I addressed the 4thannual IP Summit on June 5, 2018, in Chicago on Avoiding an ERP Implementation Train Wreck. This is a subject that is all too familiar to me as an ERP software litigation attorney having represented a significant number of clients over the years in disputes and lawsuits with ERP software vendors and implementors. The summit brought together an impressive audience of CIO’s, corporate technology directors and managers from a variety of businesses as well as representatives from technology developers, sellers and implementers.
I explained to the group how and why there are so many “train wrecks” with ERP software implementations.
A 2017 study done by Panorama Consultingfound that while 70-percent of all ERP implementations are successful, slightly more than one-quarter of ERP implementations were considered a failure by users. Cost problems explain part of the story. More than half of the installations studied were over budget by up to 25-percent and some 20-percent exceeded the budget by more than 25-percent. But cost overruns tell only part of the story. Nearly 60-percent were delivered late. Other failures were caused because the deliverables were not met, or the functionality of the system missed the mark.
Frankly, these are appalling numbers and although the specific reasons vary it is possible to identify a handful of common deficiencies that have taken me into court on behalf of clients.
One of the biggest reasons users become unhappy is because the vendor misrepresented or exaggerated its experience in the customer’s industry or overstated its experience in implementing a particular piece of software. Worse, too many vendors seem to assign consultants who are totally inexperienced so the customer’s project becomes a “learn and earn” training ground that the user is funding. And even when the on-site people have experience, too often the vendor’s staff showed up late or failed to attend project update meetings.
Another big problem causing failed ERP implementation projects occurs when the functionality of the software is misrepresented by a vendor. Clients experiencing an at-risk implementation project come to me when either the software or functionality didn’t work as represented or failed to meet the client’s business requirements even after they spelled them out to the ERP software vendor during the sales cycle. Sometimes even the functionality that is basic to a user’s industry is missing. Even more bizarre: ERP implementation projects can fail when the software lacks basic capabilities common to all ERP software — even the user’s legacy software system.
Finally, the third cause for a failed ERP implementation is when the software is unusable after the vendor or integrator throws the “On” switch and the system is supposed to go live. Thus, the ERP customer finds that they can’t ship their products to their customers, invoicing doesn’t work, or the company cannot meet federal or state regulations governing their industry. As a result, revenue, profits and customers are all lost.
These issues provide real-life lessons for vendors and integrators. In tomorrow’s blog, I will review what I told the assembled participants about what they can take away from the bad experience of others.
By Marcus Harris