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ERP System Failures Reasons

Enterprise Resource Planning (ERP) systems are information systems, which allow an enterprise to have a coordinated configuration that can link different business aspects strategically. A company may have some competitive business advantage as it saves on resources. The technology reduces any inefficiency that is associated with data entry and management of information. A successful deployment of the ERP system enhances employee satisfaction and productivity. The ERP has several challenges failing due to various reasons leaving some lessons to be learned.

One of the important lessons from the implementation of ERP is the involvement of employees, which requires the company that wishes to use ERP to put a great deal of effort into evaluating the ability of the employees to use the software (Ghosh, 2012). Evaluation of their current staff is crucial as they cannot do their daily work and implement the plan at the same time. A company’s employees can lead to the success or failure of the implementation of the ERP project depending on their commitment and skills necessary to implement the plan. In the ERP project to work, the organization may hire temporary workers in routine continuation.

ERP System Failures Reasons

Another lesson learned from the implementation of ERP is the recognition and retention of the employees. Employers, who give benefits to their workers engaged in the long-term implementation of the program, face few obstacles, as Ghosh (2012) notes. Employees get satisfaction and will stay with the employer for a long time for different reasons such as the feeling that their employer respects them and gives them time to spend with their families and to enjoy the time invested in the implementation. Employees continue to work on the project that requires so much time, and money, but the benefits are small. Giving certain benefits to the workers encourages project performance and smooth implementation.

Communication is essential in the management of a company as many issues that hinder the implementation of the project results from the lack of excellent communication between the administration and the employees. Ghosh argues that Sharing the ethical aspects of the implementation process across all departments is very important for its success (12). Many ERP projects fail because essential details on the working of the system are not revealed problems arise. Sometimes the questions are blamed on individuals, but it usually is too late for action. Communication across all management levels is essential for ERP systems to function.

The important lesson learned from the introduction of the ERP project is the strategic support of the workers by strategic. Employers should have creative ways of rewarding the employees involved in such tasking projects. Money should not be the only reward for the hard-working employees, and the employer should engage with them and collect their views on what makes them happy. Some practices, like retaining the employees for a long time, are better and cheaper than employing new ones (Ghosh, 2012).

One reason for the failure of the ERP system is an underestimation of the resources required by the project, as many companies do not have an understanding of the external and internal resources needed for the project. For internal resources, the time commitment is required from parties such as in the finance, accounting, or the HRM departments as asserted by Ghosh (2012). Many companies that fail in ERP projects bring in temporary employees to carry out the project instead of involving the company’s workforce. The company needs to consult external resources such as consultants, contractors, and advisors to enquire about the resources and skills required for the project. An example of a company that experienced this challenge is the Bottlers Company in which most of its employees were inexperienced in terms of information technology (Ghosh, 2012). The company assigned a lot of implementation work to employees without ERP knowledge and expertise. Furthermore, the employee held their normal positions and performed their regular job without additional assistance. Inadequate resources for implementation led to the challenges experienced by the company.

The other reason for the failures of the ERP system project is inadequate on-the-job training during the typical lifespan of the ERP system, which is 10 to 12 years. The duration is enough to train the majority of the employees in ERP technology and implementation Ghosh, 2012). The leaders concerned with the ERP project, whether internal or external, should have experience in implementing the system sometimes to avoid failures. In addition to training the internal resources, a company should make use of external consultants. A company that encountered failure due to inadequate training of its staff is the Fox Meyer Pharmaceutical Company as the project execution lacked skilled and knowledgeable personnel. The business lacked the in-house expertise and relied on Andersen Consulting for the implementation and integration of the ERP, which had an automated warehouse system.

Insufficient testing is another reason for the failure of the ERP project in various organizations, especially when the company’s schedules become too tight. The number and the depth of test cycles are reduced, which affects the effectiveness of the system as testing is necessary to see whether it meets the business needs, according to Ghosh (2012). Testing will also measure the output that the user requires after the implementation of the system. Reducing testing leaves, many defects undiscovered and increases the risks associated with the ability of the ERP system to perform the desired functions. Dow Chemical Company, Hershey Chocolate, and FBI ERP projects failed because of inadequate testing of the system before its implementation.

Other companies fail in their implementation due to the adoption of evil plans that are not detailed to enable successful implementation. Some of the projects are not realistic and fail to have all the required skills leading to underestimation of the change to be involved. A good plan identifies all the requirements for the project, and the workforce needed to implement the project (Ghosh, 2012). Tasks must have a logical sequence to enable the implementers to have a smooth process of implementation and reduce confusion.

Cloud computing is a model involved in the delivery of information technology services by retrieving resources from the internet via web-based applications allowing the remote working of the employees. Cloud computing reduces the cost of managing their information, and it is easy to upgrade it. Enterprise Resource Planning ERP incorporates cloud technology, making it easier for those who want to implement it; it has access to the application via the internet (Ghosh, 2012). Cloud ERP solution, for instance, Acumatica, runs on many windows, making it easier for all large, medium, and small businesses to unlock their potentials. Cloud technology has reduced ERP costs and offered excellent support for companies using ERP technology as they can install and upgrade the system at a low price from the internet. Adopting cloud solutions reduces the initial cost of p implementation and the maintenance and be done by the Cloud vendors. The cost of IT training and employing new ones is also significantly reduced, making it possible for several companies to implement the project. There is also an enhanced speed and performance of the system, which enables high data processing increasing the user’s efficiency (Ghosh, 2012). A more effective upgrade of the system and its enhancement is facilitated by the use of cloud ERP as the systems can be centrally upgraded from the system provider without involving the staff. There is also enhanced ERP mobility as the cloud solutions are accessible anywhere via web browsers by the use of PCs and Mobile phones and tablets. The location of the company does not matter, and the managers can update their data immediately it occurs.

The main barriers to the use of cloud ERP are issues with cloud transparency and privacy of data (Ghosh, 2012). Companies find it challenging to trust cloud vendors with their sensitive data as they may leak the information to the public. Some companies are, therefore, shying away from using cloud technology due to privacy issues. Another barrier is data security, which deals with protecting the company’s data from unauthorized access, use, or disclosure. However, research has shown that data is leaked due to human error and not technology (Ghosh, 2012). Some cloud technology provided by some vendors may be inferior and affect the effectiveness of ERP technology. There are also other technical challenges, especially when incorporating the ERP with other Information systems due to compatibility reasons. All these barriers can fail the ERP system leading to significant losses to the companies.

ERP systems are now applicable to several companies that require increasing their productivity and enhancing effectiveness in their daily operations. Some lessons can be learned from ERP technology, such as employee involvement and retention. Some reasons contribute to the failure of the system, such as inadequate training and motivation through incentives. Cloud technology is critical in the implementation of ERP as it helps in reducing the costs, upgrading, and updating the system. However, cloud technology can pose challenges such as transparency, privacy, and security issues relating to the company’s data.

  • Ghosh, R. (2012). A Comprehensive Study on ERP Failures Stressing on Reluctance to Change as a Cause of Failure. Journal of Marketing and Management3(1), 123-134.

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