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The Value of Enterprise Systems

By Lorraine Cosgrove Ware

November 01, 2003 — CIO —

The infamous reputation of enterprise systems (ERP, CRM) is lots of money for little value. Yet more than three-quarters of companies implementing enterprise systems say they’ve achieved at least half of the value they initially expected from the technology, according to a study by Accenture. The companies that extracted value had two things going for them: time and follow-through.

Within a year of implementation, most companies failed to realize many hoped-for benefits, such as reduced headcount and more accurate business planning. But after two years, the majority saw payback of every type of benefit except increased revenue.

At companies where implementation was the end of their enterprise systems effort, fewer than half the expected benefits were realized. But among companies that continued to integrate and fine-tune processes, 42 percent achieved the majority of the benefits they had targeted.

Who’s Got the Value?

Percentage of respondents achieving different degrees of enterprise systems benefits

Better Things Come to Those Who Wait

Percentage of respondents achieving enterprise systems benefits over time

Source: A report by Tom Davenport, Jeanne Harris and Susan Cantrell on a March 2003 study by Accenture Institute for Strategic Change of 163 businesses in North America, Europe and Australia

Best Practices

Remember: Results take time. It takes a while for companies that put in their enterprise systems (ES) one module or business unit at a time to reap any benefits. Getting to critical mass, meaning a significant portion of system modules are up and running sooner, is obviously ideal, but "big bang" implementations are more likely to lead to performance problems and project failures.

Prioritize benefits and create a plan. Benefits of ES don’t just happen; they have to be planned and managed. Formalize ways to measure and track benefits from ES, and assign this responsibility to an individual. Accenture consultant Tom Davenport says, "The 31 percent of organizations that actively track metrics achieved them significantly earlier than those that did not. Likewise, the 65 percent of organizations that hold a dedicated individual responsible for realizing enterprise systems benefits also achieved benefits earlier than those that did not hold someone responsible for benefit realization."

Manage enterprise systems as an ongoing program. "We now have evidence that getting value from enterprise systems is not a project, but a way of life," says Davenport. If the ES project ends when the software goes live, "it’s unlikely that substantial value will be achieved." Companies will gain payback by integrating ES with legacy and best-of-breed apps, adapting business processes to fit with ES, and converting ES data into knowledge to support analysis and decision making.

 

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