Three quarters of the country’s large corporations and government departments are cutting their IT budgets this year, according to the latest report from Deloitte.
Analyst IDC has taken it a step further and singled out ERP as a target for spending cuts and project cancellations. The enterprise software market is showing signs of consolidation and to cap it all the Insolvency Service has reported that business failure in the UK has grown by 56 percent since last year.
No one is really blaming ERP for the country’s business ills but it is odd to think that IT and in particular ERP is still seen as a malleable cost centre and not a necessary tool for improving business performance and financial management. It suggests that there is something wrong in the buying history, that perhaps previous experience of IT projects has been one of expensive implementation and costly support.
The fear of course is that it’s a bit of short-termism and that businesses are only, as Deloitte’s Neville Howard puts it, “storing up problems for the future.”
By shelving IT projects and cutting software that is essentially designed to help businesses run more efficiently, are businesses prolonging recovery as they struggle to identify and manage costs within their various departments?
It is quite possible that today’s decisions on IT will come back to bite UK businesses tomorrow. Haven’t we learned anything from history? Of course many analysts are pointing towards very large and expensive ERP projects as expendable and to a certain extend they have a point.
However, there is confusion. For years financial directors have been told that ERP is an essential tool for business efficiency and yet as soon as things get tough, ERP is for the chop. Is ERP really just a luxury for when things are going well?
The real issue here is that old school, traditional ERP is proving difficult to justify. It is costly and complicated. Deployment times are long and support costs and issues can boost overall spend way beyond initial budget restrictions. IDC last year pointed the finger at these traditional forms of ERP as having too many hidden costs but IDC also blamed complacent buying habits for sticking by large brands and not taking into account the overall cost of ownership.
More recently CFO Research found that mid-sized businesses are spending on average, £800,000 a year, just to maintain, modify and update ERP software. Large businesses are spending three times as much. It’s hardly surprising then that CIOs have taken a dim view of ERP.
The new breed of ERP vendors is different; they have to be, not just to survive but to grow as businesses. Recognising the changing needs of business and building software that can be adapted to help facilitate and manage those changes is the future of ERP. This also includes adapting the software for a new generation of users that have grown-up with social media and other web-based applications.
It’s common sense but not everyone thinks along these lines. The CFO Research also found that several finance executives (over 70%) said it was easier to change their company’s business processes to conform to their ERP systems than the other way around. It’s not surprising that ERP is seen as a frustrating application that is reminiscent of Little Britain’s ‘Computer says “No”’ sketch.
Yet businesses just accept that this is the way of ERP when in fact it doesn’t have to be. While research statistics scaremonger the market, many businesses have backed themselves into a corner by adopting over ambitious ERP projects that cannot cope with change and ultimately economic uncertainty. This is the crux of the problem.
ERP is not dying, it is changing. Businesses and public sector bodies need to realise this too and start looking at the total cost of change as a valid measure of ERP’s usefulness.
For too long IT buyers have been in a comfort zone, buying large brands and paying for expensive consultants to make changes which should be possible to make in-house. Perhaps this is where the recession will have its most potent role in making IT buyers more accountable for post-implementation costs? The recession after all will not kill ERP, it will change the way in which it is bought.
Anwen Robinson has been UK sales and marketing director at Agresso and for the past ten years. She is now been made MD of Agresso and CODA.