Why some ERP implementations fails?

By Esteban Pino Coviello

I was involved in many ERPs implementation along 20 years of my carreer and I had the opportunity to see multiple factors that affect a project, and I’ve encountered specific stories of failures in both small and big companies. These experiences have provided me with valuable insights into the reasons behind such failures.

As an experienced professional who has been involved in ERP implementations in both small and big companies, I’ve witnessed firsthand the reasons why some of these projects fail. While each implementation is unique, there are common challenges that can hinder success. I’ve encountered specific stories of failures in both small and big companies. These experiences have provided me with valuable insights into the reasons behind such failures. Here I explain some key points of why some companies fail on implement software.

In small Companies:

In small and middle size companies, one of the primary reasons for ERP implementation failure is the lack of top management support. Often, the decision to implement an ERP system is driven by a few key individuals without sufficient involvement or commitment from higher-level executives. This lack of support trickles down to inadequate resource allocation, insufficient decision-making authority, and a general lack of direction.

I remeber a project in a industrial and commercial company in the field of agriculture. The CEO initially championed the project, but as the implementation progressed, he became increasingly disengaged. Without his active involvement, decision-making authority was delegated to lower-level managers who lacked the necessary expertise and understanding of the company’s strategic objectives. As a result, key decisions were delayed, resources were misallocated, and the implementation team struggled to move forward. Without strong leadership, the implementation team struggles to navigate the complexities of the project, leading to failure. The CEO initially championed the project, but as the implementation progressed, he became increasingly disengaged. Without his active involvement, decision-making authority was delegated to lower-level managers who lacked the necessary expertise and understanding of the company’s strategic objectives. As a result, key decisions were delayed, resources were misallocated, and the implementation team struggled to move forward.

Another issue that frequently arises in small companies is the tendency to underestimate the planning and preparation required for a successful ERP implementation. Due to limited resources and a sense of urgency, thorough analysis of business processes, goal setting, and implementation strategies are often overlooked or rushed. This results in poor system configuration that fails to align with the unique needs of the business. Without proper planning, the implementation lacks a solid foundation and is destined to falter.

Poor project management is another common pitfall. In small companies, there may be a lack of experienced project managers who possess the necessary skills to handle the complexities of an ERP implementation. This can lead to improper coordination, unrealistic timelines, and inadequate risk management. As a result, the project faces constant setbacks, delays, and budget overruns, ultimately derailing the implementation efforts.

In another small company for professional services, the failure stemmed from inadequate planning and preparation, makin gthe mistake I remarked lines above. The management team recognized the need for an ERP system and hastily selected a vendor without thoroughly evaluating their business processes and requirements. As the implementation progressed, it became evident that the chosen system did not align well with the company’s unique needs. The lack of proper planning and analysis meant that the system was poorly configured, and critical functionalities were missing. Attempts to customize the system further complicated matters, leading to a convoluted and unreliable system. The company eventually had to revert to their previous processes, causing significant disruption and frustration among employees.

Training. Additionally, small companies often neglect the crucial aspect of user involvement and training. Employees are the end-users of the ERP system, and their active participation and understanding of the system are vital for successful adoption. Unfortunately, due to limited resources, employees are often excluded from the implementation process, and training becomes an afterthought. Consequently, when the ERP system is rolled out, employees face difficulties in understanding and utilizing the system effectively, leading to resistance and a failed implementation.

In Big Companies:

In the case of big companies, the challenges differ, but failure can still occur. One notable challenge is the sheer complexity and size of the organization. With multiple departments, business units, and locations, aligning processes and coordinating efforts becomes a herculean task. Resistance to change can also be more pronounced in big companies, as individuals and departments are accustomed to established ways of working. Overcoming resistance and ensuring buy-in from all stakeholders becomes a monumental undertaking that, if not addressed adequately, can lead to failure.

Working for a ambitious project in a large company in Latin America for food distribution with presence in six countries, I witnessed a failure related to organizational complexity and resistance to change. The company was going through a merger, and the decision was made to implement a unified ERP system for both entities. However, each company had its own established processes, organizational structures, and company cultures. The implementation team faced significant challenges in harmonizing these disparate systems, leading to resistance from various departments and individuals who were hesitant to adopt new ways of working. The lack of change management efforts and communication exacerbated the resistance, resulting in a fragmented implementation. Ultimately, the company had to abandon the project and revert to separate systems for each entity, leading to increased costs and missed opportunities for efficiency gains. Corporate Bourocracy was also a stone on the road during all the process.

Technical challenges also loom large in big companies. Integration with existing IT infrastructure, data migration, customization, and testing become exponentially more complicated as the scale of the organization increases. System performance issues, data inconsistencies, and software bugs can arise, hindering the implementation progress and risking failure.

In another large company in Latin America with the Headquarters in Switzerland in the dairy and liquid sector (milk and cheese), technical challenges played a significant role in the ERP implementation failure. The organization had a complex IT infrastructure with multiple legacy systems that needed to be integrated with the new ERP system. Many different systems working independenly without any kind of integration was a headache. However, due to insufficient testing and inadequate data migration planning, the integration process was riddled with issues. Data inconsistencies, system performance problems, and integration failures caused significant disruptions in the company’s operations. Despite efforts to address these challenges, the project timeline and budget were severely impacted, and the implementation was deemed a failure.

Regardless of the size of the company, one underlying issue that often contributes to failure is unrealistic expectations. ERP systems are powerful tools, but they are not magic solutions that instantly transform a company. If the expected benefits or capabilities of the ERP system are unrealistically high, it can lead to disappointment and a sense of failure, even if the implementation itself was executed competently.

These stories highlight the common pitfalls that can lead to ERP implementation failures in both small and big companies. The lack of top management support, inadequate planning, poor change management, technical hurdles, and mismatched expectations can all contribute to these failures. By learning from these experiences, it becomes evident that thorough planning, strong leadership, effective change management, and diligent attention to technical details are crucial for successful ERP implementations.

In conclusion, based on my experience, ERP implementation failures in both small and big companies can be attributed to a lack of top management support, inadequate planning and preparation, poor project management, insufficient user involvement and training, challenges related to organizational complexity and resistance to change, technical hurdles, and unrealistic expectations. Understanding these potential pitfalls and addressing them proactively can significantly increase the chances of a successful ERP implementation.