7 Important Risks of ERP Implementation (With Solutions)

An image uploaded to Strapi
An image uploaded to Strapi

Aslam Hasan Khan

Technology

Planning, configuration and deployment for ERP is a whole process in itself. No wonder ERP implementation has a wide range of risks and challenges to offer.

In this post, you're going to read what Enterprise Resource Planning entails and some critical risks of ERP implementation.

What Is Enterprise Resource Planning (ERP)?

ERPs help automate the process of business operation management and make them more streamlined. Your ERP system would need to be implemented according to your requirements to support the necessary functions.

7 Common Risks Involved In ERP Implementation

Despite a simplified structure for ERP implementation, there could be several risks involved while trying to implement ERP solutions. Listed below are seven significant risks of ERP implementation:

Risk 1. Lack of Prompt Integration

A primary risk is the lack of something that is pivotal to the process of ERP implementation - integration. The key business process areas need to be well integrated during the implementation process or before it.

This involved assuring that all requirements are feasible to access with their functionalities. Also, redundant systems, features and tools should be eliminated to make the process more streamlined.

The usability of these distinct departments with each other is vital. While all these system functionalities and processes are available, are they feasible to use with each other? Are financial metrics easily communicated and updated? Premium software and tools for detailed process management and their proper integration pose a possible risk area.

Possible Solutions

Trying to cover for the risk of lack of integration involves some key areas. The ERP development team should prioritize these during implementation:

  • Checking for the availability of various processes and tools.
  • Getting in touch with skilled end-users to test the functionality.
  • Eliminating any redundant processes/tools after proper assessment.

Risk 2. Unstable Project Management & Unskilled end-users

This is lack of expertise on either side - for managing the project and using the system on the other end. To begin with, ERP structuring and implementation is a complex project. If ideas from the assessment table to development, planning and implementation are not managed well, things could go sideways.

The experience of team members, the technology used, structuring, and the management of these dynamic departments is vital to ERP implementation success.

On the other hand, even if you were to succeed in this, unskilled end-users or those not skilled enough for the sophistication of what you have designed will never benefit to the fullest from the ERP system.

Possible solutions

In this case, solutions to both end problems involve detailed assessment before getting started. Some things that could help avoid this risk include:

  • Assess project requirements, segregate departments with individual managers and prompt management for the overall project separately.
  • Make sure you can sustain the project management systems put in place for the project's duration.
  • Find out the expertise or skill level of the expected end-users. The simplicity or sophistication of the software can be tuned to match the same during implementation.

Learn about: Main components of ERP

Risk 3. Mismatch of Software Design with Business Processes

This risk, in simple words, involves going for something too fancy or "apparently" useful, but not actually so. Often on the ideation table, experts present many plausible options that might not match your business processes.

Despite their high level of sophistication or complexity, while it might seem like a good idea to have these in your software design, you'd never end up using them.

A mismatch between how your ERP software has been developed/designed and your actual core business process will eventually defy the purpose of having an ERP system at all. True expertise on the implementation desk always recommends building around the focal business processes and not to match them!

Possible solutions

To avoid the risk of an evident lack of synchronization between your business and ERP design, start from the assessment of focal process requirements.

  • Consider the business processes employed by the company and not the particular business industry in general.
  • Enquire about any changes or redesigning of focal business processes already done or expected in the near future.
  • Feedback from employees and everyday users about existing mismatches before implementation can be helpful.

Relevant Read:


Risk 4. Nonā€“consideration of Business Dynamics and Change Management

While most ERP systems are developed to accommodate real-time monitoring and processing, some still fail to consider the dynamic requirements of the business and company as a whole. On one hand, ERPs are designed to make the jobs of ground-level employees streamlined; on the other, it is possible their traditional working methods clash with the same.

Considering changing practices in the business and the practices becomes vital to avoid running a risk of non-functionality. Awareness and prompt handling of this change management at all levels become another necessary aspect for ensuring that the system is understood and used the way it was intended.

