Damaging your business with a failed ERP system

Damaging your business with a failed ERP system

For many organisations the decision to embark on an ERP venture is driven by wishing to improve the business and benefit from the potential the technology has to offer.

Too often the level of understanding on what is involved is not adequately understood from the people who make the decision to proceed!

It is a simple matter to see an ERP project as a technology project and apart from making decisions on approving expenditure and a basic oversight of the project, management rarely get involved in driving ERP projects and prefer to delegate the project to middle level management who they believe have the technical skills in computers.

It is easy to see how the implementing company can get swayed by statements from vendors such as proven paths, world class experience over hundreds of implementations, and a host of other comforting terms that are more of a sales pitch to sell the product rather than real expertise.

The reality is 75% of ERP implementations can be put into the category of failure. The definition of failure depends on what the expectations were in the first place. Whilst there are organisations that abandon ERP altogether the majority of organisations implement parts of the system, namely, finance, inventory, order entry, purchasing and some works order type activity. Whilst these functions offer some degree of process capability it does not utilise the full integration of the technology in terms of planning and control and does not reap the benefits that ERP offers.

The failure of an ERP system is not just confined to areas that are not utilised or that don’t work well. Expecting to fully integrate the functions of the business utilising ERP and turning the system to live running and then finding out post-live running that the system isn’t working because issues such as resources, process reengineering, internal conflicts, management involvement were not resolved or data wasn’t sufficiently structured or cleaned-up during the implementation stage of the project can lead to operational disaster and in worse case scenarios bankruptcy.

The damage to a business through the lack of accurate information or systems problems not resolved during implementation can manifest in failure to ship and invoice product, failure in order entry, build-up of unnecessary inventory, factory shortages, late deliveries, lack of accurate financial information and significant brand damage.

Whilst these failures are the norm and not exceptions, they are unnecessary. The key to successful ERP adoption is all in the approach taken by senior executives at the beginning of the ERP planning and acquisition strategy.

We have analysed hundreds of MRPII and ERP projects for the past 35 years and have identified 26 key areas that contribute to implementation failure. You can assess your ERP project approach or identify issues you need to address by going to www.atkoglobal.net.au and downloading a free copy of our ERP self-assessment. We feel sure this will provide you with the tools to proceed with ERP and be one of the successful ERP sites.

Experience Worth Listening to.

Ray Atkinson

Atko Global


ERP Wisdom in hindsight

Many companies embark on an ERP project believing they have all the bases covered and their IT people know what they are doing. Internal projects, steering committees and executives champions are all in place and the project proceeds.

Very few problems emerge in the early days of projects as it is really a preparation stage of gathering data, migrating data, training, software configuration, process review and procedures.

Somewhere down the line when the nitty gritty of what the software does and how an organisation can use it issues start to arise. Data that is not available in the form required needs to be obtained, unbudgeted for, data is not in an acceptable form and needs to be changed and cleaned-up, unbudgeted for, training is proving to be inadequate and more is required, unbudgeted for, changes to software and scope creep start to emerge, unbudgeted for and decisions need to be made, that are resisted by departments, are not made, all add to the ERP environment and potential disaster.

Add to these a blow-out in consultant costs, all seemingly legitimate but expensive and you have a recipe for disaster.

Thirty five years of experience in integrated MRPII and ERP systems I have seen a repeat of the above over and over and continuing to this day. The amount of money that goes into these projects, and lost, is staggering to the point organisations can be seriously financially and operationally compromised.

The blame game starts when the costs begin to hurt the organisation. The finger pointing starts in earnest! The vendor misled us, the company didn’t do what they said they would do, management wouldn’t get involved and make decisions, the software doesn’t work, we were not permitted to make process changes, the consultants were incompetent and lied to us and so on.

These are issues that have been around since the early days of MRPII. Are we really that slow we have learnt nothing? The statistics on failure are there for all to see! As high as 70% of organisations attempting to implement ERP fail to achieve the results expected. Massive cost blow-outs are the norm. Some companies have gone bankrupt attempting to implement ERP.

The solution is really quite simple. Do the work up-front pre-software purchase. Identify the issues that will need to be dealt with and design a model for how the software is to work and test the software through that model. Identify the data required and commence clean-up before you buy software etc.

Look at the 26 steps that must be covered to get it right the first time. Go to http://www.atkoglobal.net.au for details of the 26 steps. It’s free no cost and no obligation. We will even give you a free self-assessment program for you to look at what you are doing and evaluate yourself against. It could save you millions of dollars.

If this were a new technology we could understand teething problems in getting it implemented and working. Could you imagine continuing a space program with a failure rate of 70%? I think not!

