In a recent study, Panorama Consulting found that over one fourth (26%) of ERP implementations fail.
Why so many? And how can you avoid the same fate?
One answer lies in Panorama’s numbers: the 26% failure rate encompasses all ERP implementations, with 67% implementing on-premise systems. Famously complex and expensive, on-premise installations have threatened the solvency even of large enterprises. Cloud ERP, with its drastically shorter and simpler implementations, only accounted for 6% of ERP rollouts.
Yet however simple, cloud implementations can still fail. An ERP system affects every aspect of the organization implementing it. When organizations fail to anticipate this, fail to plan for it, not even the cloud model can save projects from final failure.
In this article, we list seven common pitfalls that can ruin an implementation before it starts.
1. Failure to set realistic expectations
Many ERP customers begin implementations on mistaken premises. Some disillusionment is natural: if you’ve never implemented an ERP system before, even the relatively smooth rollout of a cloud system will involve surprises. However, wrong impressions often stretch back long before the contract, to early presentations and demos of the product. The ERP vendor has a strong incentive to soften the truth: to understate implementation times and overstate success rates. For instance, precious few vendors (or partners) communicate to customers just how painful, how costly and labor-draining, customization will be. And almost nobody mentions the fate of a heavily customized system, which will require specialists to rewrite code for every upgrade.
2. Failure to test
Frequently, customers fail to insist on adequate testing before entering implementation. The premise here is not to test the software itself; any system can meet its own standards. Rather, customers should test whether a given software package will meet their business needs and produce the desired output. When customers skip testing or rush it, the risks of functionality mismatch and poor user reception increase exponentially.
3. Failure to define success
In other cases, implementations fail because they never define success. Customer and partner must agree on a clear set of objectives, a timeline of deadlines and measurable goals for the entire course of the implementation. They must continually monitor their progress and adjust the project’s timeline accordingly. When the two sides fail to reach consensus, the implementation has little chance of success—if only because nobody knows what success means.
4. Failure to involve stakeholders
Those preparing for an implementation often spend too much time obtaining buy-in from upper management and too little involving stakeholders elsewhere in the organization. This focus is understandable: lack of leadership support has sunk many an ERP project. But the ultimate success of an ERP system hinges on its everyday use, on its ability to win engagement from every department in the organization. Implementations that fail to involve stakeholders will almost certainly falter or fail in the end.
5. Failure to invest sufficient resources
Many customers underestimate the task of implementing a new ERP solution, and fail to dedicate the necessary resources. In many cases, this stems from an overreliance on consultants, whether from the vendor or an outside partner. Consultants play an important role in any implementation. But they can’t refine business processes without understanding them, and they can’t understand them without the cooperation of internal stakeholders who do. Without identifying these staff and making them available, organizations and consultants alike will struggle to fulfill their sides of the bargain.
6. Failure to analyze needs
In its 2018 ERP report, Panorama Consulting cited “improving business processes” as the most popular reason for an ERP implementation. In order to improve customers’ business processes, vendors must take the time to critically evaluate existing processes relative to desired outcomes. Unfortunately, some vendors fail to do so. Even when the vendor does seek to understand, however, their knowledge hinges on that of the customer. And if the customer has not adequately documented or analyzed its own processes, then an implementation can only improve them by chance, if at all. Automation will accelerate bad processes. It won’t fix them.
7. Failure to manage change
Organizations frequently underestimate the magnitude of change, and with it the need for training and change management. Managers either emphasize IT considerations to the exclusion of human factors or strive to secure buy-in without securing technical capacities. Because cloud-based solutions offer numerous configurations, decision-makers incorrectly assume that change management is automatic or unimportant. Too often, planners relegate training to the very end of the project, when it should underpin every stage of an implementation.
As we’ve written before, a successful implementation depends on three things: the right product, the right platform, and the right partner.
For more information about how to implement wisely, or about Xledger, please contact us.