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.

Dennis Gaughan, Managing VP at Gartner Research recently published an article entitled Will Core ERP Move to the Cloud? In Dennis’s words, the topic of “ERP in the cloud generated a tremendous response, prompting a bunch of requests for more thoughts and opinions.” In his follow up, Reader Response to ERP in the Cloud,” Dennis summarizes the discussion and makes some interesting points.

Several people that read Dennis’s article mentioned the following discussion points.

• Need for deployment flexibility. Not surprisingly, people wanted different deployment models.
• Concerns over pricing. Many are intrigued by SaaS, but are unsure that SaaS pricing will save them money in the long run.
• Cloud adoption varies by industry, company size, and application category.
• Collaborative business models are supported by the cloud and can add value above and beyond the applications.

For commentary about the discussion topics listed above, please read the article on Gartner’s blog.

Cloud ERP Discussion Remains Spirited

The key takeaway is that people are interested in the Cloud and how they can use it to improve their ERP software deployments.

The bullet points above reveal that the Cloud ERP discussion has moved to the next level. A couple years ago, people were primarily concerned about saving money and worried about security. Today, many customers, vendors, and resellers are asking and learning about deployment and collaboration. In the process, they are finding that the security issues are in fact not security issues, but risk and deployment issues. Also, many are understanding the differences between web-based software and traditional client-server despite the attempts of some vendors to confuse the issue.

Cloud ERP on the Right Track

Discussions about Cloud ERP are on the right track:
- First, many are interested.
- Second, people are thinking beyond the standard pricing and security issues.
- Third, people are thinking creatively about how to benefit from the technology.

As we move into 2011, expect more creativity and exciting case studies that describe how businesses are taking advantage of Cloud ERP software.

So, it is good to hear from somebody in the field who is selling, implementing, and deploying ERP solutions. Read an account of ERP trends from a field representative.