Upon embarking upon ERP projects, the expectation is often that it will fail to meet many of the specified project outcomes, exceed the original budget and extend far beyond the estimated project time. According to CIO magazine, less than 10% of ERP projects are considered successful by executives. The majority of ERP projects were rated as only marginally successful while a third of were considered a failure.
Even so, companies spend billions of dollars each year on ERP projects. Below are excerpts from an article on the "Biggest ERP Failures ":
1. ERP project CityTime a waste time
An ERP project named CityTime, an effort by New York City to modernize its payroll system, has been dubbed the ERP failure of the decade. The project was originally budgeted for around US$60 million. The cost has since ballooned to $700 million-plus, according to the New York Daily News.
This December, New York Comptroller John Liu suspended Joel Bondy, executive director of the city's office of payroll administration, and stopped all payments to consulting firm Spherion until a thorough review has been conducted.
New York Mayor Michael Bloomberg has called the project a "disaster." New York officials simply did not understand just how complex the project would end up being, Bloomberg said. "Once they started, part of it was they just kept adding things that it made sense to do," he said.
2. ERP project liquidates profits at Lumber Liquidators
In November, Lumber Liquidators blamed a drop in third quarter profit on a failed ERP project. It sited the project significantly dampened worker productivity. But the problems were caused by employees having trouble figuring out the new system, rather than the software itself, according to the company.
"One feature of our previous system is that it was very flexible and easy to manipulate," CEO Jeffrey Griffiths said at the time. "SAP is much more structured, you follow steps, but it's much more stable. Because of that it was a change for us," he said.
Before buying into SAP, Lumber Liquidators had some clunky manual processes, even running some operations off spreadsheets, he said. With SAP, "we're confident that we're going to see significant improvements and benefits."
3. ERP project takes a bite out of Ross Systems
In December, a jury in Alabama awarded the pet food manufacturer, Sunshine Mills, $61 million in connection with a suit it had filed against ERP vendor Ross Systems, a subsidiary of CDC Software.
Ross Systems is planning to fight the verdict, saying Sunshine "knowingly purchased a beta version of the software" and that its claims were "subject to various limitations contained in the agreement between the parties."
But Daniel McDowell one of the attorneys who represented Sunshine Mills, said Ross Systems fooled the company, showing software that supposedly would work out of the box, but which failed miserably once it was turned on, McDowell said.
Who or what is to blame for the failure of ERP projects such as the ones sited above?
Would companies be better off not implementing ERP systems?