Study Shows Many ERP Projects Don't Satisfy – Do We Expect Too Much From ERP?

March 22, 2010 - 12:56pm | 0 Comment(s)

An ERP-related study was recently released by the Panorama Consulting Group, and it concluded that more than half of companies implementing ERP systems ultimately receive no more than 30% of the business profit expected. One of the interesting results of the survey was that smaller ERP companies seem to offer the most satisfactory implementations. Another interesting—though not explicit—conclusion of the survey: our ERP expectations may be too high.

The Panorama report segmented ERP offerings into three different tiers: Tier I consisted of large vendors like SAP, Oracle, and Microsoft, Tier II was comprised of Infor, Sage, and their competitors, and Tier III included NetSuite, SYSPRO, and Compiere, among others. Some 1,600 businesses were surveyed, and while 72% stated they were “fairly satisfied” with their ERP package, there is a caveat: some respondents measure contentment by project completion, and not necessarily by the tangible benefits the company gains from that ERP product.
Nevertheless, 35% said their ERP projects took longer than expected, and some 21% said implementation took less time than anticipated. Breaking down the past-due numbers by tier: 30% had Tier I implementations, 18% had Tier II, and 5% had Tier III. In terms of price the numbers are less consistent, with Tier II implementations being the least likely to incur excess costs, then Tier I, and then Tier III.

Perhaps the best solution is for ERP buyers to really research the total cost of ownership before committing to a product. ERP implementations are frequently lengthy, and this can mean a company’s requirements change greatly by the time the project is completed. This may be the biggest reason that more ERP vendors need to adopt SaaS deployment options—it’ll cut down on project time and avoid the potential requirements disparity at the beginning and end of a project. It is also the reason companies in want of ERP need to be familiar with what technologies can best support their dynamic needs—if a SaaS ERP component is the only one that will do, don’t expect an on-premise platform to perform the same way.

ERP projects are incredibly expensive on the whole, and when spending with tens and hundreds of thousands of dollars, buyers are right to demand a lot. And while it’s true that ERP infrastructure generally has a lot of ground to make up in terms of offering modern products, perhaps the bar needs to be set a little lower in terms of expectations. This isn’t at all to say that those ERP vendors failing to produce should be let off the hook, but they often seem to be called to offer more than they can, and therefore wrongly promise things they cannot deliver.

The keys are understanding TCO, and then knowing what your company needs from an implementation and not settling for anything else.