Why ERP fails after the successful implementation?

January 16, 2017 2 Comments

Featured article by Ramesh J. Chougule, Partner and ERP Transformation Leader with Infosys consulting

During one of my case study presentations of a complex ERP implementation, a CFO in the audience asked me a question, “Around 15 years ago, there was a very popular story of ERP implementation failure in this CPG Company. Why this company failed to implement the solution?” This CPG Company attempted SAP implementation during late nineties for their North American operations and failed. It was a very popular story in the media. It was referred by many other companies who were to begin their ERP implementation. There were very few failures of such magnitude and these failures received media attention because it impacted core financial parameters of the organization. In one case, inventory increased by 50% as complex algorithms in ERP provided incorrect supply plan. The organization went ahead to executed the plan resulting into excessive inventory in supply chain. In another case, ERP provided incorrect demand forecast and the company went ahead in manufacturing the goods.

We have come beyond such kind of problems. We are in the age where expertise on processes is very high, tools to test the scenarios before ERP goes live are excellent and hence such fundamental issues are very rare.

Today, we see different kind of nervousness around ERP. Most of the clients go live on ERP after tremendous effort for two to three years, spending tens or hundreds of million dollars. Once it is live, they struggle to reap benefits of the implementation. At superficial level, they identify the reasons about technological challenges, quality of process definition, and unsupportive business users. Over a period of time, not realizing the returns on the investment stamps the implementation as a failure. However, the core reason of such failure is very different. To avoid such failure, organization needs to set right priorities and bring clear objectives after the implementation. Following are the guiding principles to articulate the ERP charter in post implementation phase.

Does the ERP investment fail during the implementation? Or it fails after the implementation? Create an awareness that ERP rarely fails during implementation but it fails more frequently after the implementation.

If the implemented solution is not the best one, how does the organization go about making it better after implementation? Improving the business process and the solution is a continuous process. Soul of achieving the best solution lies in continuously nourishing the ERP.

How does the leadership perceive the 100 million dollars baby- a necessary evil or an enabler of the future? It is extremely important for leadership to keep the faith in the investment made. The impetus from leadership on this investment gets translated into the aspiration of the team to use ERP for trend changing business process innovations.

How do you measure ERP – is it an asset or a liability for the company? Asset delivers innovations and liability needs a support and maintenance. Having an innovation culture helps defining ERP as a true asset and influencing the P&L statement.

What ecosystem set up (purpose, processes and people) the organization has to dig deep and wide for mining gold from their ERP? Ecosystem of processes and people to implement innovations using ERP is the most important pre-requisite to reap the benefit. Support and maintenance oriented Ecosystem doesn’t deliver innovations. It coverts ERP as a machine which needs heavy maintenance by retarding the learning, research and development culture from users. ERP users finally deliver the innovation and benefits; not the maintenance teams.

The success of ERP investment lies in honest answers to above questions. These answers are the reflection of where ERP would appear on the balance sheet after few years in post implementation phase.

About the Author

Ramesh J. Chougule is Partner and ERP Transformation Leader with Infosys consulting. He has 20 years of experience in ERP domain and has helped large global organizations to implement ERP solutions and reap benefits from the investment.

2 Comments to “Why ERP fails after the successful implementation?”

Aditya Palkar says:

January 20, 2017 at 1:28 am

Thanks Ramesh for sharing your thoughts and experience in this article.
Many organizations really need to rip the benefits of ERP, post implementation. ROI needs to be measured at each stage. We know during implementation due to cost pressure Implementation partner miss out lot of important aspects of testing and validating business process. All this and many more points are nicely articulated.
Ayush G.V. says:

January 24, 2017 at 5:17 am

Couldn’t agree more with “Ecosystem of processes and people to implement innovations using ERP is the most important pre-requisite to reap the benefit. Support and maintenance oriented Ecosystem doesn’t deliver innovations.”

Though I wouldn’t complete agree that ERP program seldom fail in implementation. I think the nature of implementations(big bang), often a distance between promises and actual user-experience, lack of engagement of users (dependence of technical and functional consultants) and lack of agility/transparency still leads to many failures/abandoned ERP projects, as I have witnessed.

As usual great article Ramesh sir and cannot wait to read the book.