Common ERP failures and how to avoid them

If you are charged with selecting and implementing an enterprise resource planning (ERP) solution for your organization, you face significant challenges. Key hurdles include clearly identifying your business requirements, identifying the ERP solution that best fulfills those requirements, managing a successful implementation, and ensuring adoption of the new system by your organization’s employees.
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Investing sufficient time and resources at every stage of selection and implementation is critical to a smooth ERP integration that ultimately improves productivity and business decision-making, along with supporting company growth.

How ERP Systems Improve Business Operations

An ERP system, if properly matched to your needs, ties together every facet of your business operations including planning, manufacturing, inventory management, sales, human resources (HR), and more. ERP systems can also enhance other business software such as customer relationship management (CRM), supply chain management (SCM), or business intelligence (BI).

Why ERP Software Selection Is Serious Business

Selecting the right ERP software solution is about finding the one that best fits your organization’s requirements, both now and in the foreseeable future. There are many risks in choosing an ill-fitting solution. They can range from low adoption rates, meaning that employees will circumvent the new ERP and continue to do things as they did before, to frustration and wasted money when a new solution fulfills only part of your requirements, to the worst case of a failed implementation.

In the latter situation, which happens far more than many would expect, the ERP solution can never be fully implemented and launched, which results in a complete loss of the organization’s investment in it and a need to start back at square one. Given how significant a capital expenditure ERP software entails, there is no excuse for cutting corners when it comes to identifying the ERP solution that best matches your particular requirements.

By following the process that includes stating a clear business case, identifying relevant requirements, and painstakingly evaluating competing software products, you can identify a suitable ERP solution that is both cost effective and viable for the long-run. Be aware, however, that there are ample opportunities to fall into traps that can result in costly failure.

Avoiding Common Pitfalls in ERP Software Selection

Frequent failures in ERP selection and implementation fall into two broad categories:

# Organizational Pitfalls

# Underestimating the time and effort needed to develop requirements that fully capture business and user needs

# Insufficient vetting of vendors’ competing solutions

# Failing to gain key stakeholders’ buy-in

Poor assessment of vendors:

# Deciding to buy from the first vendor with a “good” solution

# Placing an over-emphasis on cost and eliminating better-matched solutions

# Failing to develop a repeatable product evaluation strategy to use for vendor demonstrations

Examining Organizational Traps

The most common mistakes organizations make are completely within their control to avoid, such as, clearly defining a business case for a first-time ERP solution, or a legacy system replacement.

Failing to State a Strong Business Case

Do not assume any ERP system designed for your industry will meet your company’s unique requirements. Identify and define internal needs precisely, including setting measurable goals for any ERP to improve planning, productivity, customer service, and so on. Additionally, anticipate future requirements as the company grows and conditions change.

Failing to Develop Business-Relevant Requirements

An accurate requirements statement is essential. Its development needs a team with diverse expertise from each department that will be using the new ERP software. Their goal is to identify critical features and functionality and prioritize these, while keeping key stakeholders informed. At this stage, it can be helpful to work with a generic request for proposal (RFP) template for the type of ERP used in your industry. Such templates can list all the possible features and functions, and can serve as a helpful checklist to determine what your organization needs.

Resist the temptation to bring in vendors at this point as they tend to limit what should be a wide-ranging discussion of your unique, detailed business needs.

The Value of Neutral, Outside Expertise

The use of industry-specific, enterprise resource planning RFP templates are useful in keeping the team focused during this disruption to their regular day-to-day duties. RFPs also serve as a checklist to see which potential ERP solutions are most closely aligned with the requirements you’ve defined.

Another highly productive move, especially in early stages, is to lean on the expertise of an outside consultant who can set up an efficacious process or assist you in running vendor demos. Just be certain the consultant is impartial and not looking to steer you into buying from any particular vendor.

The Costs of Inadequate Requirements Gathering

Failure in properly performing your requirements-gathering phase typically leads to severe problems and expense, such as:

Unmet needs for some stakeholder groups that may require expensive, custom programming, or the purchase of third-party software

Low staff adoption rates leading to unmanaged workarounds that undermine the system

Failure to Obtain Sufficient Buy-In

A successful ERP implementation requires buy-in across the entire enterprise, especially from IT, the actual end users, and C-Suit. Stakeholders who are not directly involved in requirements meetings should still receive frequent updates on the project’s progress. This helps employees to feel included and they are therefore more likely to adopt the new ERP system.

Failing to Assign Adequate Time and Resources

The requirements gathering, software selection, and implementation stages can be tedious – but putting the necessary time and effort will avert disaster.

A rule-of-thumb for most organizations is to spend a quarter of the time on requirements gathering, another quarter on software selection, and the other time spent on completing the implementation and post-implementation phases.

Vendor-Related Traps

Regardless of the bells and whistles a particular ERP software offers, if its functionality fails to align with your particular business needs then its value is diminished. Even a well-structured selection process can fall into traps that many companies spring on themselves.

Focusing on the First Vendor with a Viable Solution

Once you’ve completed the requirements-gathering phase, it’s tempting to succumb to the desire to complete your selection phase rapidly. This frequently leads to prematurely selecting the first ERP vendor with a good story. Set a goal to short-list at least three ERP solutions, followed by in-depth, live evaluation demos from each of the three.

Ill-Prepared Evaluations

Evaluation questions should focus on specific ERP procedures that will be handled by any new ERP, such as how the system manages your employee performance review process. Re-purposing RFPs from the requirements-gathering process is often a good approach to developing these questions. Be sure to ask the same critical questions of each of your short-listed vendors so that your selection team can compare the competing ERPs head-to-head.

Failing to Capture Evaluation Demos

Live evaluations are typically viewed by a subset of stakeholders. Therefore, construct a demo script that can capture the same information from each vendor’s ERP solution. You’ll want to share the functional evaluations of each vendor’s product with others from whom you need to obtain buy-in. Be sure that everyone can score these demos as they happen.

Relying on Outdated Data

Only up-to-date versions of ERP software should be included in your final evaluation. Furthermore, any data derived from non-vendor sources or third-parties should be verified as pertaining to the most recent software release.

Failing to Maintain Objectivity throughout Evaluations

Other companies using the ERP products you are evaluating may provide insightful experiences, so seek these out. Their vested interest is less than yours though. In order to evaluate products with absolute objectivity, the evaluation stage presents another excellent opportunity to avail yourself of an independent, outside consultant with relevant domain expertise.

Ensure Success Using a Thoughtful Selection Process

ERP systems are used by most employees while simultaneously cooperating with adjunct business software. The significant capital expense required to purchase and implement a new ERP can be recovered over the years from improvements to strategic planning, employee productivity, and customer satisfaction – but only if the initial ERP product selection was made carefully.

Following well-structured requirements gathering, selection, and implementation processes ensure the ERP software your organization chooses matches your business needs. Common failures, such as underestimating the requirements-gathering effort, failing to obtain buy-in, choosing vendors based on incomplete data, or mismanaging final product evaluations, can often foil even the best-laid plans.

Such failures are often the result of over-reliance on in-house staff, with limited expertise in the necessary processes, or who are too busy with day-to-day business tasks to devote sufficient time to a software selection project. It often pays to hire experienced outside consultants to jump-start these processes, take the lead in data gathering, and to develop the necessary evaluation demos for your short-listed product selections.

Rajani Baburajan