With my background of 15+ years as an ERP-SAP-PROJECT MANAGER and previous 20 years in SCM both in India and Overseas. I would like to state the following ERP Implementation Failure Reasons. You will also find this article written by Dr. Muddassir Ahmed useful – 9 Drowning ERP Implementation Risk Factors You Need to be Mindful of
6 ERP Implementation Failure Reasons
1. More than 60% of the ERP Investments are not Recovering their ROI
Some customers don’t know the difference between ERP and SAP-R/3. Finer details not explained to the customer that SAP-ORACLE-MICROSOFT is all ERP. But there are many more brands of ERP systems available. Most of these famous ERP systems are overpriced and not flexible. And therefore, there are many other ERP system systems available that can be explored.
“ERP AWARENESS WORKSHOP FOR CHANGE MANAGEMENT not conducted for KEY USERS”
2. Top Management Support and Change Management is one of the Key Issues
Is the organization ready for the change? Are the employees ready and fully communicated about the reasons for the project and benefits? When implementing an enterprise resource planning (ERP) system, top management commonly faces an unwanted attitude from potential users for one reason or another, they resist the implementation process. Top management should, therefore, proactively deal with this problem instead of reactively confronting it. This is one of the most commonly reported ERP Implementation Failure reasons.
3. ROI Can Come only if ERP Objectives are Properly Defined and Quantified.
What does a return on investment look like for an ERP project? That is a very difficult question to answer. While there are many factors to consider when understanding your ROI of ERP Implementation, but in the simplest start by calculating your total cost of ownership by understanding, License fees, development/customization fee, Implementation costs, Consulting fees, and Hardware costs, if applicable.
4. ERP Selection is Also a Major Issue- Custom Built or COTS- Commercial Off the Shelf
Most companies face this question- should it be custom-built or off-the-shelf? Again the answer to this question is complex and depends on very many factors. And the choice is not a straightforward comparison. While it sounds attractive to develop a customized system based on the business model and very specific business needs, but it cost more in the long run and is dependent on the developer. There is general agreement among IT practitioners that minimizing the level of customization within any given technology system is a better way to reduce risks and costs for buyers. Too much customization is going on on the Off shelf leading to total mutilation of the original system. Upgrades become a problem if you have done too much customization and hence, being added to the list of ERP Implementation Failure Reasons.
5. Consultants Think of this as IT Project Rather than Business Transformation Project.
Consultants do not understand the Business Process of the customer and only look at the project from the IT perspective. Just hammer the system in and run away leading to a frustrating user experience. Ideally, each consultant should have min 5 YRS EXPERIENCE in their DOMAIN before becoming an ERP consultant. For example, if someone is taking lead in the Materials Management (MM) Module of SAP should have working in Materials Management for 5-7 years to understand the Materials Management Process. Actually in my first ERP company in CHENNAI we used to insist that CONSULTANTS before joining for ERP training should have at least 5 years of domain FUNCTIONAL EXPERIENCE-EITHER FINANCE-PRODUCTION-SCM-SALES- PLANT MAINTENANCE. But in today’s ERP environment we find ERP FUNCTIONAL consultants with hardly ONE YEAR in industry and getting trained in ERP implementation in their specific modules and come as CONSULTANTS for the ERP PROJECT.
Get Materials Management Technical Competencies
6. Proactive Approach Needed by Consultants.
CONSULTANTS NEED TO BE PROACTIVE IN THEIR APPROACH with the customer rather than REACTIVE. Consultants need to have a thorough understanding of the unique business process in each vertical. eg -MADE TO ORDER-MADE TO STOCK or PROCESS MFG -(FOOD AND BEVERAGES OR CHEMICAL PROCESS ) all totally different in their basic processes. But what I have seen is that Implementation consultants just see all the above as COMMON and RAM THE SOLUTION without understanding the finer points of each. For examples. Chemical process and food is based on Recipes and not BOM, Similar is the case of PRODUCTION OF FLOAT GLASS where “YIELD PER BATCH is important. Unfortunately, nobody looks at all these finer points Lastly is the ERP REPORTS. No user wants to see the STANDARD ERP REPORTS IN SAP-R/3 OR ORACLE pre-developed as STANDARD REPORTS and already available in the ERP system. They want all their OLD MIS REPORTS in the NEW ERP so the development of these reports ADDS TO THE COST OF ACQUISITION. So it is IMPORTANT for ERP PROJECT MANGER-SAP OR ORACLE to have a cope of the LIST OF ALL STANDARD REPORTS AVAILABLE in the ERP-For example- SAP- has more than 1200 REPORTS in various modules already available. BUT NOBODY BOTHERS TO SEE THEM and JUST ASK FOR NEW DEVELOPMENTS. SO COST INCREASES. The above are only some of my experience and critical factors for SUCCESS OF AN ERP IMPLEMENTATION,
We hope this article can help you lead to a successful ERP implementation, as measured by on-time and on/under-budget performance.
If you share my experience or like to add more, please mention it in the comments what do you think is the main reason for Implementation Failure Reasons
Frequently Asked Questions (FAQs) About ERP Implementation Failures
Why do more than 60% of ERP investments fail to recover their ROI?
