ERP promises an efficient and agile business, but plenty of challenges stand in the way of ultimate success.
Every business aims to scale and grow. Sometimes it’s not a lack of new customers that limits these ambitions, but structural inefficiencies. That’s when companies commonly turn to enterprise resource planning (ERP) to integrate the management of their primary business processes.
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ERP implementation is about much more than software
ERP transformation is more than just software. It’s usually some combination of structural and cultural shifts mediated by technology. Ultimately, ERP transformation helps organizations automate and manage core business processes to yield optimal performance. With connected processes, systems, and data come the intelligence, acceleration, and adaptability needed to tackle those growth and scaling goals.
The goals of an ERP implementation can include:
- Replacing outdated legacy systems
- Integrating and centralizing data
- Enhancing analytics and reporting capabilities
- Improving customer and supplier relationships
- Streamlining procurement and supply chains
The benefits of an ERP implementation are enticing but often demand more of businesses than they expect. Because these projects are about more than just technology and IT, an ERP implementation is a transformational journey that involves and impacts the entire business.
ERP implementations can influence multiple vital business functions including:
- Commerce
- Finance
- HR
- Manufacturing
- Supply Chain
With so many moving parts and stakeholder interests, it’s a balancing act to address all the different objectives and priorities. Without relevant experience, expertise, and big-picture perspective, internal teams can struggle to manage and execute a successful ERP project. Failed implementations have devastating effects like financial loss, decreased productivity, damaged customer and vendor relationships, and even legal consequences.
Don’t underestimate the complexity of an ERP implementation
Many ERP system implementations are doomed because they’re run by leaders with little or no direct ERP implementation experience, or they try to follow a generic playbook that doesn’t account for the individuality of their business.
This highly complex project can easily overwhelm an unprepared team, and underestimating the enormity of the job is the first step toward a costly disaster. Some of the major challenges to a successful ERP implementation include:
Organizational buy-in
If stakeholders at every level fail to see the benefits for them, resistance can hinder or derail success.
Viewing it as an IT project or a one-off project
ERP implementation is far more than an IT project and it’s an ongoing process that requires continuous improvement. The wrong perspective from the outset can ruin the ROI of transformation.
Realistic and flexible timelines
Organizations commonly fail to understand the time and resources required, resulting in unrealistic timelines that expect too much progress too quickly.
*42% of ERP projects were completed later than expected, with 11% finishing “significantly later than expected.”
Vendor selection and contracting
With so many options in the market, it can be difficult to understand the best fit for the overall organization, and contracts can quickly get complex and confusing.
Program governance
Without the right program governance structure in place to align and manage vendors, system integrators, IT, and business teams, implementation objectives, budgets, and timelines are easily thrown off.
Business process reengineering
ERP transformation often involves redesigning entire business processes to align with the new system.
*A 2019 study found 31% of respondents listed inadequate business process reengineering as a reason for lack of ERP success.
Effective organizational change management
When ERP implementation requires overhauling critical business processes, it typically necessitates a shift in mindset and daily work experiences for end-user employees.
Scope creep and cost overruns
Without strict control procedures in place, projects can get carried away with customization requests that increase costs and risks, disrupt timelines, and lead to unrealized objectives.
*35% of respondents cited changing scope as a reason for budget overrun (behind only “underestimated project staffing.”
Data quality and integration
One of the many technical challenges, getting the data integration wrong limits the effectiveness of the overall project.
Poor user adoption and adequate training
End users must not only understand why they should use the new system, but how to use it, necessitating effective onboarding, training, and continued education.
Tackle the challenges with expert governance
These challenges are discussed in our guide The Secrets of a Successful ERP Implementation, which also details the benefits of having the right advisory consultant oversee the governance and project management of an ERP implementation. Get the guide here.
