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The potential cost of an ERP failure

about 2 years ago by Nick Butler
Copy Of Erp

ERP has a reputation for being difficult and expensive to implement, not because it actually is when planned correctly, but due to a number of high-profile examples of organisations who have got it spectacularly wrong. Even though hundreds of companies are successfully turning to ERP as an integral part of their digital transformation journey, the software’s colourful history is littered with some very public, expensive horror stories.

Here are half a dozen notable ERP disasters, not showcased to point a mocking finger of blame, but as an exercise in learning from their mistakes. Even though most of these failed implementations are on a scale way larger than most businesses would ever need to consider, the fundamentals of what NOT to do remain the same. Each one highlights the importance of getting certain basic steps right.

Choose the right software

Both Revlon and Elizabeth Arden had been through successful ERP implementations (with Microsoft Dynamics AX and Oracle Fusion respectively), but when the former acquired the latter, they decided to change both to SAP HANA – while they were still merging multiple business operations elsewhere. The go-live brought one of their major manufacturing facilities to a standstill, resulting in millions of lost sales, which were only announced to shareholders via the filing of financial results, resulting in the stock plummeting and a huge negative ROI for the implementation.

Choose the right integration partner

MillerCoors had grown so much through acquisitions and consolidations that it was at one point running seven different versions of SAP software that it wanted to unify. It spent $100m on an implementation, hiring HCL as their integration partner, who they then sued when the implementation failed, claiming they had inadequately staffed the project. HCL countersued, claiming the real cause of the failure was actually MillerCoors own management.

Choose the optimum time to go live

National Grid in the US spent $1bn investing in an SAP implementation that after three years was overdue. Realising that missing their go-live date would cost many more millions, they decided to go ahead – less than one week after Hurricane Sandy had left millions of customers without power. They couldn’t have picked a worse time and the implementation failed, resulting in them spending $100m to stabilise fundamentals such as employee pay and financial reporting, as well as a lawsuit against their integration partner.

Make sure business processes influence the tech, not vice versa

Two huge German companies, Lidl and SAP, began an ERP implementation together in 2011 to upgrade Lidl’s inventory system. After seven years and €500m, Lidl scrapped the project because of one elementary point in their business processes that they didn’t want to change: SAP needed to be customised from the inventory being based on retail price to Lidl’s preferred method of price paid. They couldn’t do it – a point that should have been clarified seven years beforehand.

Identify and mitigate risk

When Vodafone tried to consolidate its CRM systems, not all of their customer accounts migrated properly. Neither the project team, the executive management, or the vendor saw it coming or took responsibility for the failure but were forced to admit it when customers complained that their payments weren’t being credited to their accounts. It was an expensive error in such a regulated telecoms sector, with the company getting a £4.6m fine for not considering every aspect of risk effectively.

Test and test again

Fortune 500 company Hershey’s implemented SAP too soon and too fast, not properly testing that their day-to-day business processes could be maintained during the implementation period. They unrealistically assumed that they could go live anyway and chose to do it over one of their busiest weeks of the year – Halloween. They very quickly found out that the supply chain elements weren’t integrated correctly, resulting in them not being able to deliver $100m of orders that season. On top of that financial loss, their stock also dropped 8% as a direct result.