ERP Market Analysis

2018
Industry

In this sizable percentage of survey responses coming from manufacturing,

education and distribution companies, professional services and public sectors.
Since ERP systems were first tailored to fit manufacturing and supply chain
processes, as software vendors have started to transition into offering more SaaS
or best-of-breed applications within their core packages, the ability to support
other organizations with more niche best practices, is becoming commonplace.

Industries covered by ERP

11

11

43

10

5
3 3 3 3 2

Manufacturing Telecommunication Construction

Healthcare Education Other
Non Profit Professional Service Information Technology
Finance, Insurance & Reality Retail & Distribution
Average Annual Revenue to Reporting Organizations

The majority of organizations reported between $50M - $300M in total annual

revenue. With such a wide range in the average organization implementing an
ERP solution, the important takeaway is to understand what makes a
small/medium size firm want to embark on an ERP initiative. Companies of
varied sizes approach ERP implementations differently in order to improve or
solve a range issues. Indeed, the business case and expected benefits realized
can differ by company size. For example, larger companies tend to take a more
strategic approach and seek more robust solutions continuing to scale as their
businesses grow. Whereas, smaller companies are often more tactical and
typically look for improved performance around their core processes, such as in
production and supply chain

Total Annual Revenue (U.S. Dollars)

2%2%2%
12% 13%

29%

40%

$1M - $25M $25M - $50M $50M - $300M $300M - $500M

$500M - $1B $1B - $5B $5B+
ERP Cost as a Percentage of Annual Revenue
ERP Cost as a % Annual Revenue
50%
45% 44%

40%
35%
30%
26%
25%
20%
15% 14%
10%
10%
5% 4%
2%
0%
Less than Between 0.5 Between 1 Between 2 Between 3 More than 5%
0.5% and 1% and 2% and 3% and 5%

The above graph represents what respondents reported they spent of their annual income.
84% of respondents had an expected or actual spend on ERP of less than two percent of
annual income. However, it is important to note that these numbers are affected and differ by
the size of an organization, in this case, it was gauged by annual revenue. Our data shows
smaller companies are on the higher end of this two percent metric. It is not uncommon for
the total cost of the project to exceed four percent of annual revenue depending on the type
of ERP implementation, attention to Business Process Management (BPM) and Organizational
Change Management (OCM). When budgeting for an ERP implementation, it is important to
consider all costs, not just the licenses and services. Also consider internal costs, such as the
percentage of time your own employees will need to spend on the project, along with the
backfilling of any positions.
Vendor Selection
SELECTED ERP
35% 33%

30%

25%

20%
16%
15%
15%

10% 8%
6% 6%
5% 5% 5%
5%
1%
0%
Oracle SAP Microsoft Sage Epicor Infor NetSuite IFS IQMS Other

Oracle, SAP and Sage represented some of the most frequently selected ERP vendors among
the targeted respondents. With such a diverse range of industries stated above, this data does
not provide much insight, aside from an indication there isn’t much bias toward any particular
vendor
Deployment Options

Type of ERP Software - 2018

On-premise SaaS Cloud ERP

Type of ERP Software - 2017

On-premise SaaS Cloud ERP

Reason for ERP Implementation
Given the high costs to implement such an initiative, what motivates an organization to
implement an ERP system? Does the perceived ROI play a major role in the decision to
implement? How does an organization decide what solution to implement? The single
most compelling reason our respondents. Implemented new ERP systems was to
improve business performance. Many were also interested in positioning their
organizations for growth, reducing working capital and serving customers better.
Comparing this with last year less emphasis on making employees jobs easier and
replacing legacy systems. What this translates to is improved integration between the
different functional areas within a value chain to ultimately optimize an organization’s
business processes and ensure cross functional alignment of business processes. Laying
the foundation for optimizing critical processes, will help the selected ERP system
enable organizational strategies, helping to support further growth on a scalable
platform.

Reasons for Implementing ERP

Other (please specify) 7%
To standardize global business operations 7%
Because other companies have ERP 24%
To ensure reporting / regulatory compliance 29%
To appease the parent company or other key stakeholders 32%
To replace an old ERP or legacy system 38%
To better integrate systems across multiple locations 41%
To make employee jobs easier 49%
To better serve customers 54%
To reduce working capital 57%
To position the company for growth 57%
To improve business performance 64%
0% 10% 20% 30% 40% 50% 60% 70%
Level of Customization

Level of Customization

No customization 12%
11%

Minor customization (1-10% of code modified) 13%

10%

Some customization (11-25% of code modified) 70% #REF!

33% 2017
2018

Significant customization (26-50% of code modified) 4%

37%

Extreme customization (Over 50% of code modified) 0%

8%

1
Completely customized, in house developed, or best of breed solution 1%
1%

0% 20% 40% 60% 80% 100% 120%

Organizational Change Management
Organizational Change Management includes a variety of activities executed
throughout the project lifecycle. These encourage buy-in and support for the
organization to change. These activities include, and are not limited to, communication,
planning and training. The objective of OCM is to instill a desire for change, prepare
users for change, in doing so, ease employees through a change initiative with minimal
disruption to the organization. Those who most highly value change management are
typically individuals who have experienced a failed initiative.

