7 reasons why ERP systems fail

Not only is ERP traditionally expensive, but companies rely completely upon it. Why do many struggle to implement ERP successfully or limp along for years using partial functionality before abandoning it? 123 Insight’s Martin Bailey looks at some of the common pitfalls.

No top-level sponsorship

If the decision to select and implement a new ERP system is not driven from the top then those pushing for change are fighting a losing battle. All top level staff need to be in agreement when selecting a system, and this must be demonstrated down the chain of command. Internal politics can also play a part and because of inter-departmental conflicts, decisions detrimental to the business good are often made.

Fear of change

Staff can be fearful of change, seeing progress as a possible threat to their employment. Companies are often selective on the number of staff they send for training. People move on, taking knowledge and perhaps leaving behind staff that are less experienced. These factors play a massive part in the success or failure of a system. People by nature will take the easiest route to completing a task, which will be the way they currently know.

Generally, a new ERP system does not equal mass redundancies, but ensures that a company can grow without more resources. Staff need to know the positives that the system will bring to them, the company and customers.

Fear can be replaced by anticipation of how it could improve their working experience. One client told us that a person most resistant to change was now the biggest advocate. Remember that while a system administrator may need to understand the full system, many staff will only need to understand their job-specific elements of it, so don’t blind them with science.

ERP is not just about I.T.

Many mistakenly believe that ERP is an I.T. issue rather than an enterprise strategy – it spans virtually every department within a company and is the infrastructure upon which the business sits. Why then, do many companies under-resource its selection or implementation process, either with staff numbers or their understanding of the business? Check that the people responsible for I.T. also understand how the business needs to run overall. Note also that external I.T. consultants may have even less of an understanding of what the business needs.

Poor ERP implementation

An engine can still run when it’s poorly tuned, but it’ll drink fuel and suffer from poor performance – the same can be said for poorly implemented ERP. Companies are often recommended consultancy to customise the system beyond all recognition but then pass ownership of the problem to external consultants that may not understand their business.

This relates to our first point; as well as top-level sponsorship the system should be championed from within, rather than wholly trusting consultants that don’t fully understand your business and only have their own commercial considerations at heart. An internal team covering all affected departments should be set up to understand the workflow. A specification document spanning reams of paper isn’t necessary – a simple ‘top level’ bullet list of core functionality is all that is required.

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The tail wagging the dog

This problem occurs when the wrong solution has been implemented in the belief that it can be shoehorned to meet the company’s needs. There is often no way out of this other than to write off the cost or spend more on customisation that ensures that you will pay more with every future release. A good ERP system will be designed to meet the needs of most users without customisation. Don’t overcomplicate your requirement brief. If you evaluate an ERP system without preconceptions you may be surprised at the solution they already have.

Discontinued systems

If your ERP vendor is acquired by a bigger fish, it’s possible product may no longer be developed or even supported. Although the system won’t stop working overnight you are then hanging your company on a ‘mission-critical’ system that will bring your business to a standstill if it fails.

According to a University of Texas study, 94% of companies that suffer catastrophic data loss will not be trading a year later. If you are on the receiving end of a ‘discontinued product’ letter, then alarm bells should be ringing! Even now we regularly talk to companies looking to replace DOS, UNIX or AS/400 systems.

Obsolete Hardware Infrastructure

Discontinuation is not the only problem with age, and obsolescence also applies to the OS and/or hardware. One client previously running an AS/400 system ended up buying a motherboard from one of their own clients that had the same hardware because they couldn’t find a supplier. Often when a company contacts their vendor, the costs to upgrade the software can be prohibitively expensive and will also require a complete hardware infrastructure on top, making the pill doubly bitter to swallow.

Ensure your chosen system is based on a well-supported application development platform with an industry-standard database structure such as SQL, so that you can easily interface with other systems. Ask your vendor if they have a software development kit (SDK), or whether custom development is needed, as this could considerably increase the overall cost.

Summary

Forewarned is forearmed. Before you start to select a system, get your house in order and buy-in from the top. Select a system that offers the best fit for your business on a well-supported platform, but go in with open eyes and a simple specification. Break the implementation down into manageable chunks spread across your team and meet regularly for progress updates.

With any large scale implementation there will be challenges along the way but with the right mindset your company will make the transition with relative ease.

Companies looking to implement ERP can attend free 123insight events and receive a free copy of ‘How to implement a manufacturing system’. 


images supplied by 123insight.