1.

What are the various factors responsible for the

failure of ERP implementation.

Ans: Failure Factors:

1. ERP implementation is, at its core, a people project—The biggest challenge

before

and after implementation is not the technology; the biggest issues are
related to people.

At every stage, companies must work harder to manage change, secure buy-
in, communicate

better, and educate their employees. Top human resources issues are related
to changing

management, training, and internal staff adequacy.

2. Employee resistance—If the employees are not educated and informed

about the benefits

of the ERP system and assured about the security of their jobs by the top
management, they

will start believing in the rumors that float around and will either resist or
sabotage the ERP

implementation.

3. Lack of top management commitment—The top management should

pledge and

demonstrate that the ERP implementation has its full support. They should
assure the

employees about their jobs, clear any doubts and explain why the ERP
system is a necessity

for the organization. The CEO or some senior level manager should sponsor
the ERP project

in order to demonstrate the management commitment.

4. Inadequate training and education—All users of the ERP system should be

trained
properly in using the system to its fullest. Different groups of people in the
company will

have different training needs. Managers need more focus on the decision-
making and

analysis features of the system while the clerical staff need more focus on
how to perform

their jobs. Nevertheless, all the users must be trained in the ERP basics,
overview of the

system and its working, how an action by an employee triggers a host of

events throughout

the organization, how automation will help, what processes are changed, and
so on.

Educate everyone so that they understand what is going to be achieved with

the new system.

Additional education should include total quality management and change

management

strategies. Also the training sessions should be used to gain acceptance for
the ERP systems

by dispelling the myths about ERP. When the employees do not understand
what the new

system is and what it is supposed to do and how to operate it, they will not
use it or use it

incorrectly. This can lead to failure of the system. Train process owners
(department managers)

in how to use the system. Have them train the users.

5. Inadequate requirements definition—If the requirements of the new

system or what is

expected from a new system are not adequately defined, then the
implementation team will

find it very difficult to plan the project. Only if the requirements are specified
correctly, can

the ERP package that is best suited be selected.

6. Inadequate resources—ERP implementation is a complex, costly, and
lengthy project. The

initial budgets are very often exceeded and there are still many hidden costs
in an ERP

implementation. Therefore, while preparing the budget and allocating

resources for the ERP

implementation care should be taken to consider all the factors that could
affect the costs,

manpower requirements, infrastructure needs, and then reserve a

reasonable amount of

buffer for any contingencies that might occur during implementation.

7. A poor fit between the software and users procedures—If the selected
package is a

poor choice then either the organization has to change its business
processes or the package

has to be customized to follow the organization’s processes. If the company’s

processes are

efficient and cannot be changed, the only option is to customize. This is a

time-consuming,

costly, and error-prone process. Hence, while selecting the ERP package care
should be taken

to select a package that offers the best suits the company processes.

8. Unrealistic expectations of the benefits and the ROI—ERP systems are

capable

of producing dramatic productivity improvements if successfully

implemented and

properly operated. However, expecting ERP to perform miracles will be

asking for trouble.

The management and employees should be made aware of the benefit so

that there are

no over expectations. If ERP is touted as a panacea, then there will be

dissatisfaction and
disappointment about it, which can lead to failure of the system.

9. Poor ERP package selection—If the right package—the one that is best
suited for the

company—is not selected, it will create a lot of problems for the

implementation and

customization teams as well as the end-users and will result in failure.

Choosing an ERP package

that is not suited for the company or one that will require huge amounts of
customization is

one of the major factors that contribute to the failure of the ERP project.
Accordingly, the package

selected should be one that addresses the basic business functions of the
organization.

10. Extensive customization—Be prepared for people to argue that they need
to customize

a report or tell you that your new software does not accommodate the way
your company

pays invoices. However, you should always challenge those arguments

aggressively. Most

companies can live with standard business processes. When you over-
customize an ERP

installation, you not only add time and costs, you also make installing the
next release of the

ERP software increasingly difficult and costly.

11. Change management—Long and expensive customization efforts often

result in the lapse

of the release deadline and budget overrun. Customizations make the

software more fragile

and harder to maintain when it finally goes to production. Major changes

may be required

in the later stage of the implementation as a result of incomplete

requirements and power
struggles within organizations.

12. Failure of accommodating evolution of business processes—Business

processes

fall into three levels—strategic planning, management control, and

operational control.

Organizations continuously re-align their business processes at all levels in

response

to the ever-changing market environment. Many ERP systems are not flexible
enough to

accommodate evolution of business processes. An ERP system that worked

well last year may

need major overhaul.

13. User acceptance—The users of ERP systems are employees of the

organizations at all levels.

ERP projects usually modify the company’s business processes, which create
extra workload for

employees who use them initially. They may not think that the workflows
embedded in the software

are better than the ones they currently use. Ongoing end-user involvement
and training

may ease the difficulty in the organization’s adaptation of new systems and
new processes.

14. Going live is not the end of the ERP journey—ERP process is a never-
ending process.

ERP implementation and operation is a continuous learning process and

needs constant

review and course corrections. The organization should realize that the
benefits of ERP

go far beyond cost reduction, touching virtually every aspect of the

integrated enterprise.

Meanwhile, with a growing body of experience and best practices to draw on,
organizations
already past the go-live stage can still harvest the full benefits of their ERP
investment.

15. Companies should anticipate a temporary dip in performance after going

live—

It takes time and focus to realize the full benefits of an ERP implementation.
There is also

the sheer magnitude of the change. After going live, this change can be
dramatic, especially

in relation to how people do their jobs. Managing the dip begins with a plan
that addresses

the organization’s unique circumstances—starting with training and change

initiatives for

those who use the system. On a broader level, what the dip really shows is
an organization

stabilizing after doing something new. In that sense, the dip is a sure sign of
growth and new

capabilities—a bounce that then raises to new performance levels.