at least 5years and the vision for your company.
- Gauge if the vendor want to work with you short time by just being a software deployer or work with you long time as a solution provider.
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