It is definitely not wise to expect immediate results soon after implementing the ERP system. This software actually takes time to offer exclusive results. Thus, it is necessary to know the ERP implementation risk before making it come into execution. This can actually help you experience the desired outcome.
Then there are many inherent ERP implementation risks. In most cases, the ERP system risks are associated with the scale of the ERP project. The more the area of business touched by an enterprise system, the greater the threat attached to it.
ERP is the soul of almost every business today. Since these systems are so important, identifying and finding a perfect solution to the specific threats is the chief task. Then, many disciplines throughout the implementation help recognize the plan or lessen ERP system risks at every step.
18 ERP Implementation Risks that Every Business Should Know
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Transformation in Business Requirements
No business is static. With changing trends, change in business schemes and strategies is obvious.
This change actually helps to keep pace with your competitors and take it to the next level. However, in such a situation, it is important for your ERP to be dynamic in nature.
Most organizations often encounter a change in the management system. Having the best technicalities, experience, and principles in such conditions is important. So, while finalizing an enterprise system, spend a lot of time and see if it will support the changes you are likely to experience. Doing this helps you have a clear vision and make the right choice.
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Delay in Software Update
Updating your ERP solution timely is very important. Most marketers neglect to renew when an update is released, which is wrong. But here, it is important to note that every update has additional features that make it important. If you resist doing it on time, it is possible to bear some loss, whereas your competitors enjoy profits with the same.
Although the software update is necessary and offers plenty of benefits, some ERP implementation risks are associated. There are chances for the projects to go over your budget. In case you experience a failure in creating exact business processes or updating them successfully, that adds to the loss of your business. Hence it is important to consider several ERP risk factors when integrating an ERP module for your enterprise.
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Choosing a Startup or Bleeding Edge Technology
Choices make a great difference. Likewise, if you choose the less-trodden software, you are taking a big ERP risk. There are chances of standing exclusively higher from the crowd and the scope of falling down badly. In such a situation, if your organization or business is ready to take the ERP implementation risks, you can proceed with the bleeding edge technology.
However, before making the final choice, research and read about that less-mentioned product. Low market penetration is simply a sign of lower quality, generating the need to consider it seriously. But the contrast of this is also possible. So, it is better to have proper knowledge of the system and then choose the right one.
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Software Stability
Software stability is another ERP implementation risk to consider before proceeding with the final installment of an ERP solution. With so much ERP software, no system can be judged perfect or imperfect. There may be many which are not appropriate for your business.
So, the biggest task is to check the stability of the particular software. To make it easier, it is better to go with some renowned brand or choose a specific system for proper research. If you fail at the process, ask an experienced developer to assist you in finalizing the best ERP solution for your business.
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More the Integration Points, the More Risk
The number of integration points of an ERP is another important thing. The higher the number, the higher the chance of facing adverse results. This is because the complexity and number of interdependencies increase. A simple solution to this problem is to focus on easy and quick implementation.
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ERP Risk Emerges from Unexpected Changes
Many unexpected transformations in the company may emerge, like process requirements or unplanned business policies. At such a moment, you need to be concerned about your ERP. Make sure that the policies or the sudden changes you bring to your organization are accessible on your installed software.
This is the biggest ERP system risk because changes are obvious, and each system has its own specifications to suit best to different niches. Eventually, alterations in the main work plan involve extensions and multiply the ERP implementation risk for project success.
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No clear Vision and Poor Functioning
Another biggest ERP implementation risk is an absence of a clear vision. The foremost task in such a situation is to set a clear goal. Since every business has its own specifications, do not think what suits another will suit yours too. Your business may have different requirements.
Undoubtedly, an ERP helps enhance your business, but it happens only when you have a clear vision. The clear goal and strategy for installing the perfect ERP system. It also eradicates all the possible future ERP system risks you may encounter.
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Unidentified Requirements
Since you are not a technician, the risks associated with ERP implementation would not be known. However, that is a drawback for you. Technicalities are somewhat important to know. The ERP risk factor decreases to a great degree when you know this subject. This further assists in properly functioning your business and its entire system.
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Inadequate Testing Plans
Neglecting consideration on the ERP testing adds to the additional risks for a company.
Thus, the users must ensure that they are going through complete testing and clear system integration. If you fail to do so, your company is at risk of getting trapped in a poorly managed project.
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Wrong Choice of Vendor
Like the choice of system or software, the choice of vendor also matters greatly. It is better to go with some reputed ERP provider like Oracle, Microsoft, etc. But, with positives come negatives too. Most large vendors neglect to try their hand at innovations, while smaller ones do it efficiently. Thus, looking for reliable references for the wisest choice is better.
