Purpose of ERP: When does ERP fail?
Ramesh J. Chougule
Vice President, SAP Practice Sales and Go-To-Market, North America at Infosys
Two weeks ago, I was making a presentation of SAP implementation proposal to a meat processing company. As a partner for this engagement, I was talking about another case study of large SAP implementation to create the credibility of my firm’s experience in similar programs. The case study was about a complex and large implementation for a CPG client. The room was filled with senior stakeholders from client - CEO of US operations, CFO, head of ERP, head of supply chain and the identified program manager for this program from client’s organization. As I was approaching the last part of the case study, I was feeling very happy to see the smiling faces in the room. They were really getting excited about the work we had executed. The narration of the story included innovative solutions to clients teething problems in their existing ERP set up. At the end of the story, CFO of the company suddenly asked me the question, “Around 15 years ago, there was a very popular story in media of large scale ERP implementation failure of the same company. Were you the implementation partner then too?”
It was a difficult as well as lighter moment during that presentation. Fortunately, my firm did not implement ERP then. This company attempted SAP implementation during late nineties for their North American operations and failed. Though I don’t know all the details, I knew that it was a very popular story in the media and was referred by many other customers who wanted to start ERP implementation. I have faced such question multiple times from my customers and from my consultant colleagues. Though I have found a good answer for that presentation and that specific conversation, the real question to ask is when does ERP fail?
Most of the clients go live on ERP after tremendous effort for two to three years, spending 100 or 100s million dollars. Once it is live, many client stakeholders and my consultant colleagues blame inability to reap the benefits on the issues they have had during the implementation, quality of solution, unsupportive business users. Not realizing the returns on the investment is a very common scenario which stamps the implementation as a failure.
Does the ERP investment fail during the implementation? Or it fails after the implementation? If the implemented solution is not the best one, how does the organization go about making it better after implementation? How does the leadership perceive the 100 million dollars baby- a necessary evil or an enabler of the future? What is the general impression in the corridor- is it an asset or a liability for the company? What have they done to nourish the ERP post implementation so that delivers the benefits? What ecosystem set up (purpose, processes and people) the organization has to dig deep and wide to mine the gold their ERP contains?
The answer to 'when ERP fails' lies in the answer of above question. It is less of an issue that ERP fails at the time of implementation. The real failure happens after the implementation.
Twenty years ago, we had the stories of inventory going up by 50% as the plan provided by ERP was not correct. We are beyond those days. We are in the age where expertise on processes is very high, tools to test before it goes live are excellent and such fundamental issues are very rare. Even if those arise now and then, those are small technical issues. In today’s era, the ERP failure happens after the implementation. The failure is in nourishment of ERP. After observing and analyzing the ERP ecosystem of many clients post implementation for 10+ years, I have come to the conclusion that majority of failure happens after the implementation. It fails when the answers to above questions are far from the best.
Product Manager | Delivering Digital Transformations | Business Analyst | Solution Architect | Gen AI | Agile & Technical Manager
4yNice article.
Independent SAP Architect
7yCrisp, simple n well written This is also very true for all mature implementations that failed to leverage the right aspects of solution and business continues to suffer
Sr. Manager Business Consulting at Infosys Consulting, Inc.
7yVery thoughful. Answers to these questions will change the way organisations and SI handle ERP systems. It will be complete paradigm shift in our approach and may help bridging the gap .....We plan in a perfect world, but execute in the real world.
Associate Partner, Infosys Consulting I ex Booz Allen
7yHow do you define failure of an ERP? Is it when - 1. The project overran its timeline? 2. Client is unable to ship products immediately after go-live? 3. Plans (Demand, Supply, Production, Transportation etc) produced by ERP are not realistic? 4. New ERP system does not support the way certain business processes were executed in the past? 5. There are capabilities gaps in the ERP software that diminishes the competitive advantage of the client? 6. The performance of the system is slow? 7. Most of the key metrics like Inventory on hand, forecast accuracy, on time delivery etc do not see any improvement? 8. Fear of people displacement? 9. Client ends up on the front page with negative news attributed to ERP implementation? One of the client manager once told me – Do whatever it takes to avoid being the headline news! Avoid being on the front page of a major newspaper or publication! Typically that is perceived as ERP failure. All the others (except #8 & #9) can be fixed over a short period of time (if they occur). I agree with you that a catastrophic ERP implementation failure happening these days are very remote because of the sophistication of testing, testing tools and maturity of the products. ERP software is the same software for any client when they first install or get the cloud version (SAP or Oracle or Microsoft dynamics). It boils down to the implementation journey and the experience of the leadership. ERP projects are complicated because of several moving parts and the globally located teams. The most successful ones that I was involved in were the ones that had great implementation team, experienced project manager with leadership qualities from the implementation partner and a pragmatic client leadership that understood the vagaries of such large implementation and being patient (implementations are never linear nor smooth, they will have many ups and downs which does not mean failure).
Principal Consultant at Infosys
7yThanks Ramesh for sharing your thoughts and experience in this article. Many organizations really need to reap the benefits of ERP, post implementation. ROI needs to be measured at each stage. We know during implementation due to cost pressure Implementation partner misses out lot of important aspects of testing and validating business process. All this and many more points are nicely articulated.