We have all of the experience to ensure that every implementation should be a success learnt through many past failures. This hindsight should be a template for the future. Unfortunately it isn’t!

Experience worth listening to!

Ray Atkinson

Our ERP Doesn’t Work

For more ERP Blogs goto http://atkoglobal.net.au/member_area.php

We have visited many organisations that have implemented ERP only to find that they are having significant problems in operating the technology as they expected. In fact they have now turned off or ignore outputs from the system as the information is incorrect.

  • There are a number of reasons for this state of affairs;
  • Lack of education in how the ERP system is supposed to work
  • Poor software selection in the first place
  • Poor data set-up
  • Shortcuts taken in cleaning up data migrated to new system
  • Poor data integrity on dynamic data (ie. Inventory control)
  • Lack of effective system operations training
  • Poor operational procedures around processing operations

Whilst all of these are recognised as mistakes made during implementation and running the ERP less consideration is given to the customisation and modification carried out on the system during the implementation stage. Changes are made to the systems for a variety of reasons. Chief amongst these is the “must have” some function that was available in a previous version or system that is seen as a show stopper. When a number of these changes have been made they can have unforeseen consequences on the overall operations of the systems to the point the systems do not function in the way the designers intended.

ERP systems are fully integrated systems that enable data entered into one part of the system to flow through the organisation through processing and output to other parts of the organisation to use and onward process. An example of this is a sales order that is entered, translated into a schedule for manufacture, processed through materials requirements planning using inventory records, bills of materials and routings and ending up as planned orders for the factory and purchasing the materials to support the manufacturing.

Modifications that may seem simple at one level can have an impact anywhere in the process and end up causing incorrect information to be output due to some issue with the changes made to software.

Add these issues to the issues identified above and you have a poorly functioning ERP system. Users have no choice but to seek other means of operating the systems.

ERP has been built around a defined logic. When changes are made without an understanding of this logic then the risk is you will affect something in the systems logic that will cause the system to have problems.

The best way to avoid this is to define clearly, pre-purchase of software, and test the software fully (not a simple demonstration) prior to purchase of the software.

The construction of a model will ensure you are able to identify any shortcomings in the software and get the fit you want and need.

With the many problems being experienced over 35 years seemingly repeated over and over again we are either incapable to learning the lessons of failure or are somehow being conned.

The cost overruns in ERP project go across a spectrum from 25% to 1000% of the original budgeted cost. The work done up front on effective modelling and risk analysis can assure an effective ERP outcome every time without the hugh cost blow-outs.

With  50% – 70% of organisations reporting significant problems and failures and even those organisations claiming success reporting an average of 50% of the benefits expected, a new approach is badly needed.

For further information on ERP goto http://www.atkoglobal.net.au

Experience worth listening to

Ray Atkinson


ERP Failure! Do you just walk away?

There are many organisations facing the reality of a massive ERP disaster! This comes in a number of manifestations; Project budget over-runs of anywhere between 25 to 1000% of original estimates with no benefits being achieved for the business, post live-running the business is in chaos, software functionality that is not suitable for the business, ERP vendors and their implementation team does not have the necessary skills and experience to fix the issues in the project, the system had to be turned off due to processing problems, internal divisions and blame game affecting company performance, company financially damaged  and potential risk to the company viability.

With somewhere between 55 to 70% of organisations failing to effectively implement ERP and even those who report successful live running achieving around 50% of expectations, there is a lot of anger and disillusionment with the entire venture.

The two most important issues to look at here are:

1.A review of the project to determine the actual project status and what has to be done to get it operational and at what cost.

2. What has gone wrong with the project and who is responsible.

The first of these options is reasonably straight forward in determining the status of the project and what has to be done to either complete the project or abandon it. The review will determine the stages of completion and any additional costs involved.

Care must be taken here as too simplistic a view of the project status can lead to missing critical costly elements and solves little.

The second issue to be considered is what went wrong and who is responsible. For many organisations the confusion generated by the in-project issues and the tendency for the ERP vendor and their implementation team to point out the failings of the implementation client company whilst at the same time painting themselves as blame free tends to muddy the water on responsibility.

For most organisations the road to holding the ERP vendor and their implementation team accountable seems insurmountable and potentially costly on top of the losses already incurred.

For those companies that are prepared to pursue ERP vendors and their implementation teams there are two approaches that can yield results; Mediation with the vendor to reach an amicable solution and fair compensation for the vendor’s failure to advise competently on the implementation of the system or the lack of functionality of the system against undertakings made by the vendor during the sales stage of the ERP system.

