New report finds hospital consulting market for ERP in flux

According to a research firm who monitors and reports on the performance of healthcare vendors, the average amount hospitals pay for enterprise resource planning (ERP) software consulting has dropped considerably over the past three years.

The research firm KLAS has just issued a report that profiles fifty-nine healthcare providers who have recently implemented or upgraded ERP software with the assistance of IT consultants. The report indicates that the average ERP consulting engagement for hospitals has dropped from roughly $2 million in 2006 to just $450,000 today – a reduction of 77 percent.

The report acknowledged two significant factors leading to lower implementation prices: tighter market conditions between vendors and a higher percentage of upgrades versus new ERP projects.

“Seventy percent of today’s ERP consulting work is in upgrades, so services firms are finding themselves in more of a supportive role at lower-cost engagements,” Mike Smith, KLAS general manager of financial and services research and author of the ERP report, said in a statement. “With fewer projects and even fewer large projects, some consulting firms have adapted well to the current, more tactical ERP environment of upgrades and add-on modules, while others have not.”

The report also found that third-party vendors are doing better than the primary vendor in delivering on-budget and on-task projects. Lawson Software is the runaway leader in healthcare ERP systems with more than 80 percent of the market share. However, the study found that Lawson scored lower than external consultants at implementing upgrades to its own ERP system.

“The six consulting firms implementing Lawson scored between 11 and 17 points higher in this study than Lawson scored for implementing its own products,” Smith said. “With so much of the ERP work at hospitals focused on Lawson, you might expect Lawson to have a big advantage over third parties – but provider experiences have shown quite the opposite.”

According to providers surveyed, only 69 percent of the Lawson engagements were on time and within budget, compared to 98 percent average from other vendors. Among the top six vendors listed in the report are Computer Science Corp. (CSC), Affiliated Computer Services (ACS), CIBER, McKesson, Fujitsu and Hitachi. Honorable mention went to Deloitte, whom KLAS was unable to verify with enough specific ERP implementation projects to rank, but received high ratings by those providers they worked with.

For more information on the report, “Staying on Target with ERP Implementations: A Report on Healthcare Consulting Firms” visit KLASresearch.com

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