The Top 5 Reasons Why SAP Implementations Fail

February 12, 2019

Top 5 Reasons Why SAP Implementations Fail – And How To Avoid Those?

It’s no secret that the essence of a company’s success lies in how well it manages its business operations, vendors, employees, and customers. Of course, many companies have sought to tap into that essence. And many of them have turned to powerful technology tools to do that, and SAP implementation software has been a pioneer in that space. However, it’s a significant investment, requiring careful evaluation of ERP systems and selection of the right SAP Consulting Company.

These companies have realized that using a unifying system like an ERP (Enterprise Resource Planner) systems implementation can help them to achieve more success, especially as every organization has started its journey of digital transformation. ERPs have, obviously, evolved ever since they gained popularity. One of the most powerful ERPs out there is SAP S/4HANA Implementation. ERP Implementations with SAP S/4HANA provides real-time insights and drives value for companies irrespective of the business or industry size. It acts as a nerve center to connect operations across business units into a unified structure. It provides managers with real-time information to help them make better decisions.

SAP, a global ERP leader, provides modules that streamline critical processes, enabling data-driven decision-making. However, the SAP project implementation can be overwhelming and leads to SAP Project failures, some resulting in costly lawsuits. Despite challenges, migrating to S/4HANA is becoming imperative as SAP implementation phases out support for ECC systems in the coming years, necessitating strategic planning for migration. Although SAP implementation offers plenty of benefits, a study from 2018 revealed that only 50% of the companies had found success in SAP implementation. What are the possible reasons why some organizations face problems in SAP implementation & achieve the benefits of SAP S/4HANA implementation and do not get the value they sought?

What is SAP Implementation?

SAP implementation meaning refers to the process of SAP integration, specifically ERP (Enterprise Resource Planning) systems implementation, into an organization. It’s a complex undertaking that involves multiple steps and can take a significant amount of time to complete, depending on the size and needs of the company.

Here’s a breakdown of what are the SAP implementation steps:

Planning and Preparation: This initial phase involves defining SAP project goals, assembling a team, and understanding the current state of the organization’s business processes.
Business Blueprint: In this stage, a blueprint is created that outlines how SAP implementation will be configured to meet the specific needs of the company. This includes defining workflows, data migration strategies, and customizations.
Implementation: Here’s where the actual configuration and customization of the SAP software occurs. This may involve data migration, system integrations, and user training.
Testing and Go-Live: After the system is configured, it undergoes rigorous testing to ensure it functions correctly. Once everything is validated, the system goes live and becomes operational within the organization.
Post-Go-Live Support: Even after launch, ongoing support is essential to address any SAP implementation issues that may arise and ensure users are comfortable with the new system.

SAP implementation offers various benefits, including improved efficiency, streamlined operations, better data visibility, and enhanced decision-making capabilities. However, it’s a significant investment that requires careful planning and execution.

Why SAP Implementation is Challenging?

SAP implementation needs careful planning and effort for success. It’s not ready-made but needs customization to fit your business. For example, think about how orders are handled. With SAP, you need to think about when orders come in, how they’re processed, where documents go, how they move in the system, if there are special steps, and how everything is recorded.

When dealing with more complex tasks, like managing workflows, it gets even trickier. Using the SAP implementation process strategically means aligning it closely with how your business works. If not done right, it can lead to inefficiencies during implementation.

Why do SAP implementations fail & how to avoid sap implementation failures?

Lack of a clear strategy

The top reason for failing the SAP Implementation methodology is that companies do not have a clear strategy in place. It may be surprising, but it is true nonetheless, that many SAP implementation projects don’t start with a clear and specific end objective in mind. While they have a high-level goal of erp systems implementation, they fail to ask themselves several critical questions. A leasing giant abandoned a massive SAP-based creation of a leasing system that was seen as the crux of a worldwide IT transformation after 2 years and millions of Pounds. The issue was that, even after the end to end implementation in SAP, the system was clearly unfit for the digital strategies demanded by the new world because it would have hindered, rather than aided the agility of the company.

Understanding the company’s goals for the SAP S/4HANA implementation is crucial. This will help identify potential SAP implementation issues and ensure to resolve the SAP problems to align with business needs. Key areas to consider include resource allocation, timelines, and how the new system will support overall business goals.

Solution: The easiest way to avoid this SAP failure is by creating a clear strategy with other stakeholders and tying it to the achievement of some specific business goals. The role of the sap implementation companies could be key here too. A partner who understands the technology is, of course, essential but a partner who can look at the business context and help you define the most effective way to wield the power of that technology is invaluable.

Complexity of SAP S/4HANA

The main reason many S/4HANA implementations fail is due to its complexity. SAP S/4HANA is a comprehensive and powerful product, often chosen by large and diverse organizations because it can handle various business needs effectively. However, this complexity presents challenges during implementation.

When we talk about complexity, it’s about the broad scope of SAP S/4HANA. Organizations opt for it because of its capabilities, but this also means that changes in one area can impact other parts of the system. This interconnectedness makes it hard for organizations to grasp fully.

