ERP solutions offer all kinds of advantages, particularly given today’s global, dispersed environment. But these solutions also have a bad reputation – many enterprise resource planning projects tend to exhibit some level of failure despite the best laid plans. In fact, ERP implementation failure – best defined as a project not reaching its objectives -occurs somewhere between 50% and 75% of the time.
These failures are often well-publicised. Take the decision by Woolworths to undertake a $200 million, six-year implementation of SAP. At go-live, the ERP prevented the supermarket giant putting orders through to suppliers and generating critical reports,resulting in millions of dollars in missed sales. Or the time cosmetics leader Revlon’s 2016 ERP project was so epically disastroustheir own stockholders decided to sue.
There are many more prominent case studies of ERP failures. But while failure is common, they teach precious lessons to help you avoid the same fate.
Why do ERP projects fail so often?
1. Inadequate solution alignment - project planning is a make-or-break imperative
There is no ERP system that will work for every business out of the box. This means most extend their system to fit business needs through the building of custom extensions or developing completely new applications on top of their ERP platforms. This not only means selecting a system that offers superior extensibility and matches an organisation’s needs, it also requires the development of a highly detailed and accurate inventory of system requirements prior to implementation.
This was the oversight behind US rubbish-disposal company Waste Management’s SAP ERP implementation failure, which ended in a legal saga. Waste Management argued that SAP’s sales process was fraudulent. SAP countered, in part, that Waste Management failed to define its business requirements accurately. The matter was eventually settled out of court with SAP making an undisclosed, one-time cash payment.
Solution: Ensure that you have created a highly detailed and accurate inventory of all your system requirements through consultation with different business teams, departments and your ERP implementation partner.
2. Unrealistic timeframes – plan and prepare for detours
Many companies fail to set a realistic implementation timeline as part of their planning process. Naturally, no one wants the project to take too long or cost too much, but rushing essential processes will inevitably lead to problems.
Way back in 1999, Hershey’s rushed to deploy their ERP, reducing their implementation period from a suggested 48 months to 30 months. This meant that several modules could not be tested properly within the tight timeframe. Hershey’s deployed three resource planning technologies at once, resulting in failed systems, data migration and training. In particular, critical issues in order management and fulfillment were identified too late. Despite fully stocked warehouses, Hershey’s was unable to satisfy an estimated $100 million worth of orders. Their stock plunged 8% landing them onfront page of The Wall Street Journal.
Solution: Benchmarking your timeline against other organisations, adopting best-practice governance and proactively planning for hidden pitfalls and delays will help you plan and execute a realistic implementation timeline.
3. Lack of due diligence in choosing the right partner – identify a trusted partner
After selecting an ERP system, it must be configured to your organisation by implementation partners who can set-up the ERP software to meet your business requirements. However, choosing the wrong partner for your ERP project can have serious repercussions to your overall success. Here is a checklist to determine whether a potential implementation partner is a good fit for your business.
- Demonstrated expertise in the solution you are buying
- Expertise in your specific vertical
- Complementary solutions – some partners have developed based on their deep expertise in particular verticals
- Global implementation expertise
- Cloud integration skill – ensure your partner knows how to leverage “cloud-to-cloud” integrations using web services
- >Aligns with your culture, likeable and trustworthy
Solution: If your implementation ticks all these boxes, then it’s likely that they’ll be a good fit for your business.
4. Poor internal change communications – develop a program for success
Change can be daunting - and technology more so - when it’s being thrust upon employees. In fact, of all the ERP implementation failures that we’ve discussed in this blog, most can be attributed to some facet of poor change management. The lesson? An ERP solution will only be accepted and embraced if the process of getting the organisation ready for ERP is proactively managed. In fact, of the top 10 barriers to a successful ERP journey identified by McKinsey>,half can be addressed by developing and implementing a structured change management program:/p>
- Resistance to change
- Inadequate sponsorship
- Case for change not compelling
- No change management program
- No horizontal process view
Solution: Effective change management means making sure the necessary integration, governance, resources, training and skills development, and support is in place prior to deployment.
When YWCA was preparing for implementation, they invited staff to familiarise themselves with the system and provide feedback to build out specific functionality around their needs in future phases.
Likewise, True Protein proactively managed resistance to change using Annexa’s recommended multi-step approach, ultimately increasing the success and adoption rate of their new ERP.
A few more helpful resources:
The complete guide to selecting a NetSuite implementation partner >
Your guide to successfully navigating a NetSuite implementation >
The benefits of working with a software partner vs a software vendor >
What to look for in a NetSuite implementation partner >
In summary
The pain and expense of an ERP implementation failure is well documented. Yet for all the reasons why ERP implementations fail, they remain underestimated until the deployment is well underway. This should not deter your organisation from transitioning to a modern cloud solution. Rather, a proven partner, careful planning and due diligence will ensure your ERP deployment is successful in the long run.
Learn how an integrated NetSuite solution can help you overcome common implementation failures by speaking with a NetSuite consultant today.
Annexa is a leading NetSuite partners with extensive experience designing and implementing comprehensive and customised business systems, including payroll solutions, financial management, warehouse management and ecommerce solutions.
