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KLAS Report: Surprising Changes in the Market for ERP Consultants

The typical cost hospitals pay for a consulting engagement for enterprise resource planning (ERP) software has dropped dramatically in the past three years, according to a new report from healthcare research firm KLAS. OREM, UT, July 13, 2009 /24-7PressRelease/ — The typical cost hospitals pay for a consulting engagement for enterprise resource planning (ERP) software has dropped dramatically in the past three years, according to a new report from healthcare research firm KLAS.

The report, "Staying on Target with ERP Implementations: A Report on Healthcare Consulting Firms", reflects the experiences of 59 healthcare providers that have recently implemented or upgraded ERP software with the help of IT consultants. The study points out that the average cost of an ERP consulting engagement has dropped 77 percent in three years – from roughly $2 million in 2006 to just $450,000 today.

While the significant drop is indicative of a tough economy and tighter budgets, it also reflects that fact that most healthcare ERP engagements today are upgrades. "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," said Mike Smith, KLAS general manager of financial and services research and author of the ERP report. "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 vast majority – more than 80 percent – of the recent ERP consulting work in healthcare is related to Lawson software, and more specifically, as a result of Lawson’s decision to stop support for version 8 of its ERP system. However, as the KLAS report points out, external consultants are generally much better at implementing Lawson ERP software than Lawson itself.

"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."

Providers reported that Lawson consultants were able to deliver their services on time and within budget only 69 percent of the time, compared with a 98 percent average from other firms. Further, more than half of the hospitals using Lawson’s implementation services indicated that their project objectives were not met.

In contrast, large consulting firms with established practices in healthcare dominated the scoring in the KLAS ERP report. CSC topped the list of rated vendors with a performance score of 89.2 out of 100, followed by ACS at 83.9. Deloitte was also rated highly by a few provider clients. However, KLAS was not able to confirm and measure enough specific ERP implementation projects to rank Deloitte against other rated vendors. Other companies rated in the KLAS ERP implementation report include CIBER, Fujitsu, Hitachi, ISH and McKesson.

To learn more about the ERP implementation services market, as well as the strengths and weaknesses of participating firms, the report "Staying on Target with ERP Implementations: A Report on Healthcare Consulting Firms" is available to healthcare providers online for a significant discount off the standard retail price. To purchase the full report, healthcare providers and vendors can visit http://www.KLASresearch.com.

About KLAS

KLAS is a research firm specializing in monitoring and reporting the performance of healthcare vendors. KLAS’ mission is to improve delivery, by independently measuring vendor performance for the benefit of our healthcare provider partners, consultants, investors and vendors. Working together with executives from more than 4,500 hospitals and over 2,500 clinics, KLAS delivers timely reports, trends and statistics, which provide a solid overview of vendor performance in the industry. KLAS measures the performance of software, professional services and medical equipment vendors. For more information, go to http://www.KLASresearch.com, email [email protected] or call 1-800-920-4109 to speak with a KLAS representative.


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