The implementation of an enterprise resource planning (ERP) system holds the potential to revolutionize a business, enhancing its efficiency, scalability, and readiness for expansion. The ripple effects of a well-executed ERP deployment resonate throughout the organization, from financial processes to shipping logistics. Forecasts from Grand View Research project the global ERP market to reach nearly $125 billion by 2030, underscoring its significance in modern business strategy.

However, the comprehensive nature of ERP systems also means that a mishandled implementation can spell trouble across various departments, including accounting, inventory management, manufacturing, and sales. According to research by Gartner, a staggering 75% of ERP system implementations encounter obstacles, rendering failure as a prevalent outcome particularly for businesses embarking on their first ERP journey.

Nonetheless, failure is not an inevitability. To harness the full potential of an ERP rollout and mitigate the risks associated with failure, meticulous planning, execution, and management of the project are paramount.

It is essential for business leaders to delve into the common pitfalls leading to ERP project failures and obtain insights on preempting those risks, utilizing practical tips to achieve successful ERP system implementations that yield enduring benefits.

Causes of failure in ERP implementations

ERP implementations can fail for a variety of reasons, often stemming from complexities inherent in the process, which include:

Insufficient planning

When it comes to the failure of ERP implementations, one common factor is inadequate planning and preparation. Businesses may underestimate the scope of the project or fail to conduct thorough assessments of their needs and capabilities. Insufficiently defined objectives and vague project goals can lead to confusion and misalignment among stakeholders, hampering progress from the outset.

Poor project management

Poor project management can contribute to failure. Lack of strong leadership, ineffective communication, and inadequate resource allocation can all impede the implementation process. Without clear direction and oversight, teams may struggle to stay on track, resulting in delays, cost overruns, and ultimately, project failure.

Customization bottlenecks

Another significant challenge is customization and integration issues. ERP systems are often highly customizable to accommodate unique business processes, but excessive customization can introduce complexity and increase the likelihood of errors. Moreover, integrating the ERP system with existing software and systems can be challenging, particularly if proper compatibility assessments and data migration strategies are not in place.

Lack of change management procedures

Resistance to change is also a common barrier to successful ERP implementations. Employees can be reluctant to adopt new technologies and workflows, fearing job displacements or disruptions to familiar routines. Without adequate change management strategies in place, this resistance can undermine user adoption and diminish the system’s effectiveness.

Insufficient employee training

Lastly, insufficient training and support can hinder the successful implementation of an ERP system. Employees need adequate training to understand how to use the new system effectively and to adapt to the new processes. Without ongoing support and guidance, users may struggle to navigate the system, leading to frustration and decreased productivity.

How to avoid failure during ERP system implementations

Once they grasp the risk factors that may lead to ERP implementation failure, organizations can impart strategies to mitigate or eliminate these issues, thus facilitating a successful deployment. From thorough data cleaning to realistic budgeting and the deployment of effective leadership and training strategies, various measures can be adopted to optimize the outcome of ERP rollouts and achieve the highest return on investment possible.

1. Define and plan goals

   Implementing an ERP system entails more than simply clicking on an install button. It requires tailoring the implementation process to suit the unique needs of a company. Crafting a comprehensive roadmap to delineate ERP implementation goals is essential. A well-structured roadmap serves as a guide, ensuring the acquisition of the specific solutions a company requires while effectively navigating potential distractions.
   
   A detailed plan will also help foster cohesion with the implementation team, promoting cooperation and productivity throughout the process. By breaking down the implementation into manageable tasks, a robust roadmap facilitates the attainment of objectives and ensures team alignment and collaboration.
   
   If the idea of devising a plan of this magnitude feels daunting, business can enlist the expertise of professional consultants.

2. Establish ownership of the project

   An ERP implementation or upgrade project must be viewed as a business initiative rather than solely an IT endeavor. It is crucial for key sponsors and advocates across all levels of the organization to grasp the vision and remain actively involved and motivated to guarantee the project’s success.
   
   However, with that said, it is important not to have too many decision makers involved. While everyone's buy-in is necessary, one person needs to take control and steer the ship.

3. Set a realistic budget

   Setting a practical budget is a critical component of ERP system selection. Businesses must consider not only the upfront software expenses but also factor in implementation, training, maintenance, and ongoing support costs. Assess the expected return on investment (ROI) from the ERP system and align it with the organization’s financial capabilities.
   
   Do not forget to account for contingency costs. Add a buffer of 20% to 25% for contingency costs to make sure there is coverage for any unexpected delays or necessary scope changes along the way.

4. Clean up data before implementation

   Migrating business data from multiple legacy systems into a unified ERP environment is a substantial undertaking necessitating meticulous data management. Merely transferring old data to the new ERP system is insufficient. It is imperative for businesses to validate data accuracy, address any gaps, remove duplicates, and ensure all information is current. For instance, retaining obsolete supplier information with which the company no longer engages serves no purpose.Although this data validation process may be time intensive, it enhances the accuracy, efficiency, and error resilience of a business’s ERP operations in the long run.

5. Set milestones

   Given that ERP system implementations may span from months to years, establishing milestones is crucial in ensuring there is enough time set aside to see projects through successfully. These milestones should be categorized into major and minor stages.
   
   Major milestones typically encompass:
   • Discovery and planning
   • Design
   • Development
   • Testing
   • Deployment
   • Ongoing support
   
   Each major milestone comprises several mini milestones. For instance, during the planning phase, mini milestones may include selecting team members, appointing a leader, setting timelines, and assigning roles. Utilizing milestones effectively can mitigate ERP implementation risks and ensure focused progress throughout the project timeline.

6. Communicate clearly

   Communication is a critical component to ensure all members of the project team, whether they are internal or external stakeholders, are on the same page. It is essential that everyone is aligned toward the same objectives and follows standardized processes, with clearly defined escalation paths.
   
   When companies transition to a new ERP system—particularly if they have never had one before—the culture shift can feel dramatic to employees. Clear communication will help calm fears and tamper resistance to change.

7. Train employees early and often

   Deploying a company-wide solution that impacts multiple departments concurrently represents a significant change. Inadequate training and a lack of readiness among employees to embrace this change pose the most considerable risk to the success of ERP system implementations. Without embracing the change, staff may revert to old processes or resort to manual workarounds.
   
   To prevent ERP adoption failures, it is advisable to implement the new system in phases. Initially, involve department heads and project managers who can train their respective teams. The enthusiasm and thorough training of these leaders will significantly influence the success of disseminating knowledge to all employees.

8. Test thoroughly

   The importance of thorough testing and retesting of an ERP system cannot be emphasized enough to minimize risks that may arise before, during, and after its implementation. Testing involves various stages, beginning with pinpoint testing of individual business processes. Subsequently, testing at high workload volumes is conducted to detect and address any capacity-related issues. Finally, companies should conduct a mock go-live, akin to a beta launch of a new technology platform, to evaluate the performance of the ERP system under the full range of demands it will encounter once operational.

ERP system implementation guidance from Citrin Cooperman

Embarking on an ERP implementation journey, from inception to completion, promises both excitement and challenges with the potential for extraordinary outcomes. Citrin Cooperman’s Digital Services Practice helps many organizations that find themselves in need of additional support to navigate through every phase of the process. To learn how our team’s experience and resources can guide you through your ERP implementation journey seamlessly, reach out to your Citrin Cooperman advisor or at sales@citrincooperman.com.