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Risks of implementing ERP systems. Analysis based on organizational typologies

Successful implementation of ERP is a subject with a long history, which generated a huge case. In an attempt to increase the chances of success of such an approach, models were developed for implementation, setting “recipes” for success in situations considered extreme cases, generally negative, to help avoid common mistakes.

Despite these sources of information available, the major benefits of a successfully implemented ERP (inventory optimization, reduce operational costs, increase productivity, decrease response time in relationships with partners, reporting in real time, improved financial management, legislative updates, eliminating redundant data, etc.) cause companies to start the acquisition of such a system, without taking into account the strictly necessary implementation success.

As a result of practical experience, we noticed the existence of certain correlation between the needs for the decision to purchase and implementation risks. This correlation is due, mainly, almost exclusively sanitation company in efforts to identify and acquire a system to meet acute needs, awareness, ignoring the whole issue. Because the investment in an ERP, decision implementation is delayed by the time they found an inability to continue business in current conditions. Already, at that time, one or more deficiencies in the way they are developed business processes, generates a state of major frustration within the company, the affected segments, determining the management of the company to buy a system to eliminate, first, these tensions. Obviously, this time can commit a series of errors which we will try to emphasize.

In general, according to published studies, there are two types of motivations that lead to the implementation of an ERP:

1. Technological motivations
– Replacement of an unintegrated informational system (more applications, outdated technology or not, that operate independently).
– Replacement of one or more outdated technology systems, integrated or not.
– Improving quality and accessibility of information.
– Integration of business processes and systems that support them.
– Acquisition of a system able to support projected business increases.
– Simplifying integration of new business organizations (the acquisition of other companies) in the current technological infrastructure.

2. Operational motivations
– Optimizing business processes
– Structural cost reduction
– Improving response time to customer requests
– Simplify complex business processes, but ineffective
– Implementation of new business strategies
– Massive expansion of business
– Standardization of business processes at the company.

Statistically, the most important risk factors affecting implementation are:
– Lack of top management involvement in implementation. Delegating total responsibility leads to misunderstanding of project size, the human not being aware of the efforts made and incorrect estimation of the necessary resources. In the event of a major impasse, management can not take decisions, aims to unblock the situation.
– Poor definition of requirements. This situation appears to be responsible for 60% of the total implementation failure, as defined in the requirements is selected ERP system.
– The selection of a suitable ERP system. Besides the poor definition of requirements, the selection process is strongly affected following factors:
– The time which the team responsible will assign to the analysis of different systems.
Selecting a system based on the experience given by the makers of the system in some other companies, in previous jobs, regardless of differences between organizations.
Selecting a system directly by management, without taking into account the views of those directly involved in developing processes.
Selecting a specialized production activities for a company for import and distribution, or vice versa.
Inadequate allocation of resources. Lack of top management involvement in implementation or the desire to reduce costs leading to overbid implementation team for implementation and beyond. Often persons designated as responsible for the project did not experience an implementation and are not decision makers within the organization. A classic example is the designation of exclusive responsibility of implementing the task of IT departments.
– Resistance to change. Due to underestimation of implementation effort, management not further motivates the organization to active assimilation of the new system. This, combined with avoidance of ownership changes, the lack of communication and visible lack of support for the project by top management, creating new premises rejection.
– Wrong estimation of time and effort. Not a few times I heard from the leadership of companies wishing to implement a vision ERP following: an ERP is like a car. Going from a standard configuration, select the options you want, pay, get the key, food, and you are ready to go. It is quite clear that finality is a project from these expectations.
– Incorrect mapping of business processes on the ERP. Lack of experience on the part of the provider, doubled by a poor definition of requirements may lead to a dramatic decrease in productivity and the implementation of the rejection.
– Unrealistic expectations of benefits. The complexity of the implementation process, the major impact on the organization, the curve of the assimilation of staff by the user, leading to postpone the moment in which the benefits became apparent benefits.
– Inadequate training. Underestimation by both parties of the need for training, lack of attention in the training sessions, killing them in favor of resolving the current operational problems, leading in time for launching the system in production to a total or partial blocking activity of the organization.
– Poor planning and monitoring project implementation. If the implementation is detailed in a project plan with clearly defined phases, with phases of Acceptance and responsible with resources allocated to each phase of the project, will not be able to watch the unfolding implementation, burning phases, the project operational , the time remaining until completion, etc..
– Poor communication within the project. Organization must be informed choice regarding the reason an ERP implementation, what efforts are necessary and what benefits will arise after implementation. Processes implemented ERP have an interdepartmental, good communication is essential in the assimilation of coherence to the organization.
– Unnecessary cost cuts. The desire to reduce costs of implementation, may lead to reduce or eliminate certain phases of implementation, reducing the training period or restricting the implementation team. Big companies can choose to launch production in the system without a simulation stage and accepted the idea that in any Minuses will be the correct way. Risks assumed in this way are huge in the event of an unforeseen situations which may block the organization.

