What does a "fully deployed" ERP implementation look like? And what competitive advantage does this convey to a manufacturing organization? A recent AMR Research survey of 271 companies using ERP systems revealed two interesting points:
1. Forty-six percent of licensed ERP "seats" are unused. This higher-than-expected level helps explain the market's slow recovery over recent years.
2. Only 15% of employees are licensed for ERP, which is low considering ERP's support of nearly every manufacturing employee's function and, according to AMR Research, given the functional breadth of today's ERP systems and the industry reliance on ERP applications for most business processes.
Certainly implementing half of the licensed seats of software an organization already owns doesn't reflect well on the perceived value of ERP systems. Furthermore, having only 15% of potential employees licensed for ERP access suggests a deeper issue with the functional capabilities and perceived value of ERP systems.
In the 1990s, many ERP vendors brashly stated that they should be able to provide all employee functions with their software solutions. Naturally, CRM vendors followed suit, performing functional rollups of many sales, contact management and marketing solutions into a single suite sold as big ticket enterprise software with its exorbitant licensing fees.
This was complete arrogance. The ERP generation of IT solutions brought with it many issues that organizations are still trying to break free of, including the need to implement equally expensive integrations solutions such as enterprise application integration (EAI) and other B2B integration middleware. Meanwhile, the IT industry has been moving in a different direction with such initiatives as Web services and service-oriented architecture (SOA).
Couple these trends with the consolidation of ERP solutions and, more recently, CRM industry bellwether Siebel Systems putting another quarter of big losses on the board, and you get the picture.
The IT industry is changing. The residue of the 1990s IT platforms such as ERP, CRM and EAI is going to take decades to wash away, much like the legacy mainframe systems that are still with us.
Seventy-one percent of AMR's respondents are increasing their ERP spending by an average of 14% in the coming year. But what that spending ultimately becomes is mere conjecture. Why would ERP spending increase if nearly 50% of the licenses already owned as shelfware are still uninstalled?
Which brings me back to my original question: What is a fully deployed ERP system? I submit to you that there will be no such thing. The enterprise software industry is different than it was in the 1990s. Most organizations are trying to reconcile two somewhat conflicting trends. On one hand, they prefer managing fewer vendors. Yet, these organizations still prefer to maintain some degree of choice to avoid vendor lock-in and assure themselves a few degrees of freedom with future IT investments.
The rapid uptake of open source software, standards-based SOA and Web services, and the general avoidance of large projects, seem to point to a much different scenario than fully deployed ERP systems. Not to mention that the competitive advantage and ROI would probably be just as manufactured as the products a company makes. Is your organization headed toward a fully deployed ERP system? What does fully deployed mean to you?