ERP Disaster in SMEs: 5 Early Warning Signs | TranZact

Apr 30, 2021 in ERP for SME Manufacturers



Unlike how ERP vendors put it, implementing ERPs for SMEs comes with a number of challenges. If not looked over properly before making an investment it can result in an ERP disaster.

Read More - Why Does ERP Implementation Take So Much Time

These challenges are mostly based on limitations in terms of permissible workload, available resources, and time liberties at disposal to cope with ERP implementation.

ERP disaster

Below are 5 warning signs to watch for during your ERP implementation:

1. Unrealistic Implementation Project Timeline, Budget, and Resources

In a 2018 ERP Report, it was found that a majority of projects spend more time, money, and resources than expected. This is often because expectations were unrealistic, to begin with, which leads to a number of poor decisions in the future. When businesses don't have resources to keep the slow implementation running it results in an ERP disaster.

It’s important to add a dose of reality to any sales proposal or implementation plan that you might receive from an ERP vendor or reseller. Investing in ERP solution is a big deal as the payment is upfront and huge and implementation costs a lot with no guarantee.

Read More - ERP Implementation Failure- How Company Size Matters

2. Lack of Involvement From Your Team

Most Indian SMEs have employees that are not so tech-savvy. Most of them can only handle Tally and Excel.

On the other hand, ERPs are complex and are essentially meant for businesses bigger than SMEs. Thus when the time comes to use the software most of the employees are resistant to shift as they don't have proper training. Thus this results in an ERP disaster.

So it’s important that your executive team be involved in key decisions surrounding your project. They also need to be involved in ongoing decisions surrounding key business decisions, changes to business processes and other strategic considerations.

3. Unclear Business Processes and Requirements

Clear business processes and requirements provide the direction that every project team needs to be successful. Without them, projects are more likely to go over budget. They also take longer than expected to complete and fail to meet the organization’s broader strategic intent.

It’s important to take the time to complete this step before beginning the ERP implementation process. Most SMEs we have talked to after analyzing their needs realised that they don't need ERP. ERP looks fancy and has several complicated modules but none of them are really useful for SMEs Most SMEs are looking for a platform for inventory management and tool to streamline their operations.

4. Too Little or Too Much Dependency on Outside ERP Consultants

Implementing ERP in business needs consultant, period. Hiring ERP consultant ends up becoming 60% of the total ERP cost. Most SMEs can't afford that as the ERP itself is a huge investment. When they don't hire ERP consultant their business end up in chaos.

Either extreme is risky. Thus all costs and consequences should be figured out when wanting to implement an ERP in business. All the other available ERP alternative options should also be explored.

5. You don’t have a contingency budget

Most projects don’t go exactly as planned, so it’s important to not blindly trust any vendors' claims. Don't go for upfront payment. Instead, choose to pay on a monthly or yearly basis. This will keep the software company in check and they'll bring up new updates and functions as they'll want you to continue the services.

Also, set aside a contingency budget of at least 15% to 20%. It is an important way to ensure that you have the budget and resources required to adapt to evolving project twists and turns.

Way Forward

While these 5 warnings can’t guarantee success, they can ensure that you avoid some of the common pitfalls or ERP disasters that many organizations succumb to. It is pretty clear from the above article that for SMEs the disadvantages of ERP outweigh the advantages.

Although it’s worth checking over first as every business is different. Can you afford a complete software overhaul? Are your employees receptive to training? How long will it take before the long-term benefits outweigh the initial drawbacks? These are some of the questions you should know the answer to before ERP implementation.

Read More - ERP for SMEs? Think again

If you decide that you don’t want to spend money on ERP, it doesn’t mean you can digitize your business. You can take the first step to digital transformation with an easy to use inexpensive platform made for small businesses like TranZact. It’ll help you streamline your business processes from customer inquiry to dispatch.


TranZact is a team of IIT & IIM graduates who have developed a GST compliant, cloud-based, inventory management software for SME manufacturers. It digitizes your entire business operations, right from customer inquiry to dispatch. This also streamlines your Inventory, Purchase, Sales & Quotation management processes in a hassle-free user-friendly manner. The software is free to signup and gets implemented within a week.