Avoiding ERP Implementation Failure: Common Risks and How to Manage Them

ERP projects are high-risk, high-reward undertakings. Enterprises often embark on digital transformations to drive future growth and improve performance. However, while companies focus on ambitious objectives, they rarely emphasize the inherent risks associated with transformation initiatives. In an IT landscape that is constantly evolving, staying competitive often means taking these risks head-on. This means not only identifying the common risks associated with ERP implementations but charting a course to mitigate them throughout your initiative.

Here, I will outline a few common risks that organizations undergoing ERP transformations are facing and strategies for mitigating and managing each of those risks.

Common Risks in ERP Implementations 

ERP implementations come with numerous risks. Here are three common challenges that, if not addressed, can significantly increase costs, reduce ROI, or limit functionality at delivery:

1. Scope Management: Scope creep refers to the expansion of project scope beyond the initial estimates set during the program’s Phase 0 or initial RFP responses. During the design phase, it’s typical for scope to grow by 8-15%. However, excessive expansion can lead to increased costs and delayed timelines. Additionally, an organization’s initial goal to reduce technical debt and standardize business process can quickly become compromised.
2. Late User Engagement: Delayed user engagement and low adoption is a significant risk that can undermine your transformation’s value. Warning signs often appear during design, testing, and training, but the full impact of this risk is felt after go-live. Insufficient user engagement can lead to the late detection of issues and gaps which results in extended timelines, increased costs and reduced end user confidence.
3. Integration Issues: Integrating an ERP platform like SAP or Oracle with legacy systems and third-party apps poses serious challenges. If clear roles are not established at the start of your program, the integration responsibility often falls on the client rather than the System Integrator (SI), creating gaps that lead to delays, overruns and improper testing.

Mitigation Strategies for Each Risk

Proactive strategies are essential to mitigate risks around scope, user adoption, and integration. Here are some ways to mitigate those risks when you catch the warning signs of them happening throughout your initiative’s lifecycle:

1. Scope Management:
   • Identify and document unique internal and statutory requirements from the start.
   • Empower decision-makers on both client and vendor teams. Replace underperformers quickly.
   • Monitor progress in challenging workstreams and address performance gaps immediately.
   • Establish a clear process to review and rationalize scope deviations. Don’t only focus on the ‘what’ but understand the ‘why’.
2. User Engagement:
   • Start user engagement on day one with strong messaging and support from leadership.
   • Ensure that user involvement in requirements, design, and testing is prioritized.
   • Align adoption strategies with company culture and use influential stakeholders to drive communication.
   • Solicit end user feedback on existing pain points that could potentially be addressed as part of the implementation program, this can increase user buy-in.
3. Integration Issues:
   • Assess legacy and third-party integration needs early.
   • Include end-to-end integration testing as part of your testing strategy, communicate early and often with partners to align expectations and readiness
   • Clearly define responsibilities for each integration point.
   • Allocate resources for thorough testing to minimize disruptions at go-live.

Tools and Techniques for Effective Risk Management

The following tools and frameworks have helped our clients manage ERP risks effectively:

• Scope Control Mechanism: Establish clear guidelines and expectations for the use of a Change Control Board (CCB) to officially review and approve scope changes before they are started.
• Stakeholder Engagement Scorecards: Track engagement levels to gauge user readiness and buy-in throughout the project.
• Integration Responsibility and Resource Planning: Integration responsibilities are clearly detailed in a RACI (Responsible, Accountable, Consulted, Informed) matrix, ensuring that all roles are defined. Sufficient legacy or third-party resources are allocated to supplement client teams, mitigating risk and ensuring integration efforts stay on track.
• Risk Assessment Framework: A transformation assessment that identifies potential pitfalls early, allowing for proactive mitigation and course correction.

Securing Your ERP Journey

ERP implementations carry significant risks, but proactive risk management can make all the difference. Identifying risks early, involving the right stakeholders, and establishing structured governance keeps ERP projects on track and ensures business value.

Keep your ERP transformation on course with expert guidance from UpperEdge.  Our proven Project Execution Advisory Services provide the governance, risk mitigation and strategic oversight needed to drive success and maximize business value.