Another year has nearly flown by already. In 2013, much in the ERP software industry stayed the same but plenty of things changed as well. In terms of things that haven’t changed in the past year, ERP failure continued rearing its unwelcome head among CIOs, CFOs and project managers. For example:
- Both the states of Massachusetts and Florida recently announced high-profile failures related to their ERP and HCM systems.
- US Steel spent hundreds of millions of dollars on their ERP implementation, which is now slated to run through 2016.
- Panorama’s ERP expert witness practice has hit record levels of revenue and demand, which is a troubling indicator for the state of ERP implementations across the globe.
While the rate of ERP failure doesn’t seem to have subsided in 2013, there are plenty of positive and exciting changes that gained traction in the last year. For example:
- As we predicted at this time last year, mobile and business intelligence are gaining steam.
- SaaS and cloud solutions continue to enjoy increased adoption, although the hype has started to subside.
But that’s looking backward to what has already happened. How about next year? What does 2014 have in store for the ERP software industry? Here are our top ten predictions for the coming year:
1. ERP failures aren’t going away anytime soon. Unfortunately, and as mentioned above, ERP failures aren’t going away anytime soon. ERP implementations are simply too complex and too risky for all organizations to succeed, especially those that are overconfident in their own abilities or choose to leverage the support of subpar ERP consultants and system integrators. Our growing expert witness practice is a good indicator of ERP failure rates and we see our growth in this area accelerating, suggesting that ERP failure rates are not slowing.
2. Buyers of ERP systems are becoming more educated. The upside of ERP failures is that they tend to educate (and scare) people about to embark on their own ERP implementations. Each SAP failure or troubled Oracle ERP implementation you read about serves as a case study of what not to do. In addition, there are plenty of free or inexpensive resources available to educate on how to make your ERP implementation successful. For example, Panorama’s 2013 ERP Report and our on-demand ERP webinars are good reference points for teams wanting to educate themselves before embarking on an ERP implementation.
3. Less abdication of responsibility for ERP success. As part of their self-education, CIOs, CFOs and ERP project managers are realizing that they are ultimately responsible for the success or failure of their ERP implementations. It may sound easy enough to delegate full responsibility to your ERP consultant, ERP vendor or system integrator but your implementation will succeed only if you make the correct – and oftentimes difficult – decisions related to your business. For example, if your ERP consultant isn’t delivering results, then fire them. If you don’t fully trust your ERP vendor, look at third-party oversight options. If you don’t want a hodgepodge of different consultants working on your ERP implementation, then hire a single throat to choke. These decisions can’t be outsourced to third parties.
4. Will SAP, Oracle and Microsoft Dynamics continue holding off Tier II competitors? Our Clash of the Titans 2104 report reveals that SAP, Oracle and Microsoft Dynamics have all done a good job of reversing previous years’ loss of market share to Tier II ERP vendors, such as Infor, Epicor and IFS. For the first time in over three years, the big three vendors regained some of the market share they had lost, which we didn’t anticipate. The Tier I vendors appear to have the marketing and sales machines but plenty of Tier II vendors now have private equity backing so it could go either way. I’ll be honest, I don’t have a clear prediction on this one but it will be interesting to see play out in the coming year.
5. Continued emergence of mobility and business intelligence. As companies look to get more out of their large investments in ERP systems, more will invest in mobile solutions and business intelligence software to get their ROI. More companies will recognize that newer ERP systems will not necessarily help them make better use or sense of business information without the tools to better support decision-making among employees and key decision-makers. In addition, executive teams will be under increasing pressure in a shaky economy, which will put more pressure on their employees to provide decision-making tools and dashboards designed to support executives’ need for information, no matter where they are.
6. Convergence of ERP implementation, organizational change management and business process reengineering. It’s no longer a secret that lack of focus on business process reengineering and organizational change management is a key driver of most ERP challenges. As a result, successful organizations will realize that they need to bake these activities into their overall ERP implementation, rather than ignoring them or operating them in a silo. When choosing an ERP implementation partner, it is important to separate the ones with integrated and comprehensive implementation, business process and organizational change management methodologies. For example, Panorama’s PERFECT Path ERP Implementation Methodology fully merges these critical success factors with the more fundamental technical activities.
7. Higher failure rates of ERP vendors and consultants. I take the view that ERP implementations don’t ever fail but ERP consultants do. Up until recently, there has simply been too much money to be made and too little accountability for most ERP consultants to focus on their clients’ success. In the past, organizations had to choose ERP consultants focused on one particular software solution, which resulted in limited options, competition and accountability. Now, organizations can leverage independent ERP implementation providers to provide options to the myopically-focused technical consultants that have historically cornered the market.
8. Shakeup among ERP consultants. The ERP consulting space is slowly changing – and for the better. Implementing organizations no longer have to choose between 1) software selection firms that don’t do implementation, 2) system integrators that provide functional and technical consultants but aren’t good at project management or organizational change management, or 3) manufacturing consultants that don’t really understand ERP implementations. Good ERP consultants should be able to provide all of the above and the ones that do are more likely to succeed than those that don’t.
9. Flaws in the ERP software industry will finally be exposed. The primary reason that I started Panorama in 2005 was because I saw opportunity to provide objective guidance in a sea of imperfections and shady practices. Although I don’t consider myself a jaded person, it is somewhat disappointing to see that many of these flaws are still very much real. Whether it’s contracts that increase risk for clients or “independent” consultants that take a cut of negotiated savings with ERP vendors (leading to vendors gaming the system), there are still far more pitfalls for our clients than we would like to see. In the coming months, look to us to provide an independent inside scoop on what these risks are and how to navigate them.
10. ERP success rates will increase. Despite the gloom and doom of ERP failures, those that are successful will actually be more successful than ERP implementations of the past. In other words, there will be more of a divergence between the successful and the not-so-successful ERP implementations. The good news is that while this trend won’t completely neutralize ongoing failures, they will demonstrate that ERP success is possible when implementation best practices are followed. This trend will also reinforce the fact that cheaper is usually not better when it comes to considering various ERP implementation options.
These are just a few predictions that we anticipate for the coming year. We will start to get a sense of the accuracy of these predictions when we publish our 2014 ERP Report at the start of the year, which will quantify the trends and outcomes of the past year in more detail.
What do you think? Have we missed anything or do you have different views? Please comment below and share your predictions for the coming year as well.
Learn more by attending our webinar on Thursday, December 12, Top Ten Predictions for the ERP Industry in 2014.