ERPs cost, duration, benefits, success and failure &

Critical Success Factors for ERP Implementation

2013 studies summary

New research offers important lessons for chief financial officers when buying and implementing enterprise

technology

The latest 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 do not

fully receive expected benefits.

Nonetheless, only few respondents characterized their ERP project as a failure.

The research survey* was conducted during the four-month period of September, 2012 to January, 2013. The

results are based on data from 172 respondents who completed a on line survey. Seventy-one (71) % reported

revenues of $300 million or less and 21 % of respondent companies had revenues of $1 billion or higher.

*Panorama Consulting Solutions, 2013 surveyhttp://www.zdnet.com/2013-erp-research-compelling-advice-for-the-cfo-7000011619/

Cost, duration, & benefit summary

Although project duration and cost fluctuate from one year to the next, three points stand out about the current data:

Over 50 %of projects experienced cost overruns

Over 60 % experienced schedule overruns

Fully 60 %of respondents received under half of the expected benefit from their ERP implementation

This chart summarizes the top-level results:

Implementation budget, schedule, and realizing benefits – data for the past 4 years

According to the survey, 53 % of ERP projects exceeded their budget

Schedule - 61 %t of respondent ERP projects went beyond planned time duration

The survey shows a significant problem with respect to realizing benefits from the ERP implementation

27 % of respondents realized less than a third of anticipated project benefits

11% realize no benefit at all from their ERP implementation

22% achieved between a third and one-half their expected benefit

Fully 60 %of the ERP projects in the survey realized less than half their desired benefit.

ERP success and customer satisfaction

The survey makes a distinction between "implementation outcome" and "customer satisfaction."

As the following chart shows, only 10 % of the respondents called the ERP implementation a failure, meaning 90 % either did not know or believed their project to be successful:

Various measures related to ERP software, vendors, and implementation results showed average satisfaction:

Implementation service of vendor 40 % satisfaction

Implementation service of third-party 25 % satisfaction

Ability to meet business needs 49 % satisfaction

Employee adoption 35 % satisfaction

Overall implementation experience 44 % satisfaction

ERP vendor selectionAs the graph shows, the primary candidates for ERP software were SAP, Oracle, Microsoft, Epicor, and Infor

The cloud question. Despite the hype, only 14 percent of respondents are using ERP delivered as Software as a Service (SaaS). Although the best cloud vendors can deliver superior security and reliability than most internal IT departments, market momentum to ERP in the cloud is not there yet, as the following diagram illustrates:

The cloud question

Despite the hype, only 14 % of respondents are using ERP delivered as Software as a Service (SaaS).

Although the best cloud vendors can deliver superior security and reliability than most internal IT

departments, market momentum to ERP in the cloud is not there yet, as the following diagram illustrates:

Payback period. The survey reports an average payback period of 25 months (down from 32 months in 2009). The graph below shows that over half the respondents did not recoup their costs or were unsure:

Payback period

The survey reports an average payback period of 25 months (down from 32 months in 2009). The graph below

shows that over half the respondents did not recoup their costs or were unsure:

It is important to keep in mind that respondents who have not completed an implementation will naturally report no payback — after all, the software is not yet operational.

More intriguing is the 25 % who are unsure of their ERP payback period. One wonders whether these people had a clear set of goals and business when starting their project.

Conclusions

Although most ERP implementations run late, over-budget, and do not deliver planned results, only 10 % of

respondents called their ERP implementation a failure.

At the same time, 60 % called their ERP project a success and 30 % expressed neutrality on the success / failure issue.

These numbers indicate that buyers' expectations are too low — it is indeed unfortunate these numbers are so low.

Important lessons

Implementing an ERP system is always complex because the deployment drives changes to both data and processes

that extend across departmental boundaries inside the organization.