Often, this stems from a lack of proper education and preparation. Many companies fail to conduct an “ERP Awareness Workshop” for key users to manage the transition. Additionally, buyers may not understand the differences between various ERP systems (such as SAP, Oracle, or Microsoft) and end up overpaying for rigid, “name-brand” systems when more flexible and cost-effective alternatives might better suit their needs.
How does top management impact the success of an ERP implementation?
Employee resistance is one of the most common reasons an ERP rollout fails. If top management is not fully committed to leading Change Management, employees will naturally resist the new system. Leadership must proactively communicate the reasons for the project and its benefits to the workforce, rather than reactively dealing with pushback after the implementation has begun.
How should a company calculate the ROI of an ERP project?
Calculating ROI begins with thoroughly understanding the Total Cost of Ownership (TCO). This includes not just the initial software license fees, but also development and customization fees, implementation costs, consulting fees, and any necessary hardware upgrades. These costs must then be measured against clearly defined and quantified business objectives.
Should a company choose a custom-built ERP or a Commercial Off-the-Shelf (COTS) system?
While a custom-built system tailored to specific business needs sounds appealing, it generally costs much more in the long run and creates a heavy dependency on the developer. IT practitioners widely agree that choosing a COTS system and minimizing customization is the best way to reduce risks. Over-customizing an off-the-shelf system “mutilates” the original architecture, making future software upgrades incredibly difficult and expensive.
Why is a lack of domain experience in ERP consultants a major risk?
Many consultants view ERP implementations purely as IT projects rather than business transformation projects. Ideally, an ERP consultant should have at least 5 to 7 years of functional, hands-on experience in their specific domain (such as Finance, Supply Chain, or Production) before consulting. Without this real-world experience, consultants often fail to understand unique business processes (like the difference between a Bill of Materials in manufacturing and a recipe in chemical processing) and simply “hammer” the software into place.
How do reporting demands drive up ERP implementation costs?
Major ERP systems come out of the box with hundreds or even thousands of pre-developed standard reports (for example, SAP has over 1,200). However, users often ignore these built-in tools and demand that the implementation team recreate their old, legacy MIS reports in the new system. Developing these custom reports adds entirely unnecessary costs to the acquisition and implementation phases.
About Author
” Chandra S Gangadharan C.P.M CISA has approx 35 yrs of rich international experience in Supply Chain Management and ERP-Consulting in India, Middle East, and Far East..He has vast experience in Technology applications in Procurement -Logistics and Warehouse Management. He has in-depth experience of over 14 yrs as Head Contracts-Procurement in the Oil&Gas sector in Brunei, Oman and Qatar and worked with global Oil&Gas MNCs such as Wood Group–Houston-Oman Branch, Atlantic Power Gas Dolphin Energy Qatar .. Besides the above has worked in India in the Manufacturing-Automotive and Chemical Process sector in India as Head-Procurement and worked with Global MNC’s such as SAINT GOBAIN GLASS INDIA-Chennai He also has 15 years of hands-on experience as ERP-Practice Head in India for leading ERP-SAP-R/3 and Oracle-J.D Edwards partners in India,He managed 5 ERP- END to END implementations in SAP-R/3 and Oracle J D Edwards as Project Manager and Delivery Head and has in-depth experience in ERP-Project Management-Change Management-ERP Training and managed more than 300 ERP consultants as Profit Centre Head. Currently, he is a World Bank Public Procurement Consultant and Trainer and also CIPS-One line trainer for Level 4 and 5 ” .He has vast experience in implementing customized e-Procurement solutions both On-Premise and Cloud.”
About the Author- Dr Muddassir Ahmed
Dr. Muddassir Ahmed is a globally recognized supply chain expert, thought leader, and keynote speaker. As the Founder & CEO of
SCMDOJO, he has built one of the world’s leading platforms dedicated to empowering supply chain professionals with cutting-edge knowledge, practical tools, and access to expert insights. With over 19 years of leadership experience spanning the UK, Europe, the Middle East, and Southeast Asia, Dr. Ahmed has held key roles at Bridgestone, Doncasters Group, Eaton, and Volvo Cars, managing multi-million-dollar supply chain operations.
His expertise spans all facets of supply chain management, with a particular focus on leveraging technology and innovation to optimize processes and build resilient supply chains.
Recognized among the Top 10 Supply Chain Influencers in the World by Supply Chain Digital, Dr. Ahmed has been instrumental in shaping industry best practices through his extensive research, vlogs, and thought leadership. Holding a PhD in Management Science from Lancaster University Management School, he is also a certified Six Sigma Black Belt.
His platform, SCMDOJO, serves a vibrant community with over 51,000 monthly visitors. Moreover, he has 72,000 newsletter subscribers, and a social media following exceeding 105,000 supply chain professionals
A sought-after keynote speaker and thought leader, sharing his insights on industry trends, best practices, and the future of supply chain management. Dr. Ahmed delivers high-impact talks on supply chain excellence, digital transformation, and strategic leadership. His mission is clear: to help supply chains thrive
You can follow him on LinkedIn, Facebook, Twitter
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