Why ERP Systems Are More Important Than Ever

CIOs remain committed to ERP systems despite innovation, integration and cost issues. Why? Business can't live without it.

By Thomas Wailgum
Tue, January 29, 2008

CIO — Can't live with them, can't live without them. That pretty much sums up how CIOs and IT leaders feel about their ERP systems, according to a new CIO magazine survey that primarily focused on small to mid-market companies.

What they told us revealed the extent to which companies in 2008 are completely married to and dependent upon their ERP systems. 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."

But this marriage is also showing some signs of stress: CIOs are still plagued by complex system integrations, high cost of ownership and ERP systems that are difficult to use. They are also yearning for innovation from their vendor partners.

And yet, CIOs appear unwilling or unable to divorce their companies from their ERP systems and try something new, such as software-as-a-service (SaaS) or open-source models.

The degree to which companies are wedded to their ERP systems comes as no surprise to Amy Doherty, CIO of American Financial Realty Trust, a $426 million publicly traded real estate investment trust. Doherty says that over the past 15 years, companies have attached more and more critical data, including financials, to these systems. "The tighter your integration with ERP," she says, "the more critical it becomes to your business."

Doherty ought to know. For about two years, American Financial Realty Trust has run a JD Edwards ERP module that's specialized for the real estate industry. In that short time, it has become increasingly critical and popular, with more internal business users and external partners wanting to know "what it can do for them," Doherty says. "It's the database of record in our company. We run our business on it."

Doherty was one of nearly 400 IT leaders—all with their own ERP systems and tales of frustration and satisfaction—who responded to our October 2007 survey. Seventy percent of those responding said their businesses fell into the small and midsize category (up to $999 million in annual revenues).

We wanted to know everything about their company's back-office suites of financial, HR and inventory management applications. Who were their trusted vendors? On which areas (maintenance, upgrades, licenses) were they spending the most ERP dollars? How much innovation were their vendors providing? What were their persistent challenges? And were they looking at alternative ERP models, such as SaaS or open-source applications?

Our respondents answered those questions and more: They strongly disputed IT scuttlebutt that ERP systems were now shrugged off as legacy inside 21st-century businesses. Almost 80 percent disagreed or strongly disagreed with the statement, "My company views ERP systems as legacy systems and no longer invests in them."

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