How to Mitigate the Top 7 ERP Implementation Risks & Challenges

ERP implementation risks and challenges can lead to cost overruns, delays, and disruption of business operations. However, there are ways to mitigate each of these risks, so your project can succeed.

At Encore, we’ve completed over 2,000 implementations with our customers. In this article, we’ll introduce the biggest pitfalls and how you can avoid them.

 

Cost Overruns

A poorly scoped or planned ERP implementation can easily balloon to double or more the initially estimated costs.

This is usually due to a failure to properly assess the technical and human needs of project at the outset, or a failure to constrain scope along the way.

Possible consequences: Beyond the additional costs in dollars, the need to dramatically change budget can lead to delays, or necessitate a disruptive reduction in project scope.

How to mitigate: Map out your relevant business processes and needs very thoroughly, so that your partner can accurately scope and estimate them. That also makes it easier for you to hold your partner to their estimates.

Make sure your partner gives you technical validation and fit-gap analysis of how the new system matches up to your needs. Then determine where any customizations or integrations will be required. Adding an unexpected customization or integration partway through an implementation is the easiest way to get a cost overrun.

Project Delays

ERP implementation delays can be caused by factors like incomplete assessment of the project’s technical challenges, or a lack of availability from the customer’s team.

Possible consequences: Delays may throw off the overall project schedule, meaning that necessary resources aren’t available when they are needed later on.

This can cause further delays and costs, and reduce the quality of the implementation. Implementing an ERP in a rush is a recipe for disaster.

How to mitigate: During project planning, you and your implementation partner should work together to develop the schedule.

The schedule should account for the difficulty of various technical steps (especially customizations and integrations) and the chance of problems. Don’t assume you’ll have the best-case scenario at every stage.

Your schedule should also account for the availability of resources on your team for testing, training, and general Q&A. As a rule of thumb, assume that you and your team will need to provide 2x to 3x the budgeted time of your implementation partner. For very large projects, a dedicated project manager on the client side is necessary.

Don’t attempt to take short-cuts. The required work from your team can’t be avoided without increasing other project risks.

Furthermore, align your responsiveness with the project timeline. Your partner will be more efficient if your internal experts are responsive to their requests for info.

System Instability

If your partner customizes the ERP for you too much, that greatly increases your risk of instability and breakages during later software updates.

Some customization is appropriate in many implementations to make the system better fit your needs.

However, we sometimes meet customers who have a very large appetite and budget for customizations. All those customizations may make the initial implementation more comprehensive, and reduce the need for initial change management and retraining. But they can lead to disruptive technical problems in the future.

Possible consequences: Later updates may break your customizations, resulting in business disruptions or costly further development work by a partner.

Remember: A modern, cloud-based ERP gets updated more than once a year.

How to mitigate: Attempt to solve problems through configuration before customization. Consider altering business processes to adapt to the new ERP.

Also, your implementation partner should caution you about which customizations it may be better to avoid, so your solution will be more stable over the long run.

For each customization, prepare testing routines to use after future ERP updates.

Broken or Incomplete Functionality

The most common cause of broken functionality in an ERP implementation is poor testing.

Proper testing catches functionality problems before cut-over (final data migration and checking) to the new system.

Here are some red flags that your testing process is incomplete or inadequate:

  • Testing is not done by your actual users.
  • Testing does not include all business-critical processes.
  • Only individual tasks are being tested, not full end-to-end processes
    • Example of testing a task: Can I make a purchase order?
    • Example of testing a full process: Can I make a purchase requisition that turns into a purchase order? Can I then receive on that purchase order? Can I then see that the item appeared in the correct places in my inventory and GL accounts?
  • No protocol is in place for future testing after each update. This is especially important for customizations and integrations.

Possible consequences: Poor fit to your real business needs. Business disruption after go-live or after an update.

How to mitigate: Consult with your partner about your testing plans to identify gaps. Learn about testing best practices and examples.

Plan ahead to dedicate the relevant resources to test each process. Usually, when we do user acceptance testing, we allot a total of 2-4 weeks (depending on project size and company complexity). Different team members from your company will be involved in different days of that testing.

Poor User Adoption and Training

Although the new ERP system may be technically sound, poor user adoption and training can mean your employees are not willing or prepared to use it for their tasks. This is a frustrating problem to discover after your implementation is “complete.”

Possible consequences: The new ERP is not used consistently, meaning that many of the desired gains in efficiency, compliance, and more, are not achieved.

How to mitigate:

  • Get buy-in from your company early. Prepare the company for the upcoming changes and challenges when you plan and start the implementation of your ERP system. Keep your company updated during the process.
  • Leverage your partner to “train the trainer.” Build up a team of power users and early adopters within your company who can then assist other team members with user adoption.
  • In training, you and your partner should manage the learning curve for your team. Start from the business processes and layer the technology on top.

Missing Data and Bad Data

If you don’t migrate clean, relevant data from your old system into your new ERP, that will lead to substantial problems for your users.

Possible consequences: Users cannot do their work in the new system. Or users learn that they cannot trust the data in the new system. Poor user adoption and errors in accounts may result.

How to mitigate: It’s not necessary to migrate all the data from your past. However, you and your partner do need to identify what data will be important to future operations.

For example, obviously you need to migrate open purchase orders. But what about closed purchase orders and past invoices? How much of that historical data should the new system have?

Once you’ve identified what data you need, make sure that data gets cleaned and properly formatted before bringing it into the new ERP.

Scope Creep

Scope creep — adding extra features not essential to the project — leads to cost overruns and delays in many implementations. It’s such a common problem that it deserves its own section here.

Possible consequences: Scope creep can cause cost overruns, delays, and conflicts between the new (unplanned) features and the originally planned business-critical features of your ERP.

How to mitigate: When it comes to scope, we strongly recommend you aim for simplicity and break your implementation into phases.

Identify the crucial processes you need to have in your new ERP, communicate those clearly to your implementation partner, and address those processes in the first phase. Consider delaying other features to later phases, after the initial implementation is complete.

Empower your internal project leadership to say “no” to new, unessential feature requests from elsewhere in the company. The support of your executive team can be very helpful here.

Your partner should also help you carefully assess new feature requests, and what the business, technical, and project consequences would be of including or excluding those features.

Mitigate the Risks and Challenges of an ERP Implementation

With proper planning and guidance, your ERP implementation can be a success.

Most of these risks come down to

  1. A failure to realistically assess the costs and challenges ahead of time
  2. Not leveraging the assistance of an experienced partner

Work to eliminate surprises. Plan ahead, document your needs and processes in detail, and work closely with a solution partner you can trust.

At Encore, we have been implementing, advising, supporting, and training our clients on Microsoft Dynamics solutions since 1990. If you are working on or considering an implementation, you may also be interested in the following:

To get specific advice about how to make your next implementation a success, contact us.

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