ERP Failures

There’s no shortage of news stories about ERP failures under headlines like “Biggest ERP failures of 2010,” but of course the news media loves a disaster. As summarized in a long-time media saying: “If it bleeds, it leads.” While there are some notable ERP system failures every year, there are many more system successes, but those don’t make headlines.

Focusing on the failures, however, it is interesting to look into the causes of ERP failures. Business publications and general news sources generally react to the accusations and lawsuits, and therefore deal only with the results and the finger pointing, and not often the reasons for ERP failures.

Consistent with patterns established through long-term analysis on ERP failure, new research and statistics confirm that ERP failure is more often implementation project failure rather than ERP system failure. In other words, it’s not that the system and software don’t work, it’s that the project failed to properly select, install and implement the system. That’s a key distinction.

A company can learn valuable lessons from another company’s failure. ERP projects are challenging in many ways:

  • Software selection and implementation are rare experiences in the life of most manufacturing professionals, so there is little experience to draw on.
  • There is a lot at stake—ERP is the custodian and manager of vital company information.
  • An ERP project is a significant investment in money, time and resources.

Learning from the success and failure of others is a smart thing to do. Similar lessons are available from CRM failures, supply chain management failures, and any other major system project success or failure.

While many books have been written about ERP system implementation, the keys to success can be summarized in just a few main points:

  • Executive commitment is required to allocate the resources needed, resolve any interdepartmental conflicts, and keep the project a high priority throughout the life of the project.
  • You’ll need a strong, motivated inter-departmental project team for selection and implementation. ERP is not an IT project; it is a business improvement project and “ownership” by the users is mandatory for success.
  • User education and training is necessary to overcome fear of change and prepare future users to take advantage of all the new system has to offer. Double your education and training budget (and make sure to spend it all)—it’s the best investment you will make in project success.
  • Change management and project management are key aspects of project success.

Of course, some projects fail because the wrong system was chosen, the supplier and/or implementation partner was incompetent or dishonest, or the hardware or software failed, but these are rare occurrences. The vast majority of ERP system failures are failures in the implementation process and these are avoidable. Many failed implementations, in fact, can be “fixed” through re-implementation or other remediation, proving that it wasn’t really the system that was at fault.