According to a widely quoted report by the analyst firm Gartner, 55% up to 75% of all ERP projects fail globally.
The meaning of “failure” in this context is somewhat blurred, but it implies that the initiatives did not achieve their goals or part of their goals.
If you’ve been following our “Failed ERP Implementation” series where we document some of the world’s most spectacular ERP failures, you know that there are many different ways in which an ERP project can go wrong.
Yet, the correct implementation of the right software handled by a trusted team can totally skyrocket your operational effectiveness and efficiency. In fact, data from NetSuite — a market-leading cloud-based ERP software suite — shows that the ERP market remains in a phase of rapid expansion, with the total market size expected to exceed $49.5 billion by 2024.
With that in mind, below we’ll go over six of the most common reasons why ERP projects fail and how you can avoid them.
1. Lack Of Industry Knowledge
The first reason we want to discuss is the lack of industry knowledge on the part of those leading the initiative.
An ERP project is a complex undertaking that requires a deep understanding of how businesses operate, the specific processes involved in running them, and how to best map those processes onto an ERP system.
Furthermore, it’s also important to have a good grasp of the software itself and how it can be configured to meet the unique needs of your business.
If you don’t have this knowledge in-house, it’s crucial that you partner with an ERP consultant or implementation partner who does. They should be able to not only advise you on the best software for your needs but also help you configure it properly and train your team on how to use it effectively.
2. Inefficient Team
Another common reason for ERP project failure is an inefficient team.
An ERP project requires the involvement of many different departments and team members, all of whom need to be working together efficiently in order for the initiative to be successful.
This can be a challenge, as each department will have its own goals and objectives, which may not always align with the goals of the project as a whole.
Furthermore, there can be a lot of confusion about who is responsible for what, leading to duplication of effort and wasted time.
To avoid this, it’s important to have a clear and concise project plan that assigns specific tasks to specific team members and sets out clear deadlines. Regular progress meetings should be held in order to ensure that everyone is on track and that any issues are quickly resolved.
Working with an ERP implementation partner or a solutions provider can also be helpful, as they will have experience managing similar projects and will be able to offer guidance and advice on how to keep your team on track.
3. Unrealistic Time-Scale
One of the most common mistakes made when planning an ERP project is underestimating the time it will take to complete.
An ERP project is a complex undertaking that requires careful planning, meticulous execution, and a lot of testing. Rushing any of these steps can lead to problems further down the line, so it’s important to make sure you allow enough time for each stage of the project.
A good rule of thumb is to add an additional 20% to your estimated time scale in order to account for unexpected delays and changes.
4. Clarity Of Cost
Another frequent mistake is failing to take into account all of the costs associated with an ERP project.
An ERP system can be a significant investment, so it’s important to make sure you have a clear understanding of all the costs involved, both upfront and ongoing. These costs can include but are not limited to:
- The cost of the software itself
- The cost of licensing, support, and maintenance
- The cost of hardware (typically not needed for a cloud-native system such as NetSuite)
- The cost of implementation and training
- The cost of change management
- The cost of data migration
Failing to take all of these costs into account can lead to serious financial problems further down the line, so it’s important to be as clear and upfront about them from the outset as possible.
5. Training Issues
Once the system is up and running, it’s important that your team is properly trained on how to use it.
This might seem like a simple task, but it’s often overlooked or underestimated. Many businesses make the mistake of assuming that their team will be able to figure it out as they go along, but this is rarely the case.
Without proper training, your team will struggle to use the system effectively, which can lead to frustration and a feeling of being overwhelmed. This, in turn, can lead to them giving up on the system altogether.
To avoid this, it’s important to make sure that you allocate enough time and resources for training. Your team should be given adequate time to learn the system before they are expected to use it for work.
6. Resource Issues
ERP projects require a significant investment of time, money, and manpower in order to be successful. If any of these resources are lacking, it can put the whole project at risk.
This is why it’s so important to have a clear understanding of your resource requirements from the outset. Make sure you have enough budget and manpower to see the project through to completion.
The Bottom Line
Your ERP project doesn’t have to fail. In fact, there are some very happy organisations that have achieved great things with their ERP system.
However, as with any major project, there are risks and challenges that need to be managed in order to avoid problems. By being aware of the most common mistakes and taking steps to avoid them, you can significantly increase your chances of success.
One sure-fire way to avoid the mistakes listed above is to partner with an experienced and reputable ERP implementation company such as FinanSys.
Learn how we can bring our 25+ years of business technology experience into partnership with your company and truly get you the results you deserve.