Today’s the day we release Panorama’s 2016 ERP Report, which summarizes actual results from 215 ERP implementations across the globe. The report provides key lessons from companies of all types and sizes – from smaller, domestic organizations implementing niche solutions to larger, multi-national organizations rolling out new ERP systems in multiple locations.
This annual report is the only one of its kind. It provides a truly objective look at the actual state of ERP and enterprise software implementations across the globe. The study includes organizations implementing single ERP solutions, CRM systems, HCM software, and/or other types of enterprise software. The data is as pure and objective as it can be, so there is nothing to spin or sugar coat.
There is a multitude of information in this comprehensive report, but here are five things that stood out when I read the report for the first time:
1. Business transformation is still not the top reason for pursuing ERP implementations. Unfortunately, too many organizations still take a myopically flawed approach to their ERP implementations. The #1 reason for selecting a new ERP system was to replace the old system. While this isn’t necessarily a bad thing, it shows that too many companies are replacing systems because they have to – not because they want to pursue a larger business transformation. Still need further evidence? A full 18-percent of organizations didn’t improve business processes as a result of their projects and only 24-percent improved all of their business processes. This over-dependency on technology and lack of focus on business transformation is a sure recipe for implementation challenges and compromised business benefits.
2. Overall project costs and budgetary overruns are increasing. Overall project costs decreased in raw dollar terms – from $4.5 million last year to $3.8 million in this year’s study – but costs actually increased when normalized to account for company size. When expressed as a percentage of annual revenue, average total costs increased from 5.9-percent to 6.5-percent of annual revenue. In addition, 57-percent of organizations said that they spent more than they had expected, which is an increase over last year’s numbers. The top three reasons for these budgetary overruns are attributed to expanded scope, organizational issues and underestimated project staffing needs. Spending more on ERP systems isn’t necessarily a bad trend, provided that the expectations of and results from those increased costs are in sync.
3. SaaS ERP takes a hit, on premise holds its ground, and cloud ERP continues its growth.It may not sound consistent with what many industry pundits think and swear by, but on-premise ERP systems held steady at a slight 56-percent majority of all ERP implementations, while cloud ERP systems grew aggressively – at the expense of SaaS providers. Cloud solutions increased their share from 11-percent to 27-percent, which includes companies that buy their own software and outsource the hosting of that software to a third party. SaaS solutions appear to be losing ground to the “best of both worlds” benefits of having a third-party host a traditionally on-premise ERP system.
4. Project durations increased by 50-percent.Perhaps the most startling revelation in the report is the significant jump in average implementation duration times. Last year’s data showed an average implementation duration of 14 months (the two years prior to that were 16 and 17 months), but that number jumped to 21 months in this year’s study. This could partially be attributed to the number of larger and more complex organizations represented in this year’s study compared to last year, but that’s not enough to justify such a large increase. Companies seem to be doing a relatively decent job at containing implementation costs, but they are clearly struggling to manage time and milestones.
5. Data issues are derailing implementation project plans. For the first time since we started conducing this annual study, data issues are the number one cause for implementation timeline overruns. In the past, increased project scope and resistance to change were the primary culprits of delays, but this year’s data points to data as the top issue in hitting project milestones. This also points to the complexities and risks that go with cleansing dirty legacy data, implementing more advanced (and tougher to implement) business intelligence solutions and leveraging the more robust reporting capabilities of modern ERP systems. The technology and tools are there, but the execution and reality of using those tools have not yet caught up.
There is much more to learn in this year’s report, which you can download here. For further analysis, be sure to register for our webinar, Review of Panorama’s 2016 ERP Report, on Thursday April, 21 at 10 a.m. MT.