70% fail: How your ERP project can still succeed

Just like changing an ERP system, the implementation is a complex and resource-intensive project. It is not uncommon for ERP projects to fail before or shortly after implementation. A change also often presents the project manager with major challenges.

According to Gartner, more than 70% of all ERP projects are expected to fail by 2027, 25% of them catastrophically. There are many reasons for this, many of which can be traced back to recurring problems and structural deficits. 

Common causes of ERP project failure

A rule of thumb says that 10% to 20% of the effort or project budget should be invested in preparation. The most common reasons for the failure of ERP projects include

• Gaps in the requirements specification: incomplete or unclear requirements in the requirements specification.

• Inadequate ERP system selection: The ERP system is often selected on the basis of functions but should be based on the functional requirements.

• Lack of willingness to change: Old processes are replicated instead of developing new optimised processes.

• Excessive demands and lack of support: Large-scale ERP projects overburden the company if there is a lack of external help.

• Lack of documentation and unclear responsibilities: Without clear responsibilities and documentation, misunderstandings and inefficient processes arise.

• Too much customisation: Excessive customisation increases costs, complexity and the risk of problems.

• Insufficient quality assurance: A lack of quality assurance leads to unrecognised errors, which can cause high costs and effort later on.

• Lack of change management: Employees must be brought on board from the outset to prevent fears, prejudices and aversions to the new system.

The following therefore applies: forward-looking planning, strategic allocation of resources, involvement of employees.

Causes in detail

Gaps in the specifications

A well thought-out specification is particularly important. All important details and requirements must be clearly defined. This is because unclear requirements and ongoing changes delay the project and drive up costs to incalculable levels. A clear strategy is therefore the first step in an ERP implementation.

Lack of willingness to change

It makes no sense to automate inefficient processes. It makes more sense to rethink and optimise processes. This may lead to changes in procedures, but these will ultimately bring benefits. The aim of this careful process analysis is to scrutinise existing processes, identify weak points and make targeted improvements. The ERP system offers numerous opportunities to automate and standardise processes and make them more efficient. At this point, it makes sense to involve your employees! This will help you achieve:

• Increased productivity

• High employee acceptance

• Increased ROI (return on investment)

• Automation opportunities

Cultural change and willingness to change as a success factor

An ERP implementation or changeover is often seen as a purely technical project. In reality, however, it is a mix of technical and organisational projects. Of particular importance here is good change management that increases acceptance within the company. Company management plays a key role here by formulating clear objectives and actively driving change. An open attitude towards new processes and methods maximises the benefits of the new system. Employees must recognise the added value of the system in order to accept innovations positively, then they will actively contribute to the success of the project.

Lack of transparency and control 

Control is only possible with sufficient transparency. A clear insight into the project status and regular reporting help to identify problems at an early stage and thus prevent budget overruns and delays through early intervention. Measures to ensure transparency and control:

• Regular status reports

• Project management tools

• Milestone reviews

• Open communication culture

• Objective, external partners

Excessive demands on the organisation and a lack of foresight

A lack of resources, both in terms of budget and personnel, can quickly lead to overloads. Sufficient resource planning ensures the success of the ERP project. Close co-operation between different departments is necessary, which requires a high level of commitment and coordination. It is important not only to concentrate on short-term tasks, but also to always keep the long-term strategic goals in focus. It has proven to be a good idea to rely on external partners and appropriate consulting.

Lack of employee motivation and support

An ERP project requires not only technical knowledge and resources, but also a high level of employee motivation. Additional workloads can lead to frustration and demotivation among employees if adequate support is not provided.

• Employees should be integrated into the process as early as the planning phase

• Employees' successes during the course of the project should be specifically recognised.

• Financial incentives for the achievement of milestones

Unclear responsibilities and lack of documentation

Comprehensive documentation of tasks, progress and responsibilities provides the necessary overview. A clear allocation of roles should also be ensured at the start of the project. Tasks should be well distributed between people and departments.

• Every important task and responsibility should be documented in a RACI matrix. This ensures clarity.

• Centralised documentation platform (e.g. Sharepoint).

• Long-term knowledge transfer for the further development of the ERP system.

• Regular updating of the documentation

Maximum individualisation and its disadvantages

Individualisation can make sense, but it doesn't have to! Of course it is important to consider the individual needs of a company, but excessive individualisation complicates the course of the project considerably.  This is because individualisation leads to high costs and a complex structure. If every component is adapted to the existing structures, the ERP system often loses its flexibility and the advantages of standardised processes. Therefore, only necessary customisations should be made.

TIP: Microsoft Dynamics as an ERP system offers flexibility and adaptability!

• As an ERP foundation, Microsoft Dynamics 365 Business Central offers a high degree of adaptability and scalability for various industries and company sizes.

• The flexibility of the solution enables optimal customisation to specific requirements.

• The system covers both current and future business needs.

Inadequate quality assurance and test management

Good testmanagement helps to recognise errors at an early stage and avoid failures. It is worth creating a test plan and checking all important aspects of the system. Load and performance tests as well as user tests must be carried out regularly to ensure that the system is stable and error-free.

Conclusion and recommendations for action

A successful ERP project is not just about implementing the right technology, it also requires a lot of organisation.

With our expertise, we help with implementation from consulting to support. Would you like to find out now how to introduce an ERP system or how to optimise the changeover? Feel free to contact us!