Why are businesses still opting for huge ERP implementations?

Why are businesses still opting for huge ERP implementations

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There was a time not so long ago when meetings with CIOs would be dominated by talk of big project implementations.

From electronic data interchange (EDI) to customer relationship management (CRM), IT directors were keen to talk up the importance of their latest three-letter acronym-based project. Top of these initiatives came enterprise resource planning (ERP), an all-encompassing approach to resource management.

Nowadays, chats with technology chiefs are much more likely to encompass a series of important themes rather than acronyms. CIOs are eager to tell you about their alignment with the business, their sensitivity to sustainability and their awareness of social media.

But what about enterprise architecture; is no one spending a lot on huge ERP implementations anymore? The simple, and rather confusing answer, is no - and yes.

The last 12 months-or-so have been incredibly tough for IT. ERP has been identified as a potential source of cost savings, with researcher IDC reporting that 21% of firms' spending would be lower or much lower in 2009 than 2008.

That's a big drop. But the figures also mean that the vast majority of IT leaders have not cut deep into ERP spending. More worryingly, many businesses are tied to extremely costly projects.

Some estimates suggest the average American worker is paid about $47,000 a year and yet the average business incurs approximately $12,000 annual ERP expenses for each worker. Something, somewhere, is clearly wrong.

Why, in a cost-conscious market, are many executives still choosing to implement all-encompassing and cost-consuming ERP implementations? Surely in an age of service orientation, on-demand computing and flexibility businesses should be thinking differently about enterprise resource planning?

Rather than being tied to a big-name implementation from a big-name, global vendor, executives should work to select components that meet specific business demands.

Scalable and flexible, such components can be easily integrated into the enterprise architecture. The business can then implement financial, human resource, business intelligence and document management functionality as the need arises, reducing total cost of ownership and reducing reliance on huge ERP systems.

The past might have been about big ERP implementations but the future is all about flexibility.

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