Almost Half of Enterprise Computing Initiatives Don't Yield Enough Business Value to Justify Effort; Software Alone Doesn't Provide the Solution Corporations Need
BUSINESS WIRE, March 21, 2025

A new study by The Boston Consulting Group (BCG) reveals that only one out of every three enterprise application initiatives is successful. After surveying 100 executives at leading companies and analyzing data on the outcomes of more than 100 large-scale enterprise initiatives, BCG found that the outcome of very few of these initiatives could be considered positive, when analyzed in terms of value creation, cost effectiveness, tangible financial impact and goal attainment.

Enterprise applications are suites of software modules that integrate a company's various operations, both internally and externally. Providers and implementers of enterprise computing applications represent a major industry that is expected to grow to $125 billion by 2001. According to BCG, companies are relying too heavily on this industry for initiative success.

"Enterprise computing applications will continue to be vitally important. But the success of an initiative depends on whether the company adapting the applications thinks hard about its objectives, sticks to them and manages the process closely," said Harold Sirkin, head of BCG's Information Technology practice and co-author of the study.

In the study, Getting Value from Enterprise Initiatives, BCG analyzed a full range of enterprise initiatives, including Enterprise Resource Planning (ERP), Supply Chain Management (SCM), Customer Relationship Management (CRM) and E-commerce.

BCG Key Findings:

-- Few clear successes. Only 33% of the enterprise application initiatives studied could be considered positive or successful,when analyzed in terms of value creation, cost-effectiveness,tangible financial impact and goal attainment.

-- Little proof of value. While 60% of respondents said they were sure their initiatives had delivered sufficient value to justify the effort, only 52% reported achieving their business objectives, and only 37% could point to a tangible financial impact.

-- Vendor dissatisfaction is rampant. The executives behind one out of every three initiatives said they believed their vendor had encouraged unnecessary spending. Additionally, 15% said that vendors were not focused on business value, 33% said vendors encouraged unnecessary spending, and 12% said they fired a primary vendor.

-- Perception that cost is too high. One in five respondents who had implemented ERP or SCM applications said they felt they could have achieved the same value for much less cost. (This group estimated that more than half of the costs had been unnecessary.)

-- Smaller appears to be better. The average size of a strong positive outcome was a $10 million initiative; the average size of a negative outcome was $90 million.

-- Diminishing return on investment. For one company, 80% of the cumulative annual benefit derived from an application initiative could have been achieved with the first 33% of capital outlay.

-- Effective execution not always the answer. Among those with overall positive outcomes, 58% finished on time and on budget. Among those with negative overall outcomes, 33% finished on time and on budget.

-- Strategy and objectives do matter. Initiatives based on a clear strategic vision and strategic assessment achieved positive outcomes 53% of the time, versus 22% for those lacking.

-- Up-front analysis is key. Initiatives based on a solid business-capabilities analysis (taking into consideration competitor and best-practice benchmarks as well as existing processes) achieved positive outcomes 56% of the time, versus only 8% for those who failed to conduct such an analysis.

-- Options and alternatives often overlooked. Initiatives implemented after a thorough evaluation of options and alternatives (i.e., simple upgrades to more current software,process redesign and interim solutions) achieved positive outcomes 43% of the time, versus only 9% for those who failed to consider all options.

Said Karl Dickel, leader of BCG's Operational Effectiveness practice and study co-author: "While enterprise initiatives have the potential to deliver tremendous upside benefit for companies, this study provides the first quantifiable evidence that the overwhelmingly majority of these initiatives are not delivering true business value."

Added Mr. Dickel: "Far too many CEOs and CIOs have rushed to embark on multimillion-dollar enterprise efforts, only to discover halfway through that they've mired themselves in a sort of technological and operational quicksand. Our key learning from this study is that companies should consider, and potentially embark upon, enterprise initiatives--but only after doing the critical up-front analysis and strategic thinking that makes positive outcomes much more likely."

Methodology:

BCG surveyed 100 executives who had taken responsibility for an enterprise application initiative over the previous three years. Most of these executives had either a primary responsibility for the decision to implement, or had been closely involved in that decision. Most companies had more than 5,000 employees and were involved in a wide range of business activities.

Executives were allowed to categorize their initiatives as they saw fit. In general, ERP included applications such as SAP, Oracle, PeopleSoft, J.D. Edwards and Baan; SCM included applications such as i2, Manugistics and Numetrix; CRM included applications such as Siebel, Vantive, Clarify and Pivotal; E-commerce included applications such as Ariba, Commerce One, IBM and Broadvision.

The Boston Consulting Group, a global management consulting firm founded in 1963, works with leading international companies and organizations on issues of strategy, operations and performance. BCG is privately held by its officers and has 47 offices in 32 countries around the world. More information is available at www.bcg.com.