Why do organisations invest in Enterprise Resource Planning (ERP) systems? The goal is simple: to make their business more efficient, their employees more productive and their customers happier and consequently improve their bottom line.
However, many organisations experience the opposite – inefficient operations, unhappy employees and customers and financial losses. According to the 2024 Gartner Research, “What IT Leaders Must Do to Avoid Disappointing ERP Initiatives”, by 2027, “more than 70% of recently implemented ERP initiatives will fail to fully meet their original business case goals.” What is even more concerning is that “as many as 25% of these will fail catastrophically,”.
Let’s find out some of the reasons why ERP projects go wrong by looking at three real-life horror stories below followed by recommendations on what you can do to avoid becoming yet another statistic.
Pushing to Go Live When the System Wasn’t Ready Led to PR Disaster
The ERP implementation for a retail company already got off on the wrong foot when critical requirements were overlooked. This led to issues with invoicing, long lines at the stores and not being able to process shipments, which in turn led to long lines of trucks causing traffic jams. The invoicing issue and the traffic jams even made news.
The retail company’s tech partner informed the retailer that the system health check passed when in fact it had not and pushed its client to go live despite being fully aware that the system wasn’t ready. The technology partner thought that it could just patch it up as it went.
Despite internal concerns, the retail giant went live following pressure from its tech partner, and almost immediately, the system started to collapse and had to be stopped. When the operations crashed, the stores had to close. And the company had to reactivate its legacy system.
The rollback took time, and the retailer lost millions of dollars in the process. Its customers complained about delays in delivery of purchased items and difficulty obtaining refunds or exchanges for faulty items.
All this could have been avoided with thorough planning, transparent communication and a realistic understanding of what it takes to go live with an ERP system. Instead, they skipped critical steps, rushed to go live and relied on post go-live fixes.
The technology consultant who lived this horror story noted the collapse happened because the tech partner tried to push its own agenda instead of the client’s, and rather than doing diligent verification, it gambled with the client’s success.
Repeated ERP Implementation Failures Posed Risks to Patient Safety
A pharmaceutical company, operating in the highly regulated FDA (the US Food and Drugs Administration) space, tried four ERP implementations over five years, each ending in failure. These failures exposed the company to severe risks, including patient safety concerns due to improper shipment handling, potential FDA non-compliance, and inefficiencies in their global supply chain.
The problems arose from inadequate requirements gathering, poor data migration planning, and a lack of understanding of FDA regulations. The company’s tech partners failed to design a system that met the client’s unique compliance needs, overpromising results that weren’t delivered.
The project never reached go-live after four attempts. The client lost millions of dollars in wasted resources, missed deadlines, and business disruptions. The legality of its operations was threatened by non-compliance with FDA regulations, their operational inefficiencies got worse, and the company’s reputation was greatly harmed.
Not only did it face significant setbacks externally but also internally. The system failure affected the sales teams’ commission payouts, there was general mistrust in leadership and the stakeholders were left to deal with the fallout of repeated failures and rework.
One of the ERP consultants involved made note of the lack of expertise of tech partners in a regulated environment, along with a complex relationship of risk-averse stakeholders, made decisions harder. Regulated clients are used to receiving a perfect validated system and are not used and not willing to engage in a process that has the resilience to handle errors. If the tech partner does not have the soft skills to overcome this friction on implementing in this environment, that will lead to many points of failure and disaster.
Migration to Cloud ERP Quickly Turned Sour
A large-scale utility company serving a major metropolitan area decided to migrate from an older platform to a new cloud-based ERP solution to upgrade its human resources, finance, and operations modules.
The migration leaders underestimated the level of complexity of the project and didn’t dedicate enough resources to planning it. In addition to poor planning, there was insufficient system testing throughout the project’s life and a lack of proper risk management strategies.
This quickly led to significant operational disruptions, which in turn resulted in widespread billing errors, an accumulation of uncollected fees, and customer overcharging.
The customers grew extremely frustrated with the overcharging and errors and lost all trust in the company causing serious reputational damage. And the backlog of fees meant hundreds of millions in financial losses for the company.
The leadership also experienced change due to the chaos – the managing director stepped down after less than a year in the position; the departure followed a decision by the board to adopt a new governance model.
Even though efforts are underway to resolve the financial backlog and rectify billing systems, it’s estimated that the company will take years to restore trust and operational efficiency.
One of the experts involved commented that the migration failed due to a lack of planning and resources in a complex environment, an underestimation of project complexity by the leadership, the absence of plans for testing and risk mitigation, and the willingness to take risks on mission-critical systems, like billing.
How to Get Back on Track After an ERP Project Failure
In all three stories, we can see that when an ERP project fails, it doesn’t only affect the organisation internally but also externally. The effects can be far-reaching and long-lasting with damage to its public reputation.
Organisations need to make sure the tech partner that takes on the project understand the business and industry extremely well. This includes any regulations the organisation must comply with, to make sure the ERP system is compliant. Otherwise, the organisations’ ability to operate legally can be threatened, as is the case in the second horror story.
The partner needs to gather all critical requirements and then draft a detailed project framework, including clear roles and a well-defined scope, and establish a realistic timeline that the stakeholders can easily follow. It’s essential to maintain clear, transparent and constant communication between the partner and the stakeholders throughout the whole project. The stories above demonstrate the severe consequences of poor planning and communication.
It’s also important to verify whether the partner is up to date with the latest developments in its practices, for example, using AI for predictive risk management and real-time monitoring to identify and address potential issues early in the process, preventing delays and ensuring successful project outcomes alongside maintaining regulatory and security compliance; and AI-driven data migration tools to decrease errors and speed up the process.
Finally, everyone involved in the ERP project implementation must remember the intention behind having the ERP system – to increase operational efficiency, employee and customer satisfaction and growth of the company – and make sure it does what it’s intended for, which means that every decision and action taken during the project needs to be aligned with that end goal in mind.
