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One third of enterprise software projects have time, cost overruns says report

March 6, 2024
in Accounting
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One third of enterprise software projects have time, cost overruns says report
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While the majority of organizations report completing enterprise software projects on time and on budget, a significant portion still experiences overruns in both areas.

A recent report from Panorama Consulting looked at various aspects of enterprise software projects at different organizations, including major projects. These include things such as enterprise resource planning solution implementation, business technology improvements or digital transformation. Any of these can be major lifts for an organization, oftentimes requiring extensive time and money to complete.

Most are completed with little trouble — 55% of organizations said that their projects were completed within budget, and 58% said they were completed on time. However, in both cases there were sizeable minorities that did neither. The report found that 32.8% of organizations ended their projects either slightly or significantly over budget, and 31.3% said their projects were completed either slightly or significantly later than anticipated.

The most frequently cited reason for cost overruns was needing additional technology. The Panorama report said this could indicate issues with cloud migrations: Cloud software implementations often involve integration with additional technologies and services like data warehousing, business intelligence tools, and security solutions. Further, migrating to the cloud can also involve unexpected data migration challenges and ongoing maintenance needs which can necessitate purchasing additional tools or services. Further, rapid evolution in cloud technologies and services might mean that initial project planning doesn’t anticipate the latest tools or functionalities that emerge during implementation.

Other reasons cited for budget overruns include needing more project staff than originally anticipated, organizational issues, data issues, underestimation of consulting fees, technical issues, and scope creep.

Regarding time overruns, the most commonly cited factor was resource constraints, such as lack of skilled experts, particularly in growing fields like AI, or lack of budget. Other commonly cited reasons are unspecified technical issues, data issues, scope creep, organizational issues, unrealistic timelines, and overpromising and underdelivering from vendors.

Once the projects are completed, though, most organizations report seeing results, with only 2.3% saying their efforts bore no fruit at all, and the vast majority saying they improved either key business processes or most business processes. Of the types of projects that realized expected benefits, the most common were those centered around the customer experience, followed by those linked to standardization, followed by those intending to manage IT costs. Other beneficial projects include those improving productivity or efficiency, interaction with suppliers, real-time data, compliance, new operating models and removing silos. While still beneficial to the majority, projects centered around managing operating or labor costs and those emphasizing inventory levels saw the least benefit.

The report drew from a sample of 131 respondents who were polled between August 2022 and December 2023. Their organizations had a median annual revenue of $200 million with a median of 750 employees, and held a median of 150 software licenses.

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