ERP Failures: Not-So-Great Expectations
01/22/2019 | Denver, CO
The business of Enterprise Resource Planning (ERP) – indispensable to companies medium and large – continues its steady growth. A recent study confirms that the global ERP software market will reach heights of $49 Billion by 2024. But there’s more. Selecting and implementing enterprise software is also a lucrative business. The global system integration market – $259.9 billion in 2017 – will similarly witness significant growth – typically 5x the licensing fees for the ERP software itself.
But what’s missing from this grand view is the pink-tutu-wearing giant elephant in the room, reminding us of the historic financial losses and ERP failures that have already come to pass. The statistics are sobering:
• A 2015 study found that more than 50 percent of companies trying to implement ERPs got less than 50 percent of the benefits they hoped for—with over 20 percent of implementations being considered total failures.
• 64% had their projects exceed their budgets due to additional technology requirements and unanticipated organization/technology issues.
• 79% of projects exceed the original timeline.
• 66% of organizations experience operational disruption while implementing a new ERP, an increase of 10 percentage points over last year’s 56%.
• “Approximately 75 percent of all ERP projects fail, despite the industry’s focus on delivering better customer service and advanced IT systems.”- Gartner
We’ve partnered with enough consultants and enterprises to know that there are countless misconceptions before even getting the project off the ground. Here are a few to consider…
Planning to Plan
ERP decision-makers openly admit to the challenges of understanding the market and choosing the right vendor or partner. Some research suggests that companies spend an average of four months researching potential technology partners and conducting more detailed assessments. Despite that, only 25% of those companies were confident they’d made the right choice.
It Will Happen On-Time & Under Budget
Mismanaged expectations can sink any project. In fact, studies show that about 25% of enterprises admitting to unrealistic expectations, a key driver to ERP failure. Clearly, we all agree that ERP projects are mission critical business transformation projects and changing the way a company operates doesn’t happen overnight.
“63% of implementations went over budget while the average implementation took nearly four months longer to implement than expected” ~ 2018 ERP report
Consider a detailed internal audit with set objectives and goals, charting out the time frame and budget. Don’t downplay the time, costs, and risks associated with the project. Be realistic on your estimates and expect that your ERP project will take time.
Out-of-the-Box – yeah sure!
The trend away from ERP customization and into cloud-based configuration is another to accept in a world that can no longer afford to pay (or wait) for tailor made software. Most enterprises desire a solution with more industry-specific functionality than their current ERP system gives them.
Even cloud-based software will rarely be an “out-of-the-box” endeavor – and a global design always requires massive stakeholder alignment across many geographies when it’s time to move to a localized design that will work in each region. So, realize that it will cost more, and take longer than expected.