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The True Reason For The Failures Of ERP Implementations

Posted: 2020-02-05 Edited: 2020-02-13
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There are countless large projects in which enterprises and government departments newly purchased or replaced ERP software systems but ended in failure.

IT experts' post-mortem analyses of failed projects are not the real causes of failure, but are superficial appearance. Their conclusions are always so vague that readers are even more confused and at a loss after reading.

Too many enterprise information decision makers adopted those wrong analyses and impulsed their vague conclusions, and then infered bad or even wrong information systems implementation strategies, so repeated the same mistakes that had made by predecessors and caused ERP projects to fail repeatedly. Because no one was held accountable, it was always the company or the government that suffered losses due to the failure of the ERP projects, that is, the entrepreneurs, shareholders, and the civilian.

On the basis of technology, this article draws away from the scientific perspective and clearly exposes the real reason for the failure of large ERP projects. It can be used by large companies, government departments, and schools as a reference for future information policy decisions to avoid repeating the same mistake of others.

Types Of Failed ERP Projects

  1. Implementation failed squarely and the software was abandoned.
  2. Only 1 or 2 ERP software modules such as accounting and sales were barely used, but all stakeholders still announced "a successful implementation".
  3. Enterprises continue for a long period of time to pour more cash on consultants, IT staff, and hardware trying to rescue the implementation on the verge of failure.

The Fake Reason For The Failure Of ERP Projects

Every time a large-scale ERP implementation project fails and causes major losses to the enterprise or government department, so-called IT "experts" flock out and do hindsight analysis. Their analysis are all the same – "ERP software is no problem. It is the consultant or the victim company to be blamed for, especially the latter!"」

The vernacular translation of such comment is: "ERP software is absolutely perfect without any flaws. The victimized company deserves it!". It is equivalent to: a certain person taking the medicine produced by the world's largest pharmaceutical factory exaggerating its efficacy, and died of a strong side effect. The judge ruled: "The drug is produced by the world's largest pharmaceutical company, so its quality is unquestionable, and there is no need to test its ingredients. The negligent person is the doctor who wrote the prescription or the drug taker, and in particular the latter should bear the main fault responsibility".

These so-called IT "experts" all made a common mistake - equating the purchase price of ERP software, the software vendor's brand, and even software vendor's stock market value with the quality of ERP software.

Battle-hardened grand mothers with long term engatements in the traditional markets know how to prevent this trick. For the following reasons, only "experts" from the IT industry and academia are used to repeating this layman's mistake:

They equate ERP software vendor's brand with ERP software's quality.
Their decades of software knowledge bases on their testing experience of one or two ERP software.

These "experts" do not fully understand the ERP software (in fact, because of the complexity of the software, all the people in the world may in their lifetimes fail to thoroughly understand it; even if you really find a trick or technique hidden deep in the software today, because the software is inextricably linked and intertwined, you will forget its details tomorrow).

Moreover, even though the software has been faintly perceived to be poor during the trial of those softwares, they still draw this conclusion: "The fact that this software vendor has numerous believers can not happen for no reason. The problem is on me for being unable to understand this grandeur software."

As a result, the software vendor's brand overrides the experts' own profession and the software's quality.

Their hindsight comments on failed large scale ERP implementations are eternal: "80% of the top 500 companies on Wall Street use this world best ERP software and are 100% satisfied. These benchmarking companies in the world have successfully implemented this ERP software. They proved the quality of this ERP software is unquestionable. Only this unique company is in trouble. You tell me: Who is the culprit?"

Deep-rooted prejudice – overestimating the role of management skills and underestimating the value of software technology:
They overestimate the value of their management, planning, and strategy capabilities, and devalue the value of software technology. They deny the importance of ERP software quality and firmly believe that management skills determine the success or failure of ERP projects, not software quality:
  • "The key to the success of ERP projects is the implementation process. Counseling corporate users to bring ERP online is never easy. It is as complicated as rocket technology that shoots humans to the moon and then bring them back to the earth!"
  • "This company was unwilling to spend a small sum of money to hire our 30 top experts and consultants from around the world to coach for 3 years. So it is not surprising that they swallowed this bitter fruit today!"

These "experts" just leave this sentence without saying: "With superb management, planning, strategy, etc. skills, I can easily work with any ERP software of any quality and bring any failed ERP projects back successful."

the lack of battle field tested software engineering experiences:
"Experts" have never personally built any complete ERP platform from beginning to end. Their expertise comes from reading textbooks and blog posts without any substantial technical content and even pure guess. They cannot establish the correct concept that "ERP software quality determine the success of ERP projects", let alone spread this fact!
Selfishness surpasses public interest:
There is a class of IT practitioners whose quality of ERP software or hardware has never been their focus.

Their mentality of "it is the boss, the shareholder, or the civilian paying, not me" is strong and tenacious. They follow the motto "Encourage employers to buy ABC software or XYZ hardware and will never be removed from the post". They adhere to the belief that the wise man stands on the shoulders of giants and has a bright future. They adhere to the value of "private self-interest first. If necessary, reverse right and wrong, misinterpret facts, at any cost!"

