Why Do ERP Systems Fail?

Do a Google search on “failed ERP implementations” and you will see lots of industry
studies that have similar (or even more frightening) statistics? And despite massive
budgets and outside and internal resources, organizations as large as Hershey’s,
Whirlpool and W.L. Gore and Associates have had notable ERP implementation
How do we define ERP implementation failure? Here are four key indicators:

  • Cost overruns. Companies have experienced cost overruns ranging from single

digit to over 200%. Often, blown budgets continue well past the implementation
phase as organizations are forced to deal with higher fees for consulting, training,
administration, etc.

  • Delayed implementations. As the figures above indicate, 57% of surveyed

companies had a delayed implementation and the average duration was 18.4

  • Expectations versus reality. This is a highly subjective category but the fact is,

what the ERP vendor promised and what the customer believes was delivered,
often turn out to be two different things.

  •  Unhappy users. While it is difficult to satisfy all users, unhappy users are often

indicative of critical software deficiencies. Unhappy users can also suggest a
possible negative impact by the implementation on business performance. This is
another area where promises and delivery are not in sync.

Another common theme we see is that monolithic process manuals and scope
documents will provide a strait jacket to the project, effectively locking in current
practices and ways of doing things without question or validation – and risks the
organization selecting a product that best fits the status quo, rather than something
which will move the business forward.

Enterprise software solutions have a massive impact on the processes and
approaches taken within an organization. They can be empowering or a strait jacket;
they can deliver effectiveness or overly complicate a scenario; they can add value or
become an expensive overhead.

The cost of an implementation running off track will be many times the list price of the
software. Likewise, the impact of getting an implementation wrong will be many times
the capital cost of the overall project, so there is much at stake in any selection and
implementation process.