Why ERP Is Still So Hard

After nearly four decades, billions of dollars and some spectacular failures, big ERP has become the software that business can't live without--and the software that still causes the most angst. In Part I of CIO.com's analysis of the ERP market, we look at where ERP has been, where it's at today, and why it's still so hard to do these mission-critical projects well.

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ERP, it seems, in one technology area in which a dose of Moore's Law does not apply. "It's sickening how ERP continues to be very expensive and very risky," says Mirchandani. "There is no reason why it should be. The software should be heavily discounted to start with. The maintenance [plans] should have several different options, offered both by the vendor and third parties. And the implementations should be more brain-dead implementations."

ERP and CIOs: Complicit or Complacent?

The Chief Information Officer's slow rise to prominence inside enterprises is undeniably intertwined with ERP's climb. A significant part of tech leaders' career trajectory—from data processing to MIS to IS to IT—is the manifestation of ERP's impact on the wholesale digitization of the innerworkings and processes of businesses, governments and nonprofit organizations. In other words, there would likely have been no Chief of IT in the 1990s if there was no ERP—just an IS manager responsible for e-mail.

In that vein, some ERP analysts lay partial blame for ERP's spiraling costs at the feet of CIOs, who have aided and abetted vendors' addiction to maintenance fees, for instance. "I don't blame the vendors: They're doing what the market is telling them to do," says Wang. "And they're doing what inherently the customers are telling them to do, and it's got them to this point. The problem is that just about everyone's been kicking the can a little farther, and I don't think we can kick it anything farther than now."

Maintenance and support fees, in particular, have drawn the ire of businesses scrutinizing balance sheets and trudging to make it through the 2008 recession. SAP's redesigned Enterprise Support plan would have increased its maintenance fees, but it wisely negotiated a détente with its global user groups who were up in arms over the proposed fee increases.

CIOs, too, can play a starring role in limiting costly customizations, by educating and imploring business managers and users why customization, in the long run, is often not the better route. But that task is never easy. Singh contends that every company thinks its processes and products are so different that customization is absolutely necessary. "While in reality, there is no good, solid rationale behind that in the vast majority of cases," he says.

But the reality CIOs face when synching business processes with those in ERP applications leads to "internal arguments over how we are going to define something simple as a chart of accounts," Singh says. (A chart of accounts provides an overall view of items such as assets, liabilities and expenses.) Each business organization and unit will have a different view. "So all of the sudden, what looked like a very simple concept has exploded in complexity," he says, "and now you're into trying to get some very powerful people aligned behind one vision. In some cases, you can; in some, you can't."

All of this can add up to thousands of contentious processes when a company is implementing a traditional, on-premise ERP suite. "That's something [business managers] discount, and that's something the vendors don't talk about," says Singh, who says the CIO job can be more like a Chief Negotiator role. "Vendors will say: 'We have an out-of-the-box solution.' And they do. As long as you're willing to take what they're selling, it'll work. But as you try to deploy it, business leaders will say: 'We can't do it that way,' or 'That won't work for me.' And that out-of-the-box solution suddenly becomes heavily customized."

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."

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