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ERP and Enterprise Software: Implementation Costs Drop Dramatically
The costs of ERP implementations are dropping significantly. A survey by Panorama found that in 2012 the average cost to implement an ERP project was $7.1 million, but in 2013 the price tag had dropped to $2.8 million. Even so, 54 percent of companies implementing ERP still say that they exceeded their budgets for the projects.
An immediate thought might be that a move to the cloud may explain the large drop in implementation costs. Yet the Panorama report finds that less than 18 percent of businesses have any part of their ERP software running in the cloud. Similarly, a 2014 Gartner report finds that only 2 percent of businesses have managed to move all their core ERP operations into the cloud.
Another finding in the Panorama report is that many recent ERP projects have been disappointments, although it isn’t clear if there is a relationship between subpar implementations and lower spending. 66 percent of businesses say that their ERP implementations didn’t even realize half of the benefits that they had predicted for the project. Only 9 percent say that their ERP systems are delivering on at least 80 percent of the benefits originally projected for the project.
The Panorama report notes that while “ERP systems are flashy and exciting and, no matter how suboptimally implemented, they often represent an improvement. But satisfaction does not always indicate high ROI. An organization that can’t quantify its achievements, pinpoint areas that aren’t producing as expected and align the corporation on a whole around the need for and expectations of the system, is treading in far more dangerous territory than it may realize. Successful organizations determine what they really want out of the system, how they’re going to get their employees to want the same things, how they’re going to measure their achievement and how they’re going to mitigate potentially poor benefits realization long before embarking on implementation.”
