Lessons from ERP Implementation Failures

ERP implementation failures inflict a great deal of pain on organizations. Whether it’s implementation cost overruns, software that doesn’t support the business, or lack of employee acceptance, ERP failures entail very negative consequences. So why do over 65% of enterprise software implementations fail?

Our experience helping clients clean up projects they or their software vendors have failed to manage, along with our expert witness support to ERP lawsuits, has taught us quite a bit about the reasons for ERP failure. Below are five trends we see in most troubled enterprise software implementations: 

1. Lack of software fit. The first stumbling block for many failed implementations is a severe misalignment between software functionality and business needs. There are hundreds of enterprise software options in the marketplace, so it is important to navigate carefully and find the product with the right fit. Too many failed implementations neglected to engage in an effective ERP software selection process.
2. Unrealistic implementation expectations. Enterprise software sales reps often understate the level of resources required to make the implementation successful, so many companies fail to budget adequate time, money, resources, and external consulting support to make the project successful. In addition, failed implementations often neglect to include key activities in their implementation project plan, such as organizational change management, business process and workflow definition, and thorough conference room pilots.
3. Lack of executive buy-in and support. Executive buy-in involves more than signing the checks and delegating the implementation to a project team. It involves defining clear implementation objectives, establishing project governance, and making tough decisions when needed. This is arguably the most important, because it directly affects the other four failure points.
4. Propensity to customize software rather than leverage standard functionality. Nearly every failed implementation I have seen suffers from this problem, and it is often because of a failure to select the right software in the first place (see #1 above). The more you customize the software, the longer it’s going to take to implement, the more it’s going to cost, and the more risk you introduce into the project. It’s typically not realistic to completely abstain from customization, but changes to the software should be devoted only to key areas of competitive advantage or differentiators. If you aren’t able to limit customization to those areas, then you should either find another ERP software solution or back up and rethink your strategy.
5. Lack of ERP implementation expertise. Implementations are tough and a team with tested battle wounds is going to dramatically increase your likelihood of success. As we often tell our clients, the fastest and cheapest way to implement enterprise software is to do it right the first time. Failed implementations are more likely to have inexperienced team members who don’t know enough to know what they don’t know.

If you see one or more of these patterns emerging during your implementation, then you are putting your organization at severe risk. On the other hand, If your implementation project team is able to avoid these five common pitfalls, you will be well on your way to a successful ERP implementation.