ERP cost overruns still plague enterprise: Report

Nestor E. Arellano

11 years ago

Despite persistent reports of rising enterprise resource planning expenditures, large companies are generally satisfied with the ERP software choices, according to a recent report from a technology consulting firm.

No less than 53 per cent of ERP implementation overshot their anticipated budget, 61 per cent went pass their anticipated timeline and 60 per cent realized half or less of their expected benefits, Panorama Consulting Solutions of Denver said in its 2013 ERP Report. More than one-quarter (27 per cent) of the respondents admitted that their organizations failed to recoup the cost of their ERP implementation, Panorama said.

Despite the figures, 86 per cent of decision makers queried were satisfied with the ERP systems, and 60 per cent labeled their ERP project a “success.” About seven out of 10 respondents indicated “at least some level of satisfaction” with the chosen ERP vendor, the report found.

Results of the report came from an online poll carried out from September 2012 to January this year of some 172 large organizations from around the world that worked on ERP projects last year.

ERP systems integrate internal and external management information across an entire organization. It encompasses, finance, accounting, sales and services, customer relationship management, manufacturing and other areas. ERP systems automate this task through the use of integrated software applications.

Panorama believes the data gathered indicates that companies may be setting their ERP standards very low.

“The leadership of most any organization implementing ERP software is sophisticated, savvy and aware of both the complexities of an ERP implementation and the benefits it should bring,” said Eric Kimberling, managing partner at Panorama. “But the delta between actual ERP implementation results and the self-reported satisfactory levels indicate that companies are setting expectations of the business benefits they should achieve from an ERP system far too low…”

Kimberling also expressed doubts that many decision makers are developing and sharing with employees adequate performance indicators to accurately determine return of investment.

Panorama found that the average duration of ERP projects average around 13 months to 17.8 months.

“When durations stretch and scope increases, it can be tempting to stop working towards goals established in the beginning of the initiative,” said Kimberling. “It also becomes tempting to change the definition of success to just ‘getting the system up and running.”