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ERP investment decisions are back on the agenda but with a whole new perspective

Richard Mc Williams and Frank van Niekerk, directors at the Deloitte Consulting Technology practice have written a paper which lists key factors that executives and their boards need to consider when formulating their ongoing enterprise resource planning (ERP) investment strategies. An introduction is provided below with a link to download the full article.

If you have any questions relating to this article, contact Richard Mc Williams at rmcwilliams@deloitte.co.za or Frank van Niekerk at fvanniekerk@deloitte.co.za.

Download the the full article . . . . ERP investments are back on the agenda

Once the world had got past 1 January 2000, relatively unscathed, and the cumbersome ERP implementations were complete, bedded down and functioning as required, we saw the investment in ERP solutions taper off, and there were constant rumours about the demise of ERP, as discussed in Deloitte’s Tech Trends 2011: The End of the “Death of ERP”. However, according to this article, “ERP is seeing resurgence. SAP recently reported a 34% surge in licensing revenue at the end of 2010 to a new record, while Oracle projects licence sales will increase between 10% and 20% in their current fiscal quarter 4.”

Why is this? One of the reasons that we have identified is that the investments made in 1999 have become out-dated and require upgrading. Technology has progressed rapidly (in all areas, including ERP), and the external factors mentioned above – specifically increased competitiveness and globalisation – demand updated solutions. Another reason is that ERP choices, made 12 years ago, may not be relevant to future investments.

In some cases, ERP vendors who were around then are no longer in business. Investment in these solutions has been curtailed and a skills shortage of support consultants has developed, making the ongoing cost of ownership, of what was initially perceived to be an affordable alternative, increasingly expensive. Upgrade paths may be as expensive and challenging as implementing a new solution, leading many organisations to consider a large-scale investment in a new ERP solution.

So, for organisations that have recognised that the writing is on the wall and that they need to update their ERP, what is the major difference between then (1999) and now? In 1999, they simply had no choice. They had to implement a new solution. The justification was a well-known and widely accepted fact of life – it was a non-discretionary investment. Nowadays, many upper mid-tier and lower large-scale organisations do not have the budget or resources freely available to fund a large-scale ERP investment; and because there is no burning platform, they need to make a semi-discretionary investment decision.

These organisations need to review all the options and develop a robust business case. Some of these options include: should the current solution be upgraded, re-implemented or replaced? How does the organisation make the most of its already significant investment? What about concerns such as disruptions to the business and the impact on staff and other stakeholders such as customers and suppliers?”

Download the the full article . . . . ERP investments are back on the agenda

If you have any questions relating to this article, contact Richard Mc Williams at rmcwilliams@deloitte.co.za or Frank van Niekerk at fvanniekerk@deloitte.co.za.

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