Top Reasons Why Do ERP Projects Fail?

1. Insufficient ERP planning

Among the primary reasons, companies fail to plan their ERP implementation adequately and lack a detailed roadmap for the entire project. An efficient ERP plan must include a comprehensive analysis of multiple factors such as data migration, resource consumption, and integration with third-party systems.

Without considering these factors, most large-scale ERP projects are either likely to fail or not deliver the expected results. For successful ERP deployment, companies need leadership buy-in involving project leaders and managers, who can set realistic business goals and timelines.

2. Poor data quality

As part of a successful ERP project, companies need to perform data migration from their legacy systems to the new ERP system. A proper data migration ensures the availability of high-quality data feeds for the implemented ERP solution. Without accurate and complete data, most ERP projects are likely to fail.

To avoid this pitfall, companies must deploy data cleansing and migration tools to collect and consolidate data from disparate sources. This ensures that the data for ERP systems is in the same format and easier to process across ERP modules.

3. Lack of employee training

ERP systems are successful only when employees and businesses use them daily. Without adequate employee (or end-user) training, companies cannot improve their ERP usage or adoption. This simply happens as employees are either not willing to switch to the new system or are not familiar with ERP features and benefits.

Besides training, ERP users need technical support and guidance to leverage the capabilities of their ERP system. Without familiarity with the ERP solution provider, most employees are unlikely to switch to a new way of working.

4. Insufficient change management

An ERP system is more complex than a software upgrade. It represents the business transformation of all business processes across multiple functions. ERP adopters cannot overlook the importance of change management when switching to this system.

With effective change management, companies can ensure employee participation, thus empowering them to achieve the desired business results and outcomes. To ensure employee buy-in, they need to develop customized training programs catering to the specific requirements of each business department. This helps in overcoming employee resistance and promotes more openness to adopting the ERP system.

5. Budget escalation

Among the common pitfalls, ERP projects fail because of cost escalation. Companies adopting ERP solutions fail to accurately estimate the overall cost of the ERP system. They only consider the initial investment for implementing the solution, but overlook additional costs accrued from ERP customization, data migration, customer support, and technical recruitment.

To address this concern, companies must first perform a detailed cost-benefit analysis that includes all the potential cost factors. Further, they can leverage budget estimation tools to determine the actual cost of their ERP initiatives.

6. Inadequate resources

Apart from cost escalation, ERP projects fail due to inadequate allocation of resources— both human and capital. Depending on the complexity of their existing system, companies often exceed their ERP timelines and budgets.

For a successful ERP implementation, companies must allocate dedicated resources at every functional level. They need to allocate human resources with the necessary experience and expertise in ERP initiatives. Alternatively, they can partner with a third-party ERP service provider who can help them with ERP consulting and execution.

7. Lack of ERP testing

It’s common to see ERP projects fail at various stages of implementation. Often, ERP systems fail after going live or in production. This happens when companies don’t allocate sufficient time and resources to test the ERP system before going live. An adequate testing phase must include testing of all ERP functionalities, customizations, and integrations.

Before going live, companies must execute a comprehensive testing strategy, which includes unit testing, user acceptance testing, and integration testing. This ensures that every ERP bug or issue is identified and addressed by automated testing tools like Selenium.

8. Lack of accountability

Lack of accountability is a crucial factor in enterprises with failed ERP projects. Instead of having multiple project managers to oversee the ERP project, companies need to assign a single project owner (or manager) who is responsible for the entire implementation. With many stakeholders, ERP projects often face delays in decision-making and approvals.

At the same time, companies cannot solely rely on top-level business executives for ERP-related decisions, but have ERP specialists assigned to every team. With their ERP expertise, they can adequately make business decisions that can impact ERP execution.

In summary

In summary, companies can avoid common ERP pitfalls with comprehensive planning, budgeting, and change management. Additionally, an experienced ERP service provider can help them escape these pitfalls and successfully implement their ERP solution.

Based in India, Praxis Infosolutions is among the successful ERP solution providers specializing in SAP ERP solutions. At Praxis, we have customized our ERP solutions to align with our customers’ business objectives and industry requirements. Our ERP expertise and over 13 years of industry experience make us one of the most reliable technology partners for SAP ERP solutions.

Are you looking for a reliable partner for your next ERP project? Contact us today with your requirements.