Why ERP projects fail before the first line of code is written

Series "ERP Decision Confidence", article 1 of 3 · 

What goes wrong in ERP selection in the mid-market?

In mid-market ERP selection, the decision basis is largely created by the vendor: presentations, demo systems, references and effort estimates. The buyer rarely tests these statements against their own processes. The study "ERP in der Praxis 2024/25" (Trovarit AG, 2024) names weak budget discipline and high personnel effort as the biggest problems.

A demo system shows the prepared ideal case: standard order, clean master data, an uninterrupted process. What decides the purchase are the exceptions – batch recall, drop shipment, partial delivery with a return. A widespread misconception runs: "The vendor knows our industry, so they know our requirements." Industry knowledge does not replace gathering your own requirements.

Proposal items that are routinely set too low

• Data migration and cleansing of legacy data
• Interfaces to upstream and downstream systems
• Adaptations beyond the standard
• Testing and acceptance
• Internal contribution effort of the key users

Why are vendor documents not a neutral decision basis?

Vendors and implementation partners produce exactly the documents on which the buyer bases the ERP decision. They are paid for the signed contract, not for their forecasts coming true. This structural incentive asymmetry is not dishonesty. But it explains why convincing presentations and disappointing project outcomes so often describe the same project.

An incentive asymmetry is a constellation in which one party benefits from a decision whose risks are borne by the other party. The consequences are measurable: an analysis of over 5,400 IT projects (McKinsey & Company / University of Oxford, 2012) puts the budget overrun of large IT projects at 45 per cent on average – with 56 per cent less benefit than forecast.

Source: McKinsey & Company / University of Oxford, 2012

How we made decision bases robust in client projects

Two projects show how Dreher Consulting works before the vendor decision – in wholesale and in medical technology. Both practice cases follow the same pattern: situation, findings, approach, result, our own misjudgement and the consequence for the methodology. We do not name clients for reasons of confidentiality.

Both practice cases follow the same pattern

Practice case 1: A wholesale company received three proposals that were not comparable

A wholesale company faced the vendor decision: three proposals were on the table, with widely differing fixed prices and different scopes of work. Management could not judge which price contained which service. Dreher Consulting made the proposals comparable, surfaced hidden secondary processes and documented the decision in the decision dossier.

Situation. Industrial B2B wholesale, more than 15 branches and over 400 employees. Phase: three proposals were on the table. Trigger: widely differing fixed prices with no identifiable cause.

What we found. The proposals rested on undisclosed assumptions: cleansed legacy data, standard interfaces only, training as an option. In inside sales there were also numerous Excel-based secondary processes that no proposal took into account.

What we did specifically. A requirements catalogue built from interviews with inside sales, warehouse, purchasing and accounting; a review questions catalogue with real business transactions; all three proposals reviewed item by item against identical assumptions – completed within seven weeks.

What came out of it. The migration item was renegotiated before signing; the decision was made on the basis of the decision dossier (ERP requirements specification (Lastenheft) and process description), with a clear structure for reporting and supply chain in stock transfers and outbound logistics. Measurable Result, Case Study 1: The lead time from the initial order status to delivery was reduced from 32:00 h to 18:00 h over a period of 10 months. This represents a 45% reduction in order processing time,

What we initially misjudged. At first we took the interface lists in the proposals to be complete. Only the inventory of the Excel-based secondary processes revealed further, uncalculated connections.

What we changed as a result. Since then, taking an inventory of all Excel and secondary processes has been part of Dreher Consulting's standard approach – before the first requirements workshop.

Practice case 2: A medical technology manufacturer adopted its vendor's requirements specification

A medical technology manufacturer prepared the ERP tender with a requirements specification that was essentially derived from a vendor's template. The advisory board demanded an auditable decision basis. Dreher Consulting rebuilt the requirements catalogue from the business processes and tested the vendors against real exception cases.

Situation. Medical technology, around 400 employees, regulated and validated processes under ISO 13485. In this environment an ERP/MES/PLM regularly falls under the obligation for computer system validation (CSV) – with consequences for the requirements specification, the release and update capability of cloud ERP, change management and audit trail. Phase: requirements specification created and extended. Trigger: the company was expanding and demanded an auditable decision basis instead of a vendor presentation.

What we found. The catalogue mostly listed functions that every off-the-shelf system covers. The critical exception cases were missing: batch traceability across suppliers, complaints with reporting obligations, blocked stock, and shared-service and logistics concepts within the group.

What we did specifically. Process walkthroughs in production, quality assurance, and order processing; eliminating deal-breakers from desirable requirements; having each vendor demonstrate exception cases in the demo system using our company’s data—the selection phase, including the organization of the PoCs, took us 4 weeks.

What came out of it. The preferred vendor could not show two knockout cases. We recommended exclusion – against management's preference. The decision for a different vendor is documented in the decision dossier. Manual processes could subsequently be reduced by more than 20 per cent.

What we initially misjudged. We assumed the departments could state their requirements. In fact they described the screens of their legacy software – solutions instead of processes. The first workshop results were therefore unusable.

