Don’t believe everything you read. When you find over and over again that 75 percent of all ERP deployments end in failure, you might think that this is simply the way things have to be. But it’s not so. Many more ERP projects could be successful if they resulted from the right decision and were planned well, aligned with industry best practices, and driven by an organization’s strategic goals and near-term requirements. Today, we discuss some reasons for failing ERP projects. Because the right ERP deployment partner is critical for success, we also list the most important criteria for a good partner match.
Prioritizing clients’ reality
At Sikich, we often see that successful technology projects depend on getting to know all we can about clients’ operating conditions, challenges, goals, and transformational opportunities. Solutions may have certain standardized elements in common, but they also meet individual, specific business needs. On the other hand, when we hear about failing projects, the reasons are often the same.
Recently, Sikich collaborated with a manufacturer of industrial equipment. When this client’s customers need maintenance or repairs, a company representative puts them in touch with third-party contractors to perform the service. The client was initially interested in replacing existing legacy software with an ERP-based solution like Microsoft Dynamics 365 Field Service.
When Sikich consultants delved into the company’s business requirements and processes, they found that this solution was not the best fit—and no other product was right for the job, either. Instead, we created a custom app for the company that automated the routine steps involved in getting customers’ equipment taken care of. Instead of as many as 150 clicks, the process now just takes five. The client and the community of service contractors are thrilled with the new efficiency.
Overcoming failure tolerance
This engagement could have gone wrong, turning into one an ERP failure, if a solution provider would simply have complied with the client’s initial request. When you search for “ERP failure rate,” one of the first results you see is that analysts at Gartner estimated that close to 75 percent of all ERP projects go awry. That finding first appeared in 2017 and was widely shared in a LinkedIn article that is still online. Some posts and articles by more cautious authors offer a range of 55 percent to 75 percent. ERP consultants and analysts have warned prospective ERP adopters about the need to address the risks of failure as long as standardized ERP products have been available. Some stories about dramatic ERP failures involving well-known companies are almost 20 years old and are still being quoted, republished, and reposted.
Many posts and articles describe common reasons for ERP failure and transition to recommendations for anticipating and avoiding them. Sadly, through the years the lists of the top reasons for ERP fails are largely consistent, as companies:
- Don’t take time for in-depth market research and vendor evaluation.
- Document their requirements poorly
- Treat ERP as an IT undertaking and don’t seek participation and support from business groups
- Move forward without committed executive sponsorship and full buy-in
- Cement existing inefficiencies onto a different technology platform instead of reviewing and optimizing business roles and processes before an ERP project starts
ERP partner expertise is essential
It can be difficult even for CIOs and executives in technologically innovative companies to understand the capabilities of today’s leading ERP solutions. A Sikich client in the electric automotive industry initially chose an ERP system that didn’t meet the company’s project-based manufacturing requirements. Having vetted vendors and solutions, decision-makers were confident of their selection—until it became obvious that it lacked business-critical functionality. It might have been possible to customize the solution at great cost. Instead, the company approached Sikich and deployed Microsoft Dynamics 365 Finance and Supply Chain Management with our assistance.
Few organizations own the skills that would allow them to dedicate their IT team to performing an ERP deployment with internal resources. Instead, they rely on expert partners to help them accomplish this. That means they have to find a consulting business that can provide intelligent guidance and see their project through to successful completion. As many ERP-focused service companies at first glance sound almost alike, they will need to interview potential collaborators and rate their strengths and shortcomings. They are likely to find that some prospective ERP consultants understand one solution extremely well and can do a solid job of transitioning users, business groups, and their processes to the new ERP technology. Others take a wider view. They want to discuss transformative ambitions and address complex business challenges.
Seven criteria for choosing an ERP partner
Similar to misguided ERP selections, companies can choose the wrong ERP partner. What are the most critical criteria to evaluate as you get ready for an ERP collaboration? Consider these seven important points. If your prospective partner scores highly in all of them, they might be a good match for you.
Understands your industry.
Credible ERP collaborators can show you that they understand your industry’s trends, challenges, opportunities, and specific operating requirements. They speak your language and ask smart questions, using the right terms. They have at least some clients whose businesses are much like yours. Maybe their team members speak at industry events, publish insightful articles, or have developed solutions specifically for your market and business model. They can describe to you how they will finetune the ERP solution to your unique as well as industry-specific requirements.
Helps you improve.
You probably don’t want a technology partner who will simply accept the status quo of your operations and deliver an ERP system that locks you into it. The consultants should be interested in where you want to take the business and be ready to assess your current processes to identify opportunities for greater productivity and efficiency, or better strategic alignment. They would then work with you to prioritize and implement these improvements before they begin working on the ERP deployment.
Manufacturing and other industries are changing as businesses innovate product lines, create new services, approach different markets, reinvent their supply chains, and aim to operate sustainably. ERP and technologies like AI, machine learning, edge computing, virtual and mixed reality, digital twinning, robotics, and computer vision can help them chart their path. Your knowledgeable ERP consultants should have a strong foothold in newer and emerging technologies, so they can help you take advantage of them and out-innovate the competition.
The right use of data can make or break the success and viability of your business. Your new ERP system will be one more source of data that joins others you may already use. The best decisions and actions are based on data evidence and a complete view of business conditions, trends, and events that impact your industry and its customers. Your technology partner must have the skills to help you unify and analyze all the internal and external data streams that matter, so ERP and other technologies make your teams and activities more intelligent. The consultants should also be able to help you benefit from the data analytics and insight tools that work best to complement and extend your chosen ERP solution.
Goes beyond ERP.
Your preferred ERP partner might be an organization that can offer a greater breadth of solutions than ERP alone, because that is possibly not all you need. It could be that, in addition to ERP, it would take a customer relationship management (CRM) system or cloud-based productivity and communications tools to help you achieve your goals and empower people. Sometimes, it can be less costly and more efficient to develop a new software module to extend ERP instead of modifying the ERP solution itself.
Performs successful projects.
Your ERP partner should have a strong record of planning and completing projects that deliver what clients expect. The most effective consultancies standardize implementations and incorporate their learnings and industry insights into their deployment approach. If they also formalize this in a structured methodology which includes valuable intellectual property of their own, that can be a good indicator of likely success. Be sure to also verify that the consultancy has the skills to perform any needed data migrations and integrations efficiently and flawlessly.
Offers lifetime engagement.
When ERP partners are truly committed to your success, they might be unwilling to leave you on your own once the implementation is complete. As your business grows and changes, ERP needs to come along. In addition to anytime support for users and IT managers with common challenges, you could benefit from strategic, insightful consulting that helps you stay current with emerging technologies and turn industry trends to your advantage. Ask your prospective ERP consultancy about its service portfolio and to what extent it will tailor its offerings to your needs.
Here to help
The right ERP solution, properly deployed and configured, can help you run more productive and efficient operations, drive growth, innovate with a competitive advantage, and accelerate the pace towards your most transformational and ambitious goals. Sikich knows how to accomplish this. Serving clients in the manufacturing, distribution, professional service, life sciences, and other industries, we have delivered successful ERP engagements for many years. Validating the trust invested in us by our clients, Sikich was recently named to Microsoft Dynamics 2022/2023 Inner Circle, the fourth time it has received that level of recognition.
To take a next step, you can:
- Contact our team.
- Get an overview of our ERP services.
- See how Sikich supports manufacturing and distribution companies.
- Learn about our HEADSTART methodology for fast, transformative ERP deployments.