Therefore, in their career lifetime, no matter where they work, they will only recommend the software or hardware of a specific manufacturer to the company or government department he serves, and fall into stealth comprador.

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Because they don't deeply understand the quality of ERP software, blindly believe in famous ERP vendor's brand, and are even occupied by strong selfishness, so each time these “experts” review the cause of the failure of the ERP project, they have never doubted the “suspects” that novice IT knows first – software. They have always condemned these two sets of vague terms: "people" and "management". Their conclusions and allegations usually consist of just one sentence, but they refuse to explain in detail the reasons for the allegations and the basis of the conclusions. They also refuse to respond to readers' inquiries.

In the IT industry, the management "expertise" without software engineering foundation is like building a building on the sand. Therefore, the analysis of the reasons for the failure of ERP projects by these "experts" mostly came from baseless guesses. These "experts" have so good public relations that they never blame any specific object. Their all time scapegoat is always a vague, ethereal, and unpunishable targets – "human" and concept, "management".

The following is the fallacy analyses and their respective true causes for the failure of ERP projects:

Companies themselves don't even know the goals of their ERP projects! Insufficient communication: The company did not explain its requirements clearly to the consultant.
Companies know the goals of their ERP projects. That is: ERP software must at least output the correct information, data, reports, or statements, such as: correctly calculating employee salary, the insurance policy premiums, and claims amount. This goal is absolutely unambiguous. There is no room for bargaining, and there is no need to enumerate them one by one on the contract.

Moreover, even if consultants have not collected the requirements of the entire enterprise at one time, they can definitely ask the employees of the enterprise anytime during the course of ERP implementation. There is no convincing reason to use "corporate staff failed to enumerate requirements at once" as the reason for the project failure!

"If you only want to give bananas, you can only hire monkeys." The enterprise asks for too many requirements and is too greedy!
Enterprises require that ERP software must at least output correct figures, data, or reports. This is common sense, unwritten agreement, and tacit understanding between enterprise and ERP project contractor.

Moreover, many companies have been able to continuously obtain the correct information from their legacy software before implementing the new ERP software, and even hand-made to complete the data that the company needs. Ironically, the new ERP software can't deliver the results the legacy software have been delievering!

Any slightly ethical software vendor and consultant will not blame the enterprise for "being greedy" simply because their new ERP software is unable to provide the application functions that enterprise customers are entitled to use.

The company hired the wrong consultant John, so the project failed. If they had hired Mary, the implementation would have succeeded!

If the implementation will definitely be completed with Mary. Why didn't the company replace John with Mary immediately but let the project fail?

The logic is so obvious that the 5th grade primary school students can also infer that it is useless to swap consultants for a implementation doomed to fail, otherwise they would have been swapped already!

The enterprise only wants their ERP project to succeed but is unwilling to spend enough money.

Is the amount invested by the company in the ERP project sufficient? Can the enterprise aford the expenditure? How much should the enterprise invest to be reasonable? What proportion of software, hardware, consultants, and miscellaneous expenses should be allocated?

Among many others, it is difficult to have objective identification methods and answers for these questions.

In addition, there were many enterprises that aborted their ERP projects in the midst of ERP implementation, which was a wise move to avoid bankruptcy.

Due to the use of inferior ERP software, even if a life insurance company had spent $367 million on an ERP implemenation within five years so far in 2019, large number of errors broke out immediately after the application software went live, causing serious losses to the company. This case proves that once inferior ERP software is used, even if the company invests huge amounts of money, it will be of little help to ERP implementations.

Poor project planning and poor project management skills.
Such criticisms are too general and vague. If you ask, “If it ’s really bad, why do n’t you adjust it but let the project fail?” Usually you don’t get a response from the speaker. Therefore, such criticism does not have any reference value.
The employees of the company did not cooperate with the "best process" and "best solution", and the company refused to reform its "bad" process.

Truths are:

  • Company employees understand their processes better than consultants. Does the logic make sense for employees who have worked in the company for many years, but they do not understand their own processes and do not know the advantages and disadvantages of the process than outside consultants?

    Moreover, each time an ERP project is implemented, external consultants always interview multiple company employees to understand the company's processes. This phenomenon clearly proves that company employees understand the company's processes better than consultants, not the other way around.

  • The "best practice" is a one-sided phrase without scientific basis. Fact: The reason why an enterprise has the ability to invest cash in an ERP project usually proves that the enterprise's existing practice is reasonable and excellent at a certain level, and the enterprise can earn cash accordingly.

The reason for forcing a company to change its existing working methods or processes is largely because the software is rigid and cannot adapt to the company's existing operations. The consultant then forced the company's ERP users to change their existing good working methods and habits to adapt to their software limitations, which they called "process transformation", "process optimization", or "organization change".

The business owner or employee is not determined to make the project succeed.

Such criticisms are too general and vague. If you ask, "Exact who are the people who don't have the determination? How do you know that they lack the determination?" You usually don't get a response from the speaker. Therefore, such criticism does not have any reference value.