In what follows we will present a mix of motivations and risks, according to the common cases encountered in the market, depending on the situations in which organizations are located, relative to the implementation of an ERP-type solutions:

1. The company has an integrated, activity has increased, managers no longer controls the business.
2. The company has one or more systems that no longer meet current needs.

3. The company failed in implementing an ERP system and decides to reopen the process.

4. The company lost ground to the competition and sees a system in implementing an ERP solution rescue.

Here are the situations detailed below:
1. The company has an integrated, activity has increased, managers no longer controls the business. This case is most prone to extreme results. If the project successful, the positive differences will be so large that the case will become the reference, if it fails, destroys trust in the “miracle” for a long period of time.
– Poor definition of requirements.
– If the organization does not have a person who has participated in an ERP implementation, there is the likelihood that management is not aware of the risks of implementation. So you will define the objective needs.

The selection of a suitable ERP system
– Requirements are defined.
Being the first contact with an ERP system, everything will be wonderful in the presentations, there is a risk to chose at the first view.
– Poor communication within the project.

The company being an entrepreneurial business, it is very likely that work processes are not defined. Communication sessions are needed to decide how “things” flow in the future.
– Wrong estimation of time and effort

No processes are not defined expectations, knowing only that “it can not continue”.
– Inadequate training.
Required extended training with multi-stage verification of the level of knowledge absortie.
It is very possible to not have reserves of time spent training, due to current problems that depend exlusiv of staff skills.
– Discounts nefundamentate costs.

– There is no IT infrastructure.
Final cost of the project may result in decisions to reduce them.
– Incorrect mapping of business processes in ERP system

Perhaps the company is at a level where flexibility is a critical business advantage. ERP implementation of a rigid, very complex in relation to work performed, will lose it. Will be as rigid as their strongest competitors, but without benefits.

2. The company has one or more systems, integrated or not, that no longer meet current needs.


Poor definition of requirements.

The company focuses on identifying a software to solve current problems, is lost to all.
Resistance to change.

There is already created automatism that will be difficult to removed.
There are different degrees of satisfaction about various software used. If you approach a simultaneous implementation at the company, will create a current negative where the new system will not cover as well as the old application requirements, although the overall value added of the new system is indisputable.
Due to the existence of several applications, there is a degree of independence and flexibility. The new system is integrated, will require a rigorous flows in which the company will initially create tensions, particularly inter.
During the implementation process, it will discover all sorts of details that were treated more accessible in the old application, probably very customized in time on the specific client. If you do not understand the process of adaptation is one of duration, you can block implementation, lossing the major benefits brought about by an integrated system, which he will be adapted in time.
If current systems are developed in house, there is the likelihood that their creators to be a strong negative factor during implementation. Will be highlighted in any permanent implementation weaknesses, creating a negative on the current success of the project.

3. The company failed in implementing an ERP system and decides to reopen the process.


Resistance to change.
Implementation starts on a minefield. At the first sensation of already-vu, not real, they all return previous frustrations.
Wishing not repeat past mistakes, the decision of the new system is complicated, the duration, is required much opinion, not all objectives. There is a risk that, finally, to repeat the previous mistake, in another form. Pass from one extreme to another.
Poor communication within the project.

The provider’s effort to manage expectations and perceptions of control in various phases of the project are enormous. Policy makers who have responsibility for customer project should be well trained and willing to take extreme measures to ensure implementation purpose.
Poor definition of requirements.

The lack of objective analysis on the causes of previous failure, if the new implementation is not a great experience, can lead to assume exclusive responsibility under the project to it, the desire to catch the customer. Risks are in this major event for both partners.
Lack of top management involvement in implementation.

Lack of motivation of staff who already passed through a traumatic process can reduce the chances of massive success.

4. The company lost ground to the competition and sees a system in implementing an ERP solution rescue.


Unrealistic expectations of benefits.

The client ignores the fact that the ERP is a tool that optimizes complex / automates some functional business processes. In case these processes are not consistent, for various reasons, implementation of ERP will have an effect contrary to expectations.
Wrong estimation of time and effort.

Human and financial resources invested will be deeper and more customer situation. Is famous the phrase “managed the operation, the patient is dead.
Many other risks arising from the difference between customer expectations, its resources available and the specific context of the ecosystem of the client’s business.