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New ERP Trend in 2011: Declining Implemenation Costs

Following the trend of a declining economy, declining housing prices, and a decline of money in the wallets of the general public, ERP implementation costs are also plummeting.  According to Panorama Software’s ERP Report, the overall cost of ERP implementation is lower than it has been in years. Panorama’s report features research as a result of coverage across 1,000 ERP implementations worldwide. The report has been a trusted source of ERP information since its first publication in 2008, garnering the report as an important ERP resource in the software industry.

ERP implementation cost has been on the decline since 2009, as ERP data from the report suggests. From 2009 to 2010, ERP implementation costs decreased, but unfortunately at the same time, the benefits reaped from implementation decreased and failure rates increased. Businesses in 2009, didn’t invest in ERP software thus the drop in implementation costs, but the drop in implementation is directly related to a drop in business benefits and project success. What we can learn from these metrics is that investing in ERP software directly inspires project success, and that lowering or not implementing an ERP solution increases business risk and total overall cost of ownership.

Panorama’s 2011 forecast for the ERP climate shows yet another decline in cost of implementation, as well as duration. In 2010, the average cost of ERP software ownership was $5.5 million, which is 4.1% of annual revenue. For 2009, the average cost was 6.9% of the annual revenue.

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There are a several factors that explain the declining costs of ERP implementation. The main contributor to the decline is the state of the economy. Since we are in a veritable economic crisis, enterprise budgets are being cut left and right. Budget cuts have forced companies to implement ERP solutions sparingly, getting only the bare minimum of business benefits.  Although the results of the 2011 ERP Report haven’t been collected and interpreted, experts are already convinced that implementation costs lowering will again result in a decline of business benefits as well as project success.

Software experts also predict an increase in “material operational disruption”, as a result of skimping on vital ERP implementation processes. In 2010, there were a high number of ERP software implementation failures and lawsuits, which is why experts see an increase in “material operational disruption” cases.

These findings are based on Panorama’s ERP projections for 2011. The important information to note from the ERP research is that ERP software is ultimately a smart investment for businesses. Although the return on investment (ROI) may not be evident or significant at first, overtime ERP implementation will yield successful project results. It is important that business do their research pre-software implementation, so that success is more than just a pipedream.

The economy is in a continuous state of flux, but skimping on business benefits through ERP implementation is not a smart way to save money. Do your research and do your company a favor by implementing a savvy ERP solution.

[Photo courtesy of fitsmallbusiness.]