ERP implementation is a critical change for any business. A company has to invest resources and an ERP implementation may take months to complete. A successful ERP implementation can provide operational efficiencies, save monies, and boost productivity. In case of a failure, it affects the overall functioning of the company and leads to a waste of monetary and other resources.
There can be several reasons which may lead to an ERP implementation failure. In this blog, we share 8 reasons which lead to ERP implementation failure.
1. Inaccurate project scope definition
An organization should clearly define the project scope and create a plan accordingly. The project scope should outline the business objectives a company wants to achieve and help enhance its systems and processes. It should include a plan to overcome the challenges the company currently faces. The project scope definition should also include the benchmarks that a company can consider as guidelines to determine whether the project is successful or not.
If not done correctly, the company might choose the wrong ERP, which may not help them overcome challenges. Alternately they might not be able to achieve business objectives and complicate things further. In either case, it will lead to a complete project failure.
2. Inadequate top management support
Yes, ERP is software, and most of the heavy lifting will be done by the IT team during its implementation. However, it is critical that the top management drives the entire project. It indicates the importance of the project and shows management’s commitment to its successful implementation.
The other departments should also support and contribute to the project. It may require changes in the roles and responsibilities of some employees. It will also involve making quick decisions having a business-wide impact. A top management executive leading the project will help fast-track these tasks.
Lack of support from the top leadership may lead to a laid-back attitude from other employees and cause delays in execution. Also, any decision or changes will require approvals from the top management and cause bottlenecks if they are not actively involved in the process. All these hassles and delays will lead to project delays and a waste of time and resources.
3. Lack of communication and change management
An ERP implementation will result in changes. The employees should be made aware of these changes and their impact. If not, it may lead to uncertainties and doubts in their minds. The top management should clearly communicate the need and benefits of this change to all the employees. They should also take feedback from them regarding the same. An effective communication strategy will make employees accept the changes.
A lack of communication, on the other hand, will lead to strong resistance. It may happen that employees will not use the ERP effectively and continue doing most of their work as earlier. It will reduce an employee’s productivity and result in inter-departmental friction. Also, the entire effort and monies spent on implementing the ERP will go down the drain as the end-user, i.e. the employees, will not use it.
4. Insufficient resource allocation
A project of this scale requires adequate resource allocation, including time, manpower, and finances.
The company will have to entrust a few employees with additional responsibilities related to the project, and they should be able to devote time to various activities related to the project. Their roles should be adjusted accordingly to prevent them from being overburdened and stressed.
The organization may also need external help and decide to hire a consultant or a vendor for the project. The external team should get adequate support from all the stakeholders for the timely execution of the project. The company should also ensure that payments to the vendor or the consultant are regular as per the pre-defined agreement.
As a company, if you do not take these steps to allocate resources, it will result in an ERP implementation failure. The employees will not be able to give any priority to the project if they have a packed daily schedule. If the different stakeholders do not provide support or the external team or the consultant does not receive timely payments, it will lead to delays.
5. Improper testing
The project team should ensure that all the modules and ERP features are thoroughly tested and validated. All test cases and use cases should work as expected. Any irregularities or anomalies should be reported and fixed during the testing phase. Only post thorough testing and sign-off the ERP should be released company-wide for all the employees.
Lack of testing will result in end users facing difficulties during actual usage of ERP. If this persists, it will discourage and demotivate them from using it extensively, and employees will fall back on older systems and processes. All the effort in implementing the ERP will then be a waste.
6. Improper training
Apart from testing, training the employees on various ERP features is also critical. The employees are the end-users, and they should receive proper training. They should be comfortable with all the tasks they will perform using the ERP. They should also be aware of all the changes in processes and systems post-implementation.
The employees will face difficulties and issues if they are unfamiliar with the system’s features and functionalities. Also, it may be possible that the trainer might not be available immediately to help them resolve the issue. If they frequently encounter problems due to lack of training, it will cause delays in their daily work. It may add stress and create dissatisfaction in them. They might fall back on previous methodologies to ensure the timely completion of the work, rendering the new ERP useless.
7. Data Migration issues
Different departments in the company store data in multiple formats if there is no centralized system like an ERP. Each department might also use legacy systems customized as per their requirements. A thorough analysis of data is essential in such scenarios. Data from these departments should be converted into a compatible data format and then migrated into the ERP. In this phase, data consistency and data accuracy should be maintained.
Any failure in data migration will lead to errors, data loss, or corrupt data. It will hamper the project’s progress. Data is the key to running a successful business in today’s digital world, and any such issues will dampen the company’s growth.
8. Lack of post-implementation support
Another critical factor is the ability of the company to provide ongoing support and assistance post-implementation. Even if all goes well, issues may crop up in the future. ERP might need updating with newer features and technological advancements. There also will be changes in personnel and new employees coming into the company.
If you do not provide assistance and train them, they will not be able to use the system. Also, if any issues remain unresolved due to lack of support, it may lead to more problems as time passes.
The key to successful ERP implementation is excellent planning and efficient execution!
If you are a company looking to implement ERP and need guidance, connect with experts at Direction Software. Direction Software is a multicultural Information Technology Solutions and Business consulting company with Indo-German Management, headquartered in Mumbai, India.
We offer Bespoke solutions on .Net, Java & open-source platforms, E-Business consulting, Back Office Support, Business Intelligence, and Mobility Solutions.
About the author:
Chirag Thakkar – Sr. Digital Marketing Consultant
At Direction Software LLP, Chirag works with the Marketing Team to enhance the Digital Marketing presence and Lead Generation.