ERP implementation success

1. Environment: Cultural• Importance of training and systems• Resistance to change• Cultural readiness• Open and honest communication• Unrealistic expectations

2. Environment: Structural• Competitive pressure

• IT personnel and business expert availability

• Employee turnover

3. Software• Complexity of the software• Ability to comply with local

legislation• Focus of the software

• Suitability of operating assumptions and

business rules

4. Firm• Size of the Firm

5. Implementation team characteristics

• Experienced consultants• Implementation team responsiveness• Empowerment of team• Project champion• Team composition

6. Top Management• Clear objectives and goals

• Support, involvement and participation

• Age and functional background of CEO

7. Implementation Process• Implementation approach• Business process reengineering vs. softwaremodification• Training and Education• Data quality and accuracy• Evaluation of project progress• Timing of implementation

8. End - users• Attitudes toward the ERP system• User involvement• Job Tenure and type

Critical Success Factors for ERP Implementation or (CSFs)

1. Cultural aspects of the environment

Unique to corporate culture

Resistance to change is an important success factor to ERP implementation. 30 % of respondents indicate that resistance to change is a major problem in the implementation effort. The resistance is identified to be result to job changes and uncertainty of the new system .. As remedy – honest and open communication, trust between management and employees is a key factor helping the successful ERP implementation

Unrealistic expectations – another cultural factor defined as the inability to identify and solve problems. This leads to major obstruction to ERP success implementation

2. Structural: industry & market conditions

In some industries competitive pressure is a key factor that stimulates and keeps the organisation motivated during the implementation process and contributes to success

The lack of IT personnel, business experts / or employee turnover is being identified as another key factor – without proper ERP personnel the implementation is difficult to accomplish

3. Characteristics of the software

The complexity of the ERP software inhibits the ability of the users and implementers to understand and incorporate the software into the business processes of the organization. Also, the higher the complexity of the software, the more time and hence, expense of the implementation. Therefore, complexity of the software may have a negative relationship with successful ERP implementation. The ability of the software to comply with local legislation is an important success factor.

4. Characteristics of the firm The firm size

* International Journal of Information Technology & Information Systemshttp://papers.ssrn.com/sol3/papers.cfm?abstract_id=2256382

* Critical Success Factors for ERP Implementation or (CSFs)

5. Implementation team characteristics

Consultants are important in bringing both knowledge and experience in implementation. These are two important implementation success factors often lacking in firms implementing ERP systems.

The ability of the implementation team to plan and make decisions was named as an important factor. This empowerment of the implementation team helps to increase their responsiveness to impediments to the implementation process.

The right mix of IT experts, business experts and consultants can increase the probability of success. Finally, often the project champion seems to bring significant benefits of the ERP project.

6. Role and characteristics of top management

The clear objectives and goals are important to move all parties in the same direction. The goals and objectives, set by top management, are related to another factor: top management support, involvement International Journal of Information Technology & Information Systems and participation. This factor is often included in models of ERP implementation success. Interestingly, top management executive’s age and functional background was found significant to ERP implementation success.

7. Characteristics of the implementation process

One of the major conflicts in ERP implementation is the choice that has to be made between business process engineering vs. software modification.

Training and education of users, customers and suppliers is an important part of adoption and satisfaction of the ERP system.

8. End-users characteristics

End-user attitudes toward the ERP system were found to influence successful implementation. Employees with the lowest jobtenure and those in professional positions were more likely to be satisfied with the ERP system.

Literature references:

Review Paper: Critical Success Factors for ERP Implementation(http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2256382)

2013 ERP research: Compelling advice for the CFO(http://www.zdnet.com/2013-erp-research-compelling-advice-for-the-cfo-7000011619/)

Related articles:

Exploring the Impediments of Successful ERP Implementation: A Case Study in a Public Organization( http://www.ijbssnet.com/journals/Vol_2_No_22_December_2011/33.pdf) Top Five Factors for ERP Implementation Success(http://www.collegiateproject.com/articles/Top%20Five%20Factors.pdf)

Evaluation of Key Success Factors Influencing ERP Implementation Success (http://www.epscor.hawaii.edu/system/files/er_publication/2012/04/Hailu%2526Rahman_Evaluation_Key.pdf)

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