Dynamics 365 Implementation Challenges: Six Examples
Why your ERP implementation is out of time and over budget
Introduction
ERP implementation is sold as the path to faster processes, fewer errors, better insights, and greater control. That’s the pitch (and the board bought it). It is also, in theory, what Microsoft Dynamics 365 Finance and Operations is built to deliver.
But the gap between theory and reality is wide. Too many Dynamics 365 implementation challenges follow a familiar pattern: missed deadlines, exceeded budgets, fragile business processes, and a new system that ends up driving frustration instead of business value.
Why does this keep happening? The problem is not lack of effort. Most companies pour time and money into their Dynamics 365 implementation. Nor is it about the technology itself: Microsoft Dynamics 365 is a mature platform.
The real causes lie elsewhere: poor decisions made early in the project, fragile foundations in data and process, unmanaged scope creep, unrealistic deadlines, and an over-reliance on the IT team to carry the load.
When these problems build up, recovery is difficult. At best, you limp through to go-live and spend the next year fixing issues. At worst, you get stuck mid-implementation and need to start over.
In this cornerstone article, we will show you how these forces turn well-intentioned projects into ERP trainwrecks… and how to spot the danger signs before it is too late.
Key takeaways
If you read nothing else, remember this:
- Prevention is your best defence. Once the wrong decisions start to compound, fixing them late in the project is slow, costly, and sometimes impossible. Start on the right foot to save plenty of headaches.
- Understand the root causes. The obvious symptoms (delays, overspend, poor adoption) are effects. To fix them, you must understand and address the key areas that usually go wrong in ERP implementations.
- Watch the chain of events. Most failures don’t come from one big mistake. They build up, quietly, as one small decision after another steers the project off course. Learn to recognise the symptoms before problems escalate.
- ERP is a business project masked as an IT one. Success depends on stable business processes, strong governance, and aligned stakeholders. Good software or clever consultants are not enough.
Before we go on…
If you ERP project is already ongoing, how can you identify early symptoms before they get worse? We wrote a detailed guide about 10 common functional issues during a D365 F&O implementation: what they are, why they matter, what happens if they’re neglected, and how to spot red flags before they become critical issues. Get your free copy from the form below.
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10 common implementation functional issues and how to identify them
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What does implementation success look like?
Microsoft Dynamics 365 Finance and Operations is more than an ERP system. Microsoft presents it as a comprehensive platform for managing core data and business areas — from finance to supply chain, through project operations and human resources.
But software alone does not deliver business outcomes. A successful implementation is not about whether the system goes live on schedule. It is about how well the system is aligned to your business needs and how effectively it is adopted and governed over time.
So let’s see the six key areas that matter most and, later, how neglecting them impact budget and timeline:
- Clear and grounded expectations. The ERP is not a silver bullet. It won’t fix leadership, organisational, or cultural problems. Understanding how to make the most of this IT tool is a prerequisites.
- Stable business processes. D365 F&O cannot fix broken or unclear processes. Success requires clear ownership and well-defined ways of working before the system build begins.
- Strong leadership and ownership. A successful implementation is led by business teams, not just the IT team. Clarity on requirements, transparent communication, and visible sponsorship make a big difference.
- Realistic goals and sequencing. The objective is not to implement everything at once. It is to deliver a stable core system first, with a clear path for future enhancements.
- Controlled change and scope management. Unchecked scope creep is a silent killer of ERP projects. Success depends on clear boundaries and disciplined change control.
- Accurate data migration. Clean data is non-negotiable. Poor data undermines reporting, trust, and operational efficiency. Repeated testing and validation are key here.
Summing up, a successful implementation depends far more on governance, decisions, and execution than on software features. It is not just what you implement, but how you do it.
Challenge 1. Unrealistic expectations
A Microsoft Dynamics 365 implementation is a very expensive enterprise for a business, often part of a wider digital transformation program. This often creates bias in expecting an immediate and visible return on investment, especially from the board or C-suite.
The most dangerous case is the unhealthy expectation of quick results. Some stakeholders hold the unspoken assumption that the new ERP system will replace a customised legacy ERP that is more than ten years old and outperform it from day one. It will not happen.
