13 warning signs to prevent ERP doom

ERP helps buyers achieve levels of efficiency that would probably not otherwise be possible. However, this efficiency comes at the cost of complexity: integrating big systems across an entire organization is challenging at best and often disastrous.

Many ERP customers ignore "weak signals" that might point to obstacles that could interfere with success. For that reason, we must learn to pay attention to subtle warning signs of potential downstream trouble.

A blog post from Eric Kimberling, CEO of implementation services firm Panorama Consulting, discusses 13 of these warning signs. Eric is an expert with years of hands-on experience, so take his opinions seriously (I've edited the list slightly):

Here are a few signs that your ERP project may be in trouble:

1. You don't review the project with your executive team on at least a bi-monthly basis. You need involvement from your management team to ensure the project is aligned with their expectations, key decisions are being made in a timely fashion, and resources are being directed appropriately.
2. There is no dedicated project team. There needs to be a small internal core that is dedicated to the project.
3. There is no training scheduled until less than 90 days before go-live. Training is an iterative process and should begin well before go-live.
4. Your organizational change management plan only consists of end-user training. Organizational design, employee communications, process and organizational gap analysis, and organizational readiness are just some of the key activities too often overlooked during ERP implementations.
5. You have no contingency budget. Depending on risk and complexity, we often budget up to 15 to 20% of a total budget be set aside for contingency.
6. You don’t conduct at least three iterations of conference room pilots or integration testing. Just as you would’t introduce a new product or manufacturing process without extensive testing, you don’t want to introduce an entirely new business software into your organization without testing and refining.
7. Your budget assumes that software license costs are a majority of your total implementation costs. Software is the relatively easy and low-cost portion of your budget. Even with an accelerated implementation, you have configuration, hardware, internal and external resources, integration, and a number of other budgetary line items.
8. You don’t have a strong program management team with at least several dozen implementations collectively under their belt. Every organization has a few people that either implemented software in their previous lives or “have a friend” that did so. However, there is no substitute for a team of experts that have done it a million times.
9. The software techies are running the project. If the business isn’t driving the project, then you’re in trouble. [Michael Krigsman note: I'm resisting the temptation to talk about inmates running the asylum.]
10. You don’t have a business case, performance metrics, or a benefits realization plan. Hopefully you’re not implementing ERP just for the fun of it. You need metrics to define how you expect the new system to improve your business, along with a plan of how you are going to measure actual results.
11. Your definition of success is: “Just get the damn thing up and running.” It’s easy to fall into this trap after the project has been dragging on for months or years. Once you start cutting corners, costs, and time just to get the project done, you are driving up long-term costs and risks.
12. You have very little margin for error to miss customer shipments at go-live. According to Panorama’s independent research, over 50% of manufacturing software implementations create operational disruptions. If you don’t have much slack in your inventory or lead times, this can magnify the risks of the project.
13. You will not customize the software, under any circumstances. Unless you are a start-up with absolutely no existing business processes, this is a bigger risk than many will admit. Adopting business processes baked into the ERP software can create misfits with your business needs and/or magnify organizational change management challenges. These aren’t necessarily things that can’t be worked through, but most organizations are not prepared to deal with the consequences.

Lists such as this have an ironic aspect: frequently, folks who most need the advice are first to ignore it. If you want to achieve ERP success, listen to the wisdom of those who have walked that path before you.

Please share your thoughts and advice on how recognize the early warning signs of ERP failure.