Risk and failure of ERP projects

Sometimes moving business forward requires a great leap. Systems need to evolve to accommodate real-time demands for information. Change involves risk, and the potential for failure is a constant threat when implementing a new technology initiative. This is especially true in the complex environment of enterprise resource planning (ERP).

 

ERP is a set of best practices for performing different duties in your company, including finance, HR, manufacturing and the warehouse. To get the most from the software, you have to get people inside your company to adopt the work methods outlined in the software. If the people in the different departments that will use ERP don’t agree that the work methods embedded in the software are better than the ones they currently use, they will resist using the software or will want IT to change the software to match the ways they currently do things. This is where ERP projects break down.

IT gets bogged down in long, expensive customization efforts to modify the ERP software to fit with powerful business owners’ wishes. Customizations, especially in the core ERP software, make the software more unstable and harder to maintain when it finally does come to life.

Getting people inside your company to use the software to improve the ways they do their jobs is by far the harder challenge. If your company is resistant to change, then your ERP project is more likely to fail.

Also, sometimes there is a big difference between what an ERP vendor promises to deliver in its software and what actually is ready for prime-time enterprise use.

 

Based on Gartner, 2013, ERP implementations are risky and complex, and perceived failure rates are high. Based on Gartner interactions with clients, they estimate that 20% to 25% of ERP projects fail outright (late and/ or over budget, failed to deliver any benefits, or abandoned). A further 50% to 60% are perceived as having failed because they are considered compromised by the organization in some way (did not achieve the stated goals of the business case, late, scope was limited or incorrect, or that it may be delivering benefits, but the benefits are unclear and cannot be measured).

 

However, when properly managed and executed, ERP projects can be highly successful, mission-critical and beneficial to the organization by supporting the business strategy and achievement of specific outcomes.