Reasons Why ERP Projects Fail or Underperform

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We’ve gone over before the nine signs that your ERP project is failing, but why do these ERP projects fail?

Spectacular ERP mishaps are relatively rare. More commonly, executives, users, and IT are disappointed in the final product. They expected to see more of an impact from ERP on the organization’s ability to reduce costs, chart its course into the future, serve customers better, or improve business performance. It’s not always obvious to them why ERP did not deliver, but it’s clear that they need to change their approach. At that point, they may look for outside expert consultants to help them review their options and tell them how the ERP environment should change so it can meet business requirements.

When ERP projects take a bad turn, the reasons are typically a relatively small set of conditions. They may be highly individualized for specific users and their organization, but a best practices-based approach can often address them effectively. Here are the main reasons we find why ERP projects fail.

Processes and Requirements Are Not Understood

Manufacturers don’t take the time to assess and document their business processes and roles. People in business groups may understand at least a subset of the company’s workflows and their flaws, but executives and the team implementing an ERP solution are lacking important information. Instead of using the opportunity to revise and simplify processes and ensure that they always lead to the right outcome, companies move the current state of the business—including inefficiencies and ambiguities—to a new, digital platform.

Trying to Do Too Much at Once

Some manufacturers survey their people and review their processes, and come up with long lists of improvements and goals. When they try to accomplish all of them in the first round of an ERP implementation, maybe also deploying all available solution modules at the same time, chaos can ensue. The project gains breadth without any depth. High-priority business requirements may go unsatisfied, and both ERP implementers and IT managers may find it increasingly difficult to keep the project on track to produce measurable outcomes.

No Real Executive Sponsorship

In many projects, executive sponsorship is not firmly established or too hands-off. This is a key point in just about every article you can find with best-practice recommendations. And yet, it’s also a weak element in many ERP projects. Without a committed executive sponsor who participates in shaping and advancing the ERP deployment from initial needs definition, to selection, and past rollout, the efforts easily fall flat. For most employees, the lack of leadership from within the organization means that ERP is not a top priority for the business and can be considered an IT program that needs to be tolerated more than embraced.

Not all the right people are involved. ERP projects are too often left to a small number of employees. Sometimes, these are members of the IT team, or people from a business group who clamored loudly for the ERP solution because they had urgent issues they hoped to address. Sometimes, this team does not include any executives at all, which can make a project slow–requiring approvals at every step and whenever an important change is made–and risky. A limited project stakeholder group may be able to ensure that the new solution runs reliably and works well with the company’s other software tools, but it may not be able to optimize it for productivity, growth, and organizational agility.

We also see that companies take responsibility for the ERP project away from IT and task the finance department with it, especially if they have goals that are defined by financial performance and numbers. Finance managers may not always be in the best position to help technical experts understand what needs to change and what they hope to accomplish. Also, support from IT may be weak if the team is not given any accountability.

Bad ERP Partner Match

Poor pairings between manufacturers and ERP providers or solutions tend to happen especially when companies have never implemented ERP before. Many factors can play into this, such as a perceived urgency to move forward, political concerns, cost pressures, or a lack of experience in evaluating potential technology partners and their offerings. It also happens that a client’s requirements and an ERP provider’s solution capabilities and team skills match, but the cultures and mind sets of the two companies don’t mesh, and the ERP project is compromised as a result.

Much of the time, when we hear from companies where ERP projects fail or don’t deliver the outcomes they hoped for, one or several of these five conditions are the case. There are other causes that can contribute to ERP mishaps, such as under-budgeting or scheduling with overly ambitious timeframes, but these are relatively easy to correct. The five we mentioned tend to demand a renewed commitment to ERP success and a thorough turn-around effort.

If you’re in the middle of a failing ERP project or you need recovery from a bad ERP install, we can help! Our ERP rescue and recovery team has vast experience in stepping in and ensuring that your ERP project becomes the success it needs to be.

This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. In addition, this publication may contain certain content generated by an artificial intelligence (AI) language model. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.


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