5 - Enterprise System Implementation Risks and Controls

Summary

Introduction

Some organizations report success and significant process gains resulting from enterprise system implementation, while many others encounter significant losses. It is readily apparent that the implementation of packaged enterprise system software, and associated requisite changes in business processes, has proved not to be an easy task. As many organizations have discovered, the implementation of enterprise systems can become a recipe for disaster unless the process is carefully handled. The following headlines provide a glimpse of the troubles encountered by organizations, ‘SAP: Whirlpool's Rush to Go Live Led to Shipping Snafus’ (Collett, 1999), ‘Delays, Bugs, and Cost Overruns Plague PeopleSoft's Services’ (Olsen, 1999) ‘ERP Project Leads to Court Fight’ (Stedman, 1999) and ‘PeopleSoft Problems Persist, Cleveland State Looks for a New Project Manager’ (Olsen, 2000). In 1995, US firms incurred an estimated $59 million in cost overruns on information system projects and another $81 million on cancelled software projects (Johnson, 1995). Furthermore, it is estimated that approximately 90% of enterprise system implementations are late or over budget (Martin, 1998).

Enterprise system (ES) implementations are different from ‘traditional’ system analysis and design projects (Davenport, 2000). Among the significant differences are the scale, complexity, organizational impact, and the costs of ES projects and subsequent business impact if the project does not succeed. An ES implementation impacts the entire organization, whereas a traditional project impacts often only a limited area of the organization. Furthermore, ES projects are often associated with the reengineering of business practices.