If the new year brings thoughts of a major software purchase, help is at hand! Just published: Rethinking Enterprise Software Selection: Stop buying square pegs for round holes is written to help you make your purchase an outstanding success.
Buying enterprise software is a minefield of immature selection processes, conflicting interests, and predatory vendors. Over 90% of purchases fail to meet expectations, and close to 30% are outright disasters. This failure rate is astounding when you consider that the total cost of ownership over the software's operational life is a significant fraction of annual revenue.
A major software acquisition is an opportunity to "kick it up a notch" but, despite the best of intentions, few deliver. Far too many organizations squander the opportunity and remain mired in mediocracy.
It doesn't have to be that way!
Cubic Corporation invested in an ERP system to streamline operations and improve profitability. More than two years later software and implementation costs are over $61 million and climbing. Is this another ERP boondoggle?
Based in Southern California, Cubic Corporation is a public company that operates in the defense and transport industries. In February 2015 the CEO announced steps to streamline operations and improve profitability, which was expected to yield about $16 million annualized pre-tax savings in the financial year 2016. This would be about $160 million savings over 10 years.
The ERP project was started in late 2014 and was expected to be completed by the end of 2015. But as of mid-2017, the implementation was still going strong. Based on published financials, as of March, 2017 Cubic had spent $61 million on the project so far. With completion currently estimated to be in 2018 (assume Q2) and extrapolating implementation costs, Cubic will have spent a total of about $86 million on their new ERP software project by the time it goes live.
Enterprise software implementations usually take substantially longer and cost more than planned. When going live they often cause major business disruption. Here's a look at the root cause of the problem, with suggestions for resolving it.
Whether it is in the cloud or the data center, so often enterprise software takes much longer to implement than expected. There are three main reasons for this.
1. Unknown requirements
New requirements are discovered during implementation that should have been found during the analysis. When these new requirements are found, the organization must decide what to do with them. If they are weighted as important or higher, the consultants must determine how to implement them: by configuration, writing code, business process re-engineering, or adding new modules or third party products. All of this takes time, and when too many new requirements are found implementation schedules slip.