Why some ERP system implementations fail

Insight by COSOL /

In the first of two articles on Enterprise Resource Planning (ERP) system implementation success, we delve into some of the common practices that organisations need to avoid if they want to ensure the success of their new or upgraded ERP.

Over the past few decades, numerous studies including by Gartner and McKinsey & Co, have consistently reported that up to 75% of ERP system implementations fail. With the robust and sophisticated technology that we have today, how could implementations fail as often as they do?

The truth is, that technology, no matter how advanced it is, can still cause many complications during implementation. But it is not the main reason why the failure rate is high. ERP implementations do not succeed simply because organisations do not adequately address their business process improvement and change management needs. Add to this is the failure to communicate what success looks like and not dedicating ample time in the preparation and planning stages.

So, how then do you tackle the root causes of failure in ERP implementations? When choosing a new tier 1, 2 or 3 system, or a single or best-of-breed ERP, organisations must avoid these common practices to increase the chances of success:

  1. Unrealistic Expectations
    While today's technology can do so much more than it did 20 years ago, it usually does not match people's expectations. When organisations realise that a project is going to take much longer than they expect, they end up scaling back on critical success factors such as organisational change management or cutting a couple of iterations in user acceptance testing. Compressing the timeline only guarantees failure.

  2. Poor Implementation Planning
    Organisations tend not to spend enough time and effort in the implementation planning process. When inadequate thought is given to evaluating and choosing software, organisations end up rushing their decision. Without a clear vision and solid plan, organisations will spend a lot more time and money trying to figure out what it is or where they want to be while in the middle of the implementation.

  3. Lack of Clarity and Communication of the Vision 
    Executive teams often overlook the importance of articulating what the vision is and what the ERP implementation is going to do for the organisation. Will the new system improve their customer service? Will it increase operational efficiencies? How about employee experience? Without clarifying and communicating the operating and organisational model of that future state, it will simply cause confusion and chaos within the organisation.

  4. Poor Organisational Change Management
    Organisations should have a solid change management strategy and plan before starting an ERP implementation. If organisations get too caught up in the technology piece of the project, then they can fail to address the people side of change. Poor change management planning can result in employee resistance and reduced user adoption. Poor user adoption of the new system means organisations will end up with software or investment technology that does not deliver value to the business.

  5. Unclear Definition of Success
    An ERP implementation project requires hundreds of decisions, from how the business is going to run, to choosing what technology to deploy, etc. All these decisions materially affect the scope, cost, and risk of the project. Generally speaking, the success of a project is measured by its timeliness and staying on budget. What organisations do not realise is that for the implementation to be truly successful, they need to define what they want to get out of the implementation after they have gone through it – what is in it for your customers and your employees? Therefore, success criteria should be defined ahead of the decision-making process.

  6. Poor Data Management
    Understanding the kinds of data that already exist and how it has been categorised and managed in the past is crucial for ensuring that you get the right advantages and a return on your initial software investment. If historical data is not taken into account while implementing an ERP, you run the danger of having skewed data in your new system and not having historical insights on things like past sales numbers or purchase trends.

  7. Lack of Process Mapping
    Inadequate process mapping is a result of failing to thoroughly map existing business processes and consider new and simplified business process opportunities for the ERP system. Outdated procedures support outdated methods. And ERP software is intended to completely transform the way your company runs. When you try to integrate new technology into old processes, you will slow down adoption rates. This can lead to inefficiencies and workflow disruptions.

Implementation of a new ERP will not only impact your systems but also your people, process, and data. When organisations shift their focus from the technology side of the change to the other elements of their business, then they can have a much higher chance of success in their ERP implementation.

Ready to move or upgrade your ERP system?

Read the second article in this series that looks at the importance and benefits of a Readiness Assessment for organisation who are looking to migrate from SAP's ECC to S/4HANA.

COSOL are SAP ERP specialists with over 20 years experience helping asset intensive organisations implement and upgrade their ERP systems as part of their asset information ecosystem.