ERP Investments: Not everyone is singing the same tune.

Yeah, there has been some positive news as of late on return of growth for ERP, but not everyone is singing the same tune. For example, I came across an article the other day in SupplyChainReview taken from PC World : ERP investments to slow in 2011

The article states that according to a Forrester Research report, ERP investment plans will dip this year from last, even though overall IT investment plans are predicted to increase. It also states that roughly half the companies surveyed are running on product releases that are 2 releases behind current. It is is understandable that a lot of companies scaled back IT spending in general, and ERP system spending in particular, during the recession, but 2011 is projected to be better in terms of economic growth. If you agree with the Forrester Research, it begs the question: why is ERP system investment projected to decline, when it appears that a lot companies need to spend in order to upgrade and take advantage of the latest functionality theses systems have to offer? The answer may lie in the very nature of ERP systems themselves. ERP systems are the transactional and processing bedrock of a corporation, and as such adhere to the following characteristics:

• Transactional stability: The user must be assured every transaction processed is recorded and processed correctly.
• Process stability: The user must be assured that no short cuts or missed steps are allowed to occur in the system.
• Data Integrity and Security: The user must be assured that all transactions can be audited and reported on in future dates, without any worries as to the authenticity or integrity of the data.

The features required to ensure a solid ERP system also limit its potential in the enterprise. ERP vendors have tried to address this issue by adding modules, but the functional issues introduced by trying to adhere to the criteria listed above and still have the flexibility and additional features to support nontraditional ERP requirements such as supply and demand planning, simulation, and S&OP support have proven almost impossible to overcome. Could it be that now companies are starting to look at more than just survival? Emphasis is being put toward improving how the business works and reacts to change, versus just ensuring current processes are performed correctly?

This shift of focus will naturally favor enterprise systems that can support coordination of the complete business ecology, along with the ability to act as the ‘brains’ of an enterprises system. These types of systems have a very different set of criteria needed to meet the business requirements of today’s corporations, which might explain the shift away from traditional ERP spending towards systems that can lead to significant improvements in operational performance, not just better transactional control of data.

The ability to implement control over the numerous transactional and data storage systems in the enterprise and bring the data together in a meaningful way is crucial to getting the entire enterprise to react to change faster and move in the same direction in a coordinated manner. Once this capability has been realized in the business, the enterprise becomes much more able to compete and out maneuver the competition. 

This in turn leads to higher growth numbers, improved margins, and better ROI. It can therefore be argued that there could in fact be a movement of investment dollars away from traditional ERP system maintenance because of the desire for companies to dramatically improve their competitive position by investing in systems which can lead to a ‘smarter’ and more agile corporation.