Causes for ERP system failures, Jit Goel, XCEL Corp Jit Goel

Why Do Your ERP Systems Fail?


Enterprise Resource Planning software is commonly used by many to achieve a wide variety of objectives. ERP is important is important at every level of the enterprise and helps the decision makers to draw insights about customers, suppliers, and employees. It also helps the management to find new strategies to help their business thrive and fight off competition with ease. ERP system is required irrespective of the size of your organization.

Implementing ERP helps to improve the efficiency of your organization it is a must have for all businesses.

When ERP software could be so beneficial, why do they fail. There are many examples of massive ERP failures and the losses account to several hundred million dollars. Some of the most popular ERP failures include Hershey’s 19% drop in profits due to a ERP system failure, FoxMeyer’s ERP failure costs 100 million dollars, and the US Navy where 4 different ERP system totaling a billion dollars failed. On an average, about 29% of ERP software fail. What are the major reasons of failure, here are 5 major reasons why.

1. Train the Trainer Approach:

Many ERP software providers and business decision makers fall for this expensive mistake. To cut costs and time, enterprises choose to train only their trainers who will then train the end users. This leads to a lack of information and snowballs to become a ERP failure. You should always ensure all the end users are trained adequately by the software provider for the ERP to be successful. Another mistake enterprises make is to provide training for each department separately. This removes responsibility and coordination between your different teams and they don’t understand the importance for providing the right information to enable other lower down the order to use the software successfully.

2. No Clear Established Goals:

While understanding the reasons for failure, one of the primary reasons is the organization purchasing ERP doesn’t have any clear established goals. The very first step you should make while acquiring an ERP is to have established targets and goals. You should an idea about what problems it solves, what is the expected outcome, and what is the financial justification and timeline of implementation. Having the destination in sight helps the solution providers to work towards developing software that achieves it. It also helps you on the long to measure the ROI and the efficiency of the ERP.

3. Fixing a Timeline:

Many software providers try to cut back on implementation time and pose it as delivering on time. However in order for your ERP to successful, you should push the providers to deliver complete implementation within a proper timeline. You can compare their past projects and see how they have implemented and ensure they completely implement the software and provide training within the stipulated time.

4. Customization Issues:

Only 20% of organizations that have implemented ERP have used it without customization. ERP software is commonly very generic, using customization helps you to scale the software according to the needs of your organization. But, too many customization may lead to severe technical glitches, which would eventually cause the ERP to fail altogether. One way of eliminating this risk is to choose a provider who delivers custom made ERP solutions.

5. Resistance To Change:

Introduction of any software will easily create resistance to it. Some may like the existing system as they are used to it, some may think it would make them replaceable, and some might just not like using computers. Whatever the reason may be, the organization should be strict in ensuring adherence to using the software. Right from the decision makers to the lay employee, the enterprise should ensure every single person in the organization uses ERP and is trained adequately to do so.

While these are the major reasons for ERP systems failure, one other important aspect is the service provider. Many vendors take projects because need money but do not possess the expertise or the technical knowhow to build an ERP system that suits your enterprise. You should always ensure that the service provider you choose to work with has implemented ERP systems successfully with organizations similar to yours.

At XCEL Corp, we develop ERP system that is custom made for each organization. ERP Solutions that we have provided have enabled many businesses to manage many aspects of their business including Sales to Cash, accounting, compliance, Supply chain, human resource, customer support, and IT systems. ERP systems developed by XCEL Corp are customer centric and in line with our customers’ business goals.

If you need ERP software to be implemented for your organization effectively, touch base with us at anytime.

Author: Jit Goel ( President/CEO )

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