ERP Implementation Risk: What the Numbers Say
Updated: Aug 18
If you are planning or mid-way through a digital implementation and wanting to maximise your ROI, our straightforward calculator can determine what's at risk.
What organisations typically spend on an ERP implementation
ERP implementation cost in Australia varies considerably by scope, scale, and system. A mid-market implementation typically runs between $2m and $15m¹, covering licensing, infrastructure, system integration, project management, and consulting fees. The people who have to use the system get just a small proportion of that. That proportion is where most implementations falter, or worse, fail.
Industry benchmarking suggests that ERP change management costs typically between 10% and 20% of total project budgets, with the technology workstream receiving the balance.
For the purposes of this tool, we use 15% as a midpoint planning assumption.
What the research tells us about ERP implementation risk
The cost of ERP failure is rarely a single catastrophic event; it compounds across months and years of under-utilisation, rework, and lost productivity. These findings are consistent with McKinsey research showing that large-scale transformation initiatives frequently struggle to achieve and sustain expected value outcomes*.
ERP programs rarely collapse entirely, but underperformance is common. Panorama Consulting surveys reported that up to 74% of ERP projects exceeded budget expectations^, while around 72% ran longer than planned**. The studies also found that many organisations realised less than half of their anticipated business benefits.
In other words, many ERP programs successfully go live but fail to deliver the value originally promised in their business case.
To understand the scale of that risk for your project, start by calculating your project's potential cost exposure.
Exercise 1: Calculate your project cost exposure
Your Project | ||
Input your total ERP budget | $ | (= software; partner fees; integrations; team; training; change mgmt etc) |
Determine your potential overrun exposure (up to 74% industry benchmark) | Worst case 74% $ Aggressive 40% $ Conservative 20% $ | (= total ERP x %) |
What is your projected timeline in months | (# of months) | |
Now you can determine the estimated cost per month of delay | $ | (= budget / # of months) |
What's actually at stake: the capability value
ERP budgets are typically framed around total project cost. But within that number sits a more important figure: the capability value your organisation is purchasing.
Software licensing and infrastructure are a fixed cost. The return on that cost, which includes streamlined processes, decision-making capability, and operational efficiency, depends entirely on whether your people use the system the way it was designed and paid for. ERP under-utilisation is where the investment case unravels; a system that is only partially adopted delivers a fraction of its intended value
Exercise 2: Calculate your project’s capability value
Your Project | ||
Again, input your total ERP budget | $ | (= software; partner fees; integrations; team; training; change mgmt etc) |
What proportion is fixed costs (eg software, licensing and infrastructure costs) | $ |
|
Capability value at risk | $ | (= total ERP - fixed cost) |
The above highlights what you're investing that poor adoption puts at risk
What your project’s expected benefits actually depend on
Every ERP business case includes a projected benefits figure: efficiency gains, cost reductions, faster reporting, better decisions. That number is the justification for the investment.
Not all of it is equally at risk.
Some benefits are structural. They come from the software existing: licence consolidation, infrastructure rationalisation, automated compliance reporting. These accrue regardless of how well people use the system.
The rest depend entirely on adoption. Faster processing times require people to follow new workflows. Decision-making improvements require people to trust and use new data.
McKinsey research found that organisations captured on average just 31% of expected revenue benefits and 25% of expected cost savings from transformation initiatives*. In practical terms, the majority of projected transformation value never materialised.
Operational efficiencies require people to stop doing things the old way. If adoption is low, this portion of the benefit case does not materialise.
The format to determine your change contribution, as developed by Prosci and widely recognised throughout industry, is pretty straightforward:
Dig out your Expected Project Benefits (EPB): this $ figure most likely would have been included in your total business case,
Determine the % of those benefits that does not rely on people (eg software licensing, hardware, new devices, etc).
Use the balance of the above figure to determine which % does depend on people changing their behaviour: This is the Adoption and Usage (AU), expressed as a percentage. (As a guide, many ERP business cases rely on 60–90% of benefits being realised through user adoption, process compliance, and behavioural change.)
Calculate what the Expected Benefit (EB) might be if adoption were zero: EB = EPB × (1 − AU%).
The gap between the Expected Project Benefit and Expected Benefits is your change contribution: the dollar value of benefits that only exist if your people come with you.
This final figure is the critical element. It represents the value that only exists if your people adopt new ways of working, and it is what digital change management is designed to protect.
Exercise 3: Calculate your project’s change contribution
Your Project | ||
EPB Total expected project benefits | $ | (= cost savings + benefits; this figure should appear in your project business case) |
AU% % of benefits dependent on Adoption & Usage | $ | (% that relies on people actually using the software - not the software licenses etc) |
EB Expected benefits if adoption is zero | (= EPB × (1 − AU%)) | |
Change contribution at risk | $ | (EPB − EB) |
Capability value at risk | $ | From Exercise 2 |
Source: Prosci
The capability value from Exercise 2 shows what you've invested that poor adoption puts at risk.
The change contribution in Exercise 3 shows the return you were promised that adoption determines. It’s the same problem viewed from opposite ends.
Your change contribution figure sits alongside your capability value calculation. Together, they define what is actually at stake if the people side of your implementation is under-resourced.
What a 15% Investment in Digital Change Management Delivers
GoodShift Co. specialises in change management for digital projects and ERP implementations, working with you on workforce adoption and operational readiness.
We help organisations reduce implementation risk by supporting the people-side of complex technology change, from stakeholder alignment and readiness assessment through to training, go-live support, and sustained adoption.
Our focus is ensuring that technology investments translate into operational uptake, workforce confidence, and measurable business outcomes.
We work alongside implementation teams, PMOs, and technology partners to strengthen adoption, minimise disruption, and improve long-term utilisation across the full implementation lifecycle
But how much should you spend to reduce your risk and protect your change contribution?
Exercise 4: Calculate your dedicated digital change management cost
Your Project | ||
Total ERP budget | $ | (= software; partner fees; integrations; team; training; change mgmt etc) |
Amount you should allocate to digital change management | $ | (midpoint of the 10–20% industry benchmark) |
Cost of dedicated change management | $ | (= total ERP x %) |
Is that number a sound investment?
Most organisations that work through this calculation find the investment case straightforward.
The cost of dedicated change management is often small compared to the ERP implementation ROI at risk. When adoption falls short, the organisation captures only a fraction of the capability value and business benefits the investment was intended to deliver.
The question is whether the risk of not investing is one your business can absorb.
How you can improve your ERP Implementation ROI
Dedicated digital change management, structured independently of your systems integrator, reduces the likelihood of the failure scenarios above. This structure also improves accountability for adoption, benefits realisation, and long-term utilisation. With independent digital change management, one party owns technical delivery (that;s the SI). And the other owns your people and their adoption (That;s us). And neither carries the other's risk.
The organisations that protect their ERP investment treat change management as a structural decision; not a line item to be absorbed, deferred, or handed to whoever has capacity.
Get a customised ERP Adoption Risk and ROI Assessment
We'll help you assess your capability value at risk, identify adoption challenges, and determine whether additional change management investment is warranted.
Sources/references
^ Panorama Consulting Solutions, 2023 ERP Report.
** Panorama Consulting Solutions, 2014 ERP Report * McKinsey & Company, Unlocking success in digital transformations.
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