8 Reasons For ERP Failure & Easy Strategies To Avoid Them
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You probably heard about this often and it’s not without cause. Enterprise Resource Planning (ERP) systems are truly the key to streamlining your business’s operations while keeping productivity at the highest setting.
Serving as the ultimate truth source across your entire organization, ERP systems offer a lot of potential. However, the path to their success is fraught with obstacles and most businesses often end up colliding into them head-first!
Research by Gartner states that up to 70% of recent ERP implementations are headed towards failure by 2027! Small missteps are not to blame here; bigger issues such as budget overruns, delayed go-lives, and poor user adoption are also at play.
So if that’s got you wondering why ERP implementations fail and how you can prevent yours from meeting a similar fate, you’ve come to the right place.
We will discuss causes as well as strategies so your custom ERP story doesn’t just turn into another cautionary tale.
Why ERP Implementations Fail & How To Avoid It
1. Unclear Business Objectives With Poor Process Alignment
It might come as a shocker, but plenty of ERP projects are doomed to fail even before the selection of the software. This can be attributed to a lack of clear goals.
Organizations are often eager to skip to the implementation step with vague goals in place such as “streamline operations” or “increase efficiency” without specifying the business processes that will lead to these problems.
The Problem:
Diving headfirst into ERP implementation without aligning it with business needs can lead your teams to force their process to fit the software. If that’s not bad enough, the chances of customizing ERP to replicate broken workflows increases significantly.
The Fix:
Begin with business case development, mapping processes that are in perfect alignment with your ERP goals. This includes identifying the following:
- Broken workflows
- KPIs that impact success
- Modifications to workflows to ensure smooth ERP implementation
At the end of the day, your business should drive your ERP. It’s only then that your new software will evolve into the tool of transformation you need it to be.
2. Insufficient Executive Support
It might seem like a one-time IT project, but you know that ERP is a company-wide initiative that requires proper support along with planning.
Ongoing executive support, coupled with funding, can boost adoption and prevent morale from dwindling. Let us explain.
The Problem:
Treating ERP as a “departmental” task by the leadership will influence teams, causing them to shift their priorities while being unwilling to adopt the new system. The result is an ERP implementation program that lost its moment before it could take off.
The Fix:
All C-level champions of your organization should actively participate in the adoption process. They should ideally do the following:
- Link broader strategic priorities to specific ERP goals
- Judiciously allocate resources
- Be vocal about small and major wins and progress so teams stay motivated to adopt ERP
It’s a matter of “leading by example”. If the leadership treats ERP with gravity, the whole organization follows suit.
3. User Resistance & Poor Change Management
“The single biggest failure point for ERP implementations is the need for change management.”
— Neville Turbet, Project Perfect
Source: Deloitte's Guide to a Successful ERP Journey
Resistance is natural when moving from an old system to a new one. No matter how intuitive your new custom software is, people like the familiarity of the old. That’s why it’s crucial to have sound change management in place.
The Problem:
Leadership has the tendency to underestimate the disruptive nature of a new system like an ERP. it can throw off day-to-day operations as your team struggles to learn the ropes of the software overnight, changing their workflows to suit the new system.
The Fix:
Investing and enforcing a change management strategy that can ease the process is a must. It should include:
- Active stakeholder engagement from the very beginning
- Clear, frequent communication across the board
- Careful selection of champions and super users across each team/department
- A constant feedback loop so users can raise concerns and have any issues sorted as they arise
There might be no way out of adopting a new ERP system, but this change doesn’t have to be painful for your employees. Maintain empathy and clarity without rushing the process.
4. Inadequate Training
The complexity of ERP platforms is undeniable. Without proper training, your team won’t get the confidence to use it on a daily basis. Instead they might resort to workarounds to accomplish the same tasks.
The Problem:
A one-day introductory session with some hands-on training is like scratching the surface. It’s hardly enough. For people to truly pick up pace and learn the nuances of the new ERP system, time, repetition and support are mandatory.
The Fix:
It’s critical to come up with a detailed training program that covers the following:
- Role-specific modules for different teams and departments
- Hands-on training centered around tackling specific scenarios
- Complete access to a library of videos, manuals and internal documentation
- Ongoing support that extends beyond the go-live phase
Empowering your users will encourage faster adoption with minimal user errors.
5. Poor Data Quality
If you feed bad data in, you can expect bad data out. ERP systems thrive on clean, consistent data from all connected departments.
The Problem:
It’s common for old legacy systems to feature major data inconsistencies - from duplication to missing fields and improper formatting. Migrating this messy data in its current state to your new ERP system is not a fix. It’s simply a repeat.
