Why do ERP Implementations Fail?

Lionel Grealou ERP, Operations, Strategy Leave a Comment


Enterprise Resource Planning (ERP) solutions are like the ‘central nervous system‘ of the organization, providing the ‘sensory‘ input to management – so that they understand what is happening with their finances, employees, suppliers and customers, and respond accordingly to adjust products and services based on customer requirements, external and internal changes, market pressures, efficiency imperatives, growth planning, etc.

ERP systems provide day-to-day means to manage operations and related administrative functions: sales-to-cash, accounting, reporting, compliance, HR, supply chain, customers, procurement, sales orders, invoicing, distribution, logistics, etc. 

Similarly to Product Life-cycle Management (PLM) implementations, ERP systems have to deal with complexity, business risk mitigation, data integration, organizational silos, business process automation, business change and deployment challenges. ERP and PLM have different purposes and functions, while they are closely complementary, necessary but not sufficient in isolation to run a manufacturing organization. 

Broadly speaking, ERP implementation failures are characterized by one or more of the following root-cause factors:

  1. Unclear go-forward strategy, business case for change not compelling: when is an ERP change required, how big is the change expected (scope, speed of deployment), what will be the impacts to the business, are they understood, what is the expected return on investment, over what period (perhaps similar questions to other large IT deployments).
  2. No clear approach, no clear destination, unrealistic expectations, IT-driven vs business-driven: clear expectations require clear understanding of the art-of-the-possible, industry standards and benchmarks, what problems will be resolved, how the IT will get involved to implement the technical solution (rather than how the business will get involved).
  3. Poor project management, lack of good planning, project team lacking skills: successful implementations require (among other things) ongoing planning, assumption validation, rigorous requirements and scope control; business leads often have aspirations or expectations that focusing on out-of-the-box (OOTB) bundles or ‘best practices‘ will suffice to deliver competitive advantage, but it takes more than that to deliver successful ERP implementations: process knowledge combined with cultural change leadership. Lack of robust implementation roadmap is one of the key challenge; many small problems can be relatively easy to fix separately, but create a ‘perfect storm‘ when combined together into a large ERP project. 
  4. Ineffective business change management, poor scope control, poor risk management: when to upgrade or tweak an existing ERP vs introduce a complete new set of solutions which will transform significantly the business? Success will depend on effective change to the business, the ability of the business to implement, deploy and adopt new operations models.
  5. Insufficient use case validation, poor or late testing: testing and validating the use cases is critical to confirm that the solution has been built as intended, as per the use cases defined during the design phase; it is important to have the key users validating their own user cases early enough in the implementation to allow for adjustments, corrections and alignment across boundaries in terms of end-to-end and ‘cross-process‘ integration.
  6. Poor strategic alignment and integration with the Product Development backbone: many organizations deploy ERP solutions before having defined their PLM roadmap, where the boundaries lie, what interfaces are required, where is the master data authored, etc. Implementing ERP before having understood the PLM-ERP interlock might lead to recurring inefficiencies ‘garbage in, garbage out‘ and limited business benefit realization on the ERP side.

ERP implementation failures are more commonly reported than PLM implementation failures. They are typically more costly and more visible to company executives. An ERP implementation is usually the number one project on the CIO’s agenda; they are often IT-driven, while they should be business-driven transformation projects – in collaboration with IT in the implementation seat. There is a perception that ERP implementations are ‘just-do-it‘ projects, while they require a lot more cross-process and cross-silos validation.

What are your thoughts?


This post was originally published onĀ LinkedIn on 19 September 2015.