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.