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ERP and its prisoners

Thursday, April 5, 2007
IT executives say they're tired of being unable to make changes to systems without paying an arm and a leg. A Toronto book company offers its own work-around

Businesses are rattling what they see as the shackles of their ERP systems, calling them restrictive and costly to maintain and upgrade.


A recently released survey of Technology Evaluation Centre newsletter subscribers sponsored by Sliedrecht, Netherlands-based ERP company Agresso found that, out of the 900 respondents, 70 per cent feel their ERP systems put them at a disadvantage.

“Post-implementation agility is very hot right now,” said Judith Rothrock, Agresso’s chief marketing officer. “Many people are upset with their ERP implementations.

“The global economy is changing so fast that . . . these ERP systems have to be able to move with change instead of being so rigid and forced. When they built this architecture 20 years ago, they didn’t know the world would change this way.”

Rothrock said companies are troubled by the extreme cost and operational impact of making changes to or upgrading an ERP system. According to the survey, 70 per cent feel trapped in a “need-spend-need-spend” cycle with their ERP vendor. There can be much difficulty, said Rothrock, in making changes to an ERP system, as the software underlies much of what runs one’s business. “Nothing has as many tentacles in the business as ERP,” Rothrock said.

Rothrock said that many companies are rankled by the expensive fees charged by the corporate ERP consultants, something which Ray Wang, a principal analyst in enterprise applications with Cambridge, Mass.-based Forrester Research, has noticed, too.

“Upgrades can be twice the price of the original software, so where’s the value in that? (Companies) often just (wait) until the next release, which is seven or 10 years out,” he said.

Running ancient ERP software can cause problems, too. Wang has also heard complaints that businesses are forced to upgrade if they want new features. Wang, who has seen plenty of “ERP upgrade

Custom solutions can be costly, too. Craig Sullivan, the vice-president of international product management for the San Mateo, Calif.-based software-as-a-service ERP company NetSuite, said that many companies use piecemeal ERP solutions for different functions or departments.

“It’s a very expensive integration process with expensive consultants to make the applications talk to one another,” said Sullivan. This problem can pop up even when it’s different solutions from the same vendor. Said Sullivan: “Even if you have everything by Microsoft or SAP, it can be as complex a problem (integrating them) as if you had (applications from) different vendors.”

Both Microsoft and SAP seem content with the status quo: SAP has delayed indefinitely the creation of an on-demand integrated suite, while Microsoft abandoned “Project Green,” which would have seen its ERP products moved to single code base. SAP refused to comment and Microsoft was unavailable at press time, though it did outline plans to deal with legacy ERP issues at its recent Convergence conference.

A way around the spending trap could be choosing a mid-sized vendor. “Tier-1 implementations (from vendors like SAP) can be double the budget and the business (can be greatly affected),” said Mark Delvecchio, the IT and ERP business manager for Toronto-based book manufacturer Webcom, who said he is very pleased with his in-house/outside developer combo. Webcom customized its ERP on top of a Navision system (which is now Microsoft Dynamics NAV). “(Mid-sized vendors’ applications) can be flexible enough to move with you,” he said.

The fears of a inflexible, massive, in-depth implementation can result in an actual stagnation of business growth, according to the survey, which found that 58 per cent of respondents had refrained from using business strategies simply because of the perceived strain and annoyance of having to deal with making changes to their SAP, Oracle, or PeopleSoft ERP solutions.

“People are looking for flexibility and extensibility,” said Wang. He said that the big names like SAP and Oracle are getting better in terms of flexibility through middleware like Oracle Fusion Middleware and SAP NetWeaver, but that “making that initial jump to (increased flexibility) is difficult.”

However difficult it may be, Wang said, the industry’s top ERP vendors would be wise to keep tabs on some of the growing trends like software-as-a-service, business process outsourcing and hosted solutions.


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