How To Avoid Failed ERP Implementation
ERP solutions are critical to the proper management of commercial enterprises. While ERP is not a holy grail that guarantees success, it’s one of several tools managers use to ensure operations run smoothly as businesses look to generate and grow revenue. As capable as ERP software is, ERP implementation failure is more common than one might think, and companies are better served when they understand how to avoid failure in this area.
One must keep in mind that implementing an ERP solution falls under change management. This process does not have to be as complicated as end-to-end digital transformation, but it also involves change. Getting staff to incorporate new ways of doing business is a complex undertaking, and there should be caution in how companies go about bringing change that involves ERP implementation.
Why Do ERP Implementations Fail?
There are several reasons for the failure of ERP implementation, but four are perhaps more common.
Not identifying the reason for the ERP
Organizations choosing an ERP must do so to address and resolve a particular problem or set of problems. Simply implementing an ERP for its own sake is a poor reason for choosing this path. Wise organizations take preparation seriously. Because of this, they identify and understand the reasons for the ERP. In addition, capable companies have clear objectives and clearly articulate how ERP implementation will reach these objectives.
Many examples exist of companies identifying the challenges they hope to overcome with an ERP solution. Those may include, but are not limited to:
- Aligning operational activities to create greater efficiency
- Providing greater transparency around operational activities
- Facilitating collaboration across departments and decreasing the siloed effect prominent in many organizations
Once an organization decides to implement an ERP solution, planning exactly how the implementation will be handled is necessary. There should be a clear plan around project ownership, including knowing whether an external consultant will lead the implementation process, selecting who will be involved in the implementation, understanding what resources are needed, and determining the timeframe in which the implementation will be completed. These are essential components that require clarity to ensure ERP implementation success.
Lack of management support
Beginning an ERP implementation project without clear management support can be a recipe for disaster. In addition to securing the necessary budget and personnel support, ERP implementation must have clear support from management to ensure obstacles are removed, budgets are provided, and unforeseen challenges can be addressed appropriately.
Not properly vetting vendors
Choosing a vendor based solely on price or a single issue often leads to disappointment during and after implementation. A robust review process incorporating essential components of your organization and individual departments is an excellent starting point for crafting a clear and comprehensive vendor review process.
The vendor review process should also include checking references, researching prices, and confirming available modules important to your business. In addition, the selection process should consist of an understanding of what providers offer in terms of documentation, training, and support post-implementation. Organizations that do not check these boxes during the review process often miss critical ERP solution elements that eventually require additional funding and implementation after the fact. This lack of vetting leads to prolonged implementation and cost overruns.
Not planning for contingencies
During any change management process, including ERP implementation, there must be contingencies in place to account for unforeseen issues. No matter how well-planned an implementation is, there will always be some small or large issue that arises. Knowing how to address and resolve several types of problems before they occur will help the internal and external implementation team quickly address those issues and keep the implementation on track.
Recipe For a Successful ERP Implementation
Planning for a successful ERP implementation is possible. To ensure success, organizations must have several components in place. These components include:
- Company commitment. Because ERP implementation is a change management undertaking, the organization, and its staff, must be committed to this change. This includes using the new software once implemented, accepting the training, and using the software as intended to bring about renewed efficiency and streamlined processes. Everyone involved in using the new software and those departments that will benefit from its use must be committed to it.
- The plan of action for implementing the ERP solution should include goals, milestones, and timeframes. The planning phase must consist of several critical steps, including evaluation, gap analysis, customization, testing, and user training.
- Selection of the implementation team. Selecting a cross-functional team representing areas that will use and benefit from the ERP solution will enable a smooth implementation process. Team participants should include very knowledgeable staff and those who can adequately assess and work through potential issues during implementation.
- Excellent communication. To ensure the new ERP software maximizes the company’s operation, staff must understand how the software will work and how it will benefit the organization. To do this properly, a comprehensive communications strategy must be developed and implemented to ensure employees understand the company’s ERP initiative and what is expected of them.
- Adherence to a timeframe. Perhaps the most critical component of the ERP implementation process is the timeframe in which the solution will be implemented, when it will become operational, and when the organization will be able to realize a return on its investment. An implementation schedule within 3-6 months is inherently different from one that lags for 1 to 3 years. Whatever the timeframe, companies should adhere to it as closely as possible.
How FRC can help
Contact FRC and speak to one of our ERP implementation specialists to see how an ERP solution should be implemented and how your company can benefit from a timely implementation and go-live process.