ERP PROJECTS FAILURE: ANALYSIS OF CRITICAL FACTORS BASED ON INTERNATIONAL MARKET

30 ERP projects failure all over the world ERP (Enterprise Resource Planning) Projects usually confront many problems at different stages of their implementation process, often leading to partial or complete failure of the implementation itself or their productive operation, with sometimes disastrous results for the enterprise or the organization involved. There are many factors causing these problems. The research attempts to indicate the most significant,
after the analysis of 30 ERP projects failure all over the world. The analysis, found that the leading factors causing the failure of an ERP project, are the wrong project designing and inadequacies in its management. As important factors have been identified, the lack of the support from the organization staff and the staff training, as well as factors related to inadequacies in the infrastructure and software and the ERP support after its productive operation. Finally, based on the research findings, proposals are suggested, for the successful implementation of ERP project systems, with special account to the characteristics of the ERP market.

TYPES OF ERP IMPLEMENTATION METHODS

There are 4 different types of Implementation methods

1. Bing Bang
2. Prototype
3. Phased
4. Parallel

Big bang adoption is a software migration method that involves getting rid of the existing system and transferring all users to the new system simultaneously. Implementation is faster with big bang adoption than other methods, such as parallel adoption, phased adoption and pilot conversions.

The most common implementation methods of an ERP system are the Big-bang method, the method of Prototype, Phased and the parallel implementation of a new system while the previous one works. An ERP software can be customized or pre-configured describes the methods of implementation and the type of ERP software in the cases studied. It is noted that most failures occurred when Big-bang implementation is chosen. Also, the type of ERP product is not significant in failures, since customized ones resulted in failures too. That means that the main reasons of failure is project design and inadequacies in its management.

Big bang adoption or direct changeover is the adoption type of the instant changeover, when everybody associated with the old system moves to the fully functioning new system on a given date. When a new system needs to be implemented in an organization, there are four different ways to adopt this new system: the big bang adoption, phased adoption and parallel adoption. In case of parallel adoption, the old and the new system are running parallel, so all the users can get used to the new system, and meanwhile do their work using the old system. Phased adoption means that the adoption will happen in several phases, so after each phase the system is a little nearer to be fully adopted. With the big bang adoption, the switch between using the old system and using the new system happens at one single date, the so-called instant changeover of the system. Everybody starts to use the new system at the same date and the old system will not be used anymore from that moment on. The big bang adoption type is riskier than other adoption types because there are fewer learning opportunities incorporated in the approach, so more preparation is needed to get to the big bang. This preparation will be described below, illustrated by the process-data model of the big bang adoption.

An ERP life consists of three major phases:

• Pre- implementation
• Implementation
• Post-implementation

The problems are obvious in post-implementation and the failure usually evident in this phase but the failure could be due to reasons from previous phases or to project design.
An ERP System has four components:

1. ERP software
2. Business Processes that ERP supports
3. Users
4. Hardware and Operating Systems that save and run ERP applications.

The failures in one or more of those four components could cause the failure of an ERP project. But an ERP project often fails when the Design, the Management or the business process reengineering fails. The wrong time of implementation can even cause the failure. As per the analysis analytically 30 failure cases and describe the factors that caused this. The most significant factors causing the failure of an ERP project, are the wrong project designing and inadequacies in its management. As important factors have been identified, the lack of the support from the organization staff and the staff training, as well as factors related to inadequacies in the infrastructure and software and the ERP support after its productive operation. The factors are summarized in groups according to the component of ERP System they belong to. In each case there is more than one factor that can cause failure and give below the percentage of main reason is shown.

63.33 % of the ERP Implementation failures are due to the following reasons:

• Business process reengineering 10.55 %
• Project Design 31.66 %
• Project Management 14.08 %
• Project scope – Object of project 3.52 %
• Timing 3.52 %

20.00 % of the ERP Implementation failures are due to the following reasons:

• Insufficient Training 5.71 %
• Lack of qualified personnel 2.86 %
• Insufficient cooperation between project teams 5.72 %
• Personnel rejection or reluctancy 5.71 %

16.67 % of the ERP Implementation failures are due to the following reasons:

• Data migration 3.33 %
• Connectivity, codes, reliability 6.67 %
• Unsupported processes or processes mistakes 6.67 %

Conclusions and Recommendations:

The implementation of an ERP project is a complex engagement. It is a high-risk project that needs to be managed and planned properly because it affects nearly every aspect of organizational performance and functioning. Organizations have to learn how to identify the critical factors that affect the implementation process and know what elements in the process can drive them effectively, so as to ensure that the promised benefits can be obtained and potential failures can be avoided. Also they have to develop techniques and approaches for the risk management of the ERP implementation projects.

According to the research outcomes, critical causes of the ERP Failures are:

• Underestimating complexity of planning, development and training needs, failure to involve users-employees, too much actions too fast
• insufficient training in new tasks, failure in data conversion and testing
• over-reliance on ERP vendors or consultants support.
• critical factor may be that in the pre- implementation phase (known as the planning phase) the vendor did not estimate the needs of the company sufficiently.

The vendor did not involve the company staff to succeed in a good result and proposed a system that finally could not accomplish the company expectations.

The most significant success factors are:

• Top Management commitment and Support
• Business Process Reengineering
• Use of Project management techniques in the implementation
• Change Management Culture & Program
• Clear Goals
• focus and scope (Business Plan and Vision)
• the right team Selection (competence),
• Avoidance customization
• User Training and Education
• Effective Communication
• Use of ERP’s consultants
• Vendor package selection
• Integration of the system
• Appropriate Management expectation
• Appropriate Business & IT Legacy Systems
• Software Development
• Testing & Troubleshooting
• Vendor Partnership
• Use of vendors’ development tools
• Performance Monitoring & Evaluation
• Management Structure
• Interdepartmental cooperation and communication

Over the past years only large and medium to large enterprises attempted to implement ERP systems. Nowadays the adoption of ERP systems is common even to the SMEs, bringing up problems in ERP implementation projects which are specific to these types of companies and therefore need to be properly analyzed. There is an evidence that inadequate project management leads to short term solutions, resulting from insufficiencies during the implementation phase, with substantial side effects when systems go live. The problem is to ensure a successful ERP project implementation to SMEs. An aggravating factor is that the small and small to medium-sized enterprises are unable to spend a lot of money and usually don’t have specialized personnel. Also, they do not have enough experience in similar projects and they do not easily trust consultants. ERP implementation failure is a major concern for companies resulting to limitations and mistakes.