ERP systems are powerful software solutions that can optimize business operations and streamline processes, becoming a single source of truth. However, the implementation of ERP software is not always successful, and ERP failures can occur due to various reasons such as misalignment with business objectives, lack of ownership, insufficient investments, and other factors. Despite the potential for success, it is crucial to understand the common reasons for ERP implementation failure to avoid these pitfalls.
Challenges of Implementing an ERP System
Around 95% of businesses state that they achieved major improvements in business operations by successfully implementing ERP software. This is why a lot of time, planning, and effort needs to be spent to avail benefits of the ERP system. Otherwise, the failure to implement ERP systems can be a disaster for businesses. Famous instances such as Hershey’s reduced timeline, Nike’s supply chain failure, and many others show that the implementation of ERP software can fail due to various reasons. According to G2, nearly 50% of ERP implementation fails the first time. Often the ERP implementation is carried out based on short-term objectives instead of long-term success. Moreover, when ERP implementations fail, businesses often attribute it solely to the software, overlooking other factors such as misalignment with business objectives, lack of ownership, insufficient investments, and other ERP failures.
6 Major Reasons for ERP Failures and Their Solutions:
Not allocating enough resources
Resources imply people and money. If sufficient employees and budgets are not allocated, the ERP
software implementation is bound to fail. Suppose there is a requirement to allocate additional
resources to track the progress and ensure implementation. In that case, business leaders need to hire
additional people or allocate people within the organization to oversee the project. There needs to be
flexibility when it comes to determining the budget and increasing the budget as the conditions change.
According to Mentors Unlocked, nearly 64% of ERP projects must increase the budget more than the
allotted budget. It is necessary to deploy sufficient resources and allocate them as the circumstances
and requirements change during or after the implementation. Businesses need to be active during each
stage of ERP implementation.
Lack of realistic implementation timeframes
The ERP implementation is an intricate process. It needs time for various stages ranging from planning
to implementation. If a sufficient timeline is not allocated and the implementation is rushed, the project
may fail during execution. Hershey’s Chocolate did not set a realistic timeline of 48 months for the
implantation of the ERP software. Instead, it set the timeline to 30 months. This, in turn, led to the
failure of ERP implementation. Businesses utilizing managed mobility services need to discuss with third-
party vendors and set realistic timelines to plan, test, and implement ERP software. Furthermore,
business leaders need to be flexible if the delivery timeline is unmet due to changes in conditions and
unforeseen circumstances. Rushing the implementation may lead to disaster.
Not adapting the software to the business needs
Often, the implementation of ERP does not go as planned. The solutions provided by ERP software do
not solve the issues in business processes. Sometimes, business processes may change to improve
efficiency or serve the customers in a better manner. In these cases, there is a possibility that the ERP
software needs to be modified as per the changes. Failure to do so will result in the failure of ERP
implementation. Businesses need to introduce changes as per the current order of business.
Furthermore, they need to identify the bugs and hitches that are hindering the progress of ERP
implementation and fix them. These modifications will lead to the successful implementation.
Incomplete commitment by business leaders
The successful implementation of ERP software is a huge responsibility. It requires a full commitment
from business leaders. Delegating the responsibility to specific resources, attending project calls, and
conducting meetings to get project updates may lead to failure. There may be some factors about the
implementation that leaders are unaware of. The lack of ownership may cause confusion and lead to
many issues throughout the implementation and execution of ERP software. If business leaders are not
committed fully, the same attitude will reflect among the employees.
To avoid failure, the leadership team must thoroughly understand the ERP project to succeed.
Furthermore, it needs to allocate capable resources, give direction, and provide the necessary support.
It can allocate resources, change or add them as the conditions change, and ensure the implementation
is on track.
Failure to cleanse data
Data cleansing and software development need to go hand in hand. The data needs to be checked and
verified before deploying it in the new ERP software. Even the misspelled data will cause the software to
fail. Choosing the correct data format without understanding how the software works may also lead to
failure. The correctly formatted data is a secret to the ERP implementation. This is why the data needs
to be cleaned and put in a proper format. The data can be classified into types, static and dynamic. For
instance, the names and addresses of suppliers can be static data, while the transactions can be
classified as dynamic data. This way, businesses can cleanse, classify, and deploy the data for successful
Incorrect system testing
Testing the ERP software once or not at all may lead to ERP implementation failure. However, thorough
testing will reveal issues in data format, software development, functioning, and many others. For
instance, if the data is mentioned in the incorrect format during migration from the old to the new ERP
system, the entire system will fail to work. Furthermore, many potential problems in implementation
can be found. This is why the multiple iterations of testing are essential for the success of ERP software.
Businesses must identify the possible causes of ERP failures and take immediate action to avoid or rectify
them. From deploying sufficient resources to customizing software based on changing requirements and
from cleansing the data to testing the system, each and every factor need to be addressed on time, and
preventive measures must be taken. Business leaders must take full responsibility and be proactive in addressing issues and overcoming obstacles. The successful implementation of ERP software can be a
boon for businesses as it will streamline operations and increase overall efficiency.
Supradip is a researcher and business consultant with a cumulative experience of more than 10
years. He has been closely monitoring various industry verticals, supporting clients with in-depth
qualitative and quantitative analysis across technologies, products, and services, and providing his
recommendations for critical investment decisions and strategy formulation.