Risky ERP Selection and Implementation

Introduction

Over my 27 years in the ERP industry, I’ve witnessed numerous ERP projects, some successful and others plagued with challenges and risks. Some risky ERP projects could be identified as early as the selection process even before their implementation.

One particular project I encountered recently raised many red flags right from the start and eventually faced the risk of ERP project implementation failure.  It was a company that had been using a customized ERP solution created by a software developer for years and decided to select an off-the-shelf ERP solution after years of unhappiness with the previous software developer. They evaluated and selected an ERP vendor to implement a well-known off-the-shelf ERP about 8 months ago.

However, now they felt that their current ERP vendor is not performing to their expectation and contemplating whether to continue or terminate the project.

This experience led me to reflect on the signs that can be observed during the ERP evaluation process that indicate high-risk ERP projects.  I will also touch on the steps that can be taken to mitigate these risks.

Understanding ERP Project Risks

Before delving into the signs of risky ERP projects, it’s essential to define what makes an ERP project risky. A project is deemed risky if it exhibits a higher likelihood of encountering one or more of the following outcomes:

• Project Delays
• Project Cost Overruns
• Project Termination
• Bad Debt or Overly Delayed Payments to the Vendor

Danger Signs Observable during ERP Selection

Over my ERP career, I identified the following observations during the ERP selection and evaluation process that often leads to risky ERP projects during implementation.

Consultants or Users keep talking about Customization through Coding and are very Proud of doing that

Too much customization through coding in an ERP project is a significant cause of failure. Consultants and users who intend to rely heavily on customization to meet business process requirements often lead to project delays and cost overruns.

Any average consultant, even some users, can come up with ideas to meet the business process requirement through customization and coding. The ability to meet these business requirements without coding separates good ERP consultants from the rest during the ERP selection and implementation process, thus, reducing risks.

Viewing the Project Manager as Solely an Experienced Consultant

Underestimating the importance of project management can lead to issues. A project manager should not just possess product knowledge but also demonstrate expertise in managing project timelines, resources, and risks.

Many people including some ERP vendors, do not see the importance of project management. So, if a vendor or user sees the project manager just as a senior person with good product knowledge, then be prepared for project challenges.

I had the honor to previous experienced how a good project manager turnaround and recovered multiple ERP projects, saving them from failure and turning them to profit. And I have also worked with Project managers (PM) who perform their PM job like Post Men.

If you don’t put enough know-how and effort into project management, small issues may escalate into irreversible issues.

Top Management Not Involved

Leadership plays a critical role from the selection to implementation in ERP projects that involve multiple stakeholders. Lack of top management involvement will increase the ERP risks that are often due to competing interests among stakeholders.  A lack of strong leadership will lead to conflicts and project dissatisfaction.  This often spills over to the consulting team and makes the project challenging with heightened risks.

Changes in the Evaluation and Implementation Team Members

Changes in the project team during implementation can disrupt the trust and understanding built earlier. It is crucial to maintain continuity in the team to ensure successful project execution.

Due to the long ERP project implementation process, the implementation team members often change along the way due to the change of their role or just simply due to attrition.

A change of project team members should immediately raise a risky red flag for the project managers as it will lead to the following consequences if not handled promptly and properly:

Trust

The trust that was built earlier may not continue since people have changed.

Breakdown in Prior Agreements

Many of the earlier understandings and compromises were not understood by the team or people who took over later. They may not understand the reasons that lead to how the project is conducted.

Newcomer Behavior

It is common that a newcomer without the benefits of understanding the previous discussions and compromise, to try to prove themselves by questioning how the project is conducted.

The challenged project that I quoted earlier demonstrates these clearly:

The senior manager appointed his IT manager to evaluate and implement the project but did not personally involve. Unfortunately, there were mismanaged expectations from the users that could not be resolved. Eventually, the resignation of the IT manager forced the senior manager to take over. Without involving in the earlier discussions, the senior manager was influenced by the unhappy end users and took up a confrontational position against the ERP vendor. I noticed that some of the claims and understanding from the senior manager are unlikely true, but rather due to the fact that the senior manager was not involved from the beginning and did not understand the earlier consensus made during the evaluation and earlier part of the project implementation. If the senior manager was personally involved from the beginning, it would not have ended up in this sorry stage.

