How to avoid ERP implementation failure

Implementing an enterprise system can be a huge undertaking with plenty of potential for failure, but there are a number of key steps businesses can take to avoid the usual pitfalls and delays. In a recent webinar by Panorama Consulting Solutions, Richard Armitage, Manager of Expert Witness Services at Panorama, discusses the lessons learned from a number of ERP implementations and what to do to avoid failed projects that can descend into litigation.

Panorama Consulting specializes in enterprise consulting, infrastructure consulting and enterprise resource planning consulting for mid- to large-sized, private and public sector organizations across the globe. The company is software-agnostic, which means that its consultants are familiar with a number of tier one, two, and three software packages and can deliver vendor-neutral lessons that can be applied to any ERP implementation. Armitage’s experience as the designated expert on several of Panorama’s ERP implementation cases has given him a firsthand look at what works for a project and what mistakes to avoid so that the project doesn’t end in failures and lawsuits.

In the webinar, Armitage discusses several main issues that have been detrimental to a number of ERP implementations, but also stresses that “each implementation is unique.” He states, “I don’t think I’ve ever worked on a project that was perfect—every project has problems and just because there are problems it doesn’t mean they can’t be worked out, and it doesn’t mean there’ll be a breach of contract. There can be misunderstandings.”

In each implementation project, both sides are responsible for the project’s success and, in many instances, miscommunication or a lack of team work have been the causes of project failure.

Armitage refers to several failed implementation projects, including the failed implementation of SAP at Shane Co. Diamond Jewelers in 2009. The main issue with this project was that the company selected the wrong software due to undefined business requirements. The scope and cost was also mismanaged—Armitage states, “one of the metrics that we use is that a project should be 3-5% of your revenue…[Shane was] spending 16% of their revenue on a system that wasn’t well-thought-out.” In this case, there was a business decision behind the project that should have been better managed and involved a more detailed selection process.

Marin County in California ended up scrapping their SAP implementation after investing $30 million in the project—this instance also involved litigation as Marin County sued their System Integrator and in turn was counter-sued. Armitage states several reasons for this failure: “Poor governance, they didn’t do any OCM business transformation during implementation (which unfortunately is typical in a government situation), and they used a “Big Bang” approach, which is suitable in certain instances but not in this case.”

Lumber Liquidators also experienced a communication gap when their implementation of SAP failed in 2010. The company lost a significant amount in sales because of a poorly planned Go-Live stage, lack of proper training, and a lack of commitment from the employees who would be using the system.

Armitage states that while many companies will initially blame the software and the System Integrator for failures, it’s the lack of communication within the company itself and with the System Integrator that leads to problems.

Common mistakes companies make with ERP implementations include: a weak (or nonexistent) software evaluation and selection process, unrealistic implementation expectations, and unclear business requirements. Making sure you understand your company and its needs will help you avoid selecting the wrong software and spending large sums on customization; “people want software out-of-the-box but they feel their industry is so specialized that they have to have basically full customization,” says Armitage. “Every time you customize the software, it’s going to cause problems that you aren’t aware about.”

Likewise, executive sponsorship is key. Workers need to see that their company’s executives buy in to the project and that they’re always around and visible, or they won’t give their full effort to make it succeed. “Executives, even if they’re not working on the project, are the key turning point between success and failure,” says Armitage.

The webinar also provides some important points to follow to ensure that your company’s next implementation goes differently and follows all the right paths to success:

• Establish a rigorous software evaluation process.
• Begin with a solid business justification and have realistic expectations.
• Clearly define your business blueprint (key processes and requirements).
• Follow the plan and clearly define deliverables.
• Ensure solid executive sponsorship and employee commitment.
• Assign defined roles and responsibilities.
• Tightly manage customization.
• Manage organizational change extremely well.
• Free the team from day-to-day operations.
• Use IV&V.
• Test the system.
• Don’t be afraid to halt the project.
• Perform a pre go-live audit.
• Clearly define roles and responsibilities with a strong SOW and contract.

At the end of the day, success will lie in having a clearly defined plan and understanding of business needs, along with strong communication, change management, and executive buy in. It is important for companies to remember that “software does not determine the success or failure of the implementation,” says Armitage. “It’s about how useful it is to the client.”

View the full Panorama Consulting webinar here.