Panorama Consulting Solutions, a leading consulting firm has just released the 2016 edition of its annual State of ERP Systems and Enterprise Software Report. Again this year, the firm reports some very interesting, and revealing findings. The publication is based on responses from more than 200 organizations across multiple industries.
In the first installment of this two-part series Lavante Senior Consultant Josh Morrison discussed the impact of timing and costs on ERP deployment. In this blog – the second part of the two-part series, Morrison explores the report with specific attention paid to the impact of customization and data quality.
2016 ERP Report: 90-percent of organizations reported some level of customization, fewer organizations are choosing extreme customization when compared to last year.
Observation: Customization; even hearing the word sounds expensive. What I find very interesting is that we are seeing a continued high degree of customization, and ERP projects are realizing greater cost over runs. Is there a correlation here? Anyone who had been on a major project like this understands that in fact yes, the majority of the time and cost over runs on ERP projects are the result of customization work; development, QA, testing, training, patches, custom code and table creation, etc. This adds up quickly, I can hear Pink Floyd’s “Money” playing in the background. Further, ask yourself “If I have to customize this much, is this the right solution? Is there an alternate solution that allows me to configure rather than customize? Should I really be expected to change my business practices just to adhere to how my new ERP works?”
2016 ERP Report: Compared to last year, more respondents are pointing to data issues as the reason for schedule overages. In Panorama’s experience, organizations that spend the time developing a data migration plan and strategy well before implementation are less likely to experience data issues that lead to extended implementation durations.
Observation: I spend a lot of time talking with clients about the criticality of good data, and the various costs of bad data. When master data is incorrect, out of date, or incomplete, the error radiates out exponentially into all downstream transactions, reporting and analytics. This leads to results that cannot be trusted for decision support, compliance assurance or strategy development. If the data is wrong, who can you trust? And how can you stand up a new enterprise system using bad data? This is often overlooked. I have seen data conversion nearly crash major ERP projects because the quality of the data was an afterthought. Just as customization work is a main cause for project cost over runs, so too is bad data a leading cause for timeline over runs. Do not make this mistake!
2016 ERP Report: Benefits realization continues to elude the majority of organizations. This year, only 35-percent of respondents realized more than 50-percent of anticipated benefits, which is a 5-percent decrease from last year.
Observation: The first question that begs asking is why are organizations comfortable with using 50% realization of benefits as the standard benchmark? Is 50% realization of value really the threshold against which we should define our goals? I should hope not, because if it is, we have allowed ourselves to let the limitations of solutions dictate how we do business and define success. Why is this not 100%? Or even 110%? If only 35% of respondents are achieving 50% of anticipated benefits, this means that a mere 17.5% of anticipated value is ever realized. Why is this considered acceptable? Just because it is the norm? The fact is customization erodes realized benefits. Organizations must ask themselves; Are we seeking the right benefits? Do we have the right strategies for leveraging our enterprise solutions? Are the goals/benefits tangible and realistic? I offer thoughts on how to drive greater ROI to corporate ERP’s in a different article.
2016 ERP Report: Last year’s report revealed that 11-percent of organizations had not yet recouped the costs of their ERP projects. This year, that segment of respondents increased to 18- percent. This year also revealed that 8-percent of organizations were unsure of whether they had recouped costs.
Observation: This is another revealing figure. Now 18% of respondents are yet to recoup project costs, and another 8% don’t even have the information they need to make that determination. This means nearly a quarter of those projects surveyed still haven’t recouped costs. This is just costs, not even additional anticipated value. This 8% speaks directly to the prior points around bad data, but also to the result of lack of clarity during the scoping and planning phases. When companies don’t have a complete understanding of how the ERP will impact them, both positively and negatively, they do not identify necessary goals, baselines or tracking mechanisms to easily quantify very complex ROI and TCO (Total Cost of Ownership) areas and results. All of this leads to elongated ROI periods and under-realized value.