ERP Implementation Failure Rate
ERP stands for Enterprise Resource Planning system. It has many definitions but in short, it is a unified system that attempts to integrate most (if not all) data sources and processes in the organization into one system, so that it is possible and easier to manage the organization in one piece, areas integrated include but not limited to accounting, finance, budgeting, human resource, material flows, customer relationship management, marketing, supply chain, procurement, etc.
I spent my whole career helping companies integrate their different data sources into one and map out the best data management solution for companies, so that it is possible for them to implement an ERP. Of course integrate data sources is only part of the whole implementation process, but a large part of it.
So, if you found your way to this article, I am assuming you must be thinking of implementing an ERP system for your company.
In general it is hard to determine the failure rate of ERP, as the successful rate can depend on a lot of other factors such as which ERP package do you use, what is your company’s size and history, etc. In this article I am not going to dive into deep research and analysis on the fail rate of ERP, but I will give you a sense of what you will be facing when implementing an EPR.
According to KPMG Canada Survey in 1997, over 61% of the projects that were analyzed were deemed to have failed. In 2001, Robbins-Gioia Survey found 51% of the participants viewed their ERP implemention as unsuccessful. In 2008, the UK’s Office for National Statistics found that only 6.5% of 8000 businesses surveyed were using ERP systems in 2006. In this article by Bob Lewise in infoworld.com, he even claimed that 70% of ERP implementation failed.
Of course, despite the fact that implementing an ERP system is a huge task, most ERP package companies such as SAP, IFS, Oracle Finance, SAS ERP, just to name a few, will have tried their best to prove to you that it is easy and can be done. They will show you why you want to buy their package over their competitors with white papers and their own research papers. I am not saying it cannot be done. In my opinion it has to be done to ensure long term business success. But keep in mind that, it takes a lot of time and resources, costs, and frustration to put one together.
It just scares me that a lot of clients and executives buy into the idea that an ERP is the way to go, and as if it can happen magically overnight just by buying an ERP package.
References:
http://www.it-cortex.com/Stat_Failure_Rate.htm
http://www.itworldcanada.com/Pages/Docbase/ViewArticle.aspx?id=idgml-6ee5c716-ce35-4f8f-8c8d-55dfcfe2b38a
http://www.infoworld.com/articles/op/xml/01/10/29/011029opsurvival.html
