Some of The Most Common ERP Mistakes Made by Companies
Executive Summary
- ERP mistakes are are common in ERP selection and implementation.
- This article explains the top mistakes we have seen.
Introduction
Having seen many ERP purchases and implementations, we have identified some of the most common ERP mistakes.
ERP Mistakes #1: Selecting a Poor ERP Software Selection Advisor
This is normally not a mentioned item. However, there is a greater probability that the company will select a financially biased ERP system selection advisor than not do so. The straightforward reason for this is that most ERP system selection advisors have a financial bias.
For example, the major IT consulting firms. It is impossible for any of these companies (Accenture, Deloitte, Infosys, etc..) to claim independence, as each of them has public partnership agreements and practices with specific software vendors. So instead of discussing the “independence angle,” these companies tend to try to get their clients to ignore the issue’s importance. And they are very successful at doing this as ERP software selection vendors perform the bulk of software selection advisement in the major developed countries.
The content produced by nearly every entity that offers ERP system selection services that we have read will normally parrot the claims made by ERP vendors. This shows a lack of independence from the industry.
Therefore, most companies are interested in selecting an ERP system begin their search with an untrustworthy ERP system selection advisor. These advisors tend to recommend their clients to the most expensive solutions.
ERP Mistakes #2: Not Questioning if an ERP System is Necessary
Many companies are poor fits for ERP systems. However, it is nearly unheard of for an ERP system selection advisor to recommend anything but an ERP system once the selection project has begun.
This is not the approach we recommend. Rather, it is through analyzing the business requirements that one determines if an ERP system is the best possible option. For example, in some companies, a bank would be a good example, such as a small percentage of an ERP system’s overall functionality, that purchasing an ERP system is a major waste. Other companies have so many custom requirements that being pushed into the generic functionality offered by ERP systems is a step back. These are just a few reasons that, in many cases, the best system for a company looking to purchase an ERP system is not an ERP system.
ERP Mistakes #3: Not Considering Open Source ERP
One of the first things the ERP system selection advisors will do is rule out open source ERP. The major IT consulting firms only want to implement commercial ERP solutions to make the highest profits. Even supposedly non-implementing advisors like Panorama Consulting rule out open source, as is covered in the article How Predictable Was Panorama Consulting’s Opinion on Open Source ERP?
Open source ERP should be considered as there are many good options, and open source ERP allows one to begin using and configuring an ERP system at very low risk and cost. Even if it is not the selected system, it is good to perform testing and mini-test implementations of open source ERP.
Secondly, open-source ERP can be far more easily customized than proprietary ERP systems. And this gets to the next mistake.
ERP Mistakes #4: Underestimating the Amount of Custom Development
Both the IT consulting firms and the ERP software vendors make a big effort to delude the customer into thinking that there will be far less customization required of an ERP system than there will be in practice.
There are several reasons for this.
- The ERP vendor will, without fail, overstate how much of a match their functionality is for the requirements as they are trying to sell an ERP system.
- The IT consulting firm is essentially a proxy for the ERP vendor and will agree with the sales information that they provide to the prospect.
The point is to get the customer to buy and then worry about dealing with the repercussions of these false claims later. Once the customer begins implementation, they are locked in to continue, so there is virtually no negative business from the perspective of either the ERP vendor or the IT consulting firm about misrepresenting the coverage.
One of the worst situations is where the ERP vendor ends up prescribing the development language and environment. This is how SAP does things, and they state they require customers to use their proprietary language called ABAP. This simply pulls the customer into more dependency with SAP. Companies implementing ERP systems should insist that they control the development language and choose an open language to perform this development.
Conclusion
There are certainly more ERP mistakes than companies make, but these are significant ones and ones which none of the firms that specialize in ERP will talk about.
The ERP industry is designed to get customers “on the ramp” to implement ERP systems and extract the most out of them. This extractive model is one reason that the ROI on ERP systems is typically so weak.