The REAL Reason ERP Projects Fail (A Consultant’s Perspective)

Posted by EQ Tech on Fri, Apr 8, 2016

Reasons ERP Projects FailAs a Sage Authorized business partner and consultant with over 15 years of experience in ERP implementations, Equation Technologies, Inc. has helped hundreds of organizations to add value and create efficiencies through innovative engineering and thoughtful solution design.

As much as we like to recount the stories of successful implementations and satisfied customers, there is much to be learned by analyzing the ERP projects that did not have such a happy ending.

This article will discuss some of the major reasons that ERP projects can fail and steps your organization can take to reduce the likelihood of making similar mistakes.

 

What ERP Project Failure Looks Like

ERP project failure may look different depending on the company or project. The most extreme example would be a business that purchases software and begins working with an implementation partner and then abandons the project before any progress has been made or milestones reached. Most would agree that this represents a failed implementation. 

However, far more common, and arguably more insidious forms of failure occur when the implementation is over budget, behind schedule, or worst of all, completed but does not add value to the organization. The purchase and implementation of an ERP system is a huge investment for any business and simply “getting use out of the software” should never deem an implementation successful.

Avoiding Common Project Pitfalls

Following are some of the most common pitfalls that can throw an implementation off course:

Project Objectives Are Not Clearly Defined

A project can easily become paralyzed by absence of communication and an unclear plan of action. Some clients are eager to dive in and figure that they will plan as they go, whereas others don’t want to set hard deadlines or objectives so there is less pressure to meet expectations. In either case, these businesses are setting themselves up for failure, as a solid project plan with clearly defined goals is paramount to success.

A technology partner should assist the client in developing the project plan and should not allow work on the project to begin until it is complete. The project plan should clearly identify:

  • Project Objectives (what is the client trying to accomplish)
  • Project Timeline (how long will the project take and when must it be completed)
  • Project Budget (anticipated cost of software and services)
  • Other resources required to complete the project (people, materials, equipment, knowledge and time).

The client and partner should communicate regularly to ensure that any changes to the project plan are documented and understood clearly on both sides. 

Inadequate Resources Assigned to Project

Many different resources will be required throughout an implementation and some will be more obvious and easier to quantify than others. For example, it is much easier to calculate the cost of purchasing a new software program than it is to determine the number of employees that will need to be dedicated to the project full-time.

Regardless, every project plan should identify necessary resources and make an educated effort to estimate or budget their requirements over the life of the project. 

One of the most difficult yet critical resources to budget and manage are people. A client must be prepared to nominate a Project Manager, who should be a full-time employee in a leadership role in the organization, with a strong understanding of project objectives, and the ability to dedicate significant time over the life of the project to interacting with the partner, managing other resources, and completing any other tasks required to keep the project on track.

Companies often underestimate the man hours necessary to complete project tasks and often expect employees to manage project duties in addition to their normal responsibilities. This is a dangerous situation as it forces employees to choose between one objective and another and may cause them to resent the new system.

Another challenge is presented when companies with high turnover are faced with the additional challenge of having to pause or delay project tasks to replace employees that have left. 

Poor Choice of Software and/or Implementation Partner

For most companies, the ultimate choice of one software solution and implementation partner over another comes down to cost. Solely choosing an ERP system and implementation partner based on price is likely to be far more costly in the long run if the software is not a good fit or the partner cannot provide the necessary services to make the implementation a success.

First and foremost, companies must ensure that they are evaluating the right software for the right reasons. Many companies will look at a specific system after a staffing change in the accounting department, where the new controller or CFO wants to implement whichever program they used in a prior position.

Another influential party in system selection is a business’s IT department or service. For the sake of simplicity, IT has an obvious motivation to support and recommend systems that they are familiar with or that their other clients are using. While they can certainly provide useful feedback in the decision-making process, they usually don’t have the full picture of financial and operational needs that must drive system selection.

Finally, it is easy to become enamored by some newly-released feature that promises to do “A-Z” for your business. Just like buying a car, don’t let a dazzling display distract from evaluating the true functionality of the system for your operation.

A good implementation partner can assist in the process of system selection and should be trusted to steer the client toward the best solution for their needs.

Choosing the Right Implementation Partner

Unfortunately, it is often just as difficult to evaluate a partner as it is to choose a system.

The following reasons can be paramount in companies’ choice of a partner, when often they should merely be one of many considerations.

Location - the current technological environment facilitates efficient and affordable connection over great distances. There is no doubt that face to face interaction can be beneficial to the project and helps to build a strong relationship between client and partner.

