ERP Failure Definition & Predictors Podcast – Part One

DAN MITZENMACHER: My name is Dan Mitzenmacher, Managing Director, Strategy and Transformation Services. In this episode we'll take a deep dive into the world of ERP rescue and recovery and explore best practices and considerations when selecting and implementing an ERP system.

DAN MITZENMACHER: I'm joined by my colleague Jim Holman, Director and Strategy and Operations Leader. We're both part of Cherry Bekaert's digital advisory practice, which guides our clients forward in their digital transformation journey.

JIM HOLMAN: It's a privilege to be here. ERP systems are the backbone of many organizations' back-end operations, streamlining processes and centralizing data. These implementations are tough, and when they don't go as planned there is still time to get back on track and head the project in the right direction.

DAN MITZENMACHER: Jim, you've moderated many of these Digital Journeys podcasts, but today we're going to put you on the hot seat since we both have a lot of experience in ERP implementations and working with clients on planning and execution. We're going to get deep into ERP projects and what to do when they're going off the rails.

DAN MITZENMACHER: Let's start by talking about what ERP failures look like and what key predictors indicate a troubled ERP project. In your experience, how would you define an ERP implementation failure, and what are some indicators that a project may be headed toward issues?

JIM HOLMAN: ERP implementations are incredibly expensive, disruptive, and time-consuming when they work. In a nutshell, an ERP implementation fails if it does not meet the organization's objectives — for example, budget or timeline — if it fails to deliver the expected business benefits, or if integration and software management issues prevent the business from realizing the intended outcomes.

JIM HOLMAN: What have you seen with regard to ERP implementation failure?

DAN MITZENMACHER: These ERP projects are like heart surgery for a company when you're replacing the systems that run all financial and operational processes. As you move into go-live and sustaining an ERP project, companies often encounter scope, budget, and timeline challenges.

DAN MITZENMACHER: It's important to identify key risk factors up front and define a mitigation plan. Jim, you've been in the industry a long time and seen many implementations. What are common reasons behind ERP project failures?

JIM HOLMAN: Ironically, it's very rarely the ERP software platform itself. Most common ERP platforms are capable; sometimes there's not a good fit, but for the most part it's not the software.

JIM HOLMAN: What we see is improper planning and inefficient resourcing. Organizations often don't realize that people have their day job and are not allowed to dedicate 20 to 30 hours a week to the implementation. That ties into lack of executive support. The C-suite sometimes resents having key people engaged in non-revenue-generating activities, so responsibility gets delegated to less skilled parts of the organization.

JIM HOLMAN: Finally, we see cutovers with inadequate training, no go-live readiness assessment, and weak change management. Those factors cause projects to struggle.

DAN MITZENMACHER: I agree. Upfront planning, having the business case aligned at the executive level, the right team, and a clear work plan are critical. Throughout the project, consistent alignment on scope and progress is essential, and the final go-live depends on a coordinated readiness assessment and execution plan.

DAN MITZENMACHER: Jim, can you share an example where resource misallocation or inadequate stakeholder buy-in led to an ERP project failure?

JIM HOLMAN: Inadequate stakeholder buy-in is one of the most common issues. We often see investment in unused modules or inappropriate customizations. Organizations sometimes port over everything from their old ERP into the new ERP, which makes the system difficult to manage and costly.

JIM HOLMAN: Another issue is purchasing or subscribing to technology on a multi-year contract without realizing the long-term commitment. When key stakeholders are not fully on board, projects tend to accumulate extra features that don't add value, leading to underperformance and higher costs.

JIM HOLMAN: That often results in department heads not understanding system configuration. When buy-in is lost, implementation reversion occurs: users go through the motions but revert to old systems and habits.

DAN MITZENMACHER: That happens across industry sectors. Many struggle with aligning business process requirements to the software capabilities. Teams often jump to customization rather than adapting processes to the software's best practices, which leads to over-customization and complexity.

DAN MITZENMACHER: Have you noticed less obvious signs that an ERP project might be in trouble, and how do you advise clients to address these issues before they escalate?

JIM HOLMAN: A common engagement for us is a go-live readiness check when a client feels the project is off the rails. One area we examine is data migration. Before cutover, you need to verify that critical data from the old system — customer orders, purchase orders, invoices, payables, and receivables — has been migrated correctly.

JIM HOLMAN: End users often detect data issues during user acceptance testing. We also review project plans from the system integrator or implementer, looking for sliding delivery dates and milestones on the Gantt chart. Finally, we check user acceptance testing logs to ensure testing was executed and documented rather than performed as lip service.

JIM HOLMAN: These issues are often detected below the C-suite; end users and project governance reveal the warning signs.

DAN MITZENMACHER: Data is key. When transferring from a legacy system, cleansing and validating data prior to migration is essential. Project management plays a critical role in ensuring a repeatable process to test transitions and validate that the new system meets requirements.

DAN MITZENMACHER: Planning adequate time and steps to test the transition is difficult but necessary. This has been a useful discussion and just the start of topics we've seen regarding ERP issues and failures.

DAN MITZENMACHER: I look forward to continuing this discussion in subsequent sessions to cover ERP strategy, stakeholder engagement, change management, and additional complexities in the ERP lifecycle.

JIM HOLMAN: I look forward to that as well.

DAN MITZENMACHER: If your company is starting an ERP journey, is in a challenging ERP project, or has completed an implementation with issues, reach out to Jim or me to help guide you forward in your ERP journey and to request an assessment to assist you along the way.