2013 ERP research: Compelling advice for the CFO

Summary: New research offers important lessons for chief financial officers when buying and
implementing enterprise technology.
By Michael Krigsman for Beyond IT Failure I February 22, 2013 -- 17:38 GMT (09:38 PST)
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New research on the success of ERP implementations reveals mixed results. Although respondents are satisfied
with their choice of software, the survey shows most ERP projects run over budget and buyers are do not fully
receive expected benefits. Nonetheless, few respondents characterized their ERP project as a failure.
For chief financial officers, the survey offers compelling insights and is worth reading carefully.
Read more from the Beyond IT Failures blog (http://-.zdnet.com/blog/projectfailuresl)
System integrator, Panorama Consulting Solutions (http://panorama-consulting.com/resource-center/erp-industry-reports/) ,
conducted the research survey during the four-month period of September, 2012 to January, 2013. The results
are based on data from 172 respondents who completed a survey on the Panorama website. Seventy-one percent
reported revenues of $300 million or less and 21 percent of respondent companies had revenues of $1 billion or
higher.
Cost, duration, and benefit summary. Although project duration and cost fluctuate from one year to the next,
three points stand out about the current data:
Over 50 percent of projects experienced cost overruns
Over 60 percent experienced schedule overruns
Fully 60 percent of respondents received under half of the expected benefit from their ERP implementation
This chart summarizes the top-level results:
2013 ERP Report Findings
Sol<c: P-'OrU'IO C061tJ:St<:J 201J (lP
e <o'*'lll'lt Soi!AIOflt
Although these numbers re '*' tlley re consistent with nttes reported In othel" studle$
and enterprise softw1rre dom111ns 5\U;h DS
,
1he l'ollowlng bible report. l'llnonlml dltll ror the list four years:
YEAR
2012
2011
2010
2009
$7.1MM
$10.5MM
$5.5MM
$6.2MM
% OF COST
OVERRUNS
53%
56%
74%
51%
DURATION
17.8 months
16 months
14.3 months
18.4 months
%OF
DURATION
OVERRUNS
61%
54%
61%
36%
%
RECEIVING
SO% OR
LESS
BENEFITS
60%
48%
48%
67%
lmplamMtaiiDn lllud.-.,IIChlduJ-. and .... 11:11111 .. neflla. According tD the survay, 53 parcent of ERP
prqjetts exceeded lllelr budget:
1611
Implementation Costs
On budget
Over budget by 25% 0< less
26% budget
Under budget
51% 7S"over budget
Over bud&et by more than 76"
Pnorama Consult!n(s 2013 ERP Ropcn
Copyficht Cl 2013 Panor.Jma SOlutions
Regarding schedule, 61 ol respondent ERP proJects went beyond planned time duretlon:
ERP Proj ect Duration
On schedule
Over schedule by 25% or less
Over schedule by 51% to 75%
Over schedul e by more than 76%
Over schedul e by 26%50%
Earlier than scheduled
Source: Panorama Consulting's 2013 ERP Report
COpyright 0 2013 Panorama Consulting Solutions
The survey shCiw.s a slgnlfleant prDblem with resped: lD 11!4llzlng benefits fram the ERP lmpll!lnent.atkln:
27 percent Df respondents realized less than 11 third Df anticipated pt ojet::t benefits
11 percent rwtllze no benefit at alll"nlm their ERP lmpleml!fttetlan
22 pei"Clllnt achieved between a third and one-hair their 1DII beneftt
In other words, full'( 60 penltlnt or the ERP projects In the survey nlllllzed 1888 than half their desired benefit. By
any reasonable measure, th- projec:ts are problematic:
Percent of Benefits Realized
0-30% of projected benefits
31-50% of projected benefits
51-80% of projected benefits
We didn't have a business case
No measurable benefits to date
81-100% of projected benefits
SOurce: Panorama Consulting's 2013 ERP R@pol1
Copyrigjlt Cl 2013 Panorama Consulting Solutions
I!RP .u .ad cult& mer At1al'ec:U1tn. 111e survey makeva distinction between "Implementation o u ~ m
and "customer Slltlst'actlon. As the f'ollowlng dlart shows, only 10 percent of tile respondents mlled the ERP
Implementation 11 failure, meaning 90 percent eltller did not know or betreved their pnJjed: to be successful:
Implementation Outcome
Success
Neutral or ''I don't know
Fai lure
Source: Panorama Consulting's 2013 ERP Report
Copyright 2013 Panorama Consulting SOlutions
At the slime time, various 1111111sures relatlld to ERP softwarv, vendors, lind Implementation results showed poor
satlsl\lcilon:
Implementation service of vendor: 40 percent satlsftlctlon
Implementation service of thlrdparty: 25 pei'Oll\t satlsllldlon
Ability to meet business needs: 4!1 pei'Cilnt lllltlllllldlon
Employae adopaon: 35 percant satlsftlctlon
Overall lmplemeiiiBtlon experience: 44 pei'Cill\t aallsfacilon
I!RP vendor "acllan. As lhe following graplllllllows, the primary candidates for ERP software were SAP, Orade,
Microsoft, Eplcor, and Infllr:
Percentage of Times Vendor Is Selected When on Short Ust
Z013 fRP Repon
Cowri&it 0 lOU P:iooclr.):Ju Solvtione
,_cloud 11111Btlon. Despite the hype, only 14 percent ot are using ERP delivered as Software es 1
Service (SliiS). Although the best cloud vend0111 mn deliver superior and reliability t111n most Internal IT
departmentll, market momentum to ERP In the doud Is not there yet. 111 the following dl1gr1m lllustmes:
Type of ERP Software
On-Premise ERP (Traditional)
as a Service (SaaS)
Cloud ERP {hosted and managed off-si te)
Other
Source: Panorama Consul ting.'s 2013 ERP Report
Copyright 2013 Panorama <onsul ting Soluti ons
Paybaek period. 1hl!! !lUrvey reports n J)llyb..x period of 25 months (down from 32 months In 2009).