Organizational Change Management

13%

27%

60%

Very little or no focus on change management

Moderate focus on change management
Intense focus on change management
Most organizations having three to five full-time internal resources dedicated to
ERP implementation. The number and types of resources committed to a
project, often, significantly impacts the project’s likelihood for success. These
resources should also have an appreciation and responsibility for the change
management aspect of an ERP implementation. Throughout the implementation
project, there are different resources with different skillsets, all will have
different commitment expectations. Project managers and SME’s are typically
utilized more since they will be involved in activities such as requirements
gathering, functional design, testing, data conversions and training activities
across the program timelines. However, owners of the processes themselves,
will have to be pulled off their day jobs to sign-off on the future-state design.
These resources are often critical to the day-today operations of the organization
and it’s always a challenge to have them involved in the project while keeping
the wheels turning internally. Staffing and backfilling of positions will need to be
planned for.

Number of Full-Time Internal Users Dedicated to the Project

45%
40%
35%
30%
25%
20% 42%

15%
10%
17%
5% 12% 12%
9% 7%
0% 1%
1 - 2 FTE's 2 - 3 FTE's 3 - 5 FTE's 5 - 10 FTE's 10 - 15 FTE's 15 - 20 FTE's > 20 FTE's
Budget Overruns
Understanding and budgeting appropriately for the total cost of ownership of the
implementation is a common pitfall for scope creep and running over budget. A
proper evaluation of potential systems prior to selecting an ERP solution will help
in establishing a more accurate scope for the project. This will account for
potential customizations and integration costs, BPM and OCM projects, as well as
any additional hardware upgrades or third party bolt-on products. Larger, more
complex organizations require larger and more complex ERP systems. Not every
organization needs all the bells and whistles the Tier I packages can provide. A
more realistic approach is to consider viable ERP solutions, flexible enough and
scalable enough to support current and future growth, aligning with the
organization’s business and IT strategies.

Reasons for Budget Overages

Unrealistic budget 43%

Expanded scope 31%

Additional technology requirements 41%

Underestimated project staffing 35%

Unanticipated technical/organizational issues 45%

Underestimated consulting fees 9%

Consulting fees rose as project schedule slipped 2%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

 Project Duration Overruns

Reasons for Schedule Overages

Training issues 5%

Priority conflicts 10%

Resource constraints 40%

Vendor did not deliver in timely manner 46%

Data issues 23%

Organizational issues 76%

Technical issues 41%

Expanded project scope 61%

/ Unrealistic project timeline 74%

0% 10% 20% 30% 40% 50% 60% 70% 80%

ERP Project Duration

21%

79%

Over schedule On Schedule

 Payback Period

Timeline to Recoup Costs

1% 4%
16%

/
24% 50%

2%
3%

Less than 1 year 3 years 5 years or more Don't know / not sure
2 years 4 years Have not recouped costs
 Operational Disruption
Project success won’t have anything to do with technical features, rather it will
come down to how well you handle business process reengineering (BPR) and
OCM – the most important success factors for any ERP implementation. We often
hear organizations say the biggest obstacle to the success of their ERP initiative
was misalignment between project management and change management. Often,
people involved think they should had invested more into change management,
sponsorship and resourcing.

Length of Operational Disruption

3-6 months 9%

Experienced Operational Disruption

2-3 months 20%
34%

1-2 months 46%

66%
2-4 weeks 16%

Yes No
1 week or less 9%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Benefits Realization

Benefits Realized
60%

50%
40%

30%
20%

10%
0%
0%-30% of 31%-50% of 51%-80% of 81%-100% of
projected projected projected projected
benefits benefits benefits benefits

Series 1

Months Until Benefits Realized

0-3 months post 'go-live' 1%

4-6 months post 'go-live' 13%

7-12 months post 'go-live' 26%

13-18 months post 'go-live' 37%

19-24 months post 'go-live' 13%

24-36 months post 'go-live' 10%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Typically, organizations are looking to realize multiple benefits through an ERP
implementation. Too many organizations start to truly document what benefits
they would like to achieve during the implementation or even post go-live. The
creation of a business case, performance metrics or a benefits realization plan
doesn’t just help with scope creep, it also helps with defining and measuring
success, prioritization of pain points and opportunities for improvement. The
other benefits are establishing accountability around benefits achieved and
expectations management.

Types of Benefits Realized

Availability of information 80%
Improved data reliability 55%
Increased interaction/integration of business operations/process 46%
Improved productivity and efficiency 44%
Improved lead time and inventory levels 44%
Better decision-making 43%
Controls for compliance 38%
Reduced operating/labor costs 37%
Less duplication of effort 23%
Standardize operations 18%
Better informed decision-making 17%
Improved interaction with suppliers 15%
Reduced IT maintenance costs 14%
Better visibility into operations 14%
Improved interaction with customers 13%
Transform our business 10%
0% 20% 40% 60% 80% 100%
Implementation Outcome
Defining your organization’s quantitative metrics for implementation success prior
to project initiation will help your project teams focus, serve to help communicate
project progress and provide the ability to continually align project plan
corrections to achieve these metrics.
Implementation Outcome

30%

42%

28%

Success Failure Don't know

Measuring the project regularly will also helps team identify issues
as they arise and mitigate the risk associated with the issues via
early identification
These are a few examples of metrics of project success that you may choose to
use:
• Key Business KPI’s
• User Adoption
• Project Actuals vs Budget (time and financials)

When these metrics are in place and regularly monitored an organization is able
to determine their ability to achieve overall project success.
 
 Market In Million US Dollars
$85,000

$84,500

$84,000

$83,500

$83,000

$82,500

$82,000

$81,500

$81,000

$80,500
2015 2016 2017 2018 2019 2020 2021
 THANK YOU
W W W. N E W G E N - B D . C O M