Why Auckland ratepayers should worry about ERP

At ZDNet Rob O’Neill says SAP is the big winner from Auckland Council’s IT spending.

He writes:

“The report reveals the so-called Auckland ”Supercity“, an amalgamation of eight former local councils into one, spent NZ$21.6 million with SAP in the nine months from 1 July 2014 through 31 March 2015”

O’Neill says the council’s SAP NewCore project aims to replace eight earlier systems with one that simplifies and standardises processes.

ERP blow-out

The cost of the super city ERP project has already blown out from $71 million to $157 million.

Taken at face value, that’s a poor return on investment given the expected benefits from this spending are around $10 million a year.

Cost blow outs for big projects are not unusual. Few projects are finished on time, on budget and deliver the promised benefits.

The bigger the project, the lower the chance of hitting those targets.

ERP failure rate

The 2015 ERP Report from Panorama finds 21 percent of companies think their ERP implementation failed. More than half (52 percent) of projects fail to come in on deadline and 60 percent of customers say ERP hasn’t delivered the expected benefits.

This isn’t about SAP. It just happens to be the largest, most visible ERP vendor. And it is the one doing business with Auckland Council[1].

To be fair to SAP and other ERP vendors, these numbers are in line with other large scale software implementations. CRM systems don’t fair much better.

It also needs to be said the ERP failures and missed targets are rarely about the software.

Management failure

In almost every case the problem boils down to poor project management and badly defined, even misunderstood, business processes[2]. Muddled change management is also often behind a failed or disappointing ERP project.

All of these areas are the responsibility of the executives overseeing the project. Ownership of the project has to go right to the top.

You need exceptional management and first class leadership to get big projects humming.

None of this is comforting for Auckland ratepayers.

1. This project has been controversial for some time. The NZ Herald rang alarm bells three years ago.  ↩
2. An opinion piece from Don Christie at the NBR suggests battle-hardened CIOs from the previous Auckland councils were deliberately kept away from the project planning phase.  ↩