1hl!! below shows tllet over hlf the respondents did not rea:aup their a:asts or were unsure:
Timeline to Recoup Costs
1%
We haven' t recouped ERP costs
Don't know I not sure
2 years
1 year
3 years
Less than one year
4 years
5 years or more
Source: Panorama Consulting's 2013 ERP Report
COJ)yright e 2013 Panorama Consulting Solutions
When reDding this dot., bear In mind tht respondents who hove not completed an lmplementlltlon will nalu111lly
report no peyNdc- 11fter II, the softw11re Is not yet operlltloRDI. More trvubllng Is tile 25 pen:ent who re
unsure of their ERP per1od. One wonden11 whether these people h1d 1 set of gOllllland bus1na11
when lltllrtlng their project.
Key points for the Chief Financial Officer
1he surwy datil presents a conlnldlctory Ylew ot ERP,.., and failure. Although most ERP lmplementlltlons
run late, over-budget. and do not deliver planned rasults, only 10 percent ot respondents called tllelr ERP
lmplementrtlon a !'allure. At the same time, 60 pen:ent called their ERP project liiJUaXIIIS and 30 percent
expni&S8d neutnlllt:y on the success 1 rauure Issue. 11lese numbers Indicate that buyers' 4111118datl- are teo
low- It Is Indeed unrortunatB these numbers are so low.
Important - Implementing an ERP system Is always complex because the deployment drives changes tD
both data and prooes that extend across departmental boundaries lrwlde the organization.
Market analyst and ZDNet contributor, Brian Sommer oft'era the following advice
to d\181 nnandal omcera considering new lmoesD nMI!l!l In anterprlse technology:
Sotl:ware projecu aren't jLISt technieal endeavors. They're also politieal, financial, emotional, structural, strategic,
process and people-<:entric Ignoring any one of ttles:e dimensions is dorle at ltle project managel"s
peril.
Regarding proa!SS changes and eppllcetlort software, the stakes hllllf! dellnltety Increased In the last f1!w years as
wave after wiiVe of dlsrupltve b!d'lnologles have swept aaoss ltle rr lanclst:Bpe. Jo..&St try to Imagine any bi.ISiness
process that Isn't affected by soda!, mobile or doud tli!d'lnolagles. Oll.tD far big data, analytks and lnmemary
proce ssl n g tli!d'lnology.
Today's CFO must balance the demands of two competing forces: the extraordinary wave of innovation (and the
process changes these bring) against the regulatory, control-driven forces who want every process, every
exception, and device to be documented, controlled and secured. In recent years, CFOs have spent tens of
billions of dollars (or more) with audit firms to document the control points and risks within their existing ERP
solutions.
The costs, a result of regulations and legislation (e.g., SarbOx) in a post-Enron world, were staggering for many
firms. After all that expense, companies may find their processes 'locked-down' and unchangeable which is
unfortunate as these same companies may be forgoing phenomenal opportunities to adjust and improve business
processes with some of the newer, cloud-enabled, social data driven, mobile-connected, video-powered products
and ERP extensions available today.
Can we trust the survey? The Panorama Consulting research offers a useful benchmark for understanding ERP
success, failure, and drivers of value. Because Panorama has run similar reports for the last several years, the
data presents a consistent picture over time. In addition, the results are in line with similar studies run by other
companies.
Nonetheless, the survey does have several deficiencies:
Since 71 percent of respondents work for companies with revenues of $300 million or under, this is primarily a
small business survey. We cannot assume that large organizations would show the same results.
The survey population was only 172 respondents; a larger sample size would be desirable
The editorial content in the report seems slanted toward services that Panorama sells to clients
Despite these issues, the data seems solid and I recommend you trust the numbers.
