Why ERP Is Still So Hard

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The era of mass customization has had a contradictory effect on how packaged software was supposed to positively alter business software. According to Wang, "Packaged software was supposed to be: Let's all get together, we'll share requirements and what's going to happen is that we're going to have this wonderful mix of software best practices from all these different areas and companies." In turn, businesses would have to spend far less on keeping IT workers in-house to maintain the applications; and thoroughly enriched vendors would use their R&D capabilities to deliver the best of the best. In this utopia, customizations would negligible.

"It didn't happen that way," Wang says. "And that's why we're where we are."

Does ERP Still Matter?

Yes. ERP still matters. Very much so. CIO magazine survey data published in 2008 showed that IT leaders and their companies were completely married to and dependent upon their ERP suites. More than 85 percent of respondents agreed or strongly agreed that their ERP systems were essential to the core of their businesses, and that they "could not live without them." Interestingly, just 4 percent of IT leaders said their ERP system offered their companies competitive differentiation or advantage.

As the CIO profession has grown up, so too has the CIO's ability to manage all that comes along with ERP. Jeffrey Keisling, CIO of pharmaceutical-maker Wyeth, is presiding over a massive, multiyear ERP makeover, moving from multiple, global instances of J.D. Edwards to a single-instance SAP ERP suite. "There's always a lot written about examples of drastic overruns or miscues or re-dos around ERP," Keisling says. "But generally, the people I know in large enterprises have been much more effective in understanding the levers to pull to mitigate risk in these large programs."

Most notable among those levers: the ERP implementation has to be a priority for the company-from CEO to users, Keisling says. "If this is something one person is trying to push up the hill or one division or function is trying to push up, we would reject that," he says. "Without that level of understanding, sponsorship and expectation of value, I wouldn't take the bait."

ERP has its place, too. "The measurement stick for me and my team is not how well we did SAP," he says. "The measurement is: Did we improve the company's performance or our ability to get products to patients? [Our SAP rollout] doesn't dwarf the need for innovation for new products and for working with patients to get those products in their hands."

On the vendor side, the rise of the enterprise software supervendor (dubbed "MISO" by many) has been an unyielding force: Microsoft, IBM, SAP and Oracle have and continue to centralize their positions as software juggernauts. "The traditional boundaries between integrated ERP and best-of-breed vendors have disappeared," notes a recent Forrester report. "Over the past few years, leading vendors have significantly extended their portfolio via acquisitions and in-house developments to offer both: integrated packages for core enterprise processes and best-in-class horizontal solutions for procurement and sourcing, supply chain management, CRM, and other cross-industry application software," BI being most notable.

According to Mirchandani, consolidation might actually backfire for the supervendors: Whereas companies might have dozens and dozens of different IT spends with various vendors (which are easier to overlook, since there is not a combined view of the total dollars), a unified Oracle spend could be detrimental to Oracle's revenue streams. "If anything, Oracle, by consolidating this much, has made itself a target, because now you can have Oracle-wide strategy," he says. "Previously, companies didn't worry too much about their PeopleSoft, JDE, Hyperion [spends, because they were separate]. Now they've got a big bull's eye on their back."

Even so, Mirchandani says, vendors probably aren't losing sleep over their customers walking away any time soon. "The vendors are counting on inertia," he says.

So, are CIOs and their companies really, for lack of a better word, stuck with ERP? AMR Research Chief Research Officer Bruce Richardson was quoted as saying, "You do ERP once, concrete it over and hope you never have to dig it up." Without question, ERP has been a career-enhancing or career-limiting endeavor for many CIOs. Chiquita Brands' Singh terms the ERP vendor selection process as choosing "the lesser or two evils."

Altimeter Group's Wang believes CIOs have figured out the rules of "the ERP game." But the business side is still confused.

"The business sees the slick demos and possibilities, and then keeps forking over the money for this, and they don't understand why they are still paying all this money," Wang says. "Why is it so hard to get a simple report? Why is it so hard to add a new product or build a new product line? Why is it so hard to get consolidated financial information? Isn't that the whole point of ERP?"

Coming in Part II: The Future of ERP

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This story, "Why ERP Is Still So Hard" was originally published by CIO.

Copyright © 2009 IDG Communications, Inc.

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