ERP Backlash Coming Soon to a Company Near You

ERP software implementations can be painful—crazy expensive for the business, enormously complex for IT grunts, and annoying to change-averse users. Some see ERP as a necessary evil that enables 21st century companies to achieve competitive similarity with one another.

At best, these grueling ERP rollouts deliver a back-office system that will bore any sane person to tears. At worst, they can be costly and embarrassing corporate blunders that leave board members or shareholders asking: “What the hell happened to that IT project?” (Don’t believe me? Just ask bedding manufacturer Select Comfort why it suddenly halted its SAP ERP rollout.)

Your chances of ERP success? Not good, my friend. Today’s ERP rollout has only a 7 percent chance of coming in on time, will probably cost more than what you estimated, and will likely deliver very unsatisfying results.

And all for what? Do you think the average user gets excited about a new ERP system? No way. “This back-office automation stuff—nobody gets excited about it,” says Ray Wang, a VP and principal analyst at Forrester. “For the user, it’s just one more form they’ve got to fill.” It’s no wonder, then, that there’s a slightly better than 50 percent chance that users will want to use and, indeed, actually use the ERP application once it’s in house.

So who likes ERP systems? Business managers and bean counters. “It is very hard to get excited about back-office [ERP] projects, unless you’re a manager,” Wang adds, “because it’s designed to automate tasks so that managers get better visibility.”

But that’s all going to change this year. It has to. And it’s not just because the economy is in the Dumpster.

There have been too many enterprise software blowups during the last 20 or so years (that we know about), and in Wang’s estimation, there really haven’t been any improvements as of late in ERP project management. “I don’t know if there is any change in the level of success or failure,” he says. “My guess is that companies are putting these systems in begrudgingly. And if there’s a failure, they’re going to cover it up.”

Plus, businesses have a growing number of alternatives to the traditional on-premise ERP “solution”—viable, mostly stable and easier-to-install applications that cost much less than those offered by big ERP vendors. Software-as-a-service (SaaS) ERP options are expanding and becoming too irresistible for business users (and IT staffs) to ignore much longer. Even more radical, some new-age ERP vendors, such as IFS, are building future ERP software releases with Gen Y users in mind—not just the bean counters. Think Facebook and Twitter (minus the incriminating photos).

In addition, 2009 could be the year that open-source ERP apps finally get a second look from corporate America. Cutter Consortium Senior Consultant Vince Kellen claims that open source will get a “second chance to get a toe in the door” in the coming year. “Initially, 2009 adopters will look for focused or niche applications, including office software for desktops, rather than ‘rip and replace’ ERP swap-outs,” Kellen notes in a Cutter opinion piece. “However, I wouldn’t be surprised if a few more early adopters attempt large-scale open source ERP.”

Right now, it’s essential that CIOs and IT managers spend less time on ERP RFPs, integration headaches and implementation schedules, and more time working hand in hand with business stakeholders on what is needed from IT to keep said business afloat.

That means thinking about applications that directly impact your organization’s customers. Our recent “State of the CIO” survey data, which we combined with Forrester survey data of 600 CEOs, paints a grim and dire picture for the IT suite: Among CEOs Forrester surveyed, 53 percent said acquiring and retaining customers was a business driver important to IT decisions, according our write up of the survey data.

Yet how well did IT actually support that mission during the past year? “Forty-nine percent of the business execs judged IT’s performance as ‘fair’ or ‘poor.’ Another five percent said IT did not support acquiring or retaining customers at all. Ratings of IT’s impact on managing customer relationships were just as bad.”

Yikes.

So it is in this kind of economic environment that CIOs and IT managers are going to propose an expensive, time-consuming and less-than-sure-thing ERP rollout or upgrade. Really?

Hmmm. Might want to think that one over.