Final thoughts. The most important measure of project success and failure enterprise buyer's perception and
opinion. Since only 10 percent called their implementation a failure, we must accept that number as the failure
rate reported in this survey. However, the survey as a whole makes clear that genuine ERP success is elusive, at
least among this group of respondents.
ERP can bring significant benefit but implementation requires careful attention to both business planning and
technology activities. For this reason, achieving project success and business value demand that CFO and CIO
work together as a collaborative unit.
Therefore, it is essential to create this partnership and show your entire organization that the business and
technology teams can communicate, collaborate, and share knowledge on a systematic and consistent basis. This
collaboration is the true underlying strategy for gaining maximum value from ERP or any other enterprise
initiative.
Also read:
New ERP research: quantifying failure and growth (2007) (http://www.zdnet.com/blog/projectfailures/new-erp-research-
quantifying-failure-and-growth/473)
ERP failure: New research and statistics (2010) (http://www.zdnet.com/blog/projectfailures/new-erp-research-quantifying-
failure-and-growth/473)
2011 ERP survey: New IT failure research and statistics (http://www.zdnet.com/blog/projectfailures/2011-erp-survey-new-
it-failu re-resea rch-and-statistics/12486)
ERP change management: The silent killer (http://www.zdnet.com/blog/projectfallures/erp-change-management-the-sllent-
killer/12280)
13 warning signs to prevent ERP doom (http://www.zdnet.com/blog/projectfailures/13-warning-signs-to-prevent-erp-
6oom/101120)
2bpb: cxo, Bnt&PI i!a:e Sqfl:wartt, Ne:JdGrttn cro


About Michael Krigsman
Michael kr1gsman Is lntemallonallv as an analyst, stl'llte!IV adlllllor, enterprise
advocate, and blogger. Interact with Michael on Twltblr at Cmlcrtgsman.

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Tal.kback
Good advice
Good advice. Read an lnformaUVe ttlought leadership whlll!pllper on ERP selection and Implementation ttlat
readers wtllllncl very lnteraslfng C blt.ly/ZSEOXr
I Jayubree lhmdaramurthy
..... :15 Februery, :1.01312:10
CFOs nud to beyond payback period to determine real 'Y3lue
Pllybadt pertad may nat be the best mssure of benl!flt of a new enb!rprtse system.
Perhaps ttle matiYBtlon far nl:!w ERP lmplementlltl- may be to al:hleve beneficial DUtcumes far the
business such as:
A spedftc: target far recludng time to martcct of stand11nl products
A spedftc: target far deauslng the percentage of produtt rework or
* Increase sales time spent with likely prospeds and decrease time with low probability prospects
* Protect martet share or expand marlcet share
Beneftclal outcomes are more about opportunity, or strengthening position. SomeUmes the benetldal
outcome requires time to al:helve ttom using ttla new systam.
Oftl!n times, a specific benellt will aeate other benelldal outcomes. For example, decreasing prodlltt
rejects not only reduces waste, but It might Improve cuslxlmer sat:ls!8ct!on because produtts an1 better
quality. Payback Is &Imply about how long It takes to cover CCISt.
or CDUrse, companies need tD dedde the value of ttlese benelldal outcomes. And ttlen detsmlna It' lhe
benefit to the company Is wo1111 the coat.
, . elizah
..... Z6 Februery, :1.013 00:24
Exploring the real reasons
I ttllnk too little time Is spent on understanding lhl! real "why" Df the ERP project. 'These real reasons are
then often nat pulled through Into tile project sum c:r1ter1a as vendors alb!n c:annat or will not aa:ept
proJect responsibility ror how ttle organlmllon beneffts aftllr the conclusion or the proJect. 1118
reason for ERP project endeavo111 rarely tD maintain martcet position mostly It Is about growing the
business and Improving ttle prulllllblllty by revenue, operational cost. Improving
aJStomer at lower coat or something like that. 1bls leads to In ttle market place
from a Ollltcmer expertence pe111pectlve. hence larger customer numbe111 spending larger portions of their
budget on your company, As Ellzab IIIBtms a lot of "soft" benellls that aN dlmaJit to add to the Suocess
Olterta of a projed.
The organization/client should take owner&hlp olllle benefit realization and not the so!twaN vendor. The
and exea41on partner really onlv need to get the software In as spedlled by lila client on
time, on budget and aCCDrding to ""I'I!Ctetion.
I. Helnpr
..... 5 20ll 06:<40
ERP success starts with having the right expectations
'Thanks Mk:hael. Great Insight IS aiWIVSI
An ERP lmplementlltlon lsllle lmplementlltlon of 8 business solution.

A key reason whv ERP lmplemenlllllons are over budget Is thlllt they have not been estrlllllltled
approprtataly.
hiltp:l/gbeaubouel.wordpress.corn/201V07/04/bulldlng-erp-estlmatllll/
I humbly submit the above appi"'iiche& will go a long WIV to establish expectatlo1111.
Best Regards
Brett
beauboad@ ...
22 D:ember, 2013 19:21