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Posts Tagged ‘ERP in 2018’

Each year Panorama Consulting publishes an annual report on trends in Enterprise Resource Planning software and their implementations at companies large and small across the country.  They recently published a brief summary of their conclusions, drawn from this year’s report, that yielded what they call their five key takeaways.  We share those with readers today.  Most of what follows is taken directly from their report, which can be found here.

[We should note that the average company size reported was over $400 million, across many industries, so our small to mid-size clients should take these with a grain of salt.  Small companies’ needs, budgets and buying criteria often vary greatly from their larger counterparts, but some of the broader conclusions still hold true.  Your mileage may vary.]

  1. Cloud ERP software adoption may have finally reached a tipping point. We saw a very large increase in cloud ERP software adoption this year compared to past years, with this year’s mix of SaaS and cloud deployments increasing to 85%, compared to 15% on-premise deployments. While this number may not be striking on the surface, it is a big difference from last year’s data, which showed less than 50% of organizations were deploying cloud and SaaS solutions.
  2. The grand illusion of lower ERP implementation costs. Past years have shown that the average total ERP implementation costs anywhere from 4% to 5% of a company’s annual revenue. This number includes a project’s all-in costs, including software licenses, implementation costs, hardware upgrades, organizational change management, training, backfilling internal resources, and any other costs associated with the transformation.  This year, that number decreased to 3.6% of annual revenue. While this may sound positive on the surface, it actually reveals a flaw in our data: since most deployments are cloud solutions (see point #1 above), initial costs are naturally going to be lower. However, our implementation cost data only captures the initial implementation costs – not the ongoing costs. In most cases, cloud deployment costs less money up front, but can increase longer-term outlays due to higher annual subscription costs. It is important to take this data with a grain of salt.

[The reference figure of 3.6% of annual revenue holds relatively true for even smaller companies.  A $20 million company might expect an outlay of around $500,000 all told.]

  1. ERP implementations are taking longer and resulting in more operational disruption. Despite lower up-front costs, ERP implementation durations are increasing. While the total average duration increased a relatively innocuous 16.9 to 17.4 months, those that took longer than expected increased from 59% to 79%. Again, this can be largely attributed to the increase in cloud deployments, which creates a false sense of implementation speed and ease and results in unrealistic expectations along the way.  Operational disruptions saw a similar increase. Those that experienced a material disruption following go-live – such as being unable to ship product or close the books – increased from 56% to 66% last year.
  1. Despite relatively high satisfaction with ERP software vendors, overall ERP implementation satisfaction levels plummeted to 42%. Customer satisfaction with their chosen and implemented ERP software increased to 68% this year. However, satisfaction with their overall implementations plummeted from 81% to 42%, which suggests that more companies are either struggling with their deployments and/or managing to unrealistic expectations surrounding those initiatives.

[Or… they suggest a flaw in the data?]

  1. Organizational change management still reigns as the biggest challenge to a successful ERP implementation. For the second straight year, organizational change management was atop the list of top reasons why projects took longer or cost more money than expected. Ironically, many organizations think they will actually save time and money by cutting this important corner, but research tells a different story. You are more likely to find that you have underinvested in managing organizational change, and those that do find that they implement faster, less expensively, and with a higher ROI than those that don’t.

 

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