Failing mediation the second option is to proceed against the ERP vendor with legal proceedings for breach of contract, misleading information, fraudulent misrepresentation and failing to deliver a product that is fit-for-purpose.

In both cases the vendor will play hard ball and resist any solution that puts them into a position to have to pay compensation or accept any liability. This is an opening stand that typically puts off the grieved party as it is easy to point to failings of the customer as the reason it has failed or not performed to expectations.

Before either mediation or litigation is attempted an analysis needs to be made of the project starting with the original request for proposal.

Organisations (ERP vendors and their implementation teams) profess a great deal of expertise via their “proven paths” and other such statements of expertise yet so many
projects, 55-70% fail to deliver to expectations. Even those companies reporting project completion only realise 50% of the expected benefits.

In the majority of cases the customer has a strong case for compensation for the failure of the ERP vendor and their implementation teams to provide a useable product and implementation services in accordance with the contract for supply or what the client could expect from organisations claiming “Proven Paths and vast expertise.

With the large sums of money lost in botched ERP implementations many organisations are pursuing vendors and integrators to compensate them for the losses. Many disputes are mediated and few end up in court. Vendors do not want bad outcomes from court cases as this damages their image in the market place and potentially affects future sales.

Experience worth listening to!

Ray Atkinson


For additional blogs and info please visit: http://www.atkoglobal.net.au/member_area.php


The State of the ERP Industry

For more information visit: http://www.atkoglobal.net.au/member_area.php

ERP failures are not slowing! The complexity of ERP implementations and issues involved are simply not understood by most organisations and ends up as minor or major disasters.

Many organisations are oblivious to the problems they will face or believe that ERP is simply a technology project that the computer people will deal with, until the disaster happens. The growing demand for expert witness services or mediation in disputes between software vendors, integrators and clients is a good indicator of ERP problems and we do not see this dropping off any time soon.

ERP success and failure depends on where you sit in the equation. From an ERP software vendors and integrators perspective the project is a success if the software is installed and running, from the clients perspective they want the technology implemented and working for them on time and within budget.

Half implemented and abandoned ERP projects litter the landscape. Most ERP systems we are asked to get involved with are poorly specified, lack clear objectives, are late and are way over budget.

Shortcuts taken during the implementation stage always come back and bite during live running of the system and can result in crippling the company and costing ten-fold the cost of doing the job properly in the first place.

The message on risk of ERP projects is getting through. More and more organisations are spending more time researching ERP and how to approach it to ensure success. Unfortunately these organisations are overshadowed by the majority of organisations who simply believe they can pay a cheque and ERP will happen.
For a very small investment our book “Enterprise Resource Planning (ERP) The Great Gamble” A guide to understanding and ERP project, outlines the issues that all CEO’s managers, and implementers should understand about an ERP project. The book is available from all book outlets and can save an organisation millions in preventing ERP failures.

Some other blogs available on our website include:

ERP Implementation Goals

ERP Vendor Integrity

ERP Expert Witness Services

Ray Atkinson

Experience worth listening to!


ERP Consultants, which one?

For more information visit: http://www.atkoglobal.net.au/member_area.php

Implementing ERP systems is a major challenge for any organisation! Selecting a consultant to assist in the process requires an understanding of the terms installation and implementation.

Installation refers to the installation of software and training of users in how to use it. Implementation takes a broader view of implementing the technology and operating it in a manner that will yield the results for the company.

Each of these require different skills. The installation skills require a knowledge of software and the sequence for installation. The installation skillset does necessarily require knowledge of the particular industry beyond the configuration and basic project management requirements.

The implementation skillset requires a knowledge of the type of industry the technology is being implemented in and what needs to be done to make it work for the company beyond running software. E.g. manufacturing industry.

The type of skillset I am talking about here is one that comes from someone who has actually worked in a manufacturing company in a discipline that provided first hand knowledge of ERP processes such as planning, MRP, bills of materials (BOM’s) and structuring of same, inventory, shop scheduling, master scheduling, product costing, procurement, just-in-time and manufacturing line layouts.

The benefit of having a consultant experienced and skilled in the particular industry beyond software can make a huge difference to the results of an ERP implementation as they are able to draw on their practical knowledge learnt in the real world and not some theory from a book.

With somewhere between 55-70% of all ERP implementations not producing the results expected, massive cost blow-outs and time delays, a different approach to the people we look to assist in the implementation process may make the difference between software running and the technology implemented to get the best results.

Check the proposed consultants CV’s to see what experience they bring to the table. You may be surprised what you find!

For more information visit: http://www.atkoglobal.net.au/member_area.php

Experience worth listening to!
Ray Atkinson – Atko Global Pty Ltd