Enterprise System Spectator blog: ERP and enterprise system vendor evaluation, selection, and implementation.

The Enterprise System Spectator

Thursday, May 13, 2004

Four problems with ERP

Recently, a company asked my firm to do an evaluation of its ERP system. Users had become increasingly unhappy with the system, and management wanted an independent assessment to determine whether they had chosen the wrong system.

After a couple of weeks of interviewing users and studying the many complaints about the system, we sat down and analyzed the causes of each problem. In the past I have found it most helpful to group ERP problems into four categories.
  1. You've got a bad system. This category includes lack of needed ERP functionality, system performance problems, lack of scalability, system bugs, and ERP processes that don't match business processes. For example, the system might lock up whenever two users attempt to update the same customer master record. Or, the company might be a process industry manufacturer that is trying to use a package that was developed for discrete manufacturing. These problems are usually quite easy to spot. But although they can be serious, they do not always mean you'll need to replace the system. Sometimes a software or hardware upgrade will do the trick, or a customization may be possible.

  2. You've got a good system, but you set it up incorrectly. These problems include incorrect configuration settings and other problems with how the implementation was performed. For example, users might be complaining that product costs are not accurate, but the company has not set up the system with cost elements that are detailed enough. Or, users might be complaining that inventory counts are inaccurate, but the system has been set up with one big "four wall" inventory bucket, instead of bin location level tracking.

  3. You've got a good system, but you aren't using it. Examples could be that the original implementation was incomplete, or that the implementation was broken into phases and Phase II was never started. Other times, the problem is ignorance. It's surprising how often companies don't know what features they have in the software they already own. I have seen companies buy additional point solutions, or modify their systems, all the while their original system could have provided the same functionality, if they had just looked for it.

  4. You've got a good system, but you're using it ineffectively. In this category, I lump together all kinds of problems with business practices, such as data inaccuracy, lack of user procedures, lack of training, lack of discipline, and organizational problems. The system never has a chance to perform well, because the business is not using it effectively.
Back to my client. When we looked at this company's problems, we found that out of 15 major problem areas, the breakdown by category was as follows. (Most problems had multiple factors, so the total adds up to more than 100%):
1. Bad system:27%
2. Set up problems:33%
3. Non-use of the system:73%
4. Ineffective use:40%
As can be seen in this company, only 27% of the problem areas involved problems with the ERP system directly. The bulk of the problems were simply that the company was not using the system. For example, users had come to the belief that the system was mainly an accounting system, that it had been selected by the accountants, and that it was not a good manufacturing system. However, a quick look indicated that most of the manufacturing functionality had not been implemented! Ironically, the system had been originally selected because of its strength in the type of manufacturing that this company does, not because of its accounting functionality. In fact, as an accounting system I would rate this ERP package as just average.

How did the company get into this position? In this case, it was due to the fact that shortly after the system was selected the company entered into a period of severe financial difficulty, causing them to short-cut the implementation. Many system features were simply never implemented. Now, several years later, as the company is in a stronger financial condition and growing, new employees are surprised to see how poorly the system supports the business. So, their first inclination is to say that "the system stinks" (or, something to that effect). But as we just saw, the main problem is that the original implementation was never finished.

As a result of our assessment, the company has now launched a series of projects to finish the implementation and get the benefits from the system that they already have.

ERP systems are an easy target for blame. Executives would do well not to let users take the easy excuse that "the system" is the problem but look at all the factors that are required to make ERP effective.

Related posts
Business changes needed to ensure enterprise system success
Large system implementations require organizational discipline
Data clean up a key prerequisite for e-procurement benefits

by Frank Scavo, 5/13/2004 08:46:00 AM | permalink | e-mail this!

 Reader Comments:

Post a Comment

Links to this post:


Powered by Blogger

(c) 2002-2018, Frank Scavo.

Independent analysis of issues and trends in enterprise applications software and the strengths, weaknesses, advantages, and disadvantages of the vendors that provide them.

About the Enterprise System Spectator.

Frank Scavo Send tips, rumors, gossip, and feedback to Frank Scavo, at .

I'm interested in hearing about best practices, lessons learned, horror stories, and case studies of success or failure.

Selecting a new enterprise system can be a difficult decision. My consulting firm, Strativa, offers assistance that is independent and unbiased. For information on how we can help your organization make and carry out these decisions, write to me.

My IT research firm, Computer Economics provides metrics for IT management, such as IT spending and staffing benchmarks, technology adoption and investment trends, IT management best practices, IT salaries, outsourcing statistics, and more.

Go to latest postings

Search the Spectator!
Join over 1,700 subscribers on the Spectator email list!
Max. 1-2 times/month.
Easy one-click to unsubscribe anytime.

Follow me on Twitter
My RSS feed RSS News Feed

Computer Economics
Outsourcing Statistics
IT Spending and Staffing Benchmarks
IT Staffing Ratios
IT Management Best Practices
Worldwide Technology Trends
IT Salary Report


2014 Best Independent ERP Blog - Winner 2013 Best ERP Writer - Winner Constant Contact 2010 All Star Technobabble Top 100 Analyst Blogs

Key References
Strativa: Business strategy consulting, strategic planning
Strativa: IT strategy consulting
Strativa: Business process improvement, process mapping, consultants
Strativa: IT due diligence
Strativa: ERP software selection consulting and vendor evaluation
Strativa: CRM software selection consulting and vendor evaluation
Strativa: Project management consulting, change management
StreetWolf: Digital creative studio specializing in web, mobile and social applications
Enterprise IT News: diginomica

Spectator Archives
May 2002
June 2002
July 2002
August 2002
September 2002
October 2002
November 2002
December 2002
January 2003
February 2003
March 2003
April 2003
May 2003
June 2003
July 2003
August 2003
September 2003
October 2003
November 2003
December 2003
January 2004
February 2004
March 2004
April 2004
May 2004
June 2004
July 2004
August 2004
September 2004
October 2004
November 2004
December 2004
January 2005
February 2005
March 2005
April 2005
May 2005
June 2005
July 2005
August 2005
September 2005
October 2005
November 2005
December 2005
January 2006
February 2006
March 2006
April 2006
May 2006
June 2006
July 2006
August 2006
September 2006
October 2006
November 2006
December 2006
January 2007
February 2007
March 2007
April 2007
May 2007
June 2007
July 2007
August 2007
September 2007
October 2007
November 2007
December 2007
January 2008
February 2008
March 2008
April 2008
May 2008
June 2008
July 2008
August 2008
September 2008
October 2008
November 2008
December 2008
January 2009
February 2009
March 2009
April 2009
May 2009
June 2009
July 2009
August 2009
September 2009
October 2009
November 2009
December 2009
January 2010
February 2010
March 2010
April 2010
June 2010
July 2010
August 2010
September 2010
October 2010
November 2010
December 2010
January 2011
February 2011
March 2011
April 2011
May 2011
July 2011
August 2011
September 2011
October 2011
November 2011
December 2011
January 2012
February 2012
March 2012
April 2012
May 2012
June 2012
July 2012
September 2012
October 2012
December 2012
January 2013
February 2013
March 2013
May 2013
June 2013
July 2013
September 2013
October 2013
December 2013
January 2014
February 2014
March 2014
April 2014
May 2014
June 2014
July 2014
August 2014
September 2014
October 2014
November 2014
December 2014
February 2015
March 2015
April 2015
May 2015
June 2015
July 2015
September 2015
October 2015
November 2015
February 2016
May 2016
June 2016
July 2016
August 2016
September 2016
October 2016
January 2017
February 2017
May 2017
June 2017
October 2017
January 2018
April 2018
May 2018
Latest postings