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2014 ERP REPORT
A Panorama Consulting Solutions Research Report
Copyright 2014 Panorama Consulting Solutions. All rights reserved. No unauthorized reproduction without the
author’s written consent. All references to this publication must cite Panorama Consulting Solutions as the author and
include a link to the original report at http://Panorama-Consulting.com/resource-center/2014-erp-report/
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Introduction
Panorama Consulting Solutions developed the 2014 ERP Report to investigate ERP software
selection, implementation and satisfaction trends across industries, company sizes and
geographic locations. The report summarizes Panorama’s independent research into the
experiences of ERP customers with regards to enterprise software, vendors, consultants and
implementations overall.
To ensure our findings reflect the current conditions as accurately as possible, polling for the
2014 ERP Report was conducted on Panorama’s website (Panorama-Consulting.com) during a
recent thirteen-month period (January 2013 to February 2014). One hundred ninety-two
respondents completed the surveys upon which this data is based.
Data Summary by Year
Y E A R C O S T
% O F C O S T
O V E R R U N S
D U R A T I O N
% O F
D U R A T I O N
O V E R R U N S
%
R E C E I V I N G
5 0 % O R
L E S S
B E N E F I T S
2013 $2.8MM 54% 16.3 months 72% 66%
2012 $7.1MM 53% 17.8 months 61% 60%
2011 $10.5MM 56% 16 months 54% 48%
2010 $5.5MM 74% 14.3 months 61% 48%
Over the past four years of Panorama’s independent ERP research, the average cost of ERP
implementations has been $6.5 million and the average duration has been 16.1 months. In this
period, approximately 54-percent of projects have exceeded their planned budgets, 72-percent
of projects have exceeded their planned durations and a full 66-percent of respondent
organizations have received less than 50-percent of the measurable benefits they anticipated
from their ERP software initiatives.
Of those respondents who exceeded their planned durations, the majority indicated that
“organizational issues” was the main reason. Unsurprisingly, the data also revealed that more
than half of respondents spent 0-25-percent of their budget on organizational change and
business process management. These data also may explain why only eight-percent of
respondents reported “excellent buy-in” among employees.
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While costs, durations and benefits received fluctuate year to year due to economic conditions,
implementation trends and data set make-up, the facts remain: organizations that do not
allocate enough of their budget to organizational change and business process management
are more likely to face organizational issues, such as low buy-in, often leading to extended
durations.
Respondent Overview
Although the organizations represented by survey respondents vary in industry, location, size,
goals and needs, all respondents have had recent ERP project experience. Two out of five
respondents (39-percent) have completed their ERP implementation while 35-percent are in the
process of implementing and 19-percent are in the planning phase.
The majority of organizations appear to understand the benefits that can be realized from a new
ERP system. The top reasons cited for implementing ERP were to improve business
performance (15-percent), to better integrate systems across multiple locations (14-percent), to
better serve customers (12-percent) and to ensure reporting and regulatory compliance (11percent).
Only a small percentage of organizations reported that the reasons they implemented
ERP software was “to appease the parent company or other key stakeholders” or “because
other companies have ERP.”
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More than three out of four respondents (77-percent) indicated that their companies were
implementing or had implemented ERP software at two or more locations. The ERP systems
were purchased to replace out-of-date, existing ERP software (43-percent), a non-ERP system
or systems (20-percent) or homegrown systems (17-percent). Three-percent of respondents
indicated that they had no “true system” and were paper-based prior to the ERP
implementation.
The number of named users of the ERP system identified by respondent organizations varied
greatly. As the graph on the following page shows, nearly half of the companies represented
(49-percent) had between one and 100 named users and 51-percent had between 101 and
1,000 named users.
Manufacturing firms made up 27-percent of respondents. In years past, manufacturing
organizations accounted for a lower percentage of companies implementing ERP software. This
two-percent increase from 25-percent in 2013 to 27-percent in 2014 may be due to the recent
increase in domestic manufacturing and decrease in outsourcing; this may lead to new business
processes that require more complex software functionality.
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More than half of respondent companies (56-percent) are multinational and, as shown in the
chart on above, and total annual revenues reported ran the gamut from less than $25 million
(28-percent) to $1 billion or more (17-percent).
ERP Software Satisfaction Levels
General satisfaction levels for ERP software remain high, though significantly lower than last
year. The majority of respondents (70-percent) are satisfied with their ERP software (as
compared to 86-percent in our previous report) and 76-percent would select their chosen
software again.
