10 mistakes that push ERP projects over budget and off schedule

Implementing an enterprise resource planning (ERP) system is a complex and expensive undertaking. Unfortunately, many businesses find that their ERP projects cost more and take even longer than they originally planned.

ERP implementations go over the projected budget 56% of the time, according to a recent study by Panorama Consulting Solutions.

The consulting firm surveyed 246 organizations that had completed an ERP installation within the past year. Among those implementations:

  • 35% went over budget by 0%-25%
  • 15% were over budget by 26%-50%
  • 6% were over budget by more than 50%
  • 33% were on budget, and
  • 10% were under budget.

In addition, only 46% of ERP implementations were completed on schedule or earlier.

Given that many businesses will struggle to get a big software project like an ERP implementation approved, most can ill-afford to have a project go over budget, yet still, many make one of many common mistakes when implementing an ERP system. In the most extreme cases, issues can pile up and lead a project to fail before it’s even completed.

Here are some steps organizations should take while planning an ERP project to avoid running into unexpected costs and other problems:

  1. Not getting a list of requirements from the entire business – One of the first steps to planning an ERP implementation should be to gather the requirements of every functional area in the organization. That will keep the organization from wasting time looking at systems that don’t meet all of its needs and reduce the risk that an unsatisfactory system will be installed.
  2. Forgetting about potential hidden costs – One way to avoid having a project derailed by improper budgeting is to plan for all the potential hidden costs associated with an ERP implementation. That includes the cost of training employees, making changes to the system, extra fees for maintenance and support, and other items.
  3. Failing to get buy-in from the top – Having support from top-level management won’t necessarily help ERP implementations stay on time and on budget, but it will reduce the risk that a project will fail if there are problems. That starts with having a strong business case that clearly demonstrates the likely return on investment. Also, regularly meet with top management to keep their support from slipping.
  4. Changing processes to meet the software’s needs – Panorama’s research notes that nearly half (41%) of businesses changed some of their processes to accommodate their ERP software. However, it should be the other way around – in most cases, businesses should choose software that supports the processes they already use. Otherwise, significant and unnecessary costs can be incurred. Mapping out those processes will help organizations identify their needs, and avoid unpleasant surprises by identifying the processes that have to be changed.
  5. Overestimating the ability to customize a system – When asked to rate their ERP systems, one of the areas that got low scores across all organizations surveyed by Panorama was the flexibility to change the software after it was implemented. Therefore, businesses must be diligent when  choosing a system, and not assume they’ll be able to customize the software later.
  6. Failing to put the right person in charge – One key to successfully managing any big IT project is to have someone in charge to oversee the initiative, and serve as a bridge between IT and the rest of business.
  7. Doing too much at once – ERP systems include several different modules that affect different business units. Some businesses install the system so that all modules go live at once – however, a more popular and often more successful method is to implement the system gradually, one function at a time. That minimizes disruption and helps the organization deal with problems as they go, instead of all at once.
  8. Under-staffing the project – In addition to having the right amount of money allocated for an ERP project, businesses must also be sure they enough of a staff to complete the project and support the system. That means having both the right number of employees, and employees with the right skills and expertise.
  9. Giving users inadequate training – If people don’t know how to use an ERP system, it won’t be used to its full potential, and the business won’t get a satisfactory return on its investment. Improper training will also add to costs by increasing the need for IT support after the system is implemented.
  10. Not expecting the unexpected – ERP implementations are a huge undertaking, and even when everything is planned properly, it’s still likely some unexpected issues will arise. Businesses can do themselves a lot of favors by trying to identify as many potential problems as possible and keeping in mind that some others may appear.

Image source: Avevent Solutions

Related Posts: