by Matt Gilli
Top reasons why ERP implementations fail in 2022
Read our latest blog to get VantagePoint experts' list of the common reasons ERP implementations fail and how to avoid them.Read more
Implementing a new technology is often the largest investment a business will make during any single fiscal year. This covers both the financial investment and the often substantial investment of your team’s time. For this reason it is important for your business to embark upon the process of implementing a new ERP system sufficiently prepared.
At VantagePoint, our team is often brought in to “save the day” once a technology implementation has gone awry. By leveraging the experience gained from correcting problematic implementations, and through the hundreds of successful technology implementations we’ve run in the past, our experts have compiled a list of the common reasons ERP implementations fail and how to avoid them.
1. The business case is not clearly defined
Implementing an ERP is a significant source of change that will impact most stakeholders within the business at least in some way. An ERP implementation will take a good portion of time for each team businesswide which can often distract from or impact BAU tasks. For this reason, developing buy-in with each stakeholder is tremendously important, especially if teams feel fully utilised from a bandwidth/capacity perspective.
Creating a comprehensive and clearly defined business case helps to eliminate the ambiguities surrounding the project. It outlines the benefits that will be gained by implementing the new ERP, and helps define each stakeholders role within the wider project. Answering questions like “how does this impact the wider business?” and “how will this benefit me day-in and day- out?” helps generate the overall buy-in that will be essential for a successful ERP implementation.
Having a clearly defined business case is also an essential asset for key decision makers and board members. A comprehensive outline of the “bigger picture” means that executives can temper their expectations and won’t be met with any surprises as the project advances.
When preparing and presenting the business case make sure to consider:
- The problems you are aiming to eliminate and the ideal state you would like to achieve
- The gains that you intend to realise by implementing a new ERP. Such as:
- Elimination of human error and improved accuracy
- Added control and security
- Access to accurate and timely data and reporting
- Elimination of manual data manipulation
- Your team’s ability to focus on higher value work
- The associated cost savings and added revenue potential
- The overall cost of change including:
- Recurring software licensing costs
- Implementation costs
- Third party software costs
- Cost for new hires (if applicable, software admins etc.)
- Cost associated to disruptions in BAU
- Timeline factors:
- Full Rollout
2. There is an overreliance on third party resources
There are many reasons why you would utilise third parties during an ERP implementation. The common services include:
- Software vendors
- Implementation partners
- Support partners
- Accountants or local tax experts
- Optimisation/system consultants
It is essential to engage with third parties for a successful ERP implementation to ensure that the experiential and functional gaps within your team are sufficiently filled. Implementation partners can leverage their support and experience to ensure the project goes as smoothly as possible. You must ensure that third party support is assisting on an implementation that your team owns, and not solely responsible for outcomes and for running the entire project.
If your project team does not own the outcomes defined within the ERP implementation plan, you run the risk of failing to develop the internal expertise necessary to successfully operate and grow within your new system. When a query needs to be answered or small maintenance issues arrive, your team should be able to address these internally to ensure that internal productivity remains high and disruptions are limited. If the team is comfortable within the system and have a sense of ownership regarding their system (rather than a third party) then they’ll have the confidence to exploit system functionality to its fullest potential.
3. Failure to consider change management
One of the most common mistakes that we encounter with an ERP implementation is the failure to consider or an underestimation of the change that results from an ERP implementation. Planning for the overall impact that the ERP implementation process will have and taking into consideration each SME and their current operations will eliminate many of the stumbling blocks that often derail implementations. Sufficient change planning also addresses many of the irks that lead to internal push back from your team and individual stakeholders.
The most effective method for managing this magnitude of change is to develop an all-encompassing change management plan. A sufficient plan provides the structure needed to keep these in-depth and sometimes daunting projects on track. It ensures that additional obligations of team members due to implementation or data migration tasks are considered and resourced for. Changes to internal processes will all be outlined and documented and communicated to process owners.
Within the plan, concessions should be made to ensure each stakeholder's original motivations and obligations are considered and extra resources should be allocated to the teams who will need it.
By following a comprehensive and well developed plan to manage change, you can mitigate the risks associated with an ERP implementation and the headaches and stresses that can arise amongst your team can be avoided.
4. Failure to consider the overall cost of ownership for a new ERP
It’s extremely important to plan and budget for the overarching costs of your ERP implementation and its related activities. When budgeting for a new ERP the first thing that jumps to mind is the initial cost of the software licence itself, but significant investment must be allocated to other aspects of the implementation as well. The main drivers of the overall costs of a new ERP implementation include but are not limited to:
- Software licensing
Software licensing is not as straightforward as you may think. Most modern technologies are cloud-based and operate a subscription payment model. This means that licensing costs are recurring (usually annually) and any initial discount that you’ve negotiated often only refers to the first year or contract term.
Generally, most software vendors operate in a “land an expand” framework. This means that your ERP licensing starts out cheaper to incentivise and promote your initial subscription, but will rise in cost with time and as your company grows. The drivers for the rise in cost may include additions to functionality, end users, and volume of data you are using. Make sure to ask your vendor about their pricing structures and how it will change over the duration of your engagement; budget accordingly to avoid surprises down the road.
- Software implementation
Implementation takes significant third party resource for the configuration of the product and to align your specific internal processes. It requires specialty consultants and project management resources. These consultants and PMs can either be provided by the software vendor or a third party integration partner like VantagePoint. Choosing a partner like VantagePoint comes with the added benefit of providing things such as dedicated senior resource to every project and the ability to advise your wider project of transformation. By utilising an implementation partner, you often save money both by receiving more competitive rates on software and by leveraging their expertise to avoid pitfalls, enabling intelligent planning of implementation phasing to match your business objectives.
- Integration and customisation costs
Making an ERP fit seamlessly within your wider system’s architecture can often mean customisations to ensure an uninterrupted flow of data and overall data connectivity. This means you should consider the sometimes considerable costs of integrating your business systems and the cost impact of adding manual interventions to that data flow. Though your intent may be to keep as much functionality within your ERP system as possible, this may not always be possible and an additional system or systems may be necessary. It is important to identify these integration points and to plan for both the cost and the extended timelines that may impact the wider project.
You also may have specific business requirements that are not provided for within the new ERP’s native functionality. This may require custom modifications to your ERP instance to support the specific business process. It makes sense to align your process to the leading practices suggested by the software vendor wherever possible. Make modifications only when necessary (you’ll thank us later), but it would be a smart move to budget for some level of customisation anyway.
- Change and project management
Businesses that have the most successful ERP implementations appoint dedicated change and project management resource to the project. PMs help keep projects on track and highlight potential risks that can impact budget and extend timelines. The time needed to manage this part of a project should not be underestimated, and if there is no relevant expertise internally or an insufficient bandwidth, then a project manager should be hired or external resource should be brought in to support this.
- Training and support
Training and support is often an afterthought of a technology implementation. This is unfortunate as it is an essential element to promote full user adoption. Much of this investment will be in time devoted by stakeholders, but it often makes sense to have additional training and support resource provided by your implementation partner/vendor or third party. This cost will usually come as a support contract comprising a specified number of consulting hours monthly. The contract will focus on problem resolution, answering system and data queries and training/documentation if necessary.
The best way to reduce or even eliminate this cost is to have your team invest significantly within the initial training process. Gaining a thorough understanding of the system and developing the internal expertise/resource necessary to address basic queries and issues internally will save endless time, energy and money in the long run.
For more information on ERP support services from VantagePoint, visit our website. Book a call with an ERP expert today for tailored advice and next steps.
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