Key Users with Extensive Ideas

Users with a plethora of ideas about how the ERP software should work can lead to heavy customizations and complicate the implementation process.  Often, these users have some IT knowledge. So, naturally, it will lead to projects with heavy customizations and unsatisfiable expectations if not managed properly.

Conversion from Customized Software

Users transitioning from customized software to off-the-shelf ERP solutions may struggle to adapt their processes, posing human challenges to the project.

I was always very cautious when encountering ERP projects that attempt to convert users from customized software to off-the-shelf ERP solutions.

You see, the users have been putting up requests to their previous customized software developers to customize the software accordingly to their wishes.  Now, they have to adapt their way of work to the off-the-shelf ERP software. This is humanly challenging!  So, setting firm expectations from the beginning is important for this type of project to mitigate the risk during implementation.

Strategies to Reduce ERP Project Risks

The following strategies can be adopted to mitigate the ERP project risks during the selection and implementation process.

Top Management Involvement from the Evaluation Stage

Involving top management right from the evaluation and selection stage ensures continuity and provides the necessary leadership to make informed decisions throughout the project.  Top management also needs to make a difficult decision that involves users during the ERP project implementation.

Careful Selection of Implementation Vendors and Customers

Users must choose their implementation partners wisely, and vendors should also be cautious in selecting their customers. A good fit between both parties increases the chances of project success.

Set Expectations from the Beginning

As an ERP vendor, it is important to set clear and realistic expectations right from the beginning. Do not promise the sky unless you are sure that you can deliver. The salesperson must manage the expectation towards the later part of the project evaluation. Making sure that all discussions and agreements are documented in writing.

It is important to note that despite all the good intentions, the users will not fully appreciate all the information and discussion that you provided during your selling and pre-project discussions. Sometimes, they just genuinely could not recall as it may be their first ERP project. So, the opportunity to revisit the documented discussion will provide a starting point to resolve some of these misunderstandings.

During the ERP Project Kick-off meeting, I use to make a presentation of the “Common Mistakes in ERP Implementation”  and explained the “Whys” of the project scope and implementation to help manage expectations effectively.  This became our SOP (Standard Operating Procedure) in our ERP project implementation.

Effective Communication

Open and frequent communication is vital in ERP projects. Regular progress meetings within the consulting team and with the users help address issues promptly.

Besides formal group meetings, it is even more important to have informal discussions between top management and project managers to foster trust and help resolve issues more effectively.  I often put in the time to meet up with managers or project managers over informal occasions such as coffee or lunch.  Most of the time, small issues are easier to resolve informally instead of through formal processes.

Complete the ERP Project Quickly

Get the ERP project implemented as soon as possible.  The longer it drags, the higher chance of team member change.  So, try to keep to the original project scope and minimize customizations through coding.  Then once the project is live and running, you can gradually take your time to progress the ERP solution to the perfect ERP solution.

Conclusion

ERP Project failure is usually not due to the product if a rigorous selection process was conducted. Even if there are imperfections with the ERP, which there will be, a good implementation team consisting of both the consultant and the users working together can overcome these shortcomings.

No ERP software is perfect. If there is, then there will be no need for new upgrades and versions. In short, the expectation to get a perfect ERP when the project is first implemented is an obvious first sign of a high-risk ERP project since the users can never be satisfied.

Successful ERP projects require a strong initial foundation and continuous effort in managing the human aspect. Both users and vendors should be selective in their partnerships, and mutual trust must be cultivated and maintained.

By identifying and addressing the signs of risky ERP projects, organizations can significantly increase the likelihood of a successful ERP implementation and minimize potential risks and challenges.

Remember, while no ERP software is perfect, a well-managed and carefully executed project can overcome imperfections and deliver value to the organization. Successful ERP projects are about compromises and trust, just like a marriage.

To learn more about how ERP systems can help your business stay ahead of the game, contact us today to schedule a discussion. We can help you strategize and optimize your ERP solution for your business, ensuring you are prepared for the challenges ahead.

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