July 09, 2010

Why Enterprise Resource Planning Projects Fail?

Writing about web page http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6VCT-47G3XP2-3&_user=7195183&_coverDate=04%2F16%2F2003&_alid=1395772318&_rdoc=4&_fmt=high&_orig=search&_cdi=5963&_sort=r&_st=4&_docanchor=&_ct=7&_acct=C000029838&_version=1&_urlVersion=0&_userid=7195183&md5=d0a8e50a1cd8858ad08ccb253eea100b

Title:
Enterprise Systems For Management
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Why Enterprise Resource Planning (ERP) Projects Fail?

Adopting an ERP system has become a norm in most multinational industries in today’s competitive market. Organisations have recognized the potential benefits of implementing an ERP system so as to gain competitive advantage and improve their business strategy. Nevertheless ERP project has an infamous reputation of failure as most projects become over budget and delayed.

Umble et al (2003) based on their research identified various reasons why ERP implementation project fail. They argued that the main reasons for failure can be grouped into ten categories as listed below:

1.     Obscure Strategic goals

2.     Top management is not committed to the system

3.     Implementation project management is poor

4.     Lack of organisations commitment to change

5.     Incompetent implementation team not selected

6.     Inadequate education and training

7.     Data validation is inaccurate

8.     No performance measures

9.     Improper resolution of Multi-site issues

10.  Technical difficulties

Umble et al (2003) further reviewed the case of an ERP implementation at Huck International Inc, a design and manufacturing company. They identified that though the company successfully implementation an ERP system and achieved some of their benefits, they underwent various challenges such as; lack of complete top management and implementation team involvement during the implementation phase of the project. This resulted in the company going over budget during the course of the project and exceeding their initial time plan.

An organisation that plans to implement an ERP system needs to understand its complexity and consider all possible factors that determines its successful implementation. Careful analysis and planning must be carried out at all the different implementation phases (before, during and after implementation) so as to avoid a project failure.

Various other real life case studies of ERP implementation  that shows that factors above influence the success and failure of ERP projecthas been reviewed in Motiwalla & Thompson's book referenced below.

Book: Motiwalla, L. and Thompson J. (2009). Enterprise Systems For Management. New Jersey: Pearson Prentice Hall.

Article: Umble, E., Haft, R., and Umble, M. (2003). Enterprise resource Planning: Implementation procedure and critical succes factors. European Journal of Operation Research, 241-257.

Further Comments are welcomed!



- 5 comments by 1 or more people Not publicly viewable

  1. From my perspectives, the failure of ERP implementation depends on how the failure is measured. Yes, I agree that there are some statistics which say that 9 out of 10 ERP implementations end up with a failure. However, it needs to be checked how the failure is measured, i.e. ERP itself has numerous functions (elements) and if the company is not using all functions of ERP, then it does not mean that company fails in successful implementation of ERP. In most cases the failure is identified when company is not employing (totally) all functions of ERP, however as it was explained earlier it does not mean that company failed in implementing ERP system, it might be so that the company may not need to use all functions at all and using only some necessary functions might be enough for the company.

    10 Jul 2010, 20:32

  2. I agree with most of your views. But I think maybe most failures are because the improper customization of ERP. Enterprises even in the same type or in the same region vary due to the people and all other results. So, the appropriate customization of ERP is the premise of implementing ERP.

    12 Jul 2010, 00:26

  3. There are a host of factors that could cause failure of an ERP. I believe ERP implementation would fail if there is lack of awareness of the level of change an ERP implementation would bring about. The lack of awareness could be among the C level executives or even among the employees. The failures also occur if companies view ERP as a short cut to success. They must relaize gains from ERP are going to be long term and they cannot expect immediate returns. Also most organizations dont realize the intangible benefits an ERP would generate and they are obsessed with calculating the return on investment. ERP implementations are also about changing the way the business operates in terms of processes. An implementation would require extensive customization of internal business processes if not the implementation would not yield complete benefits. To conclude I believe the success or failure of an ERP could be attributed to a whole lot of reasons and of late companies have begun to realize the strategic nature of ERP implementation and are prepared to wait a bit longer to assess the returns from an ERP system.

    12 Jul 2010, 00:54

  4. the ERP project failure,in my point of view is mainly due to the lopsidedness of cost and benefit. with abundant precaution and attention, ten listed failure reasons are definately important matters needing attention but they are conquerable and foreseeable. However, I believe the implementation of the ERP system is always a massive and costly project to whatever size of company, which means every reasonable company wanting ERP wouldn’t take the risk of adopting ERP without plentful research and analysis. In terms of costs and benefits issue, the cost is relatively controllable, but the benefit of implementation of ERP is doutless but intangible and maybe immeasurable. It is a risky and long-term investment which exclude some company without sufficient cash flow and can’t afford the lont-term payback period.

    24 Apr 2011, 12:54

  5. I agree with the above statements and support the above interpretation of why enterprise resource planning projects fail. Specifically, I believe that the point which refers to the implementation project management is essential for an organisation to avoid failing the running of the enterprise resource planning project. Especially when ERP is implemented across multiple modules the management team must be well-educated for the implementation of ERP to be successful since complexity will increase.

    01 May 2011, 12:25


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