Disadvantages of ERP

The disadvantages of ERP systems are: 

❐ ERPs are often seen as too rigid and too difficult to adapt to the specific workflow and business process of some companies. 

❐ The re-engineering of business processes to fit the "industry standard" prescribed by the ERP system may lead to a loss of competitive advantage. Some organisations operate unique, value-adding processes that provide a competitive edge but these often do not fit within the limits of highly structured ERP systems. 

❐ Implementing ERP is expensive and buyers often report substantial cost and time overruns against their original budget. Once an ERP system is established, switching costs are very high, leading to dependence on a single supplier and lack of organisational flexibility. In some cases, project costs spiral out of control – in November 2012, the US Air Force abandoned its plans to implement an ERP system after spending the first $1 billion, concluding that finishing it would cost far too much more money for too little gain (reported by Computer World, November 13, 2012, “Air Force scraps massive ERP project after racking up $1 billion in costs”.

❐ In theory, ERP systems should allow organisations to consolidate support around a common set of skills. However, in practice, ERP systems require different specialist skills across each application – so the Finance module needs different skills from Logistics and different skills again for Human Capital Management. Organisations may therefore have to hire in additional consultants to get the range of skills needed. 

❐ Research has found an inherent paradox in ERP - organisations with the scale needed to justify an ERP system may be the least equipped to derive benefits from the technology. Organisations that are mechanistic, dominated by routine, highly programmed technologies and tightly regulated operations present the best initial fit with ERP requirements but are the least able to capitalise on the information potential these systems provide. However those that are flexible and adaptable are the best placed to create value from the knowledge but are often a poor fit with the requirements (and budget) of ERP systems.