By Sean Culey
It is over two decades now since Enterprise Resource Planning (ERP) systems first arrived on the scene promising a new dawn of business performance by integrating the enterprise through software. However, they appear to be more famous for ‘business disruption’ headlines than for business transformation ones. Constantly criticised for what is known as the ‘four too’s’ – ‘too big, too slow, too expensive and too complex’, recent developments have seen ERP vendors move their solutions into the cloud, and develop new capabilities designed to analyse ‘big data’. In his latest article, Sean Culey addresses the question; ‘can companies actually obtain a significant, sustained return from their investments in ERP?’
An awful lot of money has been wasted on ERP.
ERP systems like SAP are designed to allow companies to implement a single system that facilitates the transparent integration and flow of information between all functions within the enterprise, in a consistently visible manner, replacing or re-engineering their mostly incompatible legacy information systems.
It’s good business. Gartner Inc. revealed that the value of the enterprise software market will total around $120.4 billion in 20121 (approx. €94.4 billion), an increase of 4.5% from 2011. Topping the list of enterprise software spending is ERP software at $24.9 billion (€19.52 billion) making it the largest enterprise application market. The largest player in the ERP market is SAP, who holds 25.5% market share, followed by Oracle with 18% and then Microsoft’s Dynamics with 11%.2
The statistics show, however, that the Return on Investment (ROI) for the vast majority of these ERP investments is either below expectations or simply not known. In a study of 14,000 UK companies, Professor Clegg of Sheffield University,3 identified that only 20% of their IT investments were considered to have met their objectives, whereas 40% were deemed out-right failures and the remaining 40% met just some of their goals. In many cases ERP implementations have proven disastrous – nearly bringing many companies, such as Nike, to their knees. In fact, research shows4 that after implementation many companies suffer a dip in business performance that may take up to two years to recover from.