Even for those transitioning from older SAP systems, the complexity remains a hurdle. Implementing S/4HANA requires defining how different processes link, configuring modules, managing integration, and thorough testing to handle this complexity.

Solution: During SAP Project implementation, it’s crucial to acknowledge and address this complexity. Proper project governance and resource allocation are key to mitigating the risks associated with S/4HANA’s complexity.

Clarifying Total Cost of Ownership

One common reason for the frequent failure of S/4HANA projects is the lack of a clear understanding of the total cost of ownership (TCO) associated with SAP S/4 HANA implementation and ongoing support. Organizations often sign contracts for a certain level of SAP S/4HANA licensing without fully grasping the implications or realizing later that they need additional modules or services.

SAP S/4HANA’s rigidity and standardization come with inherent costs. It forces businesses to choose between adjusting their processes to fit the software or customizing the software to meet their specific needs, both of which can be time-consuming and expensive. Many SAP implementation projects end up exceeding budgets and timelines because these factors weren’t adequately considered.

To address this challenge and minimize risks, thorough planning and evaluation during the pre-implementation phase are crucial. Organizations should assess the gaps in the product, decide on the approach to software-business alignment, and negotiate contracts that don’t lead to unexpected expenses later.

Solutions: Organizations must factor in ongoing internal IT support costs, including the necessary skill sets and roles required to maintain and support S/4HANA effectively. Addressing these aspects early in the planning stages can help avoid surprises and manage the total cost of ownership more effectively.

Inappropriate Program Management

Insufficient program management is a key factor contributing to the high failure rate of S/4HANA implementations. Many organizations rely solely on system integrators or SAP implementation partners, including SAP Consulting Services, to oversee the implementation. However, these external parties often prioritize billable hours, which can lead to longer project durations and increased costs, ultimately harming the organization’s interests.

Moreover, the technical work stream managed by SAP and its partners is just one aspect of a broader program. Critical areas such as process improvement, organizational change management, architecture, data migration, and integration require holistic program management beyond technical implementation expertise.

Solution: Establishing a connection with the third-party SAP consultant is essential to mitigate these risks. These entities can provide the necessary oversight, project governance, and controls to ensure project success. At Third Stage Consulting, our team often supports SAP S/4HANA projects with program management expertise, enabling organizations to take ownership and maintain control over their projects while implementing essential guardrails for success.

Not aligning with the existing systems

SAP S/4HANA implementations aren’t standalone projects. They need to fit within the existing enterprise technology stack. Different departments likely rely on specific systems that work together smoothly. If the new SAP system doesn’t integrate well with these existing systems, it can lead to SAP project failures.

Solution: The only way to fix this is by working with experts who do have the knowledge and experience of implementing such systems. Many SAP implementation companies will be able to help you implement the solution, handhold you as the systems take root across the enterprise, and train you to be able to use the systems to their maximum power.

Lack of Agility and haphazard change management

Moving your business to the SAP cloud offers great benefits, but neglecting user training can be a major problem in SAP implementation. For a smooth transition, you need to address not just user adoption but also how well the new system integrates with your existing processes. The ideal situation is where the SAP cloud fosters built-in flexibility for your business.

The sap implementation challenges here is that businesses today operate in a fluid world. Customers are fickle, the competition is alert, and the market extremely dynamic. This means that the business must be extremely nimble to stay ahead. As the example of the leasing giant showed, that agility must be built into the S/4HANA implementation too. Sap implementation companies use hide-bound, inflexible, and hierarchical implementation effort may achieve what it set out to follow a path to avoid SAP project failures.

Solution: We need to deliver an SAP implementation that is in keeping with the “current” business needs. Post-implementation, it’s critical to ensure that all the decision-makers are completely cognizant of the changes that would take place in processes and workflows. These leaders will become the change agents across their functional areas.

Lack of knowledge

Over half (51%) of IT managers report lacking the necessary knowledge and skills to handle SAP S/4HANA migration or implementation. This lack of expertise can be a major source of SAP implementation challenges.

Solution: The only way to fix sap project failures is by working with experts who do have the knowledge and experience of implementing such systems. A premier SAP software partner will be able to help you implement the solution, handhold you as the systems take root across the enterprise, and train you to be able to use the systems to their maximum power.

Conclusion

As you can imagine, much of this comes down to the implementation partner. The right SAP HANA implementation partner should be able to understand the business objectives of the enterprise and then design the right solution set and implementation strategy. Agility and responsiveness become critical to success. A deep understanding of the technology is mandatory and so is experience in having delivered such complex solutions. One way is to look for a partner who has an SAP CoE with demonstrated capabilities and who has invested the time, money, and energy into building implementation assets like project management tools and processes specific to SAP migration.

It’s been said that how enterprises collect, manage, and leverage information could be the critical difference between success and failure. For the modern enterprise, a powerful ERP like SAP S/4HANA could become the key to winning -if implemented well!