So why cannot we go faster and optimise the implementation process? Two reasons. First, there are technical limitations to how much you can compress or run activities in parallel across an ERP implementation. Second, software projects like this have a negative correlation between development time and deliverable quality. The more you rush, the more you cut corners. Since an ERP system is a set of interconnected modules, weak spots tend to propagate problems across other areas too.
Another common assumption is that the effort terminates once the new system goes live, becoming self-sustaining from that point. This is both untrue and dangerous. Hypercare, the critical phase immediately after go-live, requires intensive monitoring and support. Realistically, the risks are not under control until all key business processes and periodic functions have run at least once, which often means operating through a full fiscal year.
Further challenges arise when ownership of the system shifts from the external implementation partner to the internal IT team. The two groups have different skills, and these cannot be transferred overnight. Yet many organisations expect business teams and IT staff to become immediately autonomous without proper training sessions or updated documentation.
In short, unrealistic expectations about timelines, effort, and post-go-live stability are one of the most common Dynamics 365 implementation challenges. If they are not addressed early, they will cause frustration, poor user adoption, and eventual budget overruns.
So how do unrealistic expectations actually manifest? Let us look at a realistic scenario.
Worst case example
A complex interface between D365 F&O and a key supplier is estimated to be designed, built, and delivered in two weeks. The timeline is insufficient to implement proper stock availability checks and handle purchase order changes, so they are skipped. For the same reason, the specs are rough and no training material is created. The interface is delivered half-baked and is unfit for purpose.
When the problem is finally escalated to be addressed, the implementation team is long gone and no documentation is available to understand how the interface actually works.
End users start to use Excel to track the stock available at the supplier, which is communicated via a chaotic exchange of emails. The procurement team designs a colour-coded system to flag purchase orders to monitor. More data and logic start thriving outside of the ERP system, reducing accuracy and efficiency. The dashboard for the head of procurement shows unreliable KPIs, skewing key decisions.
Sounds familiar? We know how to help.
How to avoid it
Business leaders should not make assumptions if they have little to no experience of ERP implementations. They should also not listen to those who are equally inexperienced or have ulterior motives. Good advice is:
- Take pre-sales estimates for what they are, estimates, and rely on an independent and competent third-party to stress-test the implementation plan and the timeline.
- Ensure that competent resources are allocated (ideally full-time) to the project from its beginning, and that their time is safeguarded throughout the project duration.
- If time gets tight, do not force deadlines; instead, identify the risk of leaving features out of scope and do so if possible, to avoid jeopardising the project timeline.
Challenge 2. Unstable business processes
Before we dive into the next challenge, let us review what an ERP system is meant to do. An ERP system is an IT business application designed to improve and facilitate the way a company executes and manages its business operations. It works by providing a common platform used by multiple functional areas, improving the flow and accuracy of information through a central database. To fully leverage its benefits, implementing new processes is often necessary so that staff can adapt to more efficient and standardised ways of working.
When implemented correctly, an ERP like Microsoft Dynamics 365 Finance and Operations enhances the execution of complex business tasks and helps improve efficiency by streamlining and automating business processes. However, what it cannot do is solve problems that lie outside the IT dimension, such as poor process ownership, illogical workflows, or organisational politics.
Many companies expect an ERP implementation to deliver measurable benefits such as reduced operating costs, labour savings, or increased operational efficiency. But they fail to realise that any IT system can only be as effective as the underlying business processes it supports.
If a process is unclear, unstable, or has too much variance, or if it depends heavily on experienced individuals making judgement calls rather than repeatable procedures, no IT tool will improve it. In fact, trying to force broken processes into a new ERP system often introduces even more complexity.
D365 F&O itself will not generate revenue, reduce exceptions, or increase production throughput. These are not IT problems, and no ERP system will magically fix them.
Why do business processes become unstable in the first place? Often, it happens when companies evolve based on reactive decisions rather than a clear plan. Over time, entropy takes hold. You end up with obsolete procedures, one-off exceptions that become permanent, and duplicated effort caused by inconsistent data.
When the Microsoft Dynamics 365 implementation begins, key users struggle to describe the full process landscape. They cannot explain why certain things are done a certain way. If the analysis phase is rushed, the implementation process ends up relying on assumptions, leading to fragile foundations.
