ERP Implementation Failures and How to Avoid Them

December 15, 2022
 / 
by 
Sohaib Zaidi

Table of contents

Enterprise resource planning (ERP) software is a critical investment for your business. ERPs radically improve productivity and operational efficiency by enabling real-time actionable insights and business agility.

However, a poorly planned ERP implementation can have serious business consequences, including cost overruns, system downtime, security lapses, & business process disruptions. According to Gartner, 75% of ERP projects fail. McKinsey also states that more 70% of all digital transformations fail to achieve their desired ROI.

In this blog post, we’ll discuss recent ERP implementation failures, reasons why they failed, and how your organization can avoid these pitfalls.

| Download now: The 2022 State of ERP Testing Report

Recent ERP implementation failures

Citibank: Citibank lost over $500 million in what a federal judge called “one of the biggest blunders in banking history” which happened as a result of a failed Oracle Flexcube ERP implementation. The new interface wasn’t properly tested and ended up causing Citibank to accidentally pay back the entire principal on a loan that wasn’t due until 2023.

- Lesson learned: Automated testing of the ERP, along with User Acceptance Testing (UAT) from business users performing these types of transactions, could have prevented this failure. In the court filing, Citigroup stated, “If you want to switch from one provider to another, it’s a very big project. Changes in providers are very cumbersome and very hard. Unfortunately, the manual checks of that selection also failed to detect the mistake.”

Haribo: In 2018, German candy-maker Haribo underwent a major SAP S/4HANA migration to streamline its production and modernize its outdated supply chain management system. However, the migration wasn’t as smooth as anticipated and led to a supply chain breakage that led to a 25% decline in sales.

- Lesson learned: Testing is vital to the success of any ERP implementation. With multiple rounds of testing, you can check for various quality controls, including supply chain. The earlier major problems and bugs are detected before a go-live date, the sooner the necessary steps can be taken to fix them.

Revlon: In 2017, Revlon experienced severe delays in its S/4 HANA implementation project, causing the company to miss important financial reporting deadlines. The delays were a direct result of attempting to consolidate Microsoft and Oracle systems without proper testing on the new SAP platform before going live. As a result,, Revlon’s stock price fell by almost 7% in just 24 hours and a lawsuit was filed against the company.

- Lesson learned: Revlon’s lack of planning as well as significant operational issues prior to the SAP implementation led to unnecessary bottlenecks that caused the costly delays. Also, the company should have never gone live with the ERP without undergoing proper UAT testing first.

Gaston County Schools: Just a few months ago, teachers at Gaston County protested outside of the North Carolina School Board meeting because they were receiving incorrect pay or weren't paid at all due to a newly migrated Oracle payroll system The district had to recruit a full-time Oracle coordinator, retained a consulting company, and established a dedicated customer support center to better respond to complaints in an effort to fix these problems.

- Lesson learned: Testing is absolutely critical for ERP migrations.

| Learn more: The How to Address ERP Transformation Challenges

Why early testing & UAT are key to avoiding ERP implementation failure

Successful ERP implementations require a robust implementation plan along with early testing and User Acceptance Testing (UAT).

According to IBM, it costs 6X more to fix a software bug found during the implementation phase–right before go live–than earlier, during the design phase.

To succeed in their digital transformation journeys, organizations undertaking ERP projects must incorporate testing earlier in the software development process. Testing early, testing often, and using automation to efficiently find  software bugs  in  the software development life cycle is  critical.

Organizations also can’t overlook user acceptance testing as one of the critical success factors of ERP implementation. UAT allows business users to test ERP software right before go-live based on their unique business requirements. This ensures the ERP fulfills actual needs, and helps build confidence in the ERP because end users gain first-hand experience in a safe setting prior to going live.

Conclusion

ERP implementations fail mainly due to improper testing strategies. To avoid the fate of the organizations described in this blog, you should establish a robust test plan and implement automated testing for your ERP implementations.

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