Why ERP Systems Fail

The vast majority of ERP implementation projects and installed ERP systems are successful, meaning that the company is enjoying a positive return on their investment and the system is in regular use, managing the company’s data and providing the visibility and management functions it was intended to provide. Nevertheless, some implementations do fail and some of those draw considerable notoriety in the news and social media. Unfortunately, a few big name ERP failures taint the image of the entire industry.

That being said, some ERP systems are not particularly successful, and are not generating a decent return for invested funds and effort. Others fail to help the business at all (or worse, cause real harm) resulting in a halt to the project and/or accusations and lawsuits.

From my years of experience in the software industry, I can tell you with a high level of confidence that failure is almost never the fault of the software. I’ve seen companies be quite successful with so-so software or poorly chosen software that’s not particularly appropriate for their needs. I’ve also seen companies fail despite having excellent software that should have been great for their business.

The fault is in the implementation process and the company’s overall approach including attitude and expectations.

Here are the essential ingredients for implementation success:

  • Executive Commitment – There must be a high-level sponsor and visible supporter of the project to keep people motivated throughout the process.
  • Project Leader – The project leader is an organized and motivated manager who is able to bring the team together, create a project plan that connects requirements with the solution, keep track of schedules and tasks, and just plain manage the implementation process.
  • Project Team – The users have to be involved throughout the implementation; it can’t be done for them and handed to them at completion. Their participation is part of the learning process and is necessary to build ‘ownership’ in the new system.
  • Education and Training – Education and training at all levels of the company is essential to overcoming resistance to change and building acceptance, as well as equipping the users with enough understanding to be able to use the system in their day-to-day job responsibilities.
  • Change Management – Managing scope creep is vital in an implementation project, so that a purposefully decided change becomes a part of the agreed upon Scope of Work. Implied in all of the above is a need to bring the users into the new system and help them see ‘what’s in it for me’ to build not only acceptance but enthusiasm.

As to the company’s attitude and expectations, they must be realistic. An ERP system is not a cure-all and it won’t run the business or make decisions. It is a tool, and the benefits it generates come only through the users’ understanding. A fool with a tool is still a fool. ERP won’t automatically reduce inventory or improve customer service on its own. Users can accomplish those objectives, however, with the help of the system (tool).