Enterprise Software ERP Projects Still Not Measuring Up

More than half of companies that implement ERP systems end up getting no more than 30% of the business benefits they expected, according to a study by Denver-based systems integrator Panorama Consulting Group LLC.

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.

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.

These factors explain why software as a service is gaining acceptance, with its promise of quicker implementations and easier upgrades, Wang contended. "It doesn't mean you go SaaS all the way," he said. "But there are things that are much better with SaaS," like human resources applications that require frequent updates.

Copyright © 2010 IDG Communications, Inc.

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