The consequences can be serious. Poorly defined processes increase the risk of over customization, data integrity issues, and user resistance. They also make testing and validation harder, resulting in inadequate testing and downstream performance issues.
So what does this look like in practice?
Worst case example
The production planning process of a company has a high variance based on a long list of factors and exceptions, including cases that are handled manually. During the D365 F&O implementation no effort is spent to streamline it, rather the goal becomes to have it all automated in the system.
Configuration starts from a basic scenario, then more and more parameters are changed to include all cases as they are spotted. Exceptions are still not handled, so custom features are built in an attempt to automate everything.
Complexity increases, so the IT manager makes the decision of building a prototype to be improved in iterations. Now time has become scarce, so testing and training are minimised to avoid delays.
After go-live, end users struggle to use the custom feature proficiently and end up reverting to a manual process to chase control over the output. They start blaming the system for the lack of improvement.
Efficiency is further reduced by discovering yet more use cases, which trigger the need for further customisations. Eventually, the production planning solution is a monster of complexity, that shows virtually no benefit and make users regret the legacy situation.
Sounds familiar? We know how to help.
How to avoid it
Business leaders should spend plenty of time to review their internal processes before starting the D365 F&O implementation. They should not assume that IT specialists are also business specialists, because often they are not. Here is more advice:
- Separate the solution at software architecture level (ERP and IT applications landscape) from the solution at business process level, ensuring that the latter is stable and complete by itself.
- Allocate time to analyse and map current and future business processes from start to end, for each relevant functional stream, before starting to build the system.
- Review each process to see if they can be simplified, by removing steps and reducing anomalies, to build a system that fulfils core needs and not a myriad of use cases that have low chance of occurring.
Challenge 3. Undiscovered requirements
While core business processes are common to every company, different industries have different practices, and every organisation has its own way of working. Similarly, every ERP system offers a standard set of modules, such as general ledger or warehouse management, but each module contains a wide range of functionalities, which may or may not be relevant to your specific business objectives.
It is naïve to assume there is one simple and linear path to a Microsoft Dynamics 365 implementation. Company processes may be similar, the application is the same, but every project is different. One primary reason many organisations select Microsoft Dynamics 365 is its strong flexibility. The platform allows businesses to tailor the solution to their needs using configuration and, where necessary, existing customization tools. But this makes it even more critical to understand what those needs really are.
Which brings us to requirements gathering. This is the activity of identifying, understanding, and formalising stakeholders’ needs in relation to a specific business process or scenario. It drives how the new system behaves and what outcomes it must support.
The problem is that requirements rarely present themselves in a clear, ready-to-use format. Ask a stakeholder what they need, and you will likely get a partial or confused picture. This is not their fault. Stakeholders tend to be influenced by how the company operates today. They often lack visibility into other departments or knowledge of what the new ERP can offer. They are also unlikely to understand the second-order consequences of their requests, or the integration requirements that might arise. This is exactly why business analysts and functional consultants play such an important role.
If you fail to ask the right questions, fail to uncover the true business needs, or neglect to stress-test scenarios through workshops, you end up with poor specifications. The same happens if cross-functional requirements are not reviewed by all relevant business teams, or if they are collected as an unstructured wish list rather than a coherent solution design. In short, you risk designing a system that looks good on paper but falls apart in real business operations.
It is entirely possible to conduct a full requirements phase without even mentioning the word ERP. Requirements are business-driven. They should be defined independently of technology, before the project team gets caught up in Power Platform demonstrations or Power Automate workflows. Skipping this step is one of the most common Dynamics 365 implementation challenges.
Another key point is scope. Not all requirements will be met in phase one. Some must be intentionally deferred to future upgrades, which is fine if done transparently. What causes problems is leaving requirements undiscovered until late in the project, forcing rushed changes and introducing performance issues or data integrity risks.
Let us now consider a realistic scenario that shows the impact of undiscovered requirements.
Worst case example
The new sales order process is built to simplify the activity of sales agents, who can place an order only if there is stock in the warehouse, to allow immediate fulfilment.
