New ERP research: quantifying failure and growth

AMR Research has released an exciting new report (yes, I've become a geek) describing the 2008 ERP market. Among topics covered by the report are market growth; percentage of license revenue relative to other implementation costs; and analysis of unused, yet purchased, licenses.

The curse of shelfware

As an IT failures guy, I'm most interested in the shelfware stats, so let's start there. As the following illustration indicates, 22% of purchased ERP licenses are not being used, in U.S.-based companies:

This number suggests that a significant percentage of ERP license budgets are being wasted. Chronic, unused licenses means users are not adopting the software according to plan, clearly marking failure according to my definition of IT project success:

1. The finished software meets planned scope and specifications, with a reasonable level of quality
2. The project is completed more or less on time and within budget
3. The software solves the business problem for which it was intended
4. Users adopt the software according to plan

Fellow ZDNet blogger and Enterprise Irregular colleague, Dennis Howlett, disagrees that unused licenses represent failure. In a sharply-worded Twitter, he said:

I don't see it as an IT failure, more one of overselling. Different issue altogether.

With all due respect to Dennis, in my opinion this statistic represents common, garden-variety IT project failure. Nothing special to see here, so move along.

Unsurprising allocations

The following illustration shows ERP budget allocations, breaking down project components relative to overall implementation-related costs:

The 4-5 to 1 ratio of license to overall project cost is in line with common industry expectations. It's great to see solid research validating a common rule of thumb.

ERP 2008 market growth

Finally, we come to main focus of the report, which is ERP market growth in 2008. According to AMR:

Survey data indicates that for large companies with 1,000 or more employees, ERP budgets will have an average growth of 5.4% in 2008. When compared to last year’s projection for budget increases of 12.3% for firms of all sizes, the current 2008 projection is a reasonable scale for large enterprises — many of which have already standardized an ERP package for core financials and are now expanding that footprint to include other functionality, such as manufacturing operations support and CRM.

Take a look at the graphic illustrating this data:

Although the ERP market is slowing, the old lady isn't dead yet. Given the substantial investment in ERP systems across the worldwide corporate landscape, ERP is not going away anytime soon.

[Note: All illustrations are (c) AMR Research].