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Unfortunately, ERP implementation failures are not uncommon. In fact, close to 70% of ERP implementations fail to meet their original business goals with as many as 25% never being implemented at all.

But what is the real cost of an  ERP implementation failure? And is the cost just financial, or are there other things at risk? In this blog, we will explore the risks involved with ERP implementation failure. We will also share what you can do to ensure your ERP implementation is successful. 

What Types of Costs Are Involved in an ERP Implementation Failure?

Failing to implement an ERP in your business will result in more than just a financial loss. There is human capital involved and also more intangible losses like those that affect organizational morale. 

Quantifiable Costs Involved in an ERP Implementation Failure

1. Implementation and Customization Costs 

The most evident financial loss of an ERP implementation failure is the cost of implementing, setting up, and customizing the ERP system. Depending on your approach this could range from a few thousand dollars to several million.

For example, typical configuration and setup fees for established ERP providers could range anywhere from $10,000 – $500,000, based on how complex your needs are. These costs typically go into developing custom features, workflows, or integrations for your business.

On the other hand, that number could be much higher if your organization is taking a more bespoke approach.

For example, developing a custom ERP from scratch could be even more costly, with prices ranging between $2 million and $5 million. Imagine all that money going to waste due to an ERP implementation failure—not a pleasant sight for any business.

2. Hardware Costs

Hardware is another significant cost factor in an ERP implementation failure. Setting up the infrastructure needed for an on-premise ERP can be expensive.

However, installing on-premise hardware is not always necessary when implementing ERP. Instead, organizations can opt for a cloud-based ERP like Xledger which does not require on-premise servers or the high costs to maintain them.

 

Aside from having a 99% implementation success rate, Xledger’s cloud-based ERP makes it easy and affordable for businesses to implement ERPs without the risk of failure and at a fraction of the cost.

To learn more, book a free demo today.

These are some approximates of how hardware ERP implementation failure costs break down:

• Servers: $5,000 – $100,000+ 
• Storage: $2,000 – $50,000+
• Networking equipment: $5,000 – $50,000
• Backup systems: $5,000 – $50,000+
• Power and cooling systems: $10,000 – $100,000
• IT staff: $50,000 – $300,000 per year
• Implementation consultants: $50,000 – $500,000+

3. Software 

Hardware is just one side of the equation. On the other hand, there is software licensing. ERP software licensing can range between $10,000 and $500,000 depending on whether the license is perpetual or annual. 

These fees might also have to be paid during the implementation which means they would add up to a loss if there is an ERP implementation failure.

4. Data Migration Costs

Migrating high-quality data from the old system to the new ERP is essential. But doing so requires human capital. The cost of it will ultimately depend on a case-by-case basis but it could require an investment of anywhere between 300 and up to 1500 hours involving various specialists.

5. Employee Training Costs

Training employees on the new system is a critical step in effective change management. The cost of training them can vary due to the size of the organization. However, typically they might start as low as $500 per user or be as high as a couple of thousand.

Non-Quantifiable Costs Involved in an ERP Implementation Failure

While it is easy to place a number on some of the more tangled costs of an ERP implementation failure, it is not as simple to evaluate the real magnitude of non-quantifiable costs.

These might include:

1. Employee Morale

Spending months or even years implementing an ERP requires a team effort, during which various employees might invest their time. If the ERP implementation is unsuccessful, their morale and engagement might be affected. This is particularly true for those most involved in the project.

Research shows that companies with poor engagement earn operating income that is on average 32.7% lower than those with more engaged employees. Failure to implement the ERP could have long-term negative implications for organizations.

2. Slowed Growth

Since the implementation process can consume a lot of human capital, it could hinder a company’s growth if it’s not completed promptly. That’s because employees will be focused on training, data migration, and other tasks that might take them away from growth activities.

A prime ERP implementation failure case study for this is Hershey’s ERP implementation failure which cost the company US$ 150 million in sales.

3. Reputation Damage

Last but not least there is reputational damage that could arise from loss of credibility with customers, suppliers, and stakeholders as well as negative media coverage if the failure reaches the public.

Many well-known ERP implementation failures have produced negative headlines for companies.

Take for example Nike’s ERP implementation failure case study where the company lost $100 million in 2001. The failed ERP implementation wreaked havoc on their suppliers and customers, damaging their reputation when the ERP implementation failure resulted in suppliers receiving inconsistent orders.

How to Avoid ERP Implementation Failure With Xledger

At Xledger we understand that the cost of an ERP implementation failure, whether big or small, is always too much to bear for businesses. That’s why our team of implementation experts developed XIM—an implementation methodology with a 99% success rate.

The Xledger Implementation Methodology (XIM) is a smart implementation process that deploys the system quickly and with minimal disruption to your business. 

XIM’s 99% success rate is unprecedented in an industry where the norm is to fail three-quarters of the time.

We not only value the time and resources of our clients, but also understand the value of maintaining high reputation standards and team morale. 

If you are an accomplished executive proposing an ERP implementation in your organization and want to ensure it is carried out without failure then you need to try out Xledger—one of the leading ERP systems in the United States in 2025.

Our team of implementation experts is ready to answer any questions and take you through the entire process of implementation at no charge. 

Book a free demo and discover why Xledger is the leader in implementation in the ERP industry.

Curious to Know More About ERP Implementations? 

Check out these value-packed resources:

• How Xledger Prioritizes Speed  
• Cloud ERP Software: Top Solutions & Benefits  
• What Is an ERP Consultant and Do You Need One?