What is the biggest reason for an ERP Implementation failure?

Hundreds of ERP implementations later, the ERP report for 2014 by Panaroma Consulting is finally out, and while it talks about some surprising and some not so surprising survey results, what caught our eye is the biggest reason for an ERP implementation failure.

Before we get to that, let’s take a look at the highlights of the report.

While more and more smarter ERP solutions are in the market today, organizations are now a lot more cautious with their reasons to invest in Enterprise Resource Planning.  Instead of “we have to”, there is a lot more clarity to why the business will benefit from an ERP implementation. This is a positive step towards ensuring a successful implementation, because a clear business objective means defined deliverables. Defined deliverables automatically translates to a more organized implementation.

Yet, the cost and time needed to implement ERP software has remained one of the biggest pet peeves of organizations trying to kickstart their ERP systems. The report by Panorama points out that about 63% of implementations go over their initial budget, and the average delay observed is about four months. The average total cost of an ERP implementation is $2.8 million, or approximately 4.6% of the implementing companys’ annual revenue.

One would think it is the complexity of ERP systems that causes the delays and cost override. But the report pointed out a not so surprising reason, and often undervalued aspect of a successful implementation: organizational change management.

 Twenty percent (20%)  of respondents quoted change management issues like training, resistance to change, process redesign as an overwhelming reason for implementation failure.

The report also points out that while 83% of companys’ implementing ERP software hired expensive consultants to design their systems, they sorely underinvested in organizational change management faculties leading to an un-motivated and un-interested business user, resistant to change his comfort ways of doing business. In fact, Gartner has recommended that at least 15%, if not more of the program budget be allocated to organizational change management. Yet, companies invest only 5%.

Why do companies continue to ignore this critical component for ERP implementation success?

One of the major reasons is the lack of visibility of the benefits of investing in change management. When conducting a cost-benefit analysis of any major undertaking, investment in organizational change management is often ignored. If included, leadership will have a clear view of the ROI from an organized change and change management will cease to be an afterthought. In fact, the sooner does the change management activities begin; the better are the chances of user adaptability.

A simple and inexpensive way to succeed in the huge transformational ERP undertaking. Has your company included organizational change management to ensure ERP implementation success?

Find more about the 2014 ERP report by clicking here.

 

 

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