When an ERP goes wrong

With ERP and also CRM systems at the heart of so many businesses worldwide, the thought of such a system failing is scary.? But it happens, a lot more than you may realise.?

ERP implementations are built up of several components – ‘health check’ of existing businesses practices, budget planning, business case preparation, risk management, change management, forward forecasting, lesson learned and continuous review and ongoing investment to ensure the best return on investment of a chosen ERP software.?

One area which can cause an ERP to fail is when not enough attention is given to change management.? A business focusses too heavily on the tech side of things rather than the people.? It is paramount all stakeholders are involved in the process.? If key stakeholders throughout a business are not kept in the loop and are not fully on-board with a new ERP system from day 1, the chance of it actually succeeding is significantly reduced.? On-going communication and training business wide is paramount to an ERP success. Avon is an example of this going wrong.? In 2013 Avon partnered with a software provider to implement a new order management system allowing reps to input their sales on mobile devices thus developing efficiencies on their supply chain, so they thought.? What it in fact did was the opposite, the system was too complex, non standardised and reps found it too complicated to use and ultimately stopped selling!? Costing Avon millions in lost revenue.

One of the main advantages of an ERP system is data accuracy and real time access across an entire business.? But to get to this point a business needs to get all their legacy data into a ‘clean’ format for the new system.? This has its challenges.? Legacy data is normally repetitive, saved in multiple places, full of errors and poor quality.? It is essential that this is fully cleansed before migration onto the new ERP platform.? Without a full data cleanse, ‘mucky’ data is just being moved from one place to another and will cause further headaches down the line.?

If system requirements are not defined from the outset, there is risk that an ERP implementation will fail.? Without a realistic list of requirements from day 1, there’s no clear direction for the project to go, no guidance over budget, time frame etc.? A business must set a benchmark for how they operate today compared to what they want to gain from the ERP software.? ?Nike are an example of this.? Nike set unrealistic goals when they upgraded their ERP platform in 2000 resulting in a big dent in their sales.?

Budget is another key area where ERP implementations can fail.? ERP implementations are renown for going over budget.? For example, when further staffing is required to complete the implementation, but all employees have their existing roles to fulfil so more resource needs to be brought in; and when a business chooses to add further features and advancements to their new system, functionality not set out in the original business case preparation.? Unless a realistic budget is set from initial business case preparation plus a contingency, it is highly likely that the project may fall down and/or be significantly compromised.

Test, test and test again.? Before a new ERP system is rolled out into a live business environment, it must be rigorously tested.? The value of this cannot be underestimated.? Testing needs to be from every angle to replicate how it will be used in a live environment.? This does not 100% eliminate any issues once a system has gone live, but it dramatically reduces it.?

To summarise, ERP implementations and upgrades can be a very rewarding process but they come with their complexities. The above highlights just a few of the essential areas which are needed to avoid an ERP implementation failure.?