What we changed as a result. Since then, requirements gathering begins with process walkthroughs at the workplace, and only afterwards come the workshops. The requirements catalogue describes business transactions, not software functions.

How is a decision dossier created? Six steps before the vendor decision

A decision dossier is the documented, auditable basis of an ERP decision: requirements, tested exception cases, validated costs, recorded assumptions, evaluated options and a reasoned recommendation. It is the first of five building blocks in Dreher Consulting's "ERP Decision Confidence" model – alongside stage gates, contract negotiation, project support and benefit assessment.

Seven review questions: is your ERP decision basis robust?

Seven review questions show whether an ERP decision basis stands up to scrutiny. They cover requirements, demos, effort estimates and governance. Answer each question in writing and with evidence: every "no" and every "don't know" marks a gap to be closed before signing – not afterwards.

1. For each knockout requirement, can you name which department raised it – or does the catalogue come from a vendor template?
2. Has every vendor shown your critical exception cases in the demo system – with your data instead of sample data?
3. Are the assumptions behind the estimates for data migration and interfaces available in writing?
4. Is the internal contribution effort of your key users included in the business case?
5. Do you know which proposal items are fixed price and which are billed by effort?
6. Does your decision paper include the option to postpone or abort the switch?
7. Could your advisory board or your bank follow the decision from the available documents alone?

What do software and AI achieve in ERP selection – and what not?

In ERP selection, software and AI improve the information base for robust management decisions – they do not automate the consultant's judgement. Tools reliably do three things: data preparation, completeness checks of requirements catalogues, and pattern recognition in proposals. What they cannot do is weigh conflicting objectives, assess people and organisations, and take responsibility for the recommendation.

For this, Dreher Consulting uses SCOReX®, its own AI model for avoiding risk in ERP projects. The recommendation in the decision dossier is owned by a named consultant – not a model.

Where the method reaches its limits

A decision dossier reduces uncertainty, it does not eliminate it. The method requires the participation of the departments, works only before a vendor is effectively locked in, and is not always proportionate for very small organisations. Those who know the limits plan its use realistically.

• No requirements without the departments. If sales, warehouse or production are not available for walkthroughs, the robustness of the requirements catalogue drops considerably.
• After the de facto pre-decision, a dossier only documents. Once a vendor is internally set, even a good analysis rarely changes the outcome.

How we are paid

Dreher Consulting is paid exclusively by the commissioning companies. We receive no commissions from software vendors and no revenue from implementing the software. The recommendation in the decision process is therefore free of any economic self-interest in a particular contract being concluded. We have worked on this principle since 1992.

What decision-makers often ask before ERP selection

Why do ERP projects fail in the mid-market?

ERP projects in the mid-market rarely fail because of poor software quality. The most common cause is a decision basis that largely comes from the vendor: efforts set too low, untested exception cases, unchecked assumptions. The study "ERP in der Praxis 2024/25" (Trovarit AG, 2024) names weak budget discipline and high personnel effort as the biggest problems.

How can I tell whether an ERP effort estimate is realistic?

An ERP effort estimate is verifiable when its assumptions are available in writing: the data quality of the legacy systems, the number and type of interfaces, the extent of the adaptations, the internal contribution effort. If the assumptions are missing, the figure cannot be assessed. Compare the items from several vendors against identical specifications – deviations reveal room for interpretation.

What belongs in an ERP requirements catalogue?

An ERP requirements catalogue describes your own company's business transactions, not software functions: core processes, critical exception cases, volume structures, interfaces, regulatory obligations. Every requirement needs a source in a department and a priority – knockout criterion or desirable. A catalogue taken from a vendor template maps that vendor's product, not your need.

What does independent ERP consulting cost – and does it pay off?

The fee for independent ERP consulting depends on project scope and the phases supported; it is paid exclusively by the commissioning company, not through vendor commissions. The reference point for the benefit is the downstream cost of unchecked decisions, repeatedly documented in studies (McKinsey / University of Oxford, 2012).

Are vendor presentations and reference visits enough for the ERP decision?

No. Presentations and demo systems show prepared ideal processes; the vendor chooses the reference customers. Both formats provide indications, but no verification: they do not prove whether the system handles the buyer's critical exception cases. The ERP decision becomes robust through your own test cases and assumptions confirmed in writing.

Next steps

If an ERP selection is coming up for you, it is worth reviewing the decision basis before a binding commitment. You will find more information on our approach in our overview of our ERP consulting services.

The "ERP Decision Confidence" series:
Part 2 – On what basis do you sign a ten-year ERP contract?
Part 3 – The contract is signed, now the real risk begins

The patterns described here are especially common in wholesale and in medical technology.

Sources: Trovarit AG, "ERP in der Praxis 2024/25", Aachen 2024 · McKinsey & Company / University of Oxford, "Delivering large-scale IT projects on time, on budget, and on value", 2012.

Dr Harald Dreher

Managing Director, Dreher Consulting · Over 33 years of advisory experience in the DACH mid-market · Over 1,200 ERP and digitalisation projects · 100 % vendor-independent · Available in person for an initial conversation with company leadership.

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