Computerworld reported a couple of weeks ago on a recent study of the business benefits of ERP conducted by Panorama Consulting Group. Their findings were less than encouraging:
More than half of companies that implement ERP systems end up getting no more than 30% of the business benefits they expected… Of the 1,600 organizations surveyed, 72% said they were "fairly satisfied" with their ERP package. But this can be misleading, according to the study: "Some executives are just happy to complete projects… and give little thought to whether or not the company is better off with the new software or whether or not they’re getting as much out of the system as possible." More than half (51.4%) of ERP projects went over budget, the survey found, and about 35% of the respondents said their projects took longer than expected.
Depending on whether you believe research from sources like Standish, these figures may simply be representative of broader issues with the success rate of software projects—small consolation, given the central role ERP plays in running today’s businesses.
What to do about it? The article summarizes the report’s recommendation’s:
ERP customers can avoid surprises by taking the time to pin down a project’s real costs, which go far beyond software licenses. Three quarters of a project’s budget typically goes toward implementation, hardware upgrades, customization and other needs, according to Panorama. Customers should also "identify pockets of resistance within the company and determine the organizational change management needed to make the project successful," Panorama suggested. Altimeter Group analyst Ray Wang agreed. "People do not invest enough in change management," he said. The length of ERP projects can exacerbate dissatisfaction, he added, noting that users’ requirements might change a great deal between the time the vendor is selected and the time the system is deployed.
It’s interesting the degree to which change management continues to be identified as a major point of failure in ERP implementations. Not that I’m suggesting that change management is easy to pull off, mind you—far from it. But the problem identified here doesn’t seem to be properly funded change management failing in the attempt. Change management has been widely and publicly discussed as a—perhaps even the—critical success factor for ERP success for at least a decade now, since the media coverage of several troubled projects in the late 90s. If there remains widespread underinvestment in it, there must surely be systematic reasons for that—reasons built into the standard ways companies select and design ERP projects. Several likely factors come to mind, but I haven’t seen a widespread, detailed study of why underinvestment continues over time. That’s some research I’d like to see. If anyone knows of some, please let me know in the comments, I’d love to check it out.
As for the factors I think are at work, I’ll address that in a future post (or posts).