Heading into operational quicksand

A new study by the Boston Consulting Group reveals that one out of every three enterprise application initiatives is successful.
The BCG studied 100 executives in the US who had responsibility for an enterprise application initiative in the previous three years. Most had primary responsibility for the decision to implement or were involved in the decision. The companies had more than 5000 people employed in wide range of business activities.
Some of the findings were:
? Few clear successes. Only 33 percent of the enterprise application initiatives could be considered successful in terms of value creation, cost effectiveness, tangible financial impact and goal attainment.
? Rampant vendor dissatisfaction. The executives behind one out of every three initiatives said they believed their vendor had encouraged unnecessary spending. Additionally, 15 percent said vendors were not focused on business value, 33 percent said vendors encouraged unnecessary spending, and 12 percent said they fired primary vendor.
? High cost perception. One in five respondents said they felt they could have achieved the same value for less cost.
? Smaller appears to be better. The average size of strong positive outcome was $10 million initiative; the average size of negative outcome was $90 million.
? Diminishing return on investment. For one company, 80 percent of the cumulative annual benefit derived from an application initiative could have been achieved with the first 33 percent of capital outlay.
? Effective execution isn’t always the answer. Among those with overall positive outcomes, 58 percent finished on time and on budget. Among those with negative overall outcomes, 33 percent finished on time and on budget.
? Strategy matters. Initiatives based on clear strategic vision achieved positive outcomes 53 percent of the time, versus 22 percent for those lacking.
The lessons to be learnt, says BCG, are as applicable in New Zealand as in North America. “Far too many CEOs and CIOs have rushed to embark on these efforts only to discover halfway through that they’ve mired themselves in technological and operational quicksand,” say Boston Consulting Group researchers.