Today is one of the biggest days of the year in the enterprise software industry, as the latest iteration of Panorama’s highly anticipated annual ERP Report is published (download the 2012 ERP Report). The independent study examines the results from a range of organizational sizes and industries ranging from smaller companies to global, multi-billion dollar organizations. The study also looks at ERP implementations from vendors ranging from SAP, Oracle and Microsoft Dynamics to Tier II solutions like Epicor, Infor and a variety of others. This year’s study of nearly 300 ERP implementations across the world demonstrates some of the same themes we’ve seen in years past: most projects not only cost more and take longer than expected but also fail to deliver anticipated business benefits.
However, there is good news in the report as well: the percentage of companies going over budget and taking longer than expected decreased compared to previous years. For example, 56-percent of organizations in this year’s study went over budget, compared to 74-percent in our 2011 ERP Report. In addition, 54-percent of organizations went over schedule, compared to 61-percent in 2011. While the numbers still highlight the challenges and risks that most organizations face, they also show that companies are starting to do some things better than they have in the past.
The bad news, on the other hand, is that of those organizations that go over budget, it is by a significant amount. This year’s study shows that that companies that blow project budgets do so by an average of 25-percent, hardly a immaterial number for most CFOs. In addition, 29-percent of the respondents indicated that they have yet to realize a payback on their ERP investments, another metric likely to make CFOs and other executives think long and hard about how they can better mitigate risk on their ERP implementations going forward. Finally, and perhaps most concerning, is that two out of three organizations indicated significant pain in changing their business processes and organizations to accommodate their new ERP systems; 63-percent said that this aspect of their implementation was either difficult or very difficult, suggesting that ERP projects are still by no means a cakewalk.
So why the change in this year’s numbers over last year’s? First, companies are less bootstrapped with their IT budgets than they were in years past. CFOs and CIOs aren’t forced as often to shave implementation budgets to the bone and cut corners as they were during tougher economic times. With more realistic estimates and expectations, organizations aren’t quite as likely to blow their budgets and project plans. However, as mentioned above, when organizations do go over budget, they do by a significant amount, suggesting more of a dichotomy between those that tightly manage scope and budget and those that don’t. In addition, even though companies are finishing on time and on budget slightly more than they have in years past, they still struggle with business process, organizational changes, and benefits realization, suggesting that they are not getting all they could out of their new ERP systems.
This year’s numbers suggest that there are still significant challenges in the marketplace, but they provide a thread of optimism that more companies are figuring out how to manage their ERP initiatives more effectively. Learn more by downloading our 2012 ERP Report and joining me at our free webinar, Review of Panorama’s 2012 ERP Report tomorrow at 10 a.m. MST.