ERP (Enterprise Resource Planning) softwares integrate internal as well as external management information across an organization, including customer relationship management, manufacturing, accounting/finance, sales and service, etc. ERP connects all the departments of the organization into a single computer system. It is not very easy job to cover the whole organization in a centralized computer system, but Enterprise Resource Planning softwares can combine different departments together into a single integrated computer system, so that all departments can communicate and share information with each other very easily.
Deciding to implement an ERP software system is a big decision for an organization. It is tough to believe that an unbelievable 92% of ERP system implementations fail. The most common causes of ERP implementation failure include not fulfillment of critical projects on time, implementation may go over budget, do not work as expected from ERP system, etc. Companies invest a large amount of money in their ERP implementation. It can wind up being a drain on financial resources as well as human resources to get it installed, train users, as well as maintain and upgrade it. Knowing the common mistakes that cause failure of ERP implementation is the first step in planning for Enterprise Resource Planning.
The following are common mistakes that cause failure of ERP implementations in a company.
1. Business Process Reengineering: Often companies are not willing to alter their business processes to fit with the new software and applications, or do not understand its importance that causes failure of ERP implementations.
2. Poor Planning: Planning can extent from not preparing the users to make decision on configuration, to the investing in a plan that detain all the issues related with implementing ERP software.
3. Change Management and Training: Changing the business processes and management, corporate culture, and employee training are vital components to an ERP implementation. Employee training and educating all employees should start before implementation process to make their jobs easier and the organization more efficient as a whole.
4. Assuming ERP system as a simple IT project: Assuming an ERP system as a simple IT project can also be one of the most common mistakes that cause failure of ERP implementations. After all the resources and time allocated to this project, you will end up isolating the ERP system in a vacuum. Without proper input, the ERP system will not be engineered and allied to work with the business processes and needs of employees.
5. Underestimating IT skills: As most software are upgrading, the IT skills of the staff also require to be upgraded. But, usually this effort is underestimated that lead to failure of ERP implementations.
6. Insufficient Software Evaluation: ERP is so integrated and substantial that can be much more complicated than expected. This also may be one of the common mistakes that cause failure of ERP implementations
7. Technology Trials: The effort to build interfaces, customize the software, change reports and convert the data is usually underestimated, which actually may require an effort that is beyond what is usually expected.
8. Underestimating Resources: Many organizations underestimate the cost of change management and training, report customization, process rework, integration testing, and consulting fees. This also leads to failure of ERP implementations.
All of these are the common mistakes that cause failure of ERP implementations, so you should avoid these mistakes for a successful ERP implementation.
Read about ERP Selection for SME. Also know Low Cost ERP Software. Read about ERP Implementation Planning and Strategy.