In Barcelona this week, consultancy Gartner once again tried to answer one of the perennial questions in IT: what is it about ERP projects that makes them so likely to fail?
The US Air Force, retail giant Lidl, brewer MillerCoors, and cosmetics brand Revlon have all suffered high-profile ERP disasters, but Birmingham City Council, Europe's largest local authority, topped them all by going live with an Oracle system that was not ready, leading to financial crisis and a decision to reimplement the software, taking the total project costs from around £19 million to £170 million.
According to Dixie John, senior director of ERP strategy at Gartner, such projects are inherently complex and a schism often develops between the IT department and other business leaders.
"There's so much that can go wrong," she told The Register. "From the beginning, we're talking with clients, and we're hearing a technology conversation without any type of business input, and that happened today. We're always steering clients back to the fact that this is business transformation. There needs to be executive sponsorship, there needs to be evidence that the organization is actually preparing itself for change – how they're going to operate – and not just replacing an application."
Presenting at the global analyst firm's Symposium conference, John said bad business cases, unrealistic scope, underestimated complexity, and scope creep were among the common contributors to ERP disasters. These are joined by conflicting stakeholder interests, customization being too wedded to existing processes, and limited organizational change management.
Collectively, these contribute to 70 percent of ERP initiatives failing to fully meet their original business use case goals, and 25 percent fail catastrophically, John said.
Data from 2023 gives an indication of why. The survey of 251 tech leaders found 73 percent thought their organization's ERP strategy was not strongly aligned with their business strategy.
The idea is that ERP data should be at the heart of financial planning and decision-making, but there is a reasonable chance that people setting the business strategy are in the dark about what ERP actually is. "They don't understand it" John said. "It's almost as though they say, 'I know I need to do it, but I don't know the impact.' There is this requirement, from an IT standpoint, to educate the business about those things."
"You can't speed date and build a house," she added. "You have to have built out a relationship with the business so that when the ERP does come around, it is a project of shared values and shared risk that you're taking on as an organization together. It's not IT and business, it is a shared responsibility."
Generating such an ethos should start with securing visible executive sponsorship and, together with business leads, building organizational oversight through all phases of the project, she said.
While it is is important to recognize the potential for failures, she added, IT should focus business minds on what it can achieve if all goes to plan. Targets such as more rapid product launches and flexible manufacturing are good examples.
Someone should have told Birmingham City Council. ®
Source: The register