(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 . 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’ . 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 .
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 .
- 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.
- The Price Tag of ERP Failure, Eric Kimberling. Read full article at http://bit.ly/z23456
- Panorama consulting – survey of ERP projects between Feb 2006 – May 2012
- 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).