Five ERP Implementation Mistakes that Small Businesses Make

ERP implementations are challenging propositions for companies looking to adopt new enterprise systems. This fact is true for companies of all sizes, industries and levels of complexity, but is especially true for small businesses.

The good news is that small businesses have a number of options to choose from when evaluating potential ERP systems. Traditional ERP vendors are moving downstream to find more sources of customers and revenue in the small business segment, while a host of upstarts and best-of-breed solutions are providing niche solutions for smaller organizations.

Unfortunately, along with these options comes the reality that small businesses are often times not well-equipped to manage the complexities and challenges of ERP implementations. More specifically, they habitually lack the bandwidth, skills and experience to make these initiatives successful. More often than not, these smaller organizations fall prey to the various traps of ERP implementations, such as budget overruns, slippages to project timelines and lack of business benefits realized.

Below are five of the most common mistakes that we see small businesses make when trying to manage ERP implementations for their organizations:

1.    Mistakenly thinking that their ERP implementation will be simple and cheap. According to our experience and research, small businesses are just as likely as Fortune 500 companies to spend too much time and money on their implementations without realizing the expected business benefits. ERP implementation pitfalls don’t discriminate, meaning that the same challenges that haunt large, multi-national organizations create problems for smaller businesses as well. No ERP implementation is simple or cheap – not even for the smallest of organizations.

2.    Unrealistic implementation expectations. In addition to thinking that ERP implementations are simple or cheap, small businesses often have unrealistic expectations in other areas as well. For example, they often think that they won’t need as many resources to make their projects successful or that they won’t need to spend much time reengineering business processes. However these thoughts couldn’t be further from the truth, so it is vital for any size business to take the time to make sure they have realistic expectations related to implementation time, budget, resources and critical activities in order to be successful.

3.    Failing to focus on the future state of the business. The first two challenges typically result in a third challenge, which is to gloss over the future state of the business. Since most small businesses implement new ERP systems because they want to scale for future growth, it is important for them to adequately define business processes and requirements that will take them into the future rather than simply “paving the cowpaths” and automating business processes as they are now.

4.    Neglecting organizational change management. Change is hard, even for employees of the smallest, nimblest and most entrepreneurial businesses. In fact, change related to ERP software can be even harder for smaller and more innovative organizations since they are used to being nimble, but not used to adopting the discipline typically required by ERP systems. For these reasons, it is important to not overlook organizational change management. Critical project activities such as training, communications and organizational readiness may not take as much time or effort as they do for large companies, but they are still important nevertheless.

5.    Outsourcing the ERP implementation to ERP consultants. Most smaller organizations we work with are very lean with very little extra bandwidth to take on the requirements of an ERP implementation. With this backdrop it can be very tempting to call in the ERP consultants to take care of everything. While this may sound good in theory – and your ERP consultants may like the idea as well since it means more money for them in the short-term – your project will not succeed without a minimum level of involvement and commitment from your own executives and team members. There is no magic formula for the right mix of internal and external resources on your project, but it is important to have some sort of balance.

To be fair, small businesses aren’t the only ones to make these five mistakes. However, these challenges seem to be more common and more pronounced among small- and mid-sized organizations, so it is important to keep these pitfalls in mind as you prepare for your ERP implementation.