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The Real Cost of ERP Shortcuts
Monday, February 04, 2013

I continually visit companies that have been under financial pressure due to budget and time overruns on their ERP projects and have taken shortcuts to curtail expenditure and activity to meet a go-live date and cost constraints.

Making decisions to cut corners may be expedient at the time but in the end analysis the post-live running costs of chaos, non- functional elements of the system, customer service issues and lack of transparency in financial figures costs far more in time and disruption than if the job was done correctly in the beginning.

Information systems such as ERP require accurate information to process, user knowledge on how to operate the system and clear processes to ensure the system is being used correctly. Without these essentials the system simply cannot do what it was designed for. There is not magic in ERP systems! They are decision support tools for intelligent, trained people to use to make decisions quickly and accurately. Lack of data, incorrect data, poor processes and training in the use of these systems render them useless or problematic.

The reported failure rates of ERP surveys rate ERP success somewhere between 30 and 45%. One hundred per cent of projects are reported to exceed their budgets by an average of 25% and even so-called successful ERP outcomes are reporting around 50-55% of expected outcomes (There seems to be no definitive measure of what is success).

After thirty years of MRPII and ERP projects we see little change in outcomes but an exponential blow-out in costs mainly due to the ERP consulting gravy train perpetrated by the ERP vendors and their partners. I do not know of any other activity or industry that would continue to pursue something with such poor outcomes in terms of cost and returns. Customers must accept some responsibility for their own actions and of course this is where the “Devils Triangle” kicks in to muddy the water of responsibility.

This will not change until the ERP industry cleans up its act, unlikely given the Huge revenues generated through consulting implementation services, or clients become much smarter in understanding how to approach an ERP project and take on the ownership and disconnect the vested interested sales and implementation services provided by the ERP vendors and their partners which lay at the core of the problem.

Taking implementation shortcuts, at best, are solving an immediate problem today but creating a nightmare in the longer term.