Your ERP Project is Destined to Fail - Here's How to Get it Back on Track


Finance Insights for ProfessionalsThe latest thought leadership for Finance pros

Thursday, July 13, 2023

With three-quarters of ERP projects failing to meet their goals, what can businesses do to avoid falling for the same mistakes that plague so many other implementation projects?

Article 9 Minutes
Your ERP Project is Destined to Fail - Here's How to Get it Back on Track

Enterprise Resource Planning (ERP) projects are complex, high-stakes endeavors that can have a significant impact on a business's efficiency, productivity and bottom line. These projects involve the integration of all aspects of an organization, including finance, human resources, procurement and manufacturing.

Learn more: How Can Finance Leaders Get Maximum Value from Their ERP? 2023 Research

When done right, ERP projects can streamline processes, reduce waste and improve overall business performance. However, despite their potential benefits, many ERP projects fail to achieve their objectives. In fact, studies from Gartner suggest up to 75% of ERP projects fail to meet their goals.

Given the high stakes involved and the significant resources required to implement an ERP system, it's crucial that organizations understand why so many ERP projects fail and take the necessary steps to prevent their own implementation from failing.

In this article, we will explore the common causes of ERP project failure, the signs that your ERP implementation is in trouble and the strategies you can employ to get your project back on track.

6 common reasons why ERP projects fail

There are many reasons why ERP projects fail, but some common themes emerge across failed implementations. These include:

1. Poor project management

ERP projects are complex and require a high level of coordination and communication between various stakeholders. If the project isn't well managed, it can lead to a multitude of issues that ultimately hinder the success of the system once it's implemented.

One critical aspect that is often compromised in poorly managed projects is the formation of a core project team. This is essential for driving the project, as it comprises members with the necessary skills, experience and organizational knowledge to make informed decisions and ensure smooth execution. Without a strong core team, an ERP implementation is likely to experience communication breakdowns, poor decision-making and inadequate responsiveness to problems that may arise.

Another vital component that suffers under poor project management is the project timeline. A well-structured timeframe outlines the various stages of the implementation project, sets deadlines for deliverables and allocates resources effectively. Inadequate project management can result in unrealistic timelines, leading to rushed or missed steps in the ERP implementation process. This often causes critical errors, delays and cost overruns, ultimately derailing the project and causing it to fail.

Learn more: 8 Challenges of ERP Implementation (and How to Ultimately Win)

2. Lack of executive buy-in

The lack of executive buy-in is a critical factor in ERP implementation failures, as it can lead to misalignment between implementation costs, business goals and management expectations. Executive buy-in ensures that stakeholders and C-Suite executives in your business understands the value and long-term benefits of ERP systems, thus providing necessary support and resources for a successful implementation. Without this support, you'll struggle to secure adequate budget, time and resources, ultimately compromising the system's effectiveness in streamlining business processes and achieving strategic objectives.

Furthermore, the absence of executive buy-in can often result in poor communication and collaboration among various departments, further hampering the project's success. Therefore, securing executive buy-in is crucial in mitigating the risks associated with ERP implementation and maximizing the return on investment.

3. Inadequate change management

Inadequate change management is a critical factor that can lead to the failure of ERP implementation projects. In fact, according to an IFP survey of over 200 senior finance professionals, 36% cited internal resistance to change as a key challenge of ERP implementation.

The primary reason for this is that ERP systems are designed to streamline and standardize processes across the organization. When change management isn't adequately addressed, employees may resist the new system or fail to adapt to the new processes, causing disruptions in daily operations. Furthermore, insufficient communication and training can exacerbate the situation, leading to a lack of understanding and buy-in from stakeholders.

4. A lack of training for employees

A comprehensive training plan is crucial to the success of an ERP implementation. Employees need to be properly trained and equipped to use the new system in order to maximize its benefits and ensure a smooth transition. Poor project management often neglects the importance of a thorough training plan, leading to a workforce that's ill-prepared to use the new system. This can lead to significant inefficiencies, user frustration and even a complete rejection of the ERP system by the organization.

5. Poorly defined project objectives and scope

Poorly defined project outlines and scope can significantly contribute to the failure of ERP implementation projects, as they create ambiguity for project managers and stakeholders. A lack of clarity in project objectives, deliverables and time frame can lead to misaligned expectations, resulting in wasted resources and dissatisfaction among team members, stakeholders and end users.

