ERP was once the darling of the IT world, promising to bring together disparate departmental solutions, such as MRP and finance, into a single system.
The benefits were touted as real-time data transfer between applications, single user interface and full interoperability between the various departmental systems. ERP promised to be the only business application system you ever needed.
Five years later, despite many success stories, achieving the full vision still remains a dream for most companies that plumped for an ERP implementation. So why does the reality fall short of the vision?
Mike Roberts, who was formerly director of business process improvement at Rolls-Royce, summed it up well at the annual Cambashi seminar: ‘Of all the industries in the world, IT is probably the one most guilty of overselling itself’.
The reasons for the gap between expectations and the reality of ERP solutions are numerous. Integration turned out to be a difficult problem – huge amounts of customisation were required to get the systems to work in the way individual companies wanted.
The single database solution promised by ERP proved unwieldy in practice. Flexibility and integration with external systems were sacrificed for internal efficiency.
Unfortunately, few companies operate with systems from one IT vendor – most have some specialist systems, many have a mixture of financial and manufacturing systems through their network of subsidiary companies. Most ERP solutions had areas where they were particularly strong and other areas where they had weak functionality.
Customisation or integration with third party applications were the only available solutions. ERP vendors are now coming to terms with these shortcomings, having recently embraced XML as the integration saviour. XML promises standards-based integration to any application that also supports XML.
Yet just as the ERP reality is beginning to approach the vision, the Internet age has overtaken the IT world, and companies are clamouring for applications that help them connect to their customers and suppliers. The enterprise applications newcomers have seized the opportunity to get in amongst the ERP vendors.
ERP’s image of introspection and poor integration leaves the established vendors with a difficult sell, while the new players, such as Siebel and i2, have established a new image as business-to-business application players.
And yet many of the new applications require the reliable transaction-processing base that is provided by the ERP systems. Indeed, the major return on ERP investments may come when e-business, supply chain, or CRM applications are added. Where ERP vendors went wrong was in not accepting that customers might want to use competitors’ solutions.
Had ERP vendors positioned themselves as the backbone transaction-processing engine to integrate with all other business applications early enough, they could have been regarded as the platform for the Internet age. Instead, when they did, they were perceived as covering for missing functionality. That belated realignment might yet result in a resurgence in the ERP market.