Quarter of ERP/enterprise IT projects 'on hold'

Economic slowdown is having an impact on investment levels in Enterprise Resource Planning (ERP) and other enterprise systems, according to a survey from the National Computing Centre.

Research undertaken by the NCC’s Evaluation Centre, an interactive online service guiding IT buyers in the selection and use of business software, services and technology, suggest that in 24 per cent of organisations polled all future ERP and enterprise software projects are on hold, and 41 per cent are seeing projects being postponed. This compares to 29 per cent of companies who are not experiencing any cutbacks, and 6 per cent who are increasing their investment in enterprise applications.

The implementation costs of ERP solutions are also problematic – they have exceeded expectations in 18 per cent of cases, the survey says, and have exceeded them in a further 53 per cent of responders.

The main problem area is in the length of time required to complete the implementation, the survey found, with 24 per cent of polled companies saying this has ‘greatly exceeded expectations’, and 53 per cent that it has ‘exceeded the anticipated timescales’. Only 12 per cent of respondents feel the implementation has ‘been on time’, with 6 per cent saying that it has been ‘shorter than expected’.

The implementation times have had a knock-on effect on the time to cost-benefit of the solution, with 24 per cent saying this has ‘greatly exceeded expectations’, and 24 per cent that it has ‘exceeded the timescales’. On the other hand, 24 per cent report that they have ‘generally met cost-benefit time frames’.

To achieve full value from their ERP or enterprise solutions, many companies have to customise their implementations. In 12 per cent of cases this has required ‘very significant’ modifications, and in a further 46 per cent ‘significant’ alterations. In contrast 24 per cent of organisations have made only minor changes, and 6 per cent none at all.

Where companies have made changes to the source code of their enterprise or ERP systems, then this has caused problems when upgrading to newer versions of the software. ‘Major problems’ have been experienced in 14 per cent of cases, and ‘significant difficulties’ in 57 per cent.

As an alternative to on-premises solutions, over half the respondents (58 per cent) may consider a Software as a Service (SaaS) model in the future for ERP or enterprise solutions: 6 per cent have adopted SaaS, and a further 6 per cent are evaluating this option. Despite the need for a convincing business case to invest in enterprise solutions, only 29 per cent of organisations formally measure the return on investment (ROI) from their ERP applications.

In addition, only 12 per cent of companies always put in place a range of metrics to measure the ongoing business performance of their enterprise solutions. A further 47 per cent sometimes do, while 35 per cent do not bother with performance measurement at all. The key performance criteria used are customer service (90 per cent), financial metrics (80 per cent) and productivity improvements (50 per cent).

Overall, less than half (47 per cent) of companies feel that their ERP or enterprise solutions are meeting the majority of their requirements. A further 41 per cent say they are only partially meeting their needs and 12 per cent that they are only meeting a few requirements. Over 100 companies were interviewed for this year's survey on ERP and enterprise solutions.

A substantial proportion of respondents (30 per cent) are from the manufacturing sector, which was the original base for ERP solutions; but many other sectors use enterprise solutions including the public sector (24 per cent), retail (12 per cent), distribution and logistics (8 per cent), IT and telecoms (8 per cent), and financial services (6 per cent).

The respondents represent a spread of different-sized companies with 12 per cent having in excess of £5bn turnover, 6 per cent in the £1bn-to-£5 billion bracket, and 24 per cent in the £500m-to-£1bn range. In the mid-range 28 per cent have a turnover between £100m-and-£500m, and 18 per cent £50m-to-£100m. At the smaller end, 8 per cent have a turnover between £10m-and-£50m, and 4 per cent £5m-to-£10m.

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Related feature:
Return on investment: does it still mean anything?

More information:
www.evaluationcentre.com/erp_software/home.go

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