Ten Reasons to Implement ERP During the Economic Downturn

There is considerable discussion among ERP industry analysts around whether or not now is a good time to select and implement a new ERP system. Indeed, some reports are predicting IT spending to stay flat or decrease slightly in 2009.

However, many companies are finding the current economic environment is an ideal time to replace their current enterprise systems. In fact, according to Panorama research, a majority of organizations (53%) plan to either replace or upgrade their ERP systems in 2009.

Top 10 Benefits and Results of Implementing ERP in the Current Economic Environment

1. Reduce total cost of ownership. As mentioned here in a previous blog entry, ERP software vendors are pricing their offerings more aggressively than usual. This presents a unique opportunity for companies to procure software at a lower cost than possible during a more robust economic cycle.
2. Increase revenues. Many companies are facing flat or declining sales during this economic downturn. ERP functionality such as CRM and sales force automation can help companies sell more effectively to better confront these economic headwinds.
3. Increase productivity. Many companies are laying off large numbers of employees and/or are on a hiring freeze. ERP enables companies to get more work done with less people, allowing them to maintain payroll costs both now and when the economy recovers.
4. Improve business process efficiency. ERP provides companies with a unique opportunity to automate manual business processes and eliminate non-value-add activities. In addition, ERP allows companies to more efficiently match customer demand to inventory, resulting in reduced inventory and carrying costs.
5. Ability to choose from multiple ERP delivery options. Traditionally, companies interested in ERP had to choose a costly on-premise delivery model. Now, however, ERP software has evolved to include more options, such as Software as a Service (SaaS) and open source. These alternatives often times require a lower initial investment than traditional ERP solutions and should be considered during the ERP software selection process.
6. Scale for growth and economic recovery. Smart companies are implementing ERP now to better position themselves for business growth and scalability when the economy does recover.
7. Leverage available resources. Although there is never a good time to implement ERP, a downturn is as good a time as any. There are often more internal and external resources available to help implement ERP effectively, which isn’t always the case when the economy is booming and companies are busting at the seams.
8. Prepare for mergers and acquisitions. Given the high levels of consolidation that often take place during economic slowdowns, many companies find that ERP software will help them standardize their business and prepare for either acquiring other companies or being acquired.
9. Force management to focus on benefits realization. It’s unfortunate, but ERP implementations are not always required to demonstrate measurable results when economic times are good. ERP implementations are now required more than ever to deliver results. Of course, we argue that this should be true in both good times and bad.
10. Increase rationalization of ERP investments. The scrutiny that many CIOs will face in 2009 require ERP expenditures to be rationalized and justified. Rather than overspend on unnecessary ERP functionality, CIOs now need to determine what the business really needs vs. the nice-to-haves. It also requires ERP project teams to properly manage risk to avoid cost overruns or implementation failure.

Although it is easy to put off ERP projects until the economy improves, it is even easier to use this time as an opportunity to improve business operations and systems. The main caveat is that companies need to be smarter than ever in doing so.