With Enterprise Resource Planning (ERP) applications playing a crucial role in many companies’ operations, the consequences of a failed software rollout can be serious.
Panorama Consulting Services creates yearly ERP reports based on their extensive research on the selection and implementation decisions made by ERP customers, as well as their project outcomes. The unfortunate reality is that budget and timeline overruns can ultimately result in unsuccessful software implementations. According to Panorama’s 2023 ERP report, respondents have experienced the following:
- 11.5% exceeded the project timeline, up from 41.4% in 2022
- 47% experienced budget overruns, up from 36.5% in 2022
This demonstrates that no ERP project is completely immune to failure, but there are strategies you can implement to increase your chances of success. Today, we are excited to share 5 of the most common ERP implementation risks to avoid and provide valuable insights on how to steer clear of them.
Ensuring proper resource allocation is absolutely essential for the success of your ERP project. If your team members are only able to contribute part-time due to challenges with backfilling, it could potentially impact your timeline, budget, and the overall quality of the project.
Building a strong team involves having department managers/domain experts, key executives (see point 2- executive buy-in), intended users, and a dedicated ERP partner who values collaboration. It is crucial to involve the intended users right from the beginning of the planning phase and establish clear points of contact. It’s not just about having a large number of resources, but also about bringing in the right talent and expertise to your ERP team.
Instead of simply assigning people to fill the team, take the time to carefully select employees who are well-suited for the specific tasks at hand. If you choose to utilise existing resources, make sure that the ERP implementation becomes their top priority, even while they continue with their day jobs. To address this challenge, many businesses provide backfill for these jobs so that the project team can fully focus on the project. Additionally, assigning a project manager who can effectively coordinate the project and provide regular updates to executive management is important.
2. Executive buy-in
In an ERP system selection and implementation project, having project sponsorship and executive buy-in is crucial. It’s important to have your executives fully on board to not only ensure that you have enough budget and time to complete the project but also to champion it to the rest of your workforce. Without executive buy-in, there is a risk of no one else in the organisation being committed to this project and embracing the necessary change.
Executive management holds the power to allocate resources to the ERP project. They also have the authority to reallocate these resources as conditions evolve. Money is one valuable resource, and if they refuse to invest in ERP, the project will be put on hold. People are also a critical resource.
By involving the executives, the ERP implementation will not be treated solely as a technology project but will be aligned with your overall strategy. This approach increases the likelihood of realising benefits, such as improved customer service and sustainable competitive advantage.
Are you wondering how to determine if your ERP implementation is successful without clear objectives in place? It’s essential to map out the requirements before starting the ERP selection process and establish parameters around the project budget, timeline, and key performance indicators (KPIs) to track post-live outcomes. By properly planning out the project and involving key stakeholders and business process owners in the initial planning process, you’ll be on the right path to a successful implementation. Their valuable feedback throughout all stages of the implementation, as well as their suggestions during scoping based on how they envision using the program, can greatly contribute to the project’s success.
During the implementation stage, setting a scope of delivery is crucial. In an ERP implementation, the “Scope of Delivery” plays a vital role in completing the project within the designated time frame and even exceeding expectations.
Just a friendly reminder to be mindful of ‘scope creep’, which refers to adding additional features or functions to a new product, requirements, or work that is not authorised. If there are any requests for additional functions or unauthorised work, the best approach would be to gather these requests and propose a phase 2 project to address them.
4. Timelines and budget
Implementing ERP systems can be a significant investment, both in terms of cost and time. It is crucial to maintain open and transparent communication with your executive team right from the start. By referencing past implementations and industry estimates, you can accurately estimate the project’s cost and duration. When requesting a budget, it’s advisable to provide a conservative estimate and consider whether you need to increase it to account for any unforeseen expenses.
Be cautious of any suggestions to reduce project line items like organisational change management. Cutting project costs too close to the bone can lead to budget overrun or project failure.
Be wary of vendors who offer significantly lower costs and timelines compared to other shortlisted vendors. Take a closer look at their proposal and ask relevant questions, as opting for the cheapest option can result in costly problems later.
The cost of the new ERP software is just the beginning. As the implementation progresses, there will be additional payroll costs and expenses for contractors and specialists in various fields. It’s likely that you’ll need to invest in improving hardware, networks, and other infrastructure to ensure the ERP functions properly. While there will be savings over time, the initial costs must be funded to avoid implementation failure.
5. Technical and data issues
Technical issues are a well-known risk when implementing an ERP system. While selecting software, it is important to consider how closely each solution aligns with your short-term and long-term business goals. If extensive editing of the source code or multiple integrations and third-party modules are required to meet your functional requirements, it should be considered a warning sign.
Customisation should only be pursued, when necessary, as excessive customisation of standardised functionality can become burdensome. For instance, many back-office processes do not differentiate your business from competitors, so utilising standard functionality is usually sufficient. If employees are urging for customisation in such processes, it indicates resistance to change. In such cases, it is recommended to address the resistance rather than increasing customisation.
Additionally, establishing change control mechanisms is vital to keep the project on track and within budget. To mitigate the risk of project failure, it is crucial to prioritise organisational change management and allocate sufficient time, budget, and resources to manage resistance and ensure buy-in. Neglecting change management by treating it solely as end-user training has contributed to project failures in many organisations.
Transferring data from a legacy system to a new ERP platform can be a challenging task. However, it is an essential step unless you plan to start from scratch. The data migration process should not be rushed. It requires patience and persistence because one of the most common challenges faced by even the most prepared companies is determining which data to transfer and in what format, as well as ensuring the data is cleansed properly. This requires a deep understanding of how your new system operates. Neglecting this aspect can easily lead to a failed ERP implementation.
Most project teams are required to perform data cleansing and system build-out concurrently because a new system cannot operate efficiently without data.
It’s often challenging to pinpoint a single cause for ERP failures. However, by familiarising yourself with the common reasons for ERP failures, you can identify and avoid them, thereby establishing a solid foundation for success. By being mindful of common mistakes in ERP implementation, you can position your teams for success.
Download our ‘5 lessons learned from hundreds of global ERP implementations’ guide to help you avoid these common ERP implementation mistakes, based on decades of Inixion’s experience and lessons learned in global ERP implementations. Give your ERP project a better chance of succeeding and delivering the benefits you expect from such a significant investment by having the right information from the start.