We have heard innumerable stories of ERP implementation disasters. After many months and a lot of money and hard work put in, some organizations still fail to see what they expected to see. Often times the vendor gets blamed and other times the users or the management gets blamed. Investing in a whole new ERP system and going through the whole process again is definitely not an option.
EVIDENCE OF A FAILED ERP IMPLEMENTATION
- An unending ever extending implementation schedule with the “go live” date being pushed further away more than twice.
- Running over budget in consulting services
- Calculating the ROI makes your skin crawl
- The day to day business has come to a crawling pace due to resource commitments
- Worst of all, production has slowed down reducing inventory to dangerous levels
These are only some of the symptoms. We are sure there could be many more red flags.
ERP implementation failures are surely not the norm. There are many companies with very successful implementations too. They benefit hugely from the effort. So why do ERP implementations fail in some organizations?
We have been in the industry long enough to know why. Hopefully this article will help you understand the critical factors involved in a successful ERP implementation.
The top management team sometimes are so used to delegating, that they delegate the entire ERP implementation to lower management resources and expect magic to happen. This can potentially be disastrous. The expectations of the top management is almost never communicated clearly to the lower levels and even lesser to the vendor. In some instances, after the implementation the top management fail to see their expectations manifest and this leads to disappointment. In other instances, the expectations of top management is suddenly communicated to the vendor during mid implementation which comes as a shock to the vendor. This was never discussed during the sales process. Now the implementation consultant is trying really hard to deliver the new demands. When this goes on and on every week, the implementation schedule keeps extending with the “go live” date being pushed further and further away. Consulting charges are exceeding budgets and the vendor is blamed for trying to get a quick sale.
To avoid this, it is very essential for the top management to lead the implementation process and communicate their expectations very clearly in writing to the vendor early in the sales process and demo stages.
REQUIREMENTS GATHERING PROCESS
Organizations should have a very clear understanding of their needs prior to going shopping. It is not very wise to simply realize you need an ERP solution, invite a few vendors, sit through the demos and then try to come up with your expectations list. This could lead to a failed ERP implementation. The Department Heads and the management team gain knowledge on the capabilities of an ERP after sitting through a couple of demos and then think about what else they could get out of it. Since there is no well thought out requirements list to start off with, the list keeps growing during mid implementation. This model is a perfect recipe for disaster.
It is very important to analyse your business needs and gather your requirements in the very beginning. Having a Business Analytics tool prior to going shopping for an ERP system might be a very wise choice. Analyse your business trends. Find out the missing data. Make a clear and concise list of expectations, both with functions and reporting. When you are 100% clear as to what you want, then go shopping.
Now there is another point to be very careful about. Most ERP demos look fascinating with certain functionalities you never thought about and aren’t on your list. Don’t get carried away by what you don’t need. Stay focused on your list and ensure that all expectations on your list is ticked off before considering other bells and whistles. Be careful in choosing the right ERP solution.
THE RIGHT TEAM
Time and time again we’ve seen this happen in many ERP implementations. This is by far the most common contributor to a failed ERP implementation. Selecting the right team of individuals in each department is very critical to a successful implementation. Often times, teams comprising individuals that are resistant to change, hard to teach to and are closed to new technologies are assigned to be part of the team. This could potentially delay the implementation by several weeks. People burn out after having put in long hours of work over an extended period of time.
The reason for a weak team in place is often because the entire team was never involved in the initial brain storming process. The top management usually have meetings on their own and come up with the expectations list. The implementation team is only involved during the sales demo process. Everything is new to them. They probably don’t even know why a new system is being implemented. This ends up with a lack of buy-in from the team and the users come up with their own ideas and requirements during mid implementation. Such a situation leaves the consultant confused. A very disappointed end user is almost always the end result of such a scenario.
To ensure a successful implementation and happy end users, it is critical to involve the end users and the implementation team in the very beginning. They need to know the “purpose” of implementing the ERP system. The better they understand the “why”, the better they will co-operate and help you get what you expect.
In some case we have also seen a let down by the vendor. The most likely scenario is a breakdown of proper communication from the sales team to the implementation team. The sales team promises the sun, the moon and the stars and fails to communicate the exact requirements to the implementation consultant. The consultant shows up at the organization with very little knowledge and starts the discovery process. So invariably the consultant draws from his or her own previous experience to understand the needs and goes about implementing just the same way they did before elsewhere. Another perfect recipe for disaster.
One wise thing to do in such cases is to visit the vendor’s office for the demo if possible. This will give you an idea of how they operate and their resource strength to provide support. In addition, make sure you ask them who the implementation consultant is going to be and if he or she is involved in the demo process. If it is purely a sales team involved in the demo, that is a red flag for you. Be very careful in choosing the vendor. Often times, it is much better to work with a vendor you can trust even if the ERP solution they carry doesn’t tick all your requirements criteria.
In addition to all of the above, there are other factors which leads to an ERP implementation failure. But these are not major and can be corrected during the sales process or prior to commencing implementation.
- Miscalculation of time and effort
- Misfit of the software with business processes
- Unrealistic expectations of ROI
- Unrealistic budget allocation for the project
- Non-involvement of key users
In most of the above cases, if the vendor sales person is good, he or she might ask the right questions during the sales process and steer you in the right direction.
In conclusion, an ERP system’s role is to support your business functions, improve processes and increase productivity. At the same time, provide you with critical business intelligence data to help you steer the company to a profitable future. Once implemented, it can be compared to a “life support” to a critically ill patient in an ICU. Don’t take it lightly. Be careful before you invest in one and ensure you choose the right system, the right vendor and most importantly ensure your entire organization has bought into the idea.
- Top management involvement from day one is very essential
- A thorough requirement gathering process and preparing the expectations list
- Ensure you have the right team of people leading the implementation in their respective departments. Ensure they are all fully aware of the changes to expect and they are on your side helping you to make it happen.
- Lastly, choose the right vendor. I repeat, it is more important to work with the right vendor even if the ERP solution they carry doesn’t tick all the boxes in your requirements list.
Hope this article is of help to you in choosing your ERP solution. Give me call if you wish to chat with me in person or flick me an email.
Santosh Chandran is the Business Development Manager for BOARD Management Intelligence at Olympic Software. He regularly blogs about business intelligence and corporate performance management. You can follow him on Twitter or on LinkedIn. Please contact him directly if you would like to find out how BOARD can improve your business results through better decision making, phone 09 980 3964 or email: email@example.com