Are ERP Systems Making a Comeback?

All Articles From Eric Kimberling October 17, 2012 0

ERP System ComebackEach year, Panorama conducts an annual survey of hundreds of ERP implementations across the globe. Our most recent study – which was published in our 2012 ERP Report - shows that most ERP system initiatives take longer than expected, exceed expected budgets and fail to deliver expected business benefits. While this study demonstrates the perils of ERP implementations, another data point from a recent industry survey shows that ERP systems are in fact delivering measurable results for many organizations.

A recent snapshot study by Sage, a leading manufacturing ERP vendor, reveals that 67-percent of manufacturers indicate that their ERP systems have allowed them to better serve their customers, while 56-percent say that their ERP systems have actively aided them in  growing their businesses. Further, participants said that their ERP systems help their employees with quotes, order fulfillment, checking for product availability and forecasting. While the 2012 ERP Report shows that 50-percent of organizations across the globe fail to realize at least 50-percent of the business benefits they expect, Sage’s results suggest that manufacturers are at least seeing some tangible operational results from their initiatives.

So what does this information tell us? Here are a few key takeaways from the Sage study:

  • There still is and always has been a big upside to ERP systems. Much of our experience and research outlines the challenges and pitfalls of ERP implementations. In addition, many industry analysts have declared that “ERP is dead” for quite some time now. However, despite the various examples and case studies of ERP failures, it is important not to overlook the upside potential of enterprise software initiatives. For example, of the companies that do realize measurable business results from their ERP systems, the average organization realizes a payback on their investment in less than three years. Most CFOs would consider this a strong return on investment.
  • It is important to define and understand potential business benefits. Sage’s study underscores specific business benefits realized by manufacturers participating in the study. For example, in addition to those outlined above, the study shows that manufacturers point to product delivery efficiencies, open order tracking, raw material forecasts and shorter lead times as tangible and realized business benefits. Any organization about to conduct an ERP selection and implementation initiative would be well-served to define and quantify the potential and expected business benefits of their enterprise systems. This should serve as a roadmap for a benefits realization plan.
  • Business process reengineering and organizational change management are keys to success. Although not specifically mentioned in the Sage study, Panorama’s experience has shown that realizing the potential business benefits of an ERP system is largely dependent on effective business process reengineering and organizational change management. In fact, our ERP expert witness experience and independent ERP research suggests that the lack of business process management and organizational change management both directly and indirectly lead to ERP failure. For this reason, we have developed a comprehensive and technology-agnostic business process management and organizational change management methodology that ensures ERP implementation success and benefits realization for our clients.

While most organizations fail in their attempts to successfully implement their ERP systems – with reasons ranging from weak project management to a lack of focus on organizational change management and business process reengineering – the Sage study suggests that there are reasons to be optimistic. When implemented effectively, ERP software can indeed transform and help improve a business’s operations.

To learn more about the two ERP implementation critical success factors mentioned in the last bullet, please attend our Organizational Change Management webinar on October 25 and our Business Process Reengineering webinar on November 8. These live, interactive events offer the perfect opportunity to gain a deeper understanding of some of the true keys to ERP success.

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