Why ERP Projects Fail

ERP Failure

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ERP Failure

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WHY ERP Projects Fail - The top reasons:

Pitfalls during the ERP implementations are given below.

1. Lack of Top Management Commitment (Management being involved but not dedicated). If the owner is not spending enough quality time then the ERP project is likely to be unsuccessful. In one organization (having three factories) the Director hardly took part in the discussion with ERP vendor and delegated the task to the General Manager, who in turn never wanted the ERP system, so he created all the road blocks, and the ERP vendor got frustrated.

2. Education (Not understanding what the new 'system' is designed to achieve). At least 100 hrs of training is required for key users. Preparing masters / transaction on practice database to get the comfort level and singing off is highly recommended. The CEO can make this happen if he / she personally takes interest, otherwise if left to users, the quality training does not happen and then chances of success is reduced. In one company the training was given after the system was ‘live’. ERP training should have been planned before going live. Users were busy with ISO implementation and most people saw the data entry screen for the first time, when the legacy was removed.

3. Inadequate Requirements Definition (current processes are not adequately addressed). SRS (System Requirement Specification) is not prepared because users do not want to spell out their requirements. User must write down the requirements, which means taking out time and extra effort. User usually explains casually verbally and hurriedly, how the ERP can succeed? When head of department is asked to jot down the SRS, he / she does not cooperate and later points out faults with the system.

4. Unable to leave legacy software. The ERP package is a totally integrated software, including accounts. Some organizations are so comfortable with their Rs. 5000/- wala account-centric package; that they do inventory and other functions in ERP, but ask for data transfer from ERP to such accounting package (it is like putting bullocks in front of car !).

5. Internal Resistance to changing the 'old' processes. Human nature. Unless proper confidence building is done (during training) the user will still try to do the legacy way. One ERP user was so adamant that the MD had to ask him to resign (and he was the works manager who was expert in fire fighting, but MD wanted to prevent fire altogether). Classic case where BPR is not done before ERP.

6. Suddenly ERP software vendor payment is stopped.

7. Unrealistic Expectations of the Benefits. Users starts expecting moon. One must draw a line and be satisfied (at least in the first phase, and let the system take off). Not able to accept the fact that there are still some things that ERP cannot do.

8. Unrealistic Expectations of the ROI. People forget to quantify the intangible benefit or they simply expect returns overnight. Most do not know even as to what the ROI is. For example ROI can be reducing inventory level by X % or ROI can be preparing of TAX (Excise) Invoice quickly and accurately, or ROI is to get the correct material requirement planning, or ROI can be reducing wastage (scrap monitoring and control), and so on.

9. Unrealistic Time Frame Expectations. Let us accept: ERP is like changing the wall itself (and not changing mere paint of the wall). CEO / CFO expects things to happen overnight, but they have not taken trouble to define (in writing), to what extent customization will be allowed. One has to learn to put a full stop to chopping and changing.

10. A Bottom up approach is employed (the Process is not viewed as a Top Management priority). ERP project is taken as ‘by-the-way’ project whereas in true sense it should be the only priority during implementation phase.

11. Budget is not sectioned. In company (Rs. 40 Crore turnover), the MD was from old school (basically CA not liking computer). He never sectioned the money required for the Server, etc. for nine months even after going live.

12. Chances of ERP succeeding is reduced when the 'Proof of Concept' is ignored.

13. The ERP project is likely to fail if a proper CRP run is not carried out.

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