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What are the risks of canceling an ERP project?
In response to the COVID-19 pandemic, many business and technology leaders are deciding whether to cancel or pause an ERP implementation. Here are some risks to factor into the decision.
The impact of the COVID-19 pandemic on ERP implementation projects has been particularly profound as risks have grown. In the face of uncertain economic conditions, business and technology leaders must decide whether to move forward or hit pause.
If that's your situation, you may want to develop a risk register that identifies the impact of canceling or pausing your ERP project. This risk register also outlines the measures your company can take to limit potential negative consequences.
The following is a list of risks that may emerge when you cancel or pause your ERP project during the pandemic.
1. Potential loss of valuable employees
Despite the downturn, there are many companies that are still hiring candidates with technical skills and solid work experience. Losing top talent may not only hurt in the short term, as you look for ways to gain efficiencies using your existing ERP -- instead of transforming with new ERP -- but it may also impact your ability to move forward with the ERP project once the economy improves.
2. Loss of sales and market share
Put simply, there is a reason you decided it was time to implement a new ERP. Perhaps your existing application is unreliable, has endless problems and is missing critical functionality. In this case, your fallback software is not very desirable. These issues combined may be costing you sales, which is going to make the current situation even more challenging.
3. Cost of canceling the project is high
The financial impact of canceling or pausing an ERP implementation project is an important consideration. If you've signed an agreement with one or more vendors, they may penalize your company financially for postponing or canceling the project. Depending on the project's stage, you may have already incurred significant expenses that you must pay, regardless of the project status. Hopefully, most of the work can be used in the future. However, there will likely be some tasks that will have to be redone, including any work related to data conversion, since new data is continuously added.
4. Your company may face potential lawsuits
With many companies delaying or canceling projects, vendors may sue clients who cannot abide by their contracts. This can also lead to unexpected legal fees that companies cannot easily avoid despite their current financial situation.
While it may seem tempting to let go of a costly ERP project during the pandemic, the impact of the risks involved may be higher than just continuing what you've already started.
