Over the past four decades, enterprise resource planning (ERP) solutions have evolved to incorporate new technologies and have expanded their reach to support back-end business processes as well as front-office functions, driving massive efficiencies across business operations enterprise-wide. By 2025, the ERP market is expected to exceed $49.5 billion, with defense and aerospace, retail, and government utility sectors driving its growth.1 With the rapid adoption of AI, cloud technology, and advanced integrations, ERP systems will continue to broaden their capabilities, representing 50% of global enterprise software revenue progressing through 2024.2
With the trend to incorporate more analytics, machine learning, and automation, future ERP systems will be equipped to handle complex data analysis and predictive modeling like never before. With what has become an indispensable technology that promises innovation and substantial growth for modern business, one thing is often overlooked: ERP implementation failure. Improper planning, insufficient resources, and lack of support can lead to costly ERP implementation failures and disruptions.
ERP Defined
ERP systems offer real-time software solutions in a single platform. These solutions help companies run their entire business, supporting automation and processes such as finance, human resources, manufacturing, supply chain, services, procurement and more. These systems are complete, integrated platforms that standardize, streamline, and integrate business processes and enable the flow of transactional data, acting as an organization’s central hub for all areas within the organization. Leveraging a defined data structure with a common database, ERP systems ensure that information across the organization is normalized based on common definitions, therefore delivering a single source of truth.
ERP History
It is suggested that the concept of ERP systems originated in the 1960s via the manufacturing sector. During that time, systems known as Material Requirements Planning (MRP) were developed to monitor materials and inventory. These systems required a significant amount of space and workforce to operate. As the 80s progressed, these systems evolved into more advanced solutions, supporting processes and scheduling capabilities. In the mid-90s, organizations began to realize that automation could extend beyond manufacturing and bought ERP systems at astronomical rates. At that time, the technology was rebranded by Gartner as “Enterprise Resource Planning.”2
ERP Benefits
ERP systems are responsible for integrating an organization’s people, processes and technologies. Aligning all core departments in an organization can lead to improved workflow, cost savings, and better performance. Examples of specific benefits for organizations include:
- Enhanced Efficiency: With one source of truth, business processes are clearly defined, and infrastructure, functions, and experiences are consistent
- Reduced Risk: Improved data integrity and financial controls ensure quality information and all regulations and compliances are met
- Cost Savings: Streamlined business processes and integrated systems ensure quality, consistency and operational efficiency
- High-Performance Workforce: Users have access to consistent business practices and data, enhancing morale, collaboration, and performance
Harnessing ERP Solutions
With the modernization of cloud-based ERP solutions and AI-integrated systems, many organizations are feeling the pressure to harness these new capabilities. Implementing an ERP solution can be a costly, complex, and daunting task, requiring careful planning, coordination and resources. However, it can also deliver significant value and provide a sizeable competitive advantage. As we explored in our March 6, 2024 article, 5 Key Factors to Consider When Selecting and Implementing an ERP System, whether selecting a new ERP solution or integrating applications into an existing system, a solid implementation strategy will provide countless benefits.
ERP Failures
Nevertheless, ERP deployment can pose a considerable number of challenges, even for the most well-prepared organizations. According to Gartner, 55% to 75% of ERP projects either fail or don’t meet their intended objectives, and with 50% of global enterprise software revenue dedicated to ERP, that can surmount to a significant loss.3 “ERP implementation failures or hardships are defined by projects that fail to implement on time, on budget, or fail to deliver the expected business benefits,” remarked Jim Holman, Strategy & Operations Leader, Cherry Bekaert Digital Advisory. Below are five mistakes organizations make during and after an ERP implementation:
- Poor Software Fit and Inaccurate Requirements: Establishing your organizations requirements and needs prior to implementation is paramount to its success. All stakeholders should clearly define and outline what the solution needs to accomplish including key features and capabilities. Without this critical step, organizations risk selecting a solution that does not fit their needs, thus capabilities are not met, and user adoption suffers.
- Lack of Leadership and Investment in Change Management: While ERP implementation is an enterprise-wide task, executive leadership and support must be a mainstay — from ERP selection through implementation and ongoing maintenance. Any significant change initiative requires executive activity, from budget approvals to resource allocation to organizational communication. Given the scope and scale of an ERP implementation, without executive support and consistent guidance over an ERP project, implementation will likely fail.
