Stories about failed ERP implementations are more than cautionary tales; they're the stuff of nightmares. Just ask trash-disposal heavyweight Waste Management, who filed a lawsuit last year against ERP provider SAP for $100 million to cover the cost of its failed ERP implementation. And then there's the case of consumer goods giant Nestlé, who committed six long years and $200 million to its ERP implementation. Those are just a couple of horror stories that have painted ERP as a technology with a hefty price tag and painful multiyear deployment periods.
At the crux of the problem is the difficulty most companies experience integrating enterprise-wide data into a single ERP system. "You can't minimize integration work," warned Paul Hamerman, a research analyst with Forrester Research. "It's one of the fundamental challenges that companies have with their overall business-applications footprint."
George Goodall, a senior research analyst with Info-Tech Research Group, agreed. "There are always going to be integration problems and issues regarding how to bring legacy data into a new system," he said. "There are also going to be issues about the granularity of data and at what level data should be collected."
Complicating the process of integrating data from an organization's disparate departments into a single database is the fact that many companies choose to build upon an existing ERP solution by adding standalone systems to accommodate unique needs and industry requirements.
"Almost all businesses have to extend or bolt on additional systems to reach certain aspects of their business that are not addressed by an ERP system," said Hamerman. "In most cases, you're not going to be able to get full coverage from a single ERP vendor so you'll have to extend or bolt on third-party solutions." For example, an insurance company may rely on a particular ERP solution for its accounting activities but turn to a third-party application to process insurance claims.
This mix-and-match approach may deepen a system's functionality, but it also gives rise to integration headaches as companies struggle to unite data from multiple best-of-breed applications. But that's not all. According to Goodall, "Integrating the brains of your employees is often a bigger issue than the straight-up data integration." That's because, he said, "when people get a brand new ERP system, they often try to customize it so that it reflects their outdated processes; that just happens constantly."
Rather than run outdated workflow models on a brand new system, experts recommend that companies integrate an ERP solution's fresh capabilities with day-to-day business practices. Alas, it's easier said than done. Which is precisely why so many companies turn to systems integrators and IT consultants to assist with the implementation of an ERP system.
"Very few enterprises have the technical and business savvy they need to fully revamp business processes and implement software, so consultants do play an important role in enabling people to get through the project," said Info-Tech's Goodall.
Forrester's Hamerman agreed. "IT shops are often resource-constrained when it comes to major projects so they do tend to use skilled third parties to help them [with ERP implementations]," he said. "It's good to use specialized expertise."
Nevertheless, external assistance doesn't absolve companies from having to step up to the plate and ensure a smooth ERP implementation and data-integration process. "Companies need to have good project-management practices in place to make sure they don't run into significant project delays," said Hamerman.
Selecting an ERP system is no easy task. You have to select and configure a system that fits your exact business needs. Getting it right means a myriad of benefits, from increased productivity to reduced costs. Getting it wrong can be a quagmire. Our new comparison guide gives you the data you need to make an informed decision, all in one easy-to-use Excel file. more
Best-in-class mid-market businesses are over twice as likely to deploy their ERP solutions on the cloud. They choose the cloud for scalability, flexibility, usability, and cost. These organizations saw 1.9x improvement in profitability over the past two years as compared to those who have on-premise solutions. more
Do you want to deliver the best service possible to your customers, react quickly to new opportunities, and stay ahead of your competition? more
Did you know that according to MorganFranklin Corp., only 46% of ERP users report a strong understanding of ERP features? That's not surprising when ERP software is so complex and difficult to implement. Our thorough infographic details the 15 most common ERP implementation and selection mistakes so that you can avoid them. more