Despite the high levels of overall satisfaction, it is interesting that only 63-percent of
respondents consider their ERP project a “success.” Nearly one quarter of respondents (21percent)
are “neutral” or “don’t know” if their project was a success, indicating that organizations
might not have created a business case, conducted a post-implementation audit or
communicated about project results. Nearly one in five respondents (16-percent) indicate that
their organization’s ERP project was a failure.
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The highest satisfaction rates emerged from overall software functionality (52-percent “satisfied”
or “very satisfied”) and the software’s ability to meet business needs (51-percent “satisfied” or
“very satisfied”) while the lowest satisfaction rates were found in the implementation service of
the vendor (35-percent “unsatisfied” or “very unsatisfied”) and the documentation provided by
vendor (34-percent “unsatisfied” or “very unsatisfied”). Interestingly, 33-percent of respondents
indicated that they were “unsatisfied” or “very unsatisfied” with the implementation service
provided by the third-party assisting their organization.
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Although the majority of respondents self-described as “satisfied” with their ERP software
selection, this does not appear to translate into satisfaction with individual components. This
points to a cloudy definition of “satisfaction” and “success.” Organizations that do not develop a
business case and do not measure project results against expected benefits likely have a more
difficult time defining success or failure. Working with end-users and stakeholders to define
project goals and expected benefits can create more realistic satisfaction and success
measures.
“Go-live satisfaction” is another reason that reported satisfaction levels appear so high
compared to reported success rates. As soon as an ERP system goes live, project fatigue
diminishes and executives, implementation teams and end-users consider the project
“complete.” Organizations must ensure that end-users and executives know that results will be
measured against key performance indicators and that go-live is just one of many project goals.
ERP Vendors
As displayed in the table on the left, survey respondents’ choice of
ERP vendors is varied and shows the vast amount of enterprise
solutions available in the marketplace at large.
The graphic below shows that the majority of respondents (70percent)
reported at least some level of satisfaction with their
chosen ERP vendor:
Nearly one out of three respondents (30-percent), however, reported being “moderately
dissatisfied” or “not satisfied” with their overall experience with their ERP vendor. In Panorama’s
experience, dissatisfaction can result from a disparity between promises made in the sales cycle
Sample ERP Vendors
Included in Data Set
Abacus
Clarizen
ECi Solutions
Epicor
EZware
IFS
Infor
Jobscope
Lawson
Microsoft Dynamics
NetSuite
Oracle
Plex Systems
Sage
SAP
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and actual results. Organizations that don’t clearly define requirements will often feel that their
ERP vendor has betrayed them with false promises.
In terms of specific vendors chosen, SAP was the vendor most frequently shortlisted by
respondent organizations, followed by Oracle and Microsoft Dynamics. In terms of percentage
of times the vendor was chosen after they had been shortlisted, Oracle was the vendor most
frequently selected (34-percent of the time), followed by Microsoft Dynamics (20-percent of the
time), SAP (16-percent of the time) and Epicor (10-percent of the time).
Please note that additional vendor-specific research and analysis is available in Panorama’s
2014 Clash of the Titans Report.
ERP Solutions
As we have seen in previous years, the majority of respondents (86-percent) has implemented
or is in the process of implementing on-premise ERP software. This is a significant increase
over last year where only 61-percent implemented on-premise. Together, 15-percent of
respondents selected software as a service (SaaS) and cloud ERP.
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The findings below indicate that the large majority of organizations are not implementing cloud
or SaaS ERP systems (85-percent). In comparison to last year’s report, however, there has
been a slight increase in the adoption of cloud ERP software. Last year, 18-percent of
organizations implemented cloud ERP software compared to 15-percent this year. The top two
reasons respondents did not implement cloud technology include a “lack of knowledge about
cloud offerings” (45-percent) and “risk/fear of security breach” (30-percent).
While the market for cloud ERP is growing, organizations still worry about the risk of security
breaches. This risk is a misconception, however. Panorama’s experience has shown that cloud
ERP vendors typically provide secure and reliable solutions, which is important for executives to
consider during the software selection process.
The low cost of cloud ERP solutions is a common selling point for cloud providers. According to
respondents' experiences, however, it is evident that this is not necessarily the case.
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When asked what percentage of cost savings their organization realized or expected to realize
from cloud usage, more than half of respondents who had deployed cloud technology (54percent)
indicated that they had recognized between zero-percent and 40-percent cost savings.
Organizations that implement cloud technology in order to save money should consider the true
cost of ownership over time.
ERP Consultants
The majority of respondents (83-percent) employed the services of an ERP consulting firm. This
is an increase of 23-percent over last year where only 60-percent of respondents used ERP
consultants. It seems that more and more organizations are coming to understand that hiring an
ERP consulting firm benefits project teams, project managers and overall project results.
