Enterprise Software

Does ERP still make sense in 2012?

As you stare down the barrel of costly upgrades and continued maintenance, you might legitimately wonder if ERP still matters at this point.

We are regularly inundated with stories about the latest and greatest in technology, from computers that fit on an SD card, to a world of cloud computing where 20 minutes and a credit card will be all you need to deploy enterprise IT functionality. Despite all the sound and fury, most enterprise IT shops spend the majority of their time and money on more mundane applications, ERP being one of the biggest. Cloud proponents in particular make a seemingly compelling argument that large-scale systems like ERP are slated for extinction, to be replaced by cloud applications that can quickly be deployed and integrated. As you stare down the barrel of costly upgrades and continued maintenance, you might legitimately wonder if ERP still matters at this point.

The "why" of ERP

Critical to the consideration of any major IT investment should be the question of what business problem you're solving. With ERP, the "why" usually comes down to a combination of a few key areas: handling an increasingly complex process, centralizing and integrating data to aid decision making, transitioning from a "burning" platform, and mitigating compliance or legal concerns. The most legitimate "why" of an ERP implementation should be centralizing data to allow for better decision making. While the other concerns are legitimate, in the age of cloud computing and commodity applications a centralized, integrated foundational business application is the key item that keeps ERP relevant and highly valuable.

A question of size

Part of the answer to the ERP question is the size and complexity of your company. For decades the main ERP players have been pushing for the middle and small business markets with scaled-down versions of their mainstream packages. While companies like Microsoft have done well in this space, the larger and more complex systems (I'm looking at you, SAP and Oracle) have been less successful.

Where there was once a fairly obvious "tipping point" where a company's size and complexity pushed it into the arms of SAP or Oracle, that line has blurred as mid-tier players have increased their capabilities, and cloud providers like Salesforce.com have made legitimate headway into areas that were once the exclusive domain of in-house software. Operating under the assumption that ERP's key asset is a consolidated platform that improves your decision making, if your company has the right data to support its decision making process without ERP, there's little need to embark on the huge investment until other alternatives are exhausted.

But I already wrote the check

While the list of reasons for a new installation of a major ERP system has been reduced, at this point suggestions that CIOs abandon existing ERP installations are shortsighted. In many ERP deployments, the difficult work of initial deployment is performed at great expense, then the ERP is largely ignored save for minor enhancements. This is exactly the wrong approach to take with ERP, as once the "big check" is executed to underwrite the initial deployment, additional enhancements are comparatively cheap. Even an optimized and generally effective ERP installation is likely diligently harvesting data that are unused, and could support more effective decision making and analysis. If I had to ballpark, I would guess most companies use less than 30% of the capabilities of their ERP, essentially leaving money on the table.

So, what's changed?

While there have been major changes in technology since ERP was in its heyday, most of these changes have impacted the decision making process on whether to embark on a new ERP installation, or major enhancement like adding a new core module. Despite the hype, I believe it is premature to consider abandoning an existing ERP, and would suggest looking for areas where minimal investment can improve reporting, analytics, and data acquisition. After all, ERP's core promise of integrated applications and data is still an asset cloud solutions and emerging technologies can't yet replicate.

About

Patrick Gray works for a global Fortune 500 consulting and IT services company and is the author of Breakthrough IT: Supercharging Organizational Value through Technology as well as the companion e-book The Breakthrough CIO's Companion. He has spent ...

1 comments
rhonin
rhonin

Nice article. The company I work for is slowly combining all internal businesses into one of three ERP (SAP) platforms. Let's say regulatory (FDA), Financial (SOX) and speed to market are the big three drivers. Complex. What is missing is a great reporting capability for the sheer volume of data. We continually run into systems that are cumbersome (Business Warehouse?) or reporting that has to be significantly focused (rigid) as it drives GxP processes. The "cloud" doesn't really change any of this. So yes, effective, flexible report capability is a must. and still looking.....