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The True Cause of Failures of ERP Projects

Posted: 2020-02-05 Edited: 2022-12-03
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Professional analysis often contradicts with popular hearsay.

Many large ERP projects ended up failures. IT experts' post-mortem analyses of those failed projects often do not reflect the real causes of the failures. Their conclusions are so vague that they at best confuse audiences even more.

Too many enterprise decision makers in charge of information systems adopted those vague or even misleading analyses and conclusions, and then inferred poor or even wrong information systems management strategies only to repeat the same mistakes their predecessors had made and thus caused their ERP projects to repeatedly fail. According those analyses and empty conclusions, no one except the owners of victim enterprises was supposed to hold accountable. As a result, Only entrepreneurs and shareholders of the victim enterprises and the public mass bore the losses.

Types Of Failed ERP Projects

  1. ERP implementation failed squarely and the software was abandoned altogether.
  2. Only 1 or 2 ERP software modules like accounting and sales orders were barely used, but all project stakeholders still announced the implementation "successful".
  3. Enterprise prolonged the implementation and continued to pour more cash on consultants, integrators, staff, and hardware trying to rescue the implementation on the verge of failure.

The False Reasons For The Failure Of ERP Projects

Every time a large-scale ERP project failed and caused major losses to enterprise or government department, so-called IT "experts" often flock out and do hindsight analyses and gave the all-time same conclusion – "ERP software is no problem. It is the consultant or the enterprise, the latter in particular, that are to be blamed for."

The vernacular translation of such comment is, "This ERP software is absolutely perfect without any flaw. The enterprise that wasted money and whose originally stable business is now in chaos as the result of the failed ERP project rightfully deserves the loss for its own fault!" Such accusation is equivalent to this:

One person took the drug produced by the world's best known pharmaceutical maker who exaggerates its efficacy, and died of that drug's strong adverse effects. The judge ruled so, "Because the drug was produced by the world's most famous pharmaceutical company and is expensive, its quality is therefore unquestionable. There is no need to investigate the ingredients and effects of that drug. The negligent doctor and in particular the patient shall bear all responsibilities."

These so-called IT "experts" in IT field and academia all made and have been making the common mistake that they equate 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. they have been repeating the layman's mistake for the following reasons.

Experts acquire software knowledge only by playing one or two ERP software.

These experts do not fully understand the ERP software they play. In fact, because of the complexity of the software, no one in the world can thoroughly understand it in his or her entire life. Even if you today accidently have found out a trick or feature hidden deep in the software, because the software is inextricably entangled and intertwined, all you have found is the tip of iceberg and hence you will forget tomorrow what you have found today.

Sometimes even though these software players occasionally do perceive flaws in the software, they still persuade themselvies due to their lack of self confidence, "The fact that this software has numerous fans can not happen for no reason. It is my problem for not being intelligent enough to fully understand the magnificent logic and design of this grandeur software." Such mindset creates and spreads the delusion of "this ERP software being perfect".

It has been IT industry's status quo that software vendor's brand overrides expert's profession and software quality.

The hindsight comments of these experts on failed ERP implementations are eternally amazing: "80% of the top 500 companies on Wall Street use this world best ERP software and are 100% satisfied. This fact proves that the quality of this ERP software is unquestionable. Now this is the only company in trouble. You tell me who is the culprit?"

Experts have deep-rooted prejudice that they overestimate the role of management skills and underestimate the value of software technology in ERP projects.
When it comes to ERP projects, IT experts tend to overestimate the value of project management, planning, stakeholder's communication, business process changes, and implementation strategy and look down on the value of software technology and quality. On no scientific basis, they firmly believe that management skill determines the fates of ERP projects, not software quality.

Almost all experts avoid mentioning the fact that given a low quality ERP software, ERP projects can not be successfully implemented for enterprises regardless of how good quality the project management might be. Try to imagine this scenario: Enterprise users need 500 specific functionalities and statistic reports in the new ERP to be implemented in one year, which their business can not otherwise operate without and the legacy system has been offering for years, but integrator has spent 3 years and is still unable to complete the customization of the new software.

Can project management strategies or skills mitigate the possible imminent tension or even conflicts between integrator and customer under such situation?

Experts believe abundant resources can complement the flaws of ERP software.
"If you pay bananas, you get monkeys!"

"Had the enterprise given me more money, I would have brought more people and have finished the ERP project long time ago."

