Top 9 Reasons ERP Implementation Projects Fail (and How to Avoid Them)
Tags: erp, implementation
Published: 2023-12-18 16:04:44

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ERP software is intended to make your work life easier. However, this is not always the reality. Do you know what Nike, Revlon, MillerCoors, and Lidl all have in common? They've all faced significant financial losses while implementing/updating to a new ERP system.

“According to Gartner, 55% to 75% of all ERP initiatives fail to reach their objectives because their implementation costs three to four times what was originally planned.”  

And it's not just these big organizations that are struggling. According to the Panorama Consulting 2022 report, 81% of projects met ROI expectations a year or more after go-live.

Don't let your company become another case study: learn the most prevalent causes of ERP failure and how to avoid them.

Most ERP implementation failure can be linked to one or more of the following factors:

Insufficient planning
Inadequate attention to new technology
Resistance to change management
Lack of support from the top management
Insufficient training and support
Inadequate data cleaning and migration
Lack of experienced resources
Over customization of ERP
Lack of testing
Let's look at the ways to avoid these major causes of ERP failure.

1. **Insufficient Planning**
Most ERP implementation failures stem from inadequate planning.  

The Solution: The approach is to set realistic expectations from the start.

Your team must understand how much time, money, and effort will be required for the whole project. Make sure your ERP roll-out is successful by putting a plan in place that accounts for these variables.

What can you do to ensure proper planning?

Assigning a project manager to oversee the full implementation.
Establishing an achievable scope.
Setting budget and timeline objectives for the project.
Investigating several ERP software options and selecting the best one for your company.
Putting the right people on the project team, with enough hours to get everything done.

2. **Inadequate Attention to New Technology**
When you try to integrate new technology into old processes, you can slow down adoption rates. Old processes foster old ways of working, but ERP software goes through changes that require a new way of thinking. Businesses that fail to integrate their new tools and updated processes increase the risk of missed go-live dates.

The Solution: Develop and convey an implementation strategy outlining the steps that individual employees must follow in order to carry out their unique tasks in the project.

Some tips...

Encourage adoption of new technology
Consider possible risks and develop backup measures
Create a budget that allows for uncertainties.  
Consider all of the essential expenditures associated with the implementation, such as training, salary, revenue loss, and any other overheads you may discover.  

3. **Resistance to Change Management**
When you present a new approach for people to accomplish their duties, you should expect resistance. This is a normal response to change in all businesses and workplaces.  

The Solution: Create a change management strategy even before the project starts.

Change management will assist your staff in building an innovative corporate culture.

This can include...

Frequent, open communication about the status of all business-wide changes.
A detailed description of the benefits of new changes for the company and for each employee

Consider including change management professionals on your implementation team. Those professionals will be able to recognize resources and know how to work with them all in order to help your employees accept and embrace the future.

4. **Lack of Support from Top Management**
When leaders fail to play their roles and keep teams on track, mistakes are frequently overlooked and deadlines are missed.  

The Solution: The leadership team must be involved as early as possible and ensure they understand the full scope of the project.

Your executive staff must understand:

- The project's business benefits and how it may increase productivity or reduce expenses

- The amount of time, money, and personnel needed to complete the implementation process

- The immediate impact of the implementation of an ERP on organization’s productivity

- The most significant threats to success

5. **Insufficient Training and Support**
An ERP implementation necessitates the utilization of trained personnel. Any users who are not pre-trained will drain resources from the implementation support team. The project suffers when there are fewer support resources available to address go-live problems.  

The Solution: Create an extensive training program for all users. Provide continuous assistance and resources to address user problems.

6. **Inadequate Data Cleaning and Migration**
Legacy systems have likely stored data for years or decades.  Data cleaning is about determining how much data must be transferred to the new system. Typically, only the most recent records are required. There is no use in populating your new ERP with useless data. Keep your legacy systems operating in read-only mode if you ever need to access historical data.

Before importing the data into the new ERP, carefully review every piece of information as there may be typos and other problems in the old source.

The Solution: Before migrating, perform a complete data audit and cleansing. Create an efficient data migration strategy and test it thoroughly.

7. **Over Customization of ERP**
Excessive customization lowers ERP functionality, complicates testing and upgrades, and raises all other costs and risks. Modification is expensive and should be used only when there are no other options. Most ERP systems feature simple configuration tools that eliminate the need for significant modification.

The Solution: Adhere to best practices and give configuration priority over customization. Only customize when absolutely necessary, and carefully consider the long-term effects.

8. **Lack of Experienced Resources**
It is vital to have the correct talent and experience on your ERP team. You can train your current personnel or acquire resources from outside as contractors, but this will take a significant amount of time and money. If you use existing resources, their current "day jobs" must be completed while the ERP rollout must be their primary responsibility.

The Solution: Provide training to current staff members so they can use ERP systems more effectively.  

Encourage communication and information exchange among team members.

Consider employing external experts with specific ERP experience.
Put together a cross-functional team with both functional and technical knowledge.

9. **Lack of Testing**
ERP systems are so versatile and complicated that proactive and rigorous testing is a key success element for an ERP implementation. Testing necessitates more than just allocating resources. It is an iterative process that includes not only testing but also assessing and fixing issues.

**Test, Re-Test, Repeat**  

Each test leads to a larger set of testing, therefore there is a natural growth of testing complexity throughout the duration of an implementation. From unit testing to integration, then regression, and finally UAT.  

**The Solution**: A solid implementation plan with early testing and user acceptability testing (UAT) is the key to avoiding ERP implementation failures.  

According to IBM, it costs 6X more to remedy a software bug discovered during the implementation phase--right before go live--than it does during the design phase.  

To be successful in their digital transformation journeys, organizations adopting ERP systems must incorporate testing early in the software development process. It is vital to test early and often and to use automation to efficiently detect software issues throughout the software development life cycle.  

Test automation tools built with a scalable, quality lifecycle management platform can help centralize testing activities across the software development lifecycle. These platforms not only support testing and development and help other teams stay aligned, but they also aid in the early detection of issues and enhance quality and compliance while minimizing the impact on software releases.

**Prevent ERP Failure by Opting for an ERP Testing Solution**

Intelligent, ERP-aware Testing Solution!

Opkey's test automation platform helps reduce the time and effort required for your ERP setup while ensuring your organization identifies issues early on, eliminating costly errors down the road.  

Here are a few examples of how we accomplish this:  

**Test management**: Opkey's quality lifecycle management module streamlines testing operations, making it simple to assess progress, identify bottlenecks, and effectively allocate resources.   
 
**Continuous testing**: Opkey's continuous testing solution can assist you in identifying problems as they arise, reducing the need for prolonged troubleshooting and remediation. This allows you to keep your system stable and avoid costly downtime.  

**No-Code testing**: Opkey's platform enables any employee to write and execute automated tests, regardless of their technical expertise. As a result, businesses can save greatly on development expenditures.  

**Self-healing test scripts**: When changes occur, Opkey's test scripts heal automatically, allowing employees to spend less time maintaining tests. This, in turn, shortens the implementation time.