Poor project planning leads to ERP failure

One in four ERP implementations fail due to poor planning and an unwillingness to modify existing business practices. As such, many C-level managers are refusing to green light such projects.

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By  Matthew Southwell Published  July 2, 2003

|~||~||~|One in four enterprise resource planning (ERP) implementations fail due to poor planning and an unwillingness to modify existing business practices, according to Meta Group. Furthermore, such poor return on investment (ROI) is impacting on the willingness of C-level management to green light such projects.

“The problem that most companies are facing, and the reason why most ERP implementations fail, is that they have incorrect assumptions about what the applications will do for the company,” says Paul Ventura, managing director, Asia Pacific, Meta Group.

“They think that something like a tier one solution will take away the pain of legacy applications and give them a centralised and integrated reporting structure that is hooked into all parts of their business. However, companies underestimate the amount of business process change requires. Automating an inefficient process does not automatically make it an efficient process,” he explains.

According to Ayman Abouseif, senior marketing director for Oracle Middle East & Africa, such mistakes are also made in the Middle East, where a number of local companies simply refuse to reengineer their businesses to reap the advantages ERP apps have to offer.

“We are seeing both extremes in the local market, those customers who are willing to reengineer and streamline their business processes and those who are not willing to consider any process changes,” he comments.

While an unwillingness to reengineer is, perhaps, the primary factor for ERP failure, another issue is the dynamic nature of most implementations. According to Meta, the average ERP deployment not only costs approximately 1% of corporate revenues for large companies, but also takes around 20 months. As such, priorities can shift and the original goal, which if achieved would have delivered the maximum ROI, is no longer applicable.

“Part of the problem with ERP implementations is that people do not know that they are failing. There is, instead, a gradual realignment of where people think they will end up versus where the programme is running. This means it keeps consuming budget and companies don’t know where to draw the line because they never really documented where they started from, or the milestones they needed to reach at specific times,” explains Venture.

Shishir Srivastava, executive director, Sage Middle East, adds that this is particularly the case in companies that lack the necessary implementation skills, or have to complete lots of lengthy training to gain them.

“These are the organisations where ROI is difficult to achieve,” he says. “As such, Sage is heavily involved when new partners implement projects. A lot of hand holding is required on these projects and they need to be monitored closely,” he adds.

In addition to making better use of vendor support, Ventura suggests that companies have to finalise their project goals before they embark on an implementation, if they want to succeed.

“What businesses should be looking for is something concrete in business terms. For example, are they looking to drive their bottom line through improvements in efficiency, or do they want to be able to rationalise disparate business processes across divisions? Companies have to learn to prioritise projects because it is a lack of focus that makes ERP implementations run over time and over budget,” he says.

Establishing detailed plans for implementations not only increases the likelihood of it succeeding, but also gives companies something to better measure ROI against.

As Ventura says, “lots of business cases are being written with very soft ROI, in the sense that companies will say that they are going to make employees more productive, or they will be able to get rid of a legacy system management. However, by putting together a list of strategic business objectives and listing how the project is impacting on those point shows how ROI is being achieved more effectively.” ||**||

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