Our 2010 ERP Report, of which the first installment was published last month, outlines several metrics that are of interest to most CIOs, COOs, and other executives about to embark on an ERP system implementation. Although the numbers improved relative to our 2008 study of hundreds of ERP initiatives across the globe, the data still shows that most ERP software implementations fail.
But first, how do we define implementation failure? People talk about failures all the time, whether it’s related to companies filing lawsuits against software vendors, pulling the plug on troubled implementations, or in some extreme cases, filing for bankruptcy due to their failed implementation (think Shane Co. in early 2009).
Aside from extreme cases such as these, there is a spectrum of implementation challenges that can result in varying degrees of failure. In short, we consider an ERP implementation to be a failure if one or more of the following occurs:
- Takes longer to implement than expected
- Costs more than expected
- Fails to deliver at least half of the expected business benefits
In our most recent study, which is technology-agnostic and one of the most thorough studies conducted in the ERP space, we found that there is a 72% likelihood that one or more of these three things will happen. There is a 31% chance that two or more of these things will occur.
If we assume that these are three valid failure points, then there are a number of things companies can do to avoid one of these three outcomes, most of which are outlined in our report. Perhaps the quickest and most direct way to ensure these things don’t happen is to have realistic expectations to begin with. A realistic view of what an ERP implementation will cost and the business benefits that can be realized will go a long way toward avoiding these failure points. It is important to augment software vendor sales hype with a realistic view from independent and objective sources that fully understand ERP and your business.