The data also indicate that organizations understand the importance of leveraging ERP
consultants throughout the entire lifecycle of an ERP implementation. Many respondents
brought in consultants during the selection and purchasing phase (39-percent) and an equal
amount of respondents brought in consultants during the planning phase (29-percent) and the
implementation phase (29-percent). Only three-percent of respondents used consultants postimplementation,
which may indicate unfamiliarity with how consultants can help organizations
achieve expected benefits.
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The key aspects in which consultants provided guidance include ERP implementation (21percent),
training (19-percent), organizational change management (14-percent) and software
selection (11-percent). Only nine-percent reported that consultants provided guidance in
contract negotiation and only nine-percent of respondents leveraged ERP consultants for
benefits realization services. The low amount of companies incorporating independent
verification and validation (IV&V) services (four-percent) into their consulting also stands out as
it indicates that organizations may not recognize the value of neutral, third-party oversight.
While some project teams are completely equipped to implement an ERP system, they
frequently lose the drive to measure business benefits. Third-party assistance can be valuable
for assessing project goals, determining KPIs and ensuring a high return on investment.
When asked why organizations chose to bring ERP consultants onto their teams, 20-percent of
respondents indicated that consultants were hired to “supplement internal resources with
specific skills and experience”. Almost one out of five respondents (19-percent) indicated that
consultants were hired to manage the implementations and 17-percent of respondents hired
them “to be a strategic partner from planning through implementation.”
While consultants can sometimes be seen as one of the most expensive components of an ERP
implementation, respondents’ experiences proved otherwise. Slightly more than one out of three
of respondents who used consultants (24-percent) spent between zero and 25-percent of their
entire ERP budget on those services while 31-percent spent between 26-percent and 50percent
on third-party assistance. Consultant costs vary greatly and depend on the level of
involvement the consultants have with the project. If an organization wants to achieve all of
benefits outlined in their business case, it will need the assistance of third-party guidance from
start to finish.
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Project Budgets
In terms of overall costs, the data show that the majority of ERP projects (54-percent) exceed
their project budgets.
When asked why the projects went over budget, 17-percent of respondents indicated that
project scope was expanded and 15-percent of respondents noted that “unanticipated technical
or organizational issues created additional costs.” Only 5-percent of respondents indicated that
the project did not go over budget.
While there is no denying that the investment remains a significant one, survey respondents in
this data set spent an average of $2.8 million on their ERP initiatives. Data presented last year
found that the average cost was about $7.1 million. This may indicate that organizations are
getting wiser about investing in important project components – such as organizational change
management – upfront so they do not encounter higher costs down the road when investing in
last-minute training and communication.
In terms of cost as a percent of organizations’ annual revenue, our data show that this number
is down from 5.5-percent last year to 4.6-percent this year. The main driver of smaller costs is
that more small- to mid-size companies are implementing ERP software compared to years
past, which is evident when you look at the cost as a percent of revenue numbers.
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Project Durations
In addition to budget overages, ERP projects are often affected by extended durations. As
shown in the graphic below, one quarter of respondents (25-percent) reported that their projects
were on schedule and only two-percent reported that their projects came in earlier than
scheduled. The remaining respondents (73-percent) experienced duration overages.
When compared to last year’s data, which showed that 34-percent of projects ran on schedule
and 61-percent of projects ran over schedule, this shows that more organizations are struggling
to estimate the amount of time necessary to successfully complete an ERP implementation.
Respondents also reported that their ERP projects typically exceeded planned durations by
more than 3.5 months. In terms of actual duration, respondents indicated, on average, that they
had planned for a 12.6-month long project but the initiative actually took 16.3 months. Results
from our 2013 ERP Report indicated that projects lasted, on average, about 17.8 months.
This year, when asked to detail why the project had exceeded its timeline, 14-percent of
respondents noted organizational issues, 13-percent of respondents indicated scope expansion
and 12-percent called out data issues. Issues with project scope, data migration, unrealistic
initial timelines and technical integration were responsible for schedule overages to a strong
degree as well.
In Panorama’s experience, extended durations can also be caused by a lack of third-party
guidance, implementation planning, organizational change management and business process
improvements, among other reasons.
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Benefits Realization
Organizations would not embark on expensive, lengthy and stressful projects if they did not
expect to receive substantial business benefits. Creating a strong business case, agreeing on
key performance indicators and conducting post-implementation audits is essential to achieving
all expected business benefits.
While, only 80-percent of respondents realized some measurable business benefits, this shows
an increase of five-percent from last year’s data. Of those, 66-percent realized less than half of
the benefits (between zero- and 50-percent) that they anticipated. Only 26-percent realized
between 51-percent and 100-percent of anticipated benefits.
