Failure factors in ERP implementation

Having discussed about the success factors in the previous articles it is time to analyze on failure factors. Here is the first article on this series. We are sure this series of articles will guide our readers make their ERP system work effectively and successfully.

• ERP implementation is, at its core, a people project: The biggest challenge before and after implementation is not the technology; the biggest issues are related to people. At every stage, companies must work harder to manage change, secure buy-in, communicate with and educate their employees. Top human resources issues are related to changing management, training and internal staff adequacy.
• Employee resistance: If the employees are not educated and informed about the benefits of the ERP system and assured about the security of their jobs by the top management, they will start believing in the rumors that float around and will either resist or sabotage the ERP implementation.
• Lack of top management commitment: The top management should pledge and demonstrate that the ERP implementation has its full support. They should assure the employees about their jobs, clear any doubts and explain why the ERP system is a necessity for the organization. The CEO or some senior level manager should sponsor the ERP project in order to demonstrate the management commitment.
• Inadequate training and education: All users of the ERP system should be trained properly in using the system to its fullest. Different groups of people in the company will have different training needs. Managers need more focus on the decision-making and analysis features of the system, while the clerical staff need more focus on how to perform their jobs. But all the users must be trained in the ERP basics, overview of the system and its working, how an action by an employee triggers a host of events through the organization, how automation will help, what processes are changed and so on.
• Educate everyone so that they understand what is going to be achieved with the new system. Additional education should include total quality management and change management strategies. Also the training sessions should be used to gain acceptance for the ERP systems by dispelling the myths about ERP. When the employees do not understand what the new system is and what it is supposed to do and how to operate it, they will not use it or use it incorrectly. This can lead to failure of the system. Train process owners (department managers) in how to use the system. Have them train the users.
• Inadequate requirements definition: If the requirements of the new system or what is expected from a new system are not adequately defined, then the implementation team will find it very difficult to plan the project. Only if the requirements are specified correctly, the ERP package that is best suited can be selected.
•  Inadequate resources: ERP implementation is a complex, costly and lengthy project. The initial budgets are very often exceeded and there are still many hidden costs in an ERP implementation. So, while preparing the budget and allocating resources for the ERP implementation care should be taken to consider all the factors that could affect the costs, manpower requirements, infrastructure needs and then reserve a reasonable amount of buffer of buffer for any contingencies that might occur during implementation.

Success factors of an ERP implementation

Implementation of an ERP system is a major investment and commitment for any organizations. The size and complexity of ERP projects are the major factors that impact the cost of ERP implementations. Different companies may implement the same ERP software in total different approaches and the same company may integrate different ERP software applications by following the same procedures. 

However, there are factors common to the success or failure of ERP implementation regardless of the ERP systems they implement and the methodologies they use.

Starting with this article we will discuss the various success and failure factors of an ERP implementation. So when you are planning to implement the ERP system in your company, try to follow as many success factors as possible and avoid the failure factors.

 

SUCCESS FACTORS

• Project Planning: ERP implementation starts with project planning - setting project goals, identifying high-level business requirements, establishing project teams and estimating the project costs. Project planning offers the opportunity to re-evaluate the project in great details. If the ERP project is not justified at the planning phase, organization should not hesitate to cancel the project. For every successful ERP project there are projects that are cancelled before implementation.
• Align the organization on the true destination: You should make sure that everyone in the organization has the same vision about the original motivations for implementation ERP-enabled processes: what the targeted capabilities were, as well as the targeted benefits. Only then can an organization really know how close its ERP program is to being complete. This alignment needs special focus on people: communicating, expectations, education, and top management support.
• Architectural Design: While high-level architectural decision is made in the process of ERP vendor selection, it remains a crucial successful factor in integrating ERP with other eBusiness applications, e-commerce applications or legacy systems. Choice of middle-ware interface software or programming languages drastically impact the implementation cost and release date.
• Transition project roles to a way of life: Information technology people, ERP expert, process expert, site leaders, the project manager and the steering committee - going live can involve hundreds of people, in dozens of roles. But at go-live, once the program is operational, the way roles change and the way such change is orchestrated can be an even larger undertaking. Companies successful in the post-implementation phase are simply better at mobilizing and guiding such efforts. They are also better at preparing people for the critical shift, moving from being team members to champions.
• Data Requirements: Unlike in-house eBusiness applications, much of the packaged ERP implementation involves the integration of ERP systems with existing eBusiness software (CRM, SCM and SFA) and legacy information systems. Appropriate level of data requirements is critical for an ERP to interact with other applications. Data requirements usually reflect details of business requirements. It costs ten times to correct a mistake at later phase of ERP implementation than the effort to correctly define requirements at analysis and design phase.
• Apply planning and program management practices throughout the program life cycle: If there is one thing that companies should master by the time they go-live, it is program management and planning. Companies that will succeed are those that accept the fact that if they are to achieve their benefits, the operation and maintenance phase demands at least as much planning as the implementation phase did.
• Achieve balanced people, progress and technology chances across all areas: Companies undertaking the ERP journey must make changes and take action in all areas of the modern enterprise. They need the best-of-breed technology tools, the most effective work processes using world-class practices and people who are trained and motivated. They will also need strategies that fully leverage these new organizational abilities. Far from being a one-dimensional project, the ERP journey must keep change in play and in balance, in all these areas - a fact that successful companies never forget.
• ERP must b e driven by business case: In other words, the work must be directed toward improving specific business metrics: improved cash flow, faster hiring, reduced costs and accelerated shipments. Both line and IT managers must identify the processes that need improvement. Focusing on business process improvement is the only way to know whether you have got your money's worth.
• Active executive direction: Executive direction in this case means more than just oversight or support. People do not adapt to doing work in new ways without some inspiration from the top. ERP systems are huge, influencing thousands of people, processes, practices and policies. There are thousands of decisions to be made - both large and small. Someone at the top of the organization has to make the call.
• Focus on capabilities and benefits, not just going live: The ERP implementation was initiated because of its benefits. So it will not matter much if a schedule is missed by a few days or even weeks. However, if you miss out on an expected feature or benefit, then it is going to hurt. So make sure that all the features that were planned are implemented.