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Why do ERP projects fail?

Enterprise resource planning (ERP) projects are perhaps the most intrusive project that a company will ever undergo.

Almost everyone in the organization is affected in one way or another, from having to learn new computer skills, developing new report writing skills, re-engineering internal business processes, or the possibility of having to assume new roles.

Frankly, people do not like change, and within every ERP project, there will be at least one person that doesn’t want the project to be successful. They like the way they work today, and they do not see the need for change. Technically, this is a management issue; because the company would not undergo such a disruptive project unless they had clear goals of how new software could help their company improve. And those improvements can be measured in efficiency which results in greater profitability.

Management must communicate “why” they are undertaking a project to get all employees on board. It is about survival, growth, and taking the business to the next level.

According to the Standish Group in The Chaos Report, a study of over 50,000 technology projects showed the technology industry has a poor track record of delivering ERP projects on time and on budget. The year of 2015 was the best over the past 20 years, with just 29% of projects being classified as successful. A full 19% failed, while the other 52% were classified as “Challenged”.

What does this mean?

A large percentage of projects go well over budget, well over timeline, and simply are poorly managed. It can often be traced back to a “selling model”, where technology vendors low-ball actual costs to win business, knowing that once a company is committed to a platform, returning with change orders to complete the work is the main alternative to halting the project. The reality is that most software packages in the market today do what they claim they do. It’s usually about project management.

So how do companies avoid being one of the 71% of companies that fail or are challenged?

Vetting the software partner is the first order of business. How many total implementations have they performed? How long have they been supporting the platform you are considering? The software partner’s experience is the most important decision point in every technology decision-always more important than cost of the software or ease of use.

But there are even more important considerations.

Complexity of ERP projects ranks high in contributing to challenged and failed projects. ERP is inherently complex. But why do companies attempt to eat the entire elephant in one bite? It makes much more sense to separate the “have to have” functional tools vs. the “nice to have” tools and eat the elephant in smaller bites. Remember, software vendors get paid by time and expense and want you to buy into the full complex project. So the longer they can be on site, the higher your cost, resulting in more change orders. Companies need to better define what they “have to have” on go-live to be successful, and then deploy “nice to have” tools in the future with smaller projects.

Lastly, companies need to take a look at their business processes today and reconsider if they are using best-practice business processes. Challenge your software vendor to implement best practices for your business. If they know your business, which should be a main requirement for their selection, they should be able to recommend what companies like yours do for better efficiencies. And if they provide those recommendations, find out if they can they also offer them under a Fixed-Price, Fixed-Scope model.

In the end, your project should be less-cost, due to a canned process, and less risk, since you would be keeping complexity down.  Let’s face it; companies like yours don’t make money implementing software, so choose a company that understands that.

Keep it simple.  Keep it low cost.  Be informed.

Be one of the companies that are classified as “Successful”.

Have questions? 

Take advantage of our experience, 600+ implementations.

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