Enterprise Resource Planning – Relevance
October 15, 2012

(An excerpt of the talk given at the ERP committee meeting of Northern Virginia Technology Council, NVTC, on September 9, 2012 at Reston, VA)

$400 million is the estimated loss due to ERP failure that lasted few minutes, at the KNIGHT Capital earlier this year. Also, the stock price dropped 68% the day after the ERP failure. The ERP failure has been attributed to a trading platform glitch, caused by rolling out untested software update in ERP systems [1]. Locally, Fairfax County had suspended work in April 2012, on a $43 million ERP project, called FOCUS. The work was suspended due to ‘extraordinary additional costs’ [2]. In my opinion, these and many other ERP failed and delayed projects, tell us that the  enterprise resource planning has not been relevant to the businesses. If one asks the following questions:

  • A large number of ERP systems have been in the market for a long time and all of them rely on best practices, so why such failures or delay occur?
  • Business are going to adopt the emerging technologies like cloud, virtualization, mobility, and new media, including social media. These are evolving in multiple direction at a faster rate, then traditional software cycles have handle so far. How does ERP incorporate new emerging technologies and media?
  • Changes in initial scope of project has been one of the big contributor to the delay and failure of ERP projects, based on survey of 2000 ERP projects [3].

Thus, relevance of ERP is even greater now than before, so one can avoid these delays, failures, and incorporate new technologies. We must address the following:

  •  Avoid the traditional best practice trap, that are vendor driven, rather than
  • enterprise driven.
  •  Business strategy should drive and define the technology strategy. Business executives should learn to avoid IT Blind Spot [4].
  •  Clear path for future vision rather than ‘right-sizing’ ERP for the present. Rightsizing for now, is likely to make ERP project much more expensive in long-term.

The prevalent view that ERP technologies are a “burden” and “slow moving” is mainly due to the fact that vendors are not able to integrate with emerging technologies. Irrespective of that, traditional ERP market is estimated to grow to $50 billion by 2015, and the ‘SaaS’ the long-tail aspect of ERP to grow to $78 billion by 2011. ERP relevance is great today, as the market size is growing, the integration with new technologies is essential, and the latent demand is yet to be explored.

  1. The Price Tag of ERP Failure, Eric Kimberling. Read full article at http://bit.ly/z23456
  2. http://www.fairfaxunderground.com/forum/read/2/890542.html
  3. Panorama consulting – survey of ERP projects between Feb 2006 – May 2012
  4. The Feld Framework for IT Leadership, a series post at http://chiefknowledgeguru.com/2010/02/thefeld-framework-for-it-leadership/ (Based on the book IT Blind Spot, by Charlie Feld).
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