- Team Turnover and/or Insufficient Resources: An ERP project is a time-consuming and extensive commitment and requires daily focus from executive leadership, project stakeholders, and team members alike. Because an ERP system involves all functional areas of a business, each area should have a lead stakeholder in place to plan, provide feedback, and implement and/or oversee testing for their functional area. ERP implementations fail if the organization does not devote the right resources required for success or fails to plan for talent turnover during a project.
- Insufficient Training and Support: Equally important to the project implementation is ensuring all users are properly trained. Users not trained will require additional time and resources from the implementation support team, diminishing the overall effectiveness of using and benefiting from the technology. Resources diminish, and the ability to resolve and effectively implement the solution may fail.
- Lack of Testing: Serious and repeated testing and user acceptance testing to ensure business critical processes and data migration are functioning properly is mission critical. Performing a mock go-live test will allow stakeholders to synch up old systems to new and test the volume to ensure the ERP go-live launches smoothly. Testing early and consistently and using automation to efficiently find bugs is critical. A lack of testing may cause significant disruption to daily business practices and derail user trust and adoption.
ERP Implementation and Support
“The nature of an ERP system is all-encompassing,” remarked Holman. “Failure to properly plan for your ERP implementation can have serious implications for every business department.” Due to the scope and nature of the project, hiring outside resources with ERP expertise can provide an organization with the management and project care needed to deliver positive returns for years to come. “Hiring an outside ERP partner can ensure a successful implementation, make post-implementation enhancements, drive continuous improvement initiatives, and perform targeted training with minimal disruption.” But what happens when an organization is amid an implementation and finds themselves unable to meet project milestones, over budget and under-resourced?
ERP Rescue and Recovery
“ERP Rescue and Recovery” (ERR) is an engagement executed for clients that are experiencing ERP project failure or have “gone live” with an ERP solution and are undergoing significant solution underperformance or inability to effectively operate,” stated Holman. “We provide on-site and remote expertise to help clients recover from a failed ERP implementation, providing an independent review to determine the source of the problem in a timely manner.” With an on-site discovery, interviews, analysis, research, and documentation, organizations receive an extensive strategy and roadmap on how to fully recover from ERP project failure and stabilize core business processes. Depending on the extent of the problem, this may include, but is not limited to, gaps between business process requirements and newly deployed business systems, identified opportunities to improve processes for long-term business sustainability, improved utilization of software, and, where needed, refunds and credits from ERP vendor or system integrator.
Despite an organization’s best intentions, many businesses are stretched to their limits when implementing an ERP system. Additionally, few have the bandwidth or expertise to sustain the project needs through the full extent of an ERP life cycle. To overcome this, organizations are turning to ERP product experts to support their efforts, offering end-to-end guidance and support, ensuring the organization reaps the full benefits of an ERP system — automation, innovation and growth.
How Cherry Bekaert Can Guide You Forward
Integrating an ERP system into your business enhances agility, scalability and competitiveness, empowering organizations to adapt to dynamic market conditions and drive growth effectively. Cherry Bekaert can help your organization with digital transformation or ERP-related issues. This includes strategy development, validation, selection and project assurance. To learn more about how we can help with your ERP system implementation and deployment, please reach out to us today!
Related Insights
- Article: Revolutionize ERP with Artificial Intelligence
- Article: Why Your Firm Should Have a Clearly Defined ERP Strategy & Roadmap
- Article: 5 Key Factors to Consider When Selecting and Implementing an ERP System
- Podcast: Enterprise Resource Planning System Selection and Implementation: Key Factors to Consider and Pitfalls to Avoid
References
1 Justin Biel, “60 Critical ERP Statistics: 2022 Market Trends, Data and Analysis,” Oracle NetSuite, last modified July 11, 2022, https://www.netsuite.com/portal/resource/articles/erp/erp-statistics.shtml.
2 Ian McCue, “The History of ERP,” Oracle NetSuite, last modified August 11, 2020, https://www.netsuite.com/portal/resource/articles/erp/erp-history.shtml.
3 “Why Do ERP Projects Fail?” ERP Research, last modified August 15, 2022, https://www.erpresearch.com/en-us/blog/why-do-erp-projects-fail.