Numerous failed ERP projects of large scale have already proved the fact that given inadequate ERP software, more money and human wave tactics just can not prevent the ultimate failure.

Experts lack sound software engineering expertise.
When experts accumulate knowledge only by reading text books, blogs, and posts, they tend to assume that all well known ERP software are similar and to believe these are the only keys to success:
  • buying only well known, that is expensive, ERP software
  • hiring a good, that is big and expensive, implementation team
  • acquiring enough resources, in essence money, from the organization
They can not distinguish the obvious differences among various ERP software, let along the nuances. They can not identify the weaknesses in ERP software systems fatal to ERP projects. They hence can not establish the correct concept that ERP software quality determines the success or failure of ERP projects, let alone spread this fact.

There are times when the enterprise customer asks for some functionalities in ERP software, experts blindly think programmers could realize them and therefore give their promises to the customer only to find out later that their promises are empty. Other times experts object their clients only because they do not know customer's reqirements can in fact be easily fulfilled with software engineering technology in one way or another.

Selfishness surpasses public interest.
There is a class of IT practitioners that ERP software quality has never come to their minds.

Their mentality of "it is the business owner, the shareholder, or the civilian who is to pay, not me" is so strong and tenacious that they follow the motto, "Recommending ABC software to my employer will most secure my position. Whether the software will work in the enterprise or not is not a question, neither is the overall cost.

As a result, in their career lifetime, no matter where they work, they will only recommend the same brand of software to the enterprises or government departments they serve.

Because many experts don't really understand the essence of quality of ERP software and blindly equate ERP software vendors' brands and ERP software qualities, they have never doubted the "suspects" of failed ERP projects – ERP software – while all IT novices do.

Whenever large ERP projects fail, the two vague terms "people" and "management" have been the only eternal scapegoats. These experts' conclusions and allegations usually consist of just one sentence they decline to elaborate.

Here are some false assertions and analyses along with their respective true causes for the failures of large ERP projects.

Enterprise users themselves do not even clearly know the goals of their ERP projects! They expect too many or too few from the project. Insufficient and ineffective communication exists between enterprise users and consultants that the former do not clearly and thoroughly explain their requirements and problems to consultants.
Enterprise users clearly know the goals of their ERP projects and that is, the new ERP software must produce correct information, data, figures, and reports, such as correctly calculating employee salary, insurance policy premiums, and claims amount. This goal is absolutely unambiguous. There is no room for consultants and enterprise users to bargain this goal, and there is no need for enterprise users to enumerate these requirements one by one on the contract. And its supporting reason is straightforward and simple – The enterprise needs them to run and the existing ERP software system has been correctly doing it, so must the new ERP software, too!

Moreover, even if consultants have not collected the requirements of the entire enterprise at one time, they can definitely ask the the enterprise users anytime during the course of ERP implementation. The excuse of "enterprise users failing to enumerate requirements at once is the cause of project's failure" convinces no one!

"If you only want to give bananas, you can only hire monkeys." The enterprise is too greedy that it asks for too many functionalities in the new ERP software!
It absolutely makes sense that enterprise demands "ERP software must produce correct figures, data, and reports the organization can not otherwise run without". This is a common sense, unwritten agreement, and tacit understanding between enterprise customer 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 manually compile the data 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 Mary definite would have finished the implementation, why didn't the enterprise replace John with Mary but let the project fail?

The logic is so obvious that any 5th grade primary school students can also infer that it is useless to swap consultants for a project 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 an inferior famous ERP software, a wealthy life insurance company had spent $367 million on an ERP implemenation in five years up to year 2019. Large number of errors broke out immediately after the new ERP 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.

This article unambiguously unveils on the basis of common sense, basic logic, and concrete software engineering technology the real cause behind the failures of large ERP projects. IT decision makers of companies, government departments, and schools will benefit from this article and accordingly will be able to avoid repeating the same mistake others frequently made.

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
  • Consultants and corporate IT staff cannot complete the development and customization of application software within the time they promised.
  • Immediately after the buggy application software is barely handed over, it starts to output a large number of errors – wrong policy amount, inventory figures seriously deviating from the reality, production plan far from optimal, incorrect vehicle rental data. etc. and causes chaos to the enterprise.
  • The system responds very slowly, and the server response time is measured in minutes or even hours.
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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