Later, during the training phase, the accounts payable team highlights that they need to flag orders for customers who are bad creditors, but only when specific conditions are met.
This requirement was not identified earlier. Implementing it now would mean delaying the go-live, so the IT team rejects it. Finance users are not happy with the matter and escalate it to the finance director, who uses her influence to ensure the request is implemented anyway.
Two IT consultants are assigned to it, but the timeline is tight and puts pressure on them, so they neglect their original tasks and cause stress to the whole project team.
The feature is eventually delivered, but the finance department is startled: they are wary about the new system’s ability to cope with their business needs and they now distrust the IT team. Their resistance is not open but passive, so adoption of new features is slower due to extra scrutiny. Overall, the benefits promised with D365 F&O take way longer to appear.
Sounds familiar? We know how to help.
How to avoid it
Business leaders should not assume that a requirement is valid just because an influential stakeholder said so. A thorough requirements gathering phase saves pain down the line. Here’s how to do it:
- For every set of requirements, dig deeper to find out the real business needs. Explore use cases thoroughly: do not neglect exceptions and carefully evaluate all possible implications.
- Stress-test proposed solutions by mapping end-to-end process and data flows, for main branches and for deviations if any.
- Design the new solution on paper and get it review by all stakeholders, and make sure to do this before starting the system build phase.
Challenge 4. Unsound sequence of activities
Implementing an ERP system is a complex project, no doubt about that. The typical Microsoft Dynamics 365 implementation is divided into phases, and in larger programmes it often involves separate projects by country or business unit. In some cases, go-live is staggered, with only certain functional areas such as finance or sales using the new system first, before rolling out to the entire company.
Decisions about the implementation sequence are usually made to reduce complexity or minimise disruption to business operations. Sometimes they are also driven by external factors, such as investor deadlines or acquisition timelines.
But these decisions often neglect best practices and overlook the natural dependencies of an ERP implementation. For example, you cannot run business processes correctly without first migrating real, validated data into the system. And yet many projects plan data migration and validation far too late in the implementation process.
The key concept is that Microsoft Dynamics 365 is a platform built around master data and layered functionalities. Each layer depends on a stable foundation underneath. This is true whether you are implementing finance, supply chain, or human resources. An unstable or incomplete foundation leads to cascading errors across the system.
The board wanting a new platform to impress stakeholders and satisfy auditors is not a reason to skip foundational work. The assessment for any new ERP must begin with the financial model, followed by core business operations, and only then extended to ancillary processes. Skipping steps to meet artificial deadlines is one of the most common implementation challenges.
A frequent error is focusing too much on advanced functionality before stabilising core processes. This often introduces performance issues, data integrity problems, and poor user adoption. Trying to retrofit missing core elements later causes significant rework and additional costs.
Another common issue is the lack of a clear and consistent methodology. This is not about agile versus waterfall debates. The real problem is poorly structured project plans that ignore proper sequencing and testing phases. Too many projects underestimate the effort required for integration testing and user acceptance testing, leading to inadequate testing and late-stage surprises.
Organisational changes also introduce risk. When sponsors or key decision-makers change mid-project, or when scope changes are introduced without proper analysis, sequencing errors often follow. In these cases, assuming that large teams can instantly adapt without time for realignment is wishful thinking.
Poor sequencing leads to wasted effort, redundant work, inadequate testing, and project delays. If it happens repeatedly, the project may never recover.
Worst case example
A sales-oriented company decides to implement the new ERP starting from their CRM system, because that’s where the core customer data are kept.
A strong focus is put on the sales stream, with its processes and CRM interfaces, ignoring the financial and operational setup in the ERP.
Eventually the project reaches a point in which the lack of basic data and configuration in the ERP causes a key milestone to be missed, forcing a board meeting to discuss the situation.
The project sponsor is replaced, and the new one demands a prototype of the system to understand the implementation status. Key decisions are still outstanding and no data migration has been done, so the implementation team uses sample data and makes assumption on the functionalities required to build the prototype.
When it’s ready, the project is severely behind schedule. Worse, only a small part of the prototype fits the deliverables criteria. Due to the repeated lack of progress, the CFO cuts the funds and the project is put on hold for the foreseeable future.
Sounds familiar? We know how to help.
