Today we published our brand new 2018 ERP Software Report, which summarizes the results from nearly 300 recent ERP implementations across the globe. While the data tells a similar story to years past, it also contains a few surprises.
We summarized and analyzed this broad data set to arrive at some conclusions regarding trends in the industry, challenges companies to face when implementing new ERP software, and lessons learned. This is the twelfth consecutive year that we have conducted the annual study.
Some results are not surprising to those of us that have been in the industry for a while. Others were a big surprise to the Panorama team and me.
We saw a very large increase in cloud ERP software adoption this year compared to past years, with this year’s mix of SaaS and cloud deployments increasing to 85%, compared to 15% on-premise deployments. While this number may not be striking on the surface, it is a big difference from last year’s data, which showed less than 50% of organizations were deploying cloud and SaaS solutions.
Past years have shown that the average total ERP implementation costs anywhere from 4% to 5% of a company’s annual revenue. This number includes a project’s all-in costs, including software licenses, implementation costs, hardware upgrades, organizational change management, training, backfilling internal resources, and any other costs associated with the transformation.
This year, that number decreased to 3.6% of annual revenue. While this may sound positive on the surface, it actually reveals a flaw in our data since most deployments are cloud solutions, initial costs are naturally going to be lower. However, our implementation cost data only captures the initial implementation costs, not the ongoing costs. In most cases, cloud deployment costs less money up front but can increase longer-term outlays due to higher annual subscription costs. It is important to take this data with a grain of salt.
Despite lower up-front costs, ERP implementation durations are increasing. While the total average duration increased a relatively innocuous 16.9 to 17.4 months, those that took longer than expected increased from 59% to 79%. Again, this can be largely attributed to the increase in cloud deployments, which creates a false sense of implementation speed and ease and results in unrealistic expectations along the way.
Customer satisfaction with their chosen and implemented ERP software increased to 68% this year. However, satisfaction with their overall implementations plummeted from 81% to 42%, which suggests that more companies are either struggling with their deployments and/or managing to unrealistic expectations surrounding those initiatives. Thought leadership such as Ten Tips to a Successful ERP Implementation, provide guidance on how to manage your digital transformation to success.
For the second straight year, organizational change management was atop the list of top reasons why projects took longer or cost more money than expected. Ironically, many organizations think they will actually save time and money by cutting this important corner, but our research tells a different story.