Indequete project definitions for ERP software implementation can cause delays, budget overruns and a failure to meet the organization's goals. To ensure success, project managers must establish a well-defined scope, articulate clear objectives, and set realistic time frames during the planning phase of ERP implementation projects. This helps to prevent potential issues and ensures a smoother, more successful project outcome.

6. Choosing the wrong ERP vendor or system

Another big reason why ERP implementation projects fail is often attributed to the wrong choice of ERP software, a critical decision that demands thorough analysis and consideration. 

An example of where businesses go wrong with this is in the misalignment between the software vendors and the organization's specific needs. Software selection should be based on a comprehensive understanding of the organization's requirements, objectives and existing processes. Settling for an ill-suited system may lead to inefficiency, additional expenses, and, ultimately, a failed ERP implementation.

5 signs your ERP implementation is off track

As detailed above, ERP implementation projects are full of potential pitfalls and challenges, so it's important to recognize the warning signs that your project is off track before it's too late. Some common indicators that your implementation may be in trouble include:

  1. Delays in project milestones: If your ERP project is consistently missing deadlines or milestones, this could be a sign of bigger issues.
  2. Cost overruns: If the project's costs are spiraling out of control, it's a clear sign that something is not going according to plan.
  3. Low user adoption: If employees are not using the new ERP system or are resistant to the changes being implemented, this can indicate issues with change management and training.
  4. Data migration issues: Data migration is a critical aspect of ERP implementations. If you're experiencing significant difficulties with migrating data from your old system to the new ERP, this could signal larger problems.
  5. Poor system performance: If the new ERP system is not performing as expected or is causing disruptions to your business operations, it's a sign that the implementation is not going as planned.

5 steps to get your ERP project back on track

If your ERP project is showing signs of trouble, it's important to act quickly to get it back on track. The following steps can help you turn your project around:

1. Conduct a project audit

Conducting a project audit is a crucial step for finance leaders to identify and address issues in their ERP implementation project, ensuring it stays on track to achieve desired outcomes. By examining the business process, project goals and project costs, an audit can pinpoint areas of inefficiency, misalignment or budgetary concerns that may be hindering progress.

2. Revise your project plan

Next, revising a project plan based on the findings of your audit can play a big part in getting your ERP implementation project back on track.

Project leaders must continuously assess and reassess the initial business objectives as the implementation progresses and ensure that they're still in alignment with the current project status. Revisiting the project plan can help you identify any discrepancies or deviations and make the necessary adjustments to effectively achieve your goals.

Additionally, it's crucial to allocate enough time for thorough evaluation and revision of the plan, as this will help you identify potential bottlenecks, resource constraints and other unforeseen challenges that may have arisen during implementation.

3. Improve communication and collaboration

Enhancing collaboration and communication is crucial for finance leaders in steering their Enterprise Resource Planning (ERP) implementation project back on track. By employing effective project management strategies, finance leaders can streamline the flow of information and ensure all team members are aligned with the project's objectives and business requirements. This alignment fosters a well-coordinated approach to addressing potential challenges and identifying areas for improvement in real-time. Furthermore, open channels of communication enable the team to address stakeholder concerns, ensuring their needs are met and ultimately contributing to the successful implementation of the ERP system.

4. Reevaluate your ERP vendor and system

Reevaluating your ERP vendor and system is crucial for the success and efficiency of your business operations. Over time, your business needs may change, and by reevaluating your ERP vendor and system, you can ensure that you're utilizing the most up-to-date technology and features, improving productivity, reducing costs, and staying competitive in the market. It allows you to identify any gaps or shortcomings in your current system and explore alternative options that better align with your business objectives. Additionally, reevaluating your ERP vendor and system provides an opportunity to negotiate better terms and pricing, ensuring that you are getting the best value for your investment.

5. Implement additional training and support

Implementing additional training and support for your ERP system is crucial for the successful utilization of the software within your organization. ERP systems are complex and powerful tools that can streamline and integrate various business processes. However, without proper training and ongoing support, employees may struggle to effectively use the system, leading to inefficiencies and errors. By investing in additional training and support, you can ensure that your employees have the knowledge and resources they need to fully leverage the capabilities of your ERP system, resulting in improved productivity and overall business performance.

Learn more: 6 Key Phases for an ERP Implementation Plan

Final thoughts

While there are many reasons why ERP projects fail, there are also many steps you can take to increase the likelihood of success. By understanding the common causes of failure, recognizing the warning signs that your implementation is off track, and implementing the necessary strategies and actions to turn your project around, you can help ensure that your ERP project delivers the desired benefits and improves your organization's efficiency and performance.

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