How to avoid it
Business leaders must understand what an ERP implementation entails and how it works. It is perfectly normal not to know it, but it is unreasonable to think one knows better than a whole industry predicated on it. Therefore:
- Ensure a robust and sensible project plan is in place at the beginning of the project and it is reviewed regularly, monitoring actual progress carefully.
- Stick to a tested implementation methodology and double check dependencies between phases before allocating time and resources to them.
- Protect the project from sudden changes of direction, keeping stakeholders informed of the risks and consequences of doing so; if everything else fails, assume the worse and be ready to mitigate.
Challenge 5. Unchecked scope creep
What is a project? In simple terms, it is a temporary and carefully planned endeavour designed to deliver a specific outcome, subject to constraints such as time, cost, and quality. An ERP implementation fits this definition perfectly. However, there is a peculiarity: it is always a collaborative effort between the customer and the supplier.
This sometimes creates confusion around the definition of the project outcome. As we already said, a Microsoft Dynamics 365 implementation does not follow a fixed, pre-packaged path. If you also add the conflicting interests of various stakeholders, it is very likely that the desired outcome will evolve, or expand, before the project is completed.
The most common form of this evolution is an increase in scope compared to the original plan. The decision to adopt an ERP is usually driven by strategic business objectives. But middle managers and end users often see the introduction of the new system very differently.
They may fear a loss of control over their work, reduced functionalities compared to their existing ERP, or an increase in manual work to run new processes. Lack of proper training sessions often makes things worse. When these concerns arise, stakeholders will push for changes to adapt the new system to their personal needs, instead of adjusting their processes to the system.
If there is no proper filter in place, these requests get approved without sufficient consideration. The project scope expands, which brings with it extra complexity, longer timelines, and higher risk of performance issues. Trying to deliver a perfect system for everyone will eventually put the entire implementation at risk.
But why do these requests arise in the first place? One primary reason is that many stakeholders do not understand that not all benefits of the system will materialise on day one. A Dynamics 365 implementation should be viewed as an ongoing journey. The system will evolve and improve over time through future upgrades and phased enhancements.
It is critical to align expectations early on. Some features must be delivered before go-live; others should be deferred to a later phase. Clear communication around this is essential. Without it, tensions will increase as go-live approaches and stakes rise.
Scope changes become most disruptive when no precise statement of work exists, when stakeholders are not aligned, and when no formal process is in place to manage change requests. Without strong governance, discussions heat up, rework increases, and project milestones slip further and further out of reach.
Unchecked scope creep remains one of the most dangerous and subtle Dynamics 365 implementation challenges. Let us see a realistic scenario where this goes wrong.
Worst case example
A company decides to keep their production scheduling system, to be used in parallel with the accounting functionalities of D365 F&O.
During the analysis phase, all production use cases are identified, but to ensure that the overall timeline is respected, the integration scope is limited to the most common use cases for go-live, leaving any exceptions to be sorted manually.
When the interface is tested, the production manager realises how much extra labour is required, so he demands that all use cases are included. Leveraging the lack of any formal documentation to define the scope, he gets all change requests approved and the interface is redesigned to include extra new use cases.
Following this episode, all other department managers start demanding additional functionalities. They all insist that all these features are essential for go-live, so they encounter virtually no opposition and all change requests are approved.
This happens in several waves, to a point where the initial solution design is now unfit for purpose. The UAT phase fails on multiple fronts, forcing the governance team to postpone the go-live.
Sounds familiar? We know how to help.
How to avoid it
Business leaders should keep a tight grip on the project scope, communicating clearly and from the beginning to key stakeholders what is in scope and what is not. To handle unavoidable scope creeps:
- Involve all parties early in the design and ensure that key stakeholders are comfortable with the proposed solution, to reduce the risk of change of mind later.
- Put in place a formal process to formalise, submit, consider, and approve or reject any change request presented by stakeholders.
- Do not assume that design changes are the only acceptable solutions; instead explore manual workarounds and alternatives, even at the cost of causing some dissatisfaction to end users.
Challenge 6. Untrustworthy data migration
Data migration is one of the most underestimated activities in a Microsoft Dynamics 365 implementation. It looks simple on paper. Move the data from existing systems into the new platform, load it, and get on with delivering the business objectives. The reality is far messier.