Common sense points out:

  • Cash is the blood of a business. The fact that business owners are willing to pay for the ERP project demonstrats their determination to make the project succeed.
  • If an employee of the company resists the ERP project, the most likely reasons are as follows:
    Employees worry that they will be replaced by software.
    • First of all, this mentality is no longer a major obstacle to ERP implementation today, and the number is not large. Because automation has been a constant threat to humans for decades, not the first day.

      The idea that "The trend is unstoppable, and resistance is ineffective. It is the best strategy to seek another way or increase your value in your workplace." has long been deeply rooted in the minds of corporate employees.

    • Secondly, the biggest obstacle that resisters can do is to respond passively, which is to procrastinate. But the biggest harm the procrastination can possibly cause to ERP implementations is the delay of the ERP project, which can not lead to the overall failure of the project.
    • Finally, those who can become consultants have superb "management skills" and cannot tolerate resisting force for a long time. Why they never resorted to the "personnel management skill" and removed these obsticles.
    ERP software is difficult to use and does not match the current operation of the enterprise.
    When this happens, the target to be blamed is the ERP software, not the user.

Under the careful guidance of these "experts", no one must be held accountable for the failure of the ERP project. Those who have suffered substantial losses will always be inanimate – enterprises or governments.

The vague comments of "experts" make the real reason for the failure of large ERP projects a permanent mystery. They lack objective or logical foundations, but are speculation or imagination. But everyone sees it as insight. Enterprises and governments repeatedly cited street talks as the basis for IT decisions, so ERP projects repeatedly failed.

The Real Reason For Failure Of ERP Projects

The quality of ERP software determines the success of the ERP projects. Its reasons follows:

  1. The core quality of ERP software cannot be greatly improved during the course of ERP implementations, and the system architecture cannot be changed on a large scale. Therefore, the main advantages and disadvantages of the software that determine the success or failure of the project have not changed much from the beginning of the project to the suspension or end.
  2. The number of ERP project counseling consultants can be increased at any time. The consultants can also be replaced with experts with higher education and more experience.
  3. The management strategies, quality assurance and supervision mechanisms, communication skills and frequency, user training hours and quality used in ERP implementation process can be added, adjusted, improved, and the implementation can even be repeated at any time.

Numerous cases have proved that once the core quality of ERP software is poor, the second and third adjustment measures are completely futile.

Poor quality ERP software is the main reason for the failure of ERP projects. The introduction of poor-quality ERP software is the first step of chaos and project failure. Buying inferior ERP software at a high price is the beginning of business losses.

Take the wrong first move and lose all:

cause: use of inferior ERP software
phenomenon: Enterprises are in chaos and are facing crisis
  • The company's internal staff become intolerable and angered, and resist the project, and refused to use the ERP software.
  • Enterprise external customers complain and suppliers are dissatisfied. Sales performance and corporate revenue both fell, and the company is severely blowed.
response: crisis countermeasures and damage control
When the ERP project encountered the aforementioned difficulties and faced failure, all the participants in the project blamed each other and shirked responsibilities:
  • software vendor:"The problem is not in our software."
  • consultant:(See section "Fake Reason For The Failure Of ERP Projects".)
  • information systems decision makers:The first idea coming to the decision makers who originally advocated the purchase of the inferior ERP software is preserving their posts by rescuing the failing implmentation. So they usually advised the enterprises they serve to follow the advice of their consultants, that is, try to salvage the critical ERP project by hiring more consultants, extending the implementation period, recruiting more IT personnel, and purchasing more robust (ie expensive) hardware. IT industry has hardly ever seen information systems decision makers who voluntarily resigned because of failed ERP implementations.
  • intermediate and grassroots IT staff:"Silence is wisdom. Those who survive win. Speed up learning the rocket science of the ERP software to either facilitate promotion or beautify my resume and increase the assets of job hopping!"
  • ERP software end users:"Enough is enough! This software is difficult to use. It just never stops producing errors and wrong data and severely affects my work efficiency! I refuse to continue to debug software in lieu of consultants and IT staff, work overtime, and burn liver!"

The enterprise having invested capital and human resources in the ERP project is now under the pressure from internal and external stakeholders. It is unwilling to lose money for nothing. The enterprise with strong financial resources usually repeatedly succumb, so it cooperates with consultant's various demands, and invests more resources to save the ERP project on the verge of failure.

As a result, a life insurance company has been in the state of "rescuing ERP project" for a long time. No one can predict the completion date of the project after the company has spent $367 million as of December 2019 in 5 years.

outcome: failure
  • If the senior management of the enterprise decides to stop the loss, the enterprise will abort the ERP project in the middle of its implementation, that is, the ERP project will fail.
  • Some enterprises with weaker financial strength used inferior ERP software and failed to start the stop-loss mechanism in a timely manner – to acknowledged the fact of the loss and aborted the ERP project. Eventually, they went bankrupt due to excessive loss of cash and new software's erroneous data that affected the operations of the enterprises.

Conclusion

The real reasons for the failure of large ERP projects are almost the same:

The use of inferior ERP software by enterprises is the main (and mostly the only) real reason for the failure of ERP projects.

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