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How to Avoid Going to Trial Over an ERP Failure

How to Avoid Going to Trial Over an ERP Failure

At the beginning of an ERP implementation, no one involved wants or expects to get caught up in a lawsuit. Despite the fact that, according to our 2013 ERP Report, most ERP implementations take longer than expected, cost more than expected, and fail to deliver expected business benefits, most organizations commence their projects with the best of intentions. Other than the occasional CIO or CFO who is afraid of losing his or her job, not many are thinking about ERP failure this early in the project.

However, it is helpful to think about and understand the role and risk of ERP failure throughout the project lifecycle. This understanding will help you to mitigate potential and common risks by ensuring a “Plan B” is in place in the event that some of those risks come to fruition. From the onset of an ERP software initiative, it is very helpful to have the “plan for a worst case scenario” mindset of an attorney.

For example, many ERP failures and lawsuits involve instances of misaligned expectations regarding roles played in the project by both the implementing organization and the ERP vendor. The implementing company may expect that the vendor is going to take responsibility for activities such as data migration, business process documentation, training and other critical elements required for ERP success. However, these expectations may not necessarily be outlined in the contract and statement of work. If these expectations aren’t clearly outlined and understood in the contracts, things can get pretty messy if litigation occurs.

Safeguards Against ERP Failure

There are a number of pitfalls inherent in any project and a myriad of lessons that we’ve learned within Panorama’s ERP Expert Witness practice. When embarking on an ERP implementation, here are a handful of things to keep in mind to plan for a potential worst case litigation scenario:

Clearly define roles and expectations in your contracts
It may seem reasonable to expect that your ERP vendor will handle everything required to make your implementation successful, but you don’t want to assume anything unless it’s stated in your contract or statement of work. Remember that you are probably dealing with a sales rep – not an attorney – when discussing the needs of the project, so it’s up to you to make sure that expectations are clearly outlined in the contract. This is especially true if you have a fixed-bid or not-to-exceed engagement, in which case your vendor or systems integrator will have a negative incentive to take on additional work that might be required for a successful project.

Recognize that a successful ERP implementation is a lot less expensive than a lawsuit
It may look good on paper to skimp on organizational change management because you don’t think you need it or to gloss over business process reengineering because you assume the software will tell you how to run your business, but it’s important to remember that investing in these critical activities is a lot less expensive than pursuing or defending a lawsuit. Think of it as an insurance policy: the incremental cost and time associated with ERP critical success factors such as strong project management, organizational change management and business process reengineering is a small price to pay to make a project successful.

>Remember that ERP vendors cannot fix your business
Even though ERP systems have the capability to transform your business, there is no magic button when it comes to implementation. Your executive team still has to decide how the business should operate, how much it will standardize, and how fast it needs to make decisions to keep the project on track. ERP vendors are capable of implementing software, but most are not good at transforming your business. For that transformation to happen, you need to invest in non-technical activities (such as those mentioned in point two) that involve ensuring the people, business processes and project are all on track for success. As stands to reason, these kinds of activities are typically outside the scope of most ERP vendors.

The beauty is that even though it is likely your project won’t go to trial, having these risk mitigation buffers in place will make your ERP implementation even more successful.

[This post originally appeared on Panorama Consulting’s 360 ERP blog and is republished with permission.]

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  • Consultant

Panorama Consulting

ERP Consultant, Panorama Consulting Solutions
Independent ERP Expert
Panorama Consulting Solutions is an independent, niche consulting firm specializing in digital transformation and ERP systems expertise for mid- to large-sized private- and public-sector organizations worldwide. One-hundred percent technology agnostic and independent of vendor affiliation, Panorama offers a phased and ...