Legacy systems rarely hold perfect data. Over time, companies accumulate errors: duplicate records, inconsistent field values, obsolete transactions, and entire fields whose original purpose is now a mystery. Over customisation in the existing ERP often adds another layer of confusion. Without a detailed audit and clean-up, moving this data into Dynamics 365 can cause major operational issues and lasting damage to user adoption.
Poor data quality is more than a technical inconvenience. It actively undermines trust in the new system. When users encounter missing customer data, incorrect stock balances, or transactions that fail due to data issues, their natural response is to stop relying on the system. Instead, they turn to spreadsheets and manual workarounds. This behaviour is very hard to reverse once it takes hold.
Adding to the complexity, data migration is usually more time consuming than project plans allow. Far too many implementation teams try to save time by running a single migration cycle close to go-live, with minimal validation. This approach almost guarantees problems. Without multiple test cycles, teams cannot properly check data quality, integration behaviour with other systems, or the end-to-end impact on business processes. In fact, each major test cycle should include a migration run as a prerequisite.
Data validation is also frequently squeezed when the project falls behind. In these cases, performance testing, integration testing, and user acceptance testing are the first to be compromised. As a result, critical data issues are often discovered late during hypercare or, worse, by end users in production.
Another common mistake is the absence of a stable GOLD environment. This environment should hold clean, validated master data and system parameters, frozen and version controlled. Without it, each migration run introduces new risks. If test data, development data, or dirty records from legacy systems are accidentally included, the new environment becomes immediately polluted. The situation only worsens if emergency re-migrations are required after issues are found in production. We have seen this happen even post go-live.
Data security risks are also often overlooked. During migration, sensitive data typically moves across multiple environments. Without proper controls and documentation, there is a real danger of breaching regulatory requirements or exposing the business to compliance issues.
Ultimately, if data migration is treated as a low priority technical task, the project will suffer. The new system will struggle to deliver reliable reporting, business processes will slow down, and users will resist transitioning to the new platform. Business leaders must recognise that data migration is a critical component of operational efficiency, not an optional add-on.
Let’s see this in a realistic scenario when data migration is underestimated.
Worst case example
A retail group decided to migrate from their legacy ERP to Dynamics 365 in a short timeframe. They did not bother to recruit specialists, and put the existing application manager in charge of the data migration, who had no previous experience of Dynamics.
They exported data from the legacy system in a single run with minimal cleaning, expecting their implementation partner to transform them in the right format for upload. After that was done, the application manager and his team only performed spot check as validation and went for a quick sign-off to keep the project going.
When key users logged into the new system on the first day of UAT, prepared to run end-to-end processes, they immediately hit a blocker to their testing due to data being missing or incorrect.
Under pressure, the IT team scrambled to run the data migration again. But, lacking a GOLD environment as a safe repository of parameters and master data, they ended up reloaded dirty data from prior test cycles and development runs. This caused an overwriting of what little had been correct in the new test environment.
Eventually the situation turned out to be so bad that UAT was postponed by two months, and with it the go-live date.
Sounds familiar? We know how to help.
How to avoid it
Business leaders should treat data migration as a first-class project stream with internal ownership, rather than a technical task for your implementation partner. To do it right:
- Audit and cleanse data early. Do not migrate bad data to fix later, as it will only undermine trust and make future operations and future upgrades far more painful.
- Run multiple full migration cycles as you go through integration testing and end-to-end testing included, rather than squeezing it in at the last minute.
- Define and safeguard a GOLD environment as a repository of validated parameters and master data, to ensure consistency and data integrity across migration and testing cycles.
Conclusion
This long article describes the top six challenges that cause an ERP implementation to run out of time and go over budget. Expectations, business processes, requirements, sequence of activities, scope, and data all play an important role in a D365 F&O implementation.
If one thing is clear from the worst case examples, is that as a business leader awareness and prevention are your best weapons. Once the events that lead to these six challenges start appearing, it becomes more and more difficult to fix them.
So be ready and prepared from the start — hopefully now you know how. And if you are still in doubt, reach out to us and we will be thrilled to help you.