Possible solutions

Some solutions to avoid this risk can come from creating awareness on both development and user ends for understanding why developing the right ERP specifications can be beneficial.

  • Change management programs to make ground-level employees understand how ERPs can be incorporated with their current working methods.
  • Encourage the transition with proper training to be able to adapt to it.
  • Consider changing business and system dynamics before finalizing the ERP design.

Looking to improve, analyze and improve efficiency of business processes? Contact our experts and learn how we can help you in process mining solutions.


Risk 5. Compromised Technology Planning

Integration of the right technology and prompt planning for it becomes extremely important while implementing ERP. It, thus, also becomes a risk factor that could compromise functionality, scope, complexity, and sophistication all at once.

This includes including new technologies that are scalable and integrable with existing systems. The size of the application to accommodate the required number of users and cross-platform functionality are a few more areas of concern during ERP implementation.

Possible solutions

Great planning and technical expertise on the team can help combat this risk effectively.

  • Assess the existing technological infrastructure and plan the ERP design to accommodate the same.
  • If any technological updates are being made, understand how these are going to remain relevant at the functional level.
  • Bank of technological newness and complexity only after considering the ground level use with existing systems.

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Risk 6. Cost Overruns

Running over the budget with ERP projects is not very uncommon. Less detailed plans are often responsible for businesses to underestimate their final budget while retaining elaborate plans for their ERP systems. These result in significant cost overruns, which interfere with the financials of the company at many levels.

In addition to the cost of collaborating with ERP development consultants and vendors, the cost of training staff to bring these new systems to use is often not considered.

Overall, a lack of adequately researching requirements for the design and assessing it against the available budget leads to significantly blowing up the budget.

Possible solutions

Research, assessment, and financial planning can be support measures to avoid running this ERP implementation and development risk.

  • Start with setting a budget first to ascertain a suitable amount for ERP development.
  • Match your expectations for development, training, and additional costs with the set budget to see if any changes are to be made to either the budget or development plans.
  • With detailed planning, ensure your development partners stick to the plan to ensure you don't cross the project cost.

Risk 7. Part-time Employees or Managers

Many roles within an ERP development project are non-specific or taken up by part-time employees. Some of these employees/managers could be unavailable mid-project or be unable to commit to a certain required role within the project.

Along with project officials, the ERP operators also might fit into this bracket. Retention of skilled professionals involved in the implementation process and post-implementation operations pose some risk in the long term.

Possible solutions

To overcome these risks, we can propose certain solutions:

  • Consider backup professionals and supplementary workers for the entire duration of the project.
  • Technical aid through RPA implementation or Robotic Process Automation can be a backup for human interaction with the software at the business end.

Benefits of ERP Implementation

Despite the major risks involved in getting your ERP set up right, implementing ERP solutions for your business processes has significant benefits.

Some key benefits of prompt and robust ERP implementation include:

  • Real-time data enhancing and reporting
  • Improved efficiency for the integration of information
  • Faster response and query resolution time
  • Streamlined workflows
  • Improved financial planning
  • Enhanced data security and structured accessibility.

It is safe to say that the risks and benefits of ERP implementation can be juggled with by banking on the right ERP development company.

Want to steer away from these ERP implementation risks? Sofyrus can be the best bet as your development partner.


Final Words

Thus, implementing a robust ERP system for your business is a band-wagon that you simply cannot miss getting on.

To be able to focus on key business decisions, work processes, and other strenuous tasks at hand, a central and properly managed system can be the key to communication for employees at all levels.

The only key to success here is to ensure you rely only on the best ERP development to rise out of the tide of these risks of ERP implementation.

Need help in ERP implementation, contact our team of experts and learn how we can help your business.

An image uploaded to Strapi
Aslam Hasan Khan

ERP software implementation has a lot of risks and challenges. Learn about the 7 common ERP implementation risks and how to avoid them.