You can also go through the proper analysis, like checking the previous work of specific vendors. Apart from that, looking for the reviews online, the prominence, etc, is suggested. It is also important to check whether the company has a proper physical address. If you are doubtful, avoid going with that particular ERP vendor because it is no less than putting your business at stake.
Data Management Risk
Another risk associated with ERP systems is the data management problem. It may be because of a lack of planning, the available resources, the time, or the overall mapping of data structures. However, the companies’ biggest responsibility is to test the programs thoroughly. If the data risks are assessed constantly, major losses can be prevented.
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Security
This is one of the major risks associated with ERP implementation. In every technical business, the storehouse of information is a network system. Thus, when someone wants to check into your business, a door is not the way for them. It is the network system that lets them peep into your business. Hence, when choosing an ERP system for your trade, security must be the major factor to be kept in mind.
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Technical Risk
The risks associated with ERP implementation technical issues are broad and so wide that some are not found through formal ERP risk assessments. However, the risk factor is shrinking greatly with continuous standardization and customization of ERP systems.
In addition, every individual does not possess technical knowledge, so understanding all its terms is not as easy as ABC. Thus whatever ERP you plan to integrate, there remains some ERP implementation risk in choosing a perfect one.
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Improper Maintenance Plan
Implementing and installing an ERP takes a lot of time. However, the work does not end once the system is installed. Businesses need to come up with a maintenance strategy. This assures that the workers are aligned properly and know what is required to be done.
Doing this also prevents it from getting obsolete or outdated. If you fail at maintaining an ERP, there are fair chances of putting your business at risk. Improper maintenance puts your enterprise system in danger, further contributing to the loss of your business. However, this can be avoided with the time-to-time maintenance of the ERP software. It also keeps the software up to date and makes it function properly.
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Improper Business Process Re-Engineering
Proper BPR exercise is the best way to reduce the risks associated with ERP implementation. When performing this task efficiently, the users and vendors learn about a particular system’s functional requirements. While such an approach helps eradicate the risk of ERP, many other risks go out of the picture.
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Avoidable Cost Cuts
While trying to eliminate the costs of implementation, you may also try on some unnecessary elements. Doing that can fulfill your desire to pay less, but at the same time, you put yourself at risk. There are fair chances of eliminating some particular phases of ERP implementation.
ERP Risks that may emerge this way can actually prove to be drastic. With such risks, you are unaware of the unforeseen situations which may further become the reason for business failure.
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The Risk With the Different Testing Phases of ERP
There is also some ERP implementation risk with the ERP system testing. As the nature of testing is super flexible and varies from vendor to vendor, most vendors prefer using shortcuts and making it go live as soon as possible. This may offer you a temporary functional ERP. However, to control this situation, it is important for the buyer to have proper knowledge of the phases involved in testing a system.
Here are the phases explained to make it easier for you and keep you on the safe side when implementing an ERP in your organization.
Uni-Testing: This is a stand-alone test that checks on individual transactions and subprocesses. Integration Testing – It is end-to-end testing that checks on real business transactions.
User Acceptance Training: This is the next phase of ERP testing. It lets the end users be concerned about the learned training skills and give feedback.
With these testing phases, it becomes the responsibility of the project managers to ensure timely unit testing. Doing this actually lets’s avoid time restrictions and thus test firmness.
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Risk Accounting to your Financial Budget
A financial budget is important to consider when giving away to design your ERP for any company. This ERP implementation risk factor comes out with improper projection or budgeting, concrete profits, and a wrong measure of targets. Additionally, budget allocation leads to serious problems. However, the only solution to avoid this ERP system risk factor is to avail proper guidance and realize the value of the projects while keeping them on priority.
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Improper Training
If you are not professionally trained in using an ERP, there are rare chances of getting exact benefits from the software. So, this is the major responsibility of a manufacturer to impart the proper lesson about how a particular system works. Until proper knowledge of its working is delivered, the user will not be able to avail the exact benefit of the software. As a consequence, your business may suffer a lot.
With so many companies investing in ERP, implementing them but not achieving the desired results leaves a negative impact on the systems on them. However, the problem is not with the solution but with neglecting the risks of ERP involved in the installation. Once a user is acquainted with all the ERP implementation risk factors involved in these systems, achieving success with its implementation is not at all complicated.
Now that it has such a great role in your business, it is important to know the ERP implementation risk involved. If you properly manage the business from all aspects, there is a great possibility to reduce the ERP risk. It is important that you do complete financial and technical management of the ERP system. Once you have all these factors in place, there can be no bar in smoothly implementing and processing an ERP for your business.
Priya is a writing coach and blogger at Impinge Solutions, an IT company which provides web development, designing, digital marketing and mobile application development services.
Nice article, interesting to read