ERP Implementation Costs and Cloud Software

January 12, 2011
By grippen

Panorama Consulting LogoIn his preview of Panorama’s 2011 ERP Report, Eric Kimberling says that ERP implementation costs continue to decline.

Similar to what we saw in implementations completed in 2009, implementation costs and durations appear to be on the decline again in 2010. The average ERP software total cost of ownership was $5.5 million in 2010, or 4.1% of annual revenue. This is down fairly significantly from 2009, when the average implementation was 6.9% of annual revenue.

Eric cites two main reasons for the lower ERP software and implementation costs. First, lower IT budgets result in closer control of costs and less tolerance for overruns. Second, overall satisfaction and business benefits are lower. In other words, people are paying for less customization and integration which saves on the bottom line, but may not help overall satisfaction.

To learn more go to the Panorama Consulting website article.

Cloud and SaaS Impact

The final Panorama report will know all and tell all. Hopefully the final report will include an impact of SaaS and Cloud on the implementation times and costs.

As more folks move to SaaS and Cloud purchasing arrangements, front-loaded license costs are spread more evenly over time. Thus, costs go down in the short term, but may remain steady over time. In this case the discrepancy might be compared to an accounting rule change. Also, SaaS may have a downward impact on implementation times – which is a good thing!

The folks at Panorama will have the final word when they publish their report – so we are looking forward to it.

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