This is in line with last year’s findings, which showed that 26-percent of respondents realized
greater than 50-percent of their anticipated benefits and 11-percent of respondents received no
benefits. A full 14-percent didn’t have a business case. The percent of respondents realizing
less than half of anticipated benefits (66-percent) has slightly increased since last year where
60-percent of respondents received less than half of the benefits they expected.
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In terms of specific benefits realized, responses line up with previous years’ findings. As shown
above, the top five benefits noted by organizations included availability of information, improved
productivity, increased interaction, less duplication of effort and improved data reliability. ERP
implementations seemed to have little positive effect on IT costs, operating expenses or leadtime
and improved inventory.
Timeline to Recoup Costs
Increased efficiency and improved customer service are two ways organizations can recoup the
costs of an ERP implementation. Over one quarter of respondents (27-percent), however, have
not recouped their project costs. Less than one quarter of respondents (17-percent) report that
they recouped costs in two years, which is a realistic timeframe and slightly less than
Panorama’s previous findings that costs are typically recouped within three years of go-live. An
additional 24-percent are unsure, pointing again to a lack of communication and a lack of a
business case to measure against. The average payback period reported by survey
respondents was 30 months, which shows a five-month increase over last year’s average of 25
months.
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When compared to responses analyzed in our 2013 ERP Report, the complete lack of project
cost recoupment has not changed but the amount of companies that have taken four years or
more to recoup costs has increased from 5-percent to 14-percent.
While it’s important to set realistic expectations with regard to project budget and time to recoup
costs, some organizations are so overwhelmed by the task of implementation that they overlook
the importance of achieving returns in the short- and long-term. Third-party assistance can
greatly improve an organization’s return on investment and the time it takes to achieve that
return.
Operational Disruption
Considering the metrics throughout this report, it is not surprising that over half (51-percent) of
ERP implementations experience some type of material operational disruption at “go-live.”
Despite all their efforts to increase efficiency and streamline business processes, many
organizations find that they are not able to do something as simple as ship products or close the
books when they finally flip the switch on their ERP system.
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ERP implementations are all too often plagued by technical, process and organizational issues
– all or any of which can cause an operational disruption. According to Panorama’s research
and experience, it is the process and organizational issues that pose the most risk. Technical
issues do exist, and are likely responsible for short-term disruptions, but they are typically more
quickly and more easily resolved than organizational issues.
Conclusion
Not unlike years past, Panorama’s research has found that the majority of organizations
experience extended implementation durations and came in over-budget. The most common
reasons for extended durations, however, are not the same as previous findings. While data
from our 2013 ERP Report pointed to scope increase as the main reason behind extended
durations, findings from this year’s report highlight “organizational issues” as the main culprit.
Now, more than ever, our findings are emphasizing the importance of organizational change
and business process management and their impact on implementation duration.
Another interesting data point this year is the amount of respondents who employed the
services of an ERP consulting firm. The fact that this number showed a significant increase from
last year is encouraging. What is troubling, however, is why this third-party guidance did not
seem to have an impact on project results, specifically the amount of respondents experiencing
“organizational issues” and extended durations. While third-party guidance is essential, finding
the right consulting firm can be difficult. The ideal consulting firm is one that can come alongside
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your organization and ensure that every dollar spent on an ERP project contributes to who your
organization already is and what it hopes to become. Organizations with strong third-party
guidance understand that a significant amount of their implementation budgets should be
allocated toward organizational change management, business process management and every
project activity that can help maximize benefits realization.
As reflected in the data, organizations without third-party guidance still appear to be satisfied
with their ERP implementations. Satisfaction, however, does not always indicate that a project
achieved a high ROI. True ERP success is measured in benefits realization, efficiency gains
and anything your organizations deemed important back when the implementation began, back
when hopes were high. As organizations lower their expectations, satisfaction is understandably
easy to achieve. Organizations that take the time to create a business case and define their
goals and objectives are well on their way to achieving everything they hope for.
About Panorama Consulting Solutions
Panorama Consulting Solutions is an IT consulting firm specializing in the enterprise resource
planning (ERP) market for mid- to large-sized organizations around the world. Independent of
affiliation, Panorama facilitates the evaluation and selection of ERP software, manages ERP
implementation, and expedites all related organizational change to ensure that each of its
clients realize the full business benefits of their ERP systems. Panorama maintains a global
presence with current offices in Denver, Chicago, Boston, San Francisco, Lima and Dubai.
More information can be found on its website, Panorama-Consulting.com and Twitter
feed, Twitter.com/PanoramaERP.