The Fix:
While implementing ERP is your project at large, treat data migration as a sub-project within it to fix this problem. Here’s what you can do:
- Audit your existing data and clean it up before migration
- Have standard formats and naming conventions to ensure easy navigation
- Assign data stewards in each of the departments of your company
- Validate data sets created with sample imports before migrating them fully
Clean, high quality data lies at the heart of ERP success.
6. Budget Constraints With Unrealistic Timelines
As an industry insider, you’ve probably heard several tales of delays and overruns in ERP implementation. Though ERP is notorious for it, the culprit is often over-optimism.
The Problem:
Underestimating the resources required for a successful implementation or setting arbitrary go-live dates can pressure your team into cutting corners so they can meet the deadline. The result? A half-baked system that is bound to fail.
The Fix:
Planning, planning, planning - but done properly, with margins so it accounts for the following:
- Discovery and process-based workshops to thoroughly educate your teams
- Training sessions with User Acceptance Testing (UAT) to encourage company-wide adoption
- Buffer time to make space for delays or complications without disrupting the timeline too much
It makes sense to allocate extra budget that covers the time beyond the software’s license.
That’s because processes such as customizations, acquiring implementation partners and integration can add up, leading to expenses you haven’t planned for.
7. Insufficient Test Runs
Expect ERP integration to be closely linked with your entire business ecosystem. If you do not test your system adequately before it goes live, expect multiple issues to crop up including operational chaos.
The Problem:
Restricting test runs to verifying log-in credentials and running a few scripts is a risky game to play. Tests should not be a checkbox task that you mark “done” after covering the basics.
The Fix:
The approach to testing needs to change. Organizations should have a layered testing strategy in place that includes:
- Testing units to ensure each module of your ERP is capable of working on its own
- Testing integration to ensure individual modules communicate with each other efficiently
- User Acceptance Testing (UAT) to simulate real scenarios so real users can understand the ins-and-outs of the system
Consider testing as a dry run before the marathon of ERP begins. Document every single test conducted, ensuring each of them is rigorous as well as repeatable if needed.
8. Selecting The Wrong ERP
Off-the-shelf solutions might portray themselves as a successful example of “one size fits all” but they seldom do. If your chosen software’s features do not match your business’s needs, continuous friction at every step of the way is inevitable.
The Problem:
The key consideration when choosing ERP systems typically depends on the cost or the brand name of the provider. While it might seem like a sound approach in theory, not validating whether the software fits your company’s niche, size and goals is a recipe for disaster.
The Fix:
Your choice of the ultimate ERP system should be based on:
- Scalability: It should grow as your business grows
- Industry fit: It should support the unique requirements of your niche
- Integration Ease: It should integrate seamlessly with other tools your business relies on
- Implementation Support: It should come with the support of experienced partners
Think of choosing an ERP system like choosing a business partner. You’re in it for the long haul so better make it count.
Several of our clients have come to us frustrated with their run-of-the-mill ERP system, looking for a software that just clicks. Each time we’ve given them just the solution they need.
When a sports shooting facility reached out to us with their unique membership management, scheduling, rentals, and payment processing requirements, we rose up to the challenge and built a custom ERP solution for them that met their exact needs.
See how we helped them streamline their operations here.
Avoiding ERP Failures: A Framework For Success
By now you know that the failure of ERP implementation can be attributed to specific fixable causes, which means that its success is far from random. Here’s a success framework that you can use as a guide whenever you get stuck:
Conclusion
A failed ERP system can hurt any organization. Luckily, it is entirely avoidable. All you need is to plan well, budget wisely and ensure goal alignment along with user readiness. If you are still unsure about where to begin, let Vestra Inet help you. Contact us to let our ERP experts guide you so they can arm you with the right software and strategies needed to thrive!
FAQs
1. Why does ERP implementation fail?
Failure can be attributed to poor planning, lack of leadership support, and inadequate change management among others.
2. How long does it take to successfully implement a custom ERP?
It can take anywhere between 6 to 18 months, and is dependent on the size of the company as well as the complexity of the software.
3. Is custom ERP a more viable alternative to off-the-shelf solutions?
Yes, since it has been designed to specifically serve your business. However, be wary of over-customizations as that can cause unnecessary delays, expenses and complications.
4. What is the single biggest cause for ERP failure?
Inadequate user training and not investing in change management are the biggest causes for failure.
5. Is high-quality data necessary for ERP success?
Yes. Clean, well-formatted data enables ERP to function in an optimal fashion.
Author Bio
Andrey Wool
Helming the operations at Vestra Inet, Andrey has over 20 years of leadership experience in the ERP industry. Having successfully launched 550+ software projects across a diverse set of industries, Andrey continues to transform the way businesses function with pioneering custom software solutions. His in-depth knowledge of sectors such as manufacturing and distribution has helped him curate actionable solutions that eliminate bottlenecks and pave the way for sustainable growth.
