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A majority of ERP projects go over budget, report says

A staggering 93% of companies said their ERP implementations took longer than expected, and 65% said they went over budget. To avoid failure, focus on people and processes.

Lack of buy-in from employees is one of the leading causes of ERP implementation failure, according to a recent report from Panorama Consulting Group.

Of the 1,300 companies the Denver-based ERP consulting firm surveyed, 93% said their ERP implementation projects took much longer than expected, and 65% indicated that they went over budget. The majority of ERP implementations took between four and 18 months, according to the report.

Assembling a team with a strong project manager and "A-players" from several departments to identify and track key business needs will help ensure ERP implementation success. That includes involving executives outside IT in vendor evaluation and process planning to identify the benefits and hidden costs of ERP projects, according to Panorama president Eric Kimberling.

"Really focus on the business -- because it's not about the software," Kimberling said. "Set realistic expectations, and take the time to really plan the project. Go in with eyes wide open."

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Taking time to prepare an  ERP implementation plan up front -- including validating business requirements, the implementation project plan and spending at least four months evaluating vendors -- will help companies develop a realistic implementation timeline and budget, Kimberling said.

He also recommends looking for the hidden costs associated with ERP implementations, including hardware, training, organizational change management, project management, hiring temporary contractors to replace team members, and software customization.

"Many ERP software vendors fail to adequately manage client expectations about the implementation duration," the report reads. "The most successful ERP implementations occur in companies that have realistic expectations about how much time and effort is required."

Part of that planning process involves assembling a good  ERP implementation team. To increase employee buy-in, involve many employees from the business side. These employees should not only help evaluate, select and implement the software, Kimberling said, they should define how the company's business is going to look once the software is live.

Choose people who have been involved with an ERP implementation project before and who have an ability to look beyond how the business currently works to how it could work better, he said. Choose a project manager who has worked on a project of this size before.

In turn, increasing employee buy-in requires investing in adequate training and change management.

"The system -- no matter how advanced -- will prove to be ineffective if the staff does not understand how to use it," the report reads. "A focus on training, organizational change management, job design, and other employee support measures is crucial to any ERP project."

Also, make sure there's a strong focus on the data, and invest heavily in data cleansing, mapping, migration and verification, Panorama says.

But above all, proper planning will help the company to ensure that it's the right time for ERP, and -- if not -- to consider alternatives.

"Even companies with the most manual processes and outdated technologies may not be suited for immediate ERP implementations," the report reads. "Perhaps a better or more cost-effective solution, such as business process improvements to the current system, will provide more immediate bang for the buck."

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