Major reasons for ERP implementation failures,
Poor ERP Package Selection: Poor package selection occurs when a company has inadequately developed functional requirements definitions. It also occurs when staff members assigned to ERP Implementation projects do not take the time to run the screens of the new system, as they would during their daily work tasks, to find out if the software package features are adequate for their needs.
Another reason we have found is executives, familiar with an ERP system from a last job they held, implement the same system in their new company without defining functional requirements. We have also encountered companies who made major gaffes by selecting a package at the top levels of a company without intimately knowing its characteristics.
What often results from this is the ERP package doesn’t fit the organizational needs, or that the package selected takes longer to process daily work tasks. We have also seen executives select a distribution package for a manufacturing environment, or a manufacturing package for a distribution environment, for obscure reason, such as liking one salesman over another.
ERP Implementation Failures
Lack of Top Management Commitment: The propensity of top management to delegate the oversight of an ERP implementation to lower management levels often results in (1) being “out of touch” with critical events, or (2) the lack of understanding of the size, scope, and technical aspects of the project, and subsequently, the lack of proper commitment of time and resources required for a successful implementation. The result is a failure waiting to happen.
Inadequate Requirements Definition: Surveys have shown that inadequate definition of functional requirements accounts for nearly 60% of ERP implementation failures. This is simply a matter of not comprehensively and systematically developing a quality set of functional requirements definitions. This leads to the second greatest cause of ERP implementation failures: poor package selection.
Inadequate Resources: The third greatest reason for ERP implementation failures is inadequate resources. Many companies will attempt to “save dollars” by doing everything on an overtime basis, whether or not there are adequate skills within the company, extending individual work loads to 150%. This approach can be a “kiss of death” for the program.
Time and time again we run across this mistake in ERP implementation. The financial and emotional drain of what seems sometimes to be perpetual extensions, reschedules and delays of implementations takes its toll. People burn out after having put in extensive hours over a long period of time.
Resistance to Change/Lack of Buy-in: The lack of a change management approach as part of the program can prevent a program from succeeding. Resistance to change is quite often caused by (1) A failure to build a case for change, (2) Lack of involvement by those responsible for working with changed processes (3) Inadequate communication (4) Lack of visible top management support and commitment, and (5) Arrogance. A lack of buy-in often results from not getting end-users involved in the project from the very start, thereby negating their authorship and ownership of the new system and processes.
Miscalculation of Time and Effort: Another cause of ERP implementation failures is the miscalculation of effort and time it will take to accomplish the project. Companies who treat an ERP selection, evaluation and implementation comparable to buying a washing machine are doomed to failure.
Misfit of Application Software with Business Processes: One of the main causes of ERP implementation failure is the misfit of application software with the company business processes. This failure — to examine underlying business process flaws, and integrate the applications with the business processes, causes loss of productivity and time, and ultimate benefits.
Unrealistic Expectation of Benefits and ROI: Another significant cause for ERP implementation failure is the unrealistic expectation of benefits and return on investment. Software providers are notorious for overstating the benefits in terms of ROI, when the total costs of the project have been understated. Often left out of the total costs are costs of planning, consulting fees, training, testing, data conversions, documentation, replacement staffing, and the learning curve performance drop. When this happens, a company doesn’t stand a chance of achieving the ROI it anticipated.
Inadequate Training and Education: Another of the biggest causes of ERP implementation failure is inadequate education and training, which are almost always underestimated. ERP-related training is crucial as most employees must learn new software interfaces and business processes which affect the operation of the entire enterprise.
The corporate culture is impacted by changes in the company’s business processes, and shortchanging this part of the ERP implementation leads to much pain and suffering downstream.
Poor Project Design and Management: A major mistake is to short-cut critical events in the project plan, such as time for documentation, redefining and integrating processes, or testing before “going live.” Another common mistake is made when a company leaves out the self-examination of business processes and uses ERP to cover-up weaknesses. It is easier to buy software than to perform the more difficult task of identifying weaknesses and opportunities for improvement.
Also See: How to do Pricing Release Procedure in SD?
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