ARE ERP SYSTEMS MAKING A COMEBACK?

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1 ARE ERP SYSTEMS MAKING A COMEBACK? ERIC KIMBERLING OCTOBER 17, 2012 Each year, Panorama conducts an annual survey of hundreds of ERP implementations across the globe. Our most recent study which was published in our 2012 ERP Report - shows that most ERP system initiatives take longer than expected, exceed expected budgets and fail to deliver expected business benefits. While this study demonstrates the perils of ERP implementations, another data point from a recent industry survey shows that ERP systems are in fact delivering measurable results for many organizations. A recent snapshot study by Sage, a leading manufacturing ERP vendor, reveals that 67-percent of manufacturers indicate that their ERP systems have allowed them to better serve their customers, while 56-percent say that their ERP systems have actively aided them in growing their businesses. Further, participants said that their ERP systems help their employees with quotes, order fulfillment, checking for product availability and forecasting. While the 2012 ERP Report shows that 50-percent of organizations across the globe fail to realize at least 50- percent of the business benefits they expect, Sage s results suggest that manufacturers are at least seeing some tangible operational results from their initiatives. So what does this information tell us? Here are a few key takeaways from the Sage study: There still is and always has been a big upside to ERP systems. Much of our experience and research outlines the challenges and pitfalls of ERP implementations. In addition, many industry analysts have declared that ERP is dead for quite some time now. However, despite the various examples and case studies of ERP failures, it is important not to overlook the upside potential of enterprise software initiatives. For example, of the companies that do realize measurable business results from their ERP systems, the average organization realizes a payback on their investment in less than three years. Most CFOs would consider this a strong return on investment. It is important to define and understand potential business benefits. Sage s study underscores specific business benefits realized by manufacturers participating in the study. For example, in addition to those outlined above, the study shows that manufacturers point to product delivery efficiencies, open order tracking, raw material forecasts and shorter lead times as tangible and realized business benefits. Any organization about to conduct an ERP selection and implementation initiative would be well-served to define and quantify the potential and expected business benefits of their enterprise systems. This should serve as a roadmap for a benefits realization plan. Business process reengineering and organizational change management are keys to success. Although not specifically mentioned in the Sage study, Panorama s experience has shown that realizing the potential business benefits of an ERP system is From panorama-consulting.com/are-erp-systems-making-a-comeback/ 31 January 2013

2 largely dependent on effective business process reengineering and organizational change management. In fact, our ERP expert witness experience and independent ERP research suggests that the lack of business process management and organizational change management both directly and indirectly lead to ERP failure. For this reason, we have developed a comprehensive and technology-agnostic business process management and organizational change management methodology that ensures ERP implementation success and benefits realization for our clients. While most organizations fail in their attempts to successfully implement their ERP systems with reasons ranging from weak project management to a lack of focus on organizational change management and business process reengineering the Sage study suggests that there are reasons to be optimistic. When implemented effectively, ERP software can indeed transform and help improve a business s operations. From panorama-consulting.com/are-erp-systems-making-a-comeback/ 31 January 2013

3 Newsroom Article Details Sage Snapshot Survey: Manufacturers Add Jobs and Use Their Enterprise Resource Planning Systems to Meet Customer Demand A majority of SMB manufacturers have hired in the last six months, and a third plan to hire in the next six months, indicating a possible uptick in the sector IRVINE, Calif. (September 20, 2012) Sage North America announced today the results of a snapshot survey of small and midsized business (SMB) manufacturers on the general health of their businesses and use of their enterprise resource planning (ERP) system. The snapshot revealed that SMB manufacturers have added jobs, are more optimistic than not about the economy, and that their ERP systems have helped serve their customers needs while contributing to the success of their businesses. Sage, a leading provider of business management software and services to more than 6 million small and midsized businesses worldwide, conducted the survey among 134 executives of SMB manufacturers with fewer than 100 employees. According to the United States Bureau of Labor and Statistics and Census data, 98 percent of America s manufacturing firms are small (fewer than 500 employees). More than one in three Americans who work in manufacturing work at a small to midsized business. The snapshot revealed that hiring in the SMB manufacturing sector ticked up, as 73 percent of respondents reported hiring staff within the last six months. In a possible indication of future growth in the SMB manufacturing segment, a third of respondents plan to add staff within the next six months, while 53 percent intend to maintain the same level of employment over the next six months. When asked about the specific conditions of their own manufacturing business over the next six months: 49 percent believed that new orders would increase. 47 percent felt that production would increase. 23 percent believed that inventories would increase. While respondents showed optimism about their own business prospects, they were not as hopeful about the overall economy. Only 27 percent believed that the economy would grow over the next six months, while 57 percent felt that the economy would stay the same. The remaining 16 percent believed that the economy would contract over the next six months. Two-thirds felt that their accounting or ERP system has helped them better serve their customers in the areas of product delivery efficiencies, open order tracking, raw material forecasts, and shorter lead times. Manufacturing continues to play an important role in the American economy, and for this reason, we wanted to gauge the health and stability of this sector. While the findings show slightly different outcomes than recent national reports, we re glad that our results seem to indicate that SMB manufacturers are hiring and will continue to hire in the coming months and that generally they re optimistic about their businesses, said Joe Langner, executive vice president mid-market solutions for Sage North America. We re also pleased that Sage ERP appears to be playing a major role in helping manufacturers deliver great customer experiences, which, in turn, have contributed to their success. From na.sage.com/sagena/newsroom/details/sna%20corporate/2012/09/sage%20snapshot%20survey%20manufacturers%20add%20jobs%20and%2 0Use%20Their%20Enterprise%20Resource%20Planning%20Systems 31 January 2013

4 The snapshot survey was conducted by invitation to a panel of U.S. manufacturing executives between July 11 and August 1, Seventy percent of respondents had between 10 and 100 employees, and twothirds of them manufactured durable goods. This survey of manufacturers reflects a target population with a margin of error of plus or minus 7%, nine times out of ten. The full findings can be found here [see below]. About Sage Sage is a leading global supplier of business management software and services for small and midsized businesses. The Sage Group plc, formed in 1981, was floated on the London Stock Exchange in 1989 and now employs more than 12,600 people and supports more than 6 million customers worldwide. For more information about Sage in North America, please visit the company website at NA.Sage.com. Follow Sage North America on Facebook, Facebook.com/SageNorthAmerica, and Twitter, Twitter.com/SageNAmerica Sage Software, Inc. All rights reserved. Sage, Sage Software, Sage logos, and the Sage product and service names mentioned herein are registered trademarks or trademarks of Sage Software, Inc. or its affiliated entities. All other trademarks are the property of their respective owners. Press Contact Melody Chalaban Sage North America Melody.Chalaban@Sage.com # # # From na.sage.com/sagena/newsroom/details/sna%20corporate/2012/09/sage%20snapshot%20survey%20manufacturers%20add%20jobs%20and%2 0Use%20Their%20Enterprise%20Resource%20Planning%20Systems 31 January 2013

5 From infographics.lucidfusion.com/sage-snapshot-of-smb-manufacturers-summer-2012/ 31 January 2013