Nonetheless, choosing the partner physically closest to your business is not going to guarantee a successful implementation. Video/Teleconferencing, online project management platforms, regular communication via email and phone, and software allowing remote access to client systems are all critical in managing an implementation from afar. Additionally, while it is helpful for the client and partner to be in the same time zone, as long as reasonable schedules can be established, this should not be a critical factor in the final choice.

Price – to a certain extent, the cliché “you get what you pay for” holds true. Companies are always advised to obtain quotes from different partners and the comparison can be helpful in determining a reasonable budget for the project. While one partner may offer a dramatically lower estimate, prospective clients should ensure that this is not due to a smaller scope of services that may exclude tasks essential to a successful implementation.

Equating Size with Expertise – it can be easy to assume that a large partner will have more experience and will be able to attract more skilled consultants. While this may hold true for some partners, there may be a tradeoff in the level of customer service and the partner’s investment in the success of the project.

For a partner working on hundreds of implementations a year, it may be difficult to provide the same level of individual attention to each project. Similarly, a partner that boasts of experience with many different software programs may actually lack a sophisticated knowledge of any one system. A partner that focuses on products from a single publisher, or even solely on one product, is often best equipped to lead a successful implementation.

Implementations led by a partner who is not a good fit for the project or client are almost guaranteed to fail. Nowhere is this more evident than in the case of clients who come to Equation Technologies in the years following their initial implementation, only using a fraction of their system and frustrated with what they perceive to be a “bad” software product. When all they really need is the right implementation consultant and a well-planned ERP project recovery

Forcing the New to Look Like the Old

Although some companies are forced off their system when the program is retired and the publisher is no longer providing support or new releases, most businesses implement new ERP software because they are looking to gain efficiencies, improve processes or have some other clear objective in mind. Therefore, one of the worst turns that an implementation can take is when the client insists on replicating features or functionality from their legacy system that may not be practical in the new program.

If a business has reached the stage of purchasing software and beginning implementation, there should be no doubt that the new program contains all of the features that are an absolute must for its operation. While some customization is reasonable, clients should not be making changes just for the sake of trying to recreate the look and feel of their legacy system.

Not only is this time-consuming and expensive, but adding unnecessary, complex customizations will restrict the functionality of the new system and can prevent the client from taking advantage of features that may not have been available in the legacy system.

Clients seem to take this approach to implementation when one or more key players are somewhat resistant, if not hostile, toward the change. Depending on their role in the organization, people may resent having to learn an entirely new program or make substantial changes to their day to day processes. Likewise, employees involved in designing or supporting the legacy system may also be difficult to get on board. A business that invests in staff buy-in prior to the implementation is really investing in a smooth transition and the long term success of the project. 

Assuming an Implementation is Complete at Go-Live

Without a doubt, go-live is one of the most important milestones in an implementation and clients should celebrate having reached this point in the project.

Nonetheless, one of the biggest mistakes that can be made is to assume that the project is complete once the cut-over from the legacy system occurs and users begin entering transactions in the new system. The graphic below illustrates some of the critical “tests” of the new system that happen in the days and months following go-live.

ERP Implementation Timeline

It is often not until the months following go-live that a company will be able to fully evaluate the true impact of the new system. For example, if a company is unable to produce financials or obtain accurate costing information in the new system, it would be difficult to say that the project has been a success.

To guarantee long term satisfaction, client and implementation partner should continue to work together so that the partner can provide support for each new financial or operational milestone, and ensure that the client is confident in using the new system. It is also important to look back in the months, or even years, following implementation to evaluate whether the original goals of the implementation have been fulfilled.

For example, if one objective is to improve the efficiency of month-end close and financial reporting, the client should be able to say that they have shortened the process by X days, or require X fewer employees to perform the same number of tasks.

Conclusion

Since 2001, Equation Technologies, Inc. has had the privilege of helping a host of companies to implement Sage 300 as part of achieving a variety of financial and operational objectives. This experience has revealed a number of attributes that are shared by successful implementations, as well as the patterns in projects that may not have accomplished the client’s original goal. While this article may illustrate some of the more common pitfalls to avoid, the best way to ensure a successful ERP implementation is through a careful process of system selection, a committed project team, and a strong relationship with a software partner committed to leading your organization to project completion.

If you need help with your next ERP implementation or want to resurrect a failed project to preserve your technology investment, click below to get in touch. We’d love to schedule a free consultation.

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Topics: Project Recovery, Implementation Tips

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