Most organizations have dug themselves an ERP hole, according to survey


Consulting and technology firm, Oakton, has unveiled the results of a survey it has had commissioned with clients on their current and future ERP implementation plans. And the conclusions that can be drawn from it aren't pretty.

Executive general manager, Oakton Applications, Shaji Sethu, said, "Most organisations have dug themselves an ERP hole with overstretched teams, complex customisations and a backlog of expensive upgrades. Few have taken advantage of the massive decreases in cost and increase in business agility afforded by modern Cloud-based ERP solutions.

"Our survey shows that some organisations still believe that more customisations and cosmetic additions will be their future. Others have shifted their thinking to service defined functions as a future trend. It is clearly time to start thinking outside the box.

"The rise of enterprise ERP SaaS as an emerging model has the potential to dramatically improve business performance and reduce significantly business cost," Sethu saidThe primary aims of the survey were to understand the challenges organisations face in running their ERP services, and identify improvements in how they are being delivered to business users.

The survey measured the market's reflections on these challenges, and looked at the responders experience and plans in moving towards an ERP as a "Software-as-a-Service" model (SaaS). . Australian businesses and IT executives from multiple industries participated in the survey.

Results and statistics

There were a number of common themes evident in the survey outcomes. Clients in general confirmed that large and customised legacy implementations have become a major bottlenecks for innovation, with the most common issues cited being:

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  • Scarce internal resources for operations and projects.
  • Cost and complexity in licensing.
  • Upgrade costs being a major concern for the ERP roadmap.
  • Return on investment questionable because of the high cost of change.

Existing ERP implementations are still strongly 'in-house' with internal customisation often the first choice:

  • 80 per cent of organisations maintain their own ERP.
  • 52 per cent of organisations say the right "business fit" is the most important driver in selecting an ERP solution.
  • 80 per cent of organisations do understand licensing models when purchasing their ERP software.
  • 47 per cent of organisations heavily customise their ERP.
  • Customisation is strongly driven by 'improving business processes' or 'unique industry requirements' for more than 80 per cent of organisations.

Industry solutions

ERP in the Cloud is still a new concept with:

  • 69 per cent of organisations not currently having their ERP delivered in a Cloud or SaaS model.
  • 55 per cent of organisations are looking to shift IT from a technology-defined to a service-defined function.

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Of those looking to shift to service-defined IT, 30 per cent say 'complexity' is the main impediment to doing so.

  • 23 per cent of organisations will look at Cloud-based application deployment (SaaS) when they upgrade or replace their current ERP.
  • Only 10 per cent of organisations will NOT be considering Cloud-based application deployment, Cloud-based infrastructure deployment, Hosting or Complete Outsourcing when they next upgrade or replace their current ERP.

While running costs were a factor, it was not a strong signal. An indicator that there was poor separation of commodity ERP services that must be driven by cost and the business customisations that are driven by value with:

  • 30 per cent of organisations say Total Cost of Ownership (TCO) is the most important driver in selecting an ERP solution.
  • 35 per cent of organisations cite reducing cost, complexity and capital investment as key drivers to upgrade or replace their ERP.

Respondents recognised the need for innovation and responsiveness with an equal split between building more customisations and adopting new digital and mobile interfaces as the likely response:

  • 34 per cent of organisations believe greater customisation is the right way to get more value from their ERP solution.
  • 30 per cent of organisations would extend ERP to mobile and tablet devices when considering how to make their current ERP more agile.

"Organisations that have invested heavily in standardisation of their back office functions and appification of front office are realising significant improvement in their bottom line. Recent profit announcements from leading Australian organisations is evidence of the same. Alternative is to lose your competitive advantage to faster and more nimble startup and go out of business," Sethu said.

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This story, "Most organizations have dug themselves an ERP hole, according to survey" was originally published by ITworld.

Copyright © 2014 IDG Communications, Inc.

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