ERP Costs: 3 Signs Companies Are Wasting Less Money

By Thomas Wailgum , CIO |  Software

ERP investments have long held a stranglehold on corporate IT investments. The Great Recession, however, has pushed boards and budgeting committees to examine IT spending like never before. Not surprisingly, ERP's juicy slice of the corporate spending pie has come under closer scrutiny.

Now, Panorama Consulting Group's 2010 ERP Report, when compared to its 2008 data set, provides some evidence that companies have seen the errors of their ways in managing ERP systems and have taken small, but important corrective actions for the future. (Panorama's data comes from survey respondents at 1,600 organizations that implemented ERP during the past four years.)

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To wit these three reference points:

1. Total Cost of Ownership Data Point: In examining TCO of enterprise software solutions, the average investment costs $6.2 million compared with $8.5 million in the 2008 study. Normalized to account for different company sizes, the average initial implementation costs are 6.9 percent of annual revenue, notes the report, compared with 9.0 percent in 2008. Panorama Comment: "This decrease of over 20 percent can be attributed to efforts to limit IT budgets and reduce implementation scopes in response to weak economic conditions. The tradeoff to these reduced implementation costs is that companies are less satisfied with their ERP investments than in years past."

2. Implementation Times Data Point: Organizations' ERP implementation lasted an average of 18.4 months, down slightly from 19.8 months in the 2008 study. Panorama Comment: "These decreasing implementation timelines can be partially attributed to a weak economy which has forced companies to more tightly manage implementations. Further, a number of companies decreased the scope of their enterprise software initiatives."


Originally published on CIO |  Click here to read the original story.
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