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ERP: You Win Some, You Lose Some. Technology Successes and Failures
ERP has a reputation for being able to bring about revolutionary transformation for some businesses, and in some cases it has. But there have been notable exceptions, and when something goes wrong with an ERP implementation, things can be painful.
The good news is that overall, people are happy with the benefits that an ERP system brings. A report by ERP consulting company Panorama reported the following results from a recent survey.
- 94 percent of companies say that they realized business benefit from the implementation and use of ERP system
- 81 percent of organizations said that they were overall pleased with their ERP software
An Aberdeen Group report surveyed the use of ERP in the Aerospace and Defense industry and reported significant realized benefits from the implementation of ERP technology.
- 34 percent reduced their operations costs
- 29 percent reduced their adminstrative costs
- 52 percent reduced their industry costs
- 31 percent saw increased profits
- 26 percent saw increased revenues
But those positive sentiments need to be weighted down by a number of short-comings identified by a Panorama report.
- In 2011, 56 percent of ERP implementations went over budget (down from 74 percent in 2010)
- 25 percent of those systems that went over budget did so by more than $2 million, which is more than 25 percent of original budgets
- In 2011, 54 percent of ERP implementations were over schedule (down from 61 percent in 2010)
- 29 percent of organizations felt that they had not yet been able to claim a positive return on investment yet from their ERP system
- 63 percent thought that their ERP implementations brought with them process and organizational changes that they weren’t able to completely address
Eric Kimberling, in his predictions for what to expect from ERP in 2012, said that “Tight IT budgets and a “do it yourself” mentality to ERP projects of the last few years have finally started catching up in terms of the large number of publicized ERP failures in the latter part of 2011. Companies have simply under-invested time, money, expertise, and resources in their ERP projects in recent years, so we will see those bad decisions catch up to us in the coming year.”
An article in late 2011 by IDG journalist Chris Kanaracus summarizes some of the worst known ERP implementation. These include:
- Massive overruns for the New York City’s CityTime project.
- A lawsuit by Montclair State University in New Jersey against Oracle claiming a bungled ERP implemetnation
- Ingram Micro hit hard by losses due to a failed SAP implementation in Australia
ERP also struggles with transforming itself to adopt new technologies like the cloud and Big Data. A report sponsored by SAP found also that the desire by organizations to use Big Data is often at odds with the realities of their current ERP system.
Chris Osborne, retail industry principal at SAP, said that “Retailers need to get to grips with ‘Big Data’ now in order to be able to cope with the deluge of data that is available, both on their business and their customers… The retail industry recognizes the need to analyse data while improving customer service, but how to achieve that in harmony is clearly where there’s cause for confusion. By investing more heavily in customer-facing technology, companies are opening themselves up even wider to receive more data which they are already struggling to utilise effectively.”
