8 reasons why ERP implementations fail and our tips how to succeed

In ERP systems by Ivana BartonkovaLeave a Comment

Fail of ERP implementation can cost your company a lot – not just money, but also time and opportunities to grow. Even some well-known brands did not handle it well – implementations of Nike, Hewlett Packard & Lidl failed. Lidl lost 7 years & 500 million euro in their SAP implementation.

What should you do in order not to repeat someone elses mistakes?
Check out our article about the 8 most common reasons why ERP implementations fail and our tips on how to mitigate the risk of ERP implementation failure.

UNCLEAR VISION OF DESIRED ERP SYSTEM / MISALIGNMENT WITH COMPANY VISION & STRATEGY

Many companies decide to digitize their processes, but they do not have a clear goal for their implementation.
Before you decide to implement ERP, it is good to have answers for the following questions:

  • What is the vision of your company?
  • What is the plan of your company for the next couple of years?

This information are relevant to select the right ERP system and start the implementation. Every company needs a different approach, different modules and different system. ERP should help you achieve your company goals and vision and its structure should correspond with it.

PERCEIVING ERP IMPLEMENTATION AS A COST

ERP system implementation should be perceived as an investment, not as a cost. If you implement the system correctly and handle change management well, it helps you to grow your profit and you can get your initial investment back within months.

Well-handled middle-sized implementation of Odoo ERP for Port Cities client “paid itself” in less than 4 months. The implementation itself took 6 months and its budget was 15k USD.

Apart of reducing the mistakes done by the human factor, significant change which was brought to the client was reduced time of the management body spent doing operations. Management gained time to work on the business development & acquiring new clients, which raised the monthly revenue of their business

 

 

 

 

 

 

 

To see more detailed information about this implementation, check out the whole case study.

 

If you want to invest in the ERP system, make sure to assess multiple options. Low price does not always mean high quality of the service and the same principle applies to more expensive solutions as well. Make sure you will choose a right ERP implementation partner, who is experienced with implementations in your sector.

SELECTION OF THE WRONG ERP CONSULTANT

Choice of the right ERP consultant means 50 % of your success. Good ERP implementation partner analyzes & understands your business, its process flows and designs the system which meets your company needs. He will guide you through the implementation, recommend the best practices for your field and oversee all the important factors that will make your implementation a successful one. Even though fee for consultancy from an experienced consultant can be higher, his know-how can help you to save a lot of possible costs in the future.

There are many criteria for the choice of the right implementation partner and that is why we prepared an individual article for this topic.

LEAVING ALL THE WORK FOR CONSULTANTS

Even having the best ERP consultant does not mean that your implementation will be successful. ERP implementation is a game of 2 players – the ERP consultant and the company itself. It is a demanding process and you are expected to communicate regularly, provide feedback, handle internal communication with your employees & the change management. There are many cases of ERP implementation failures, even with the best and most experienced consultants, because of insufficient communication from clients side.
Good consultants always present you their methodology, communication risks mitigation plan and it is highly recommended for clients to follow the instructions.

We prepared a specific example to show you, how such a division of responsibilities between the client and consultant can look like. This table also showcases the need for regular communication and attention from both sides.

 

PROVIDERS RESPONSIBILITIES

CLIENT‘S RESPONSIBILITIES

ACCOUNT MANAGER

PROJECT SPONSOR

Reviews project on monthly basis Key decision maker & control point for project
Control point for customer Should review progress with consultants AM

PROJECT MANAGER

INTERNAL PROJECT MANAGER

Responsible for project delivery from consultants side Responsible for project delivery from clients side
Reviews budget, progress & timeline on weekly basis Should review progress with consultants project manager

BUSINESS PROCESS OWNER

Clarifies & approves features related to his/her department

USERS

To provide feedback & inputs for the system

CONSULTANT DOES NOT FULLY UNDERSTAND YOUR BUSINESS

Understanding your business, its processes, vision and plans is a crucial aspect which defines the success of the ERP implementation. ERP system is supposed to help you streamline your business processes, simplify them and convert to digital form. Every business has its own needs and specifics, which needs to be taken into consideration. The bigger and more complex your business is, the deeper understanding of it is needed.

Choose the ERP consultant which asks you questions, goes deep and tries to understand your business, Also make sure to provide to your consultant the highest quality information about your processes you can, so he can design a suitable solution tailor-made for your business.

WRONGLY SET PRICING MODEL FOR THE IMPLEMENTATION

Choice of pricing model & payment terms is one of the frequent failures during ERP implementation. The 2 mainly used models are fixed budget (the consultant estimates the budget and adds buffer and delivers you the solution) and flexible budget (the consultant invoices you the real-time spent on tasks).

Both of these approaches can be good for specific cases, the problems usually appear when the client with the consultant choose the wrong approach for the project.

If you want to know how to identify, which of the pricing models is the one for your ERP implementation in Vietnam, stay tuned for our next article about the pricing models. We will show you what to be careful about, how to choose the right pricing model for your implementation and present you cases of correctly chosen, as well as wrongly chosen implementations.

OVER CUSTOMIZATION OF YOUR ERP

The more customizations your system has, the more complex it becomes & the bigger chance of complications is present. Too many customizations can bring issues during, as well as after implementation itself.

Customizing your ERP too much is often a sign of unwillingness to change and modify the current business processes. When companies rely more on their way of doing things rather than on proven, tried and tested functionalities of the software, they tend to customize too much. Not only budget will be higher, but the company also misses one of the biggest advantages of ERP system, which is streamlining the business processes.

Make your processes simpler, easier and faster with ERP. It is a tool which can help you save time and resources in a smart way. ERP is not only about switching from paper to PC, but also about optimizing your business processes.

Customizations are often riskier and more expensive solutions, although sometimes they are needed. Do not over customize – try to find the smart solution for your business to benefit out of it.
To read & understand about this topic more, we recommend you to check the article The Key to ERP implementations: Manage Customer Expectations from Fabien Pinckaers, the CEO of Odoo,

INSUFFICIENT CHANGE MANAGEMENT & USER TRAINING

Owning the best and fastest car does not help you to travel places, unless you can drive your car. This is a very similar principle with ERP system. The success of the ERP system implementation depends a lot on the ability of the employees/users to use it properly in their day-to-day operations. The bigger your company is, the more important is to set the change management strategy correctly to ensure that ERP will bring you the expected benefits.

COMMUNICATION STRATEGY:

You need to explain to your employees, how will the ERP system improve their jobs, why it is needed for your company and how will the company benefit from using such a system. Understanding “the why” will raise the motivation of your employees to use it regularly and properly.

Make your employees a part of ERP implementation. Let them ask questions, discuss the newly set and updated processes with them. Often they can provide interesting inputs about day-to-day processes since they are the ones who use them every day.

Many companies do not include the employees (users) in the implementation process, which often results in the misunderstanding of the system and low motivation to use it.

USER TRAINING:

In order to train your people how to work with the system efficiently, it is necessary to define what should be trainings done and which people and departments should attend them.

Usually, your ERP consultant will provide the list of trainings for your company and ensure you know how to use the system to reap its benefits.

Before you start your ERP implementation, make sure to mitigate the risks by defining the clear purpose why you need an ERP, how should the ERP system help your business grow and what are your internal human resources for the implementation. Be sure to get in touch with an experienced ERP consultant, who can help you to mitigate the risks of ERP implementation failure.

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