Erp Implementation Failures

In a recent survey, information technology managers identified three primary reasons for the failure of all IT-related projects: poor planning or poor management (cited by 77 percent), change in business goals during the project (75 percent), and lack of business management support (73 percent). Since ERP is an IT-related project, the above are valid reasons for explaining ERP implementation failures.

But more specifically, ERP implementation failures fall into 10 categories:

Poor leadership from top management. If top management is not strongly committed to the system, does not foresee and plan for the profound changes necessitated by ERP, or does not actively participate in the implementation, the implementation has a high likelihood of failure. The implementation of ERP must be viewed by top management as a transformation in the way the company does business.

Automating existing redundant or non-value-added processes in the new system. The integrated environment of the new ERP system will require the organization to do business in a different way Therefore, existing business processes need to be reengineered from the bottom up to dovetail with the ERP structure and requirements.

Unrealistic expectations. Many companies grossly underestimate the amount of resources, time, and outside assistance required to implement and run the new system. Moreover, managers and workers frequently assume that performance will begin to improve immediately Because the new system is complex and difficult to master, organizations must be prepared for an initial decline in productivity after the new software is put into operation. As familiarity with the new system increases, the expected improvements will come. But management must be prepared for initial waves of frustration.

Poor project management. Managers are often surprised by the scope, size, and complexity of an ERP implementation. As a result, management sometimes does not initiate the necessary level of detailed project management planning and control.

Inadequate education and training. Top managers and all system users must be fully educated so they understand how the ERP system should be integrated into the overall company operation. All users must be trained to take full advantage of the system's capabilities. A failure to educate and train all relevant personnel will guarantee implementation problems.

Trying to maintain the status quo. People have a natural tendency to be comfortable with the status quo and may be fearful of changes brought about by any new system, especially one as pervasive as an ERP system. They may fear that the new system will make their jobs more difficult, reduce their importance, or even cost them their jobs. People are also afraid to fail. And ERP systems may create a great deal of uncertainty in some people as to whether or not they will be able to perform their jobs as well as they did under the old system. Some front-line staff may be uncomfortable with the realization that with better information, upper management can keep better track of what they are doing and the money they are spending.

A bad match. Some of the biggest ERP system implementation failures occur because the new software's capabilities and needs are mismatched with the organization's existing business processes and procedures. An ERP system that is not designed to meet the specific business needs of the company can cause tremendous problems. A significant mismatch between the technological imperatives of the system and the existing structure, processes, or business needs of the organization will generate widespread chaos. Less severe mismatches between business processes and software