When ERP projects fail: causes, consequences and solutions

sabineknoll3
Jul 7
4 min read

Imagine investing millions in a new ERP system, holding weeks of kick-off meetings, hiring top consultants and sending your employees on training courses. And then - nothing. Standstill. Processes run worse than before, the workforce rebels and the sales department threatens to send its orders by postcard. Welcome to every decision-maker's nightmare: the failed ERP project.

ERP projects are like open-heart surgery for a company. And just like in surgery, they require a mixture of precise planning, experienced hands and realistic expectation management. Unfortunately, studies show that over 50% of ERP projects fail to achieve their objectives. Particularly affected: medium-sized companies, often with Dynamics 365 FSCM, Business Central or hybrid hybrid forms.

But why do so many projects fail - and what can be done about it?

The most common causes of ERP project failure

1. unrealistic expectations - or: ERP as a miracle machine

Many managers expect an ERP system to be a sure-fire success. Once introduced, processes, customers and sales will run by themselves. The truth is, however, that an ERP is not a panacea, but a tool. It is only effective if processes have been properly analysed and optimised beforehand.

2. lack of involvement of top management

If the C-level only signs off on the invoice but takes a back seat on the project itself, trouble is inevitable. ERP projects need strong leadership and clear prioritisation - otherwise there is a risk of silo thinking and resistance at operational level.

3. over-complexity and scope creep

‘While we're at it, we might as well...’ - This sentence has driven many a project to the brink of madness. If you want too many features at once, you run the risk of overloading the system and turning the introduction into a never-ending odyssey.

4. poor data quality

An ERP system is only as good as the data it processes. If master data, supplier information or price lists are transferred without being checked, the hoped-for efficiency gain quickly turns into a chaotic blind flight.

5. lack of a change management strategy

People like change - as long as it affects others. Without targeted change communication (ERP projects without chaos: the power of change management), training and user involvement, even the best system is doomed to failure. An ERP project is not just an IT project, but also a cultural project.

The consequences of a failed ERP project

The consequences of a failed ERP project are serious - both economically and psychologically:

Financial losses: failed implementations often swallow up seven-figure sums. Added to this are opportunity costs due to inefficient processes and lost market opportunities.
Productivity losses: If the new system provides more questions than answers, operational efficiency suffers. Employees spend their time tinkering with workarounds - or in the worst case scenario: reactivating Excel.
Demotivation and staff turnover: Unclear processes, constant changes and a lack of training frustrate the workforce. Good people leave the sinking ship.
Loss of image: If customers or suppliers are served worse by the new system than before, not only the reputation suffers - but often also the turnover.
Distrust of future digitalisation projects: After a failure, the fear of new investments is great - which can lead to technological standstill in the long term.

Solutions: How to save your ERP project - or prevent it from failing in the first place

1. rely on strong project management

A successful ERP project needs a clear owner at C-level. Someone who makes decisions, resolves blockages and anchors the project internally. An interdisciplinary team consisting of IT, specialist departments and external consultants is mandatory - but the engine must be ignited from the very top. (Everware Consulting GmbH | ERP Strategy)

2. start with a realistic scope

‘Think big, start small’ - sounds trite, but it's worth its weight in gold. Instead of integrating all modules straight away, it is better to start with a focussed minimum viable product and then roll it out iteratively. This keeps budget, time and nerves in check.

3. make change management a matter for the boss

Communication is not a ‘soft skill’, but a critical success factor. Use town halls, intranet, feedback loops - and above all: talk to people, not about them. Involving employees at an early stage reaps acceptance instead of resistance.

4. invest in data quality

Before you even write a specification, carry out a data cleansing project. Clean up master data, harmonise duplicates and document data responsibilities. A clean data foundation will save you millions later on.

5. choose implementation partners with ERP and industry expertise

A partner who knows Dynamics is good. A partner who masters Dynamics in your industry is better. And a partner who is also available after the go-live with service, training and optimisation is priceless.

6. utilise lessons learned

If your project has already stalled, organise a structured project retrospective. Bring in external experts who can identify weak points with a fresh perspective. Sometimes it is enough to make individual adjustments - sometimes you need the courage to make a fresh start.

Conclusion: ERP can fail - but it doesn't have to

ERP projects are among the most complex endeavours in corporate IT. They demand time, money and nerves - but they also offer huge opportunities. A structured, realistic and communicative approach to the project avoids the classic pitfalls and turns ERP into a strategic power tool rather than a time bomb.

And should your ERP project nevertheless hit the skids - keep calm. Even the first rocket launch was a crash landing. It is important that you learn from your mistakes, turn the tide in good time and get back on the road to success with the right partners and methods.

Pro tip at the end: If you realise today that your ERP project is more of an ‘Excel with a cloud subscription’ than a future-proof system - let's talk. A good strategy starts with an honest status check. (Consult for Microsoft Dynamics 365 | Implementation | Everware Consulting