ERP's Paralysis Problem and the Repercussions for Businesses Everywhere
Another ERP survey, another indictment of ERP's failings to the business. But this one is costly.
There's a growing movement underway to rid the business world of the acronym ERP.
Print
For real.
In fact, executives at SAP—the ones who practically invented the concept and related terminology—are among those leading the charge. (See The Future of ERP for more.)
The reason? ERP is an outdated, almost meaningless piece of IT jargon that crudely attempts to encompass all that enterprise systems have become and will be for today's and tomorrow's large, midsize and even small companies, but falls woefully short: No one does just ERP anymore.
Another reason to deep-six ERP is to ensure that there is no future association between next-generation business applications and the long-standing failings of monolithic ERP software deployments. And, of course, to put as much distance between next-gen software and ERP survey results, such as the findings from a December 2009 study conducted by IDC and sponsored by ERP vendor Agresso.
The survey, based on the ERP experience of 214 business executives across a wide variety of midsize and larger industries, found that today's ERP systems "are not providing businesses with the architectural agility necessary to support businesses adequately in today's high-change, global environment."
That's not too shocking. But what is notable about the results (and what makes them different than your garden-variety ERP study that shows sky-high TCO, or application performance problems, or unfavorable implementation odds), is that this survey actually quantifies ERP system-related failings directly to business disruption—expensive, unpleasant and career-killing business disruption.
"Survey respondents said that the inability to easily modify their ERP system deployments is disrupting their businesses by delaying product launches, slowing decision making and delaying acquisitions and other activities that ultimately cost them between $10 million and $500 million in lost opportunities," according to the survey report. (That's a substantial gulf in "lost opportunities," but we'll chalk that up to the size differences in companies surveyed.)
That related impact is costly: 21 percent of respondents reported declines in stock price; 14 percent suffered revenue losses tied to delayed product launches; and 17 percent encountered declines in customer satisfaction.
A couple of verbatim responses from respondents should make the hairs on the back of your neck stand up: "Capital expenditure priorities are shifted into IT from other high-payback projects" just to perform necessary ERP changes, noted one respondent. Said another: "Change to ERP paralyzes the entire organization in moving forward in other areas that can bring more value."
I don't have an MBA, but I'm pretty sure that paralyze is not a word you want associated with your department right now—or ever.
Today's business environment is, of course, changing much faster than most businesses can keep up with, and any type of technology that impedes the ability to adapt and be flexible is most unwelcome. Which leads to another interesting data point from the survey: ERP systems are constantly being modified, updated and, well, changed. Just 3 percent of respondents had not made changes to their ERP systems, and nearly half (43 percent) are continuously making changes as needed.
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