5 ERP Failure Stories and How to Avoid Becoming One
It’s a fact that not many like to acknowledge, especially those embarking on a new project: ERP failure stories happen. Because ERP implementations take up so much of a company’s resources and are intended to support such a wide range of processes, failures can be truly devastating when they do occur, and big-name ERP failure stories are widely reported on and can strike fear into the heart of anyone looking to implement or upgrade an ERP system. However, the best thing about failure is the lesson that often comes from it—and there are a lot of things to be learned from some of the most talked about ERP failure stories. Read on for 5 of those stories—and how to avoid making those same mistakes.
In 2013, Avon’s $125 million SAP enterprise resource planning project failed after four years of work, development and employee testing. After rolling out the system for testing in Canada, the door-to-door makeup giant reported that the technology had provided extra work for its critical sales representatives, rather than easing their number of tasks as the technology had been designed to do. This then understandably discouraged the reps from utilizing the system in the regions in which Avon tested, and the makeup seller lost its reps in droves. After they got word of the failure for the software to perform adequately in Canada, Avon discontinued the rollout across the rest of the country and called off any further work with the enterprise software. The software was kept on in Canada to avoid any further disruption to the company’s services but the rest was binned, costing Avon a pretty penny.
Lesson Learned: ERP software can brag all it wants about functionality and all of the magical modules and apps you can use to make your business processes easier but that won’t mean anything if your software isn’t actually usable. It’s all about the business processes, not the software after all, and if you can’t get staff to use your ERP they won’t be carrying out the processes necessary to keep your business running. Make sure your employees are properly trained and transitioned into the new, and that they will want to use that system in the first place.
This project failure may have happened way back in 2004, but there are still lessons to be learned from Hewlett-Packard’s disastrous attempt at an implementation of multiple enterprise systems across their many offices. As the HP CIO at the time, Gilles Bouchard, later mentioned that the failure could largely be attributed to an accumulation of problems. As they attempted to transition a region into a simplified group of ERP applications, they found that communication between both teams and software broke down. As multiple silos worked individually and legacy software systems lost data in the transition, increased demand put entirely too much pressure on the whole ordeal. The failed project cost HP over $160 million; quite a chunk of change for a product meant to overhaul business processes and drive costs down.
Lesson Learned: In any ERP project, you need to plan for problems, and plan for the fact that system failures can interact and make the others even more impactful on your implementation. Bouchard noted that HP should have a “contingency plan for four, five or six weeks,” indicating that the company was clearly not prepared to deal with such a buildup of problems along with increased demand for their products in that time frame; make sure you learn from the company’s mistake.
Waste Management and Avantor
Waste Management signed onto an 18-month ERP implementation deal with SAP that ended in disaster and was dragged out for years after the project’s original 2005 start date. WM struggled with the project so badly that they ended up in court with software vendors SAP, in a suit that claimed they had been duped by the SAP sales team and a flashy demo that never ended up materializing and providing a different model of their software than they had advertised. Not one to take the punches quietly, SAP counterclaimed that the project failure had been entirely due to WM and their inability to provide key information and knowledgable employees to the project. The case was only settled in 2010; safe to say it did not provide the improvements or time-saving benefits that the ERP had originally intended to.
Waste Management hasn’t been the only company to end up with an ERP project turned litigious case. Avantor, a high-performance manufacturer of chemicals and materials also brought charges against its consulting company IBM for another poor SAP experience. Once again, the suit hit out at sales people who didn’t accurately represent their software’s capabilities to support Avantor’s processes. They also accused IBM of staffing their project with unknowledgeable consultants who would take shortcuts in order to reach a predicted go-live date and sacrifice on quality because of it. IBM alleged that the suit exaggerated Avantor’s complaints and categorically denied that the project had failed as dramatically as their client claimed—a clear failure not only of a system, but also of communication between consultant and client.
Lesson Learned: Communication, communication, communication. It can be an incredibly smart decision to go with an outside partner for an ERP project, but you need to make sure that both parties know the project you are embarking on. You need to stack your project team with experts from both your team and your consulting partner’s line-up. Make sure you grill your potential consultants and that they are up to speed with your project and have the experience it will take to complete it successfully. Ask for references, get a timeline, and make sure you have full confidence in your partners before you sign anything.
It was announced in November 2012 that the U.S. Air Fore was finally pulling the plug on a huge enterprise project that would seek to integrate hundreds of disparate financial systems into one single, auditable, source of truth. That project had been running for over seven years and had gone far over budget—it would need another $1.1billion on top of the money already spent in order to just finish the project. As a result, the Air Force decided it would just be better to call it quits before they invested that cash, as the previous investment had yielded very little system improvement.
In fact, the Air Force is not the odd step-child in the military; as this article reports, a Government Accountability report released that same year concluded that many ERP projects taken on by military branches were notoriously over budget and failing to meet expectations in terms of completion or success, with most topping billions of dollars in spending.
Lesson Learned: Understand the size and scope of your project at the beginning, and set clear limits so that you know exactly when your ERP project is getting out of hand. Scope creep is one of the biggest hurdles an enterprise project has to overcome, so managing expectations for your ERP project among every employee and executive out of the gate is critical to project success. With clear, achievable goals for timeline and budgets you can ensure that you keep your software out of the ERP failure stories’ pile
It’s undeniable that any ERP project carries a certain measure of risk along with it—it has such a great effect on your business processes and is intended to work closely with every single one of them. When ERP failures happen to big business like the ones mentioned above, they can rack up millions of dollars of loss in investment, product not manufactured and lost customers; not to mention the many bitter courtroom arguments that can ensue. Now, the stakes may not be as high when it comes to small to midsize businesses, but that doesn’t mean the effects of a failure can’t be as upsetting when it’s your business that’s affected. Take notice of these well-known ERP failure stories and learn how to avoid them to ensure it’s not you throwing away that hard-earned investment when it comes time to implement.
For advice on ERP implementation or a helping hand to keep your next enterprise project from becoming one of those ERP failure stories, contact an expert at Datix today.