Techweb State Of ERP

The State of ERP

TechWebTechWeb

September 2008

TechWeb The State of ERP September 2008 Page 2

Overview

ERP applications – which today span a variety of functions – have helped many companies transform the way they do business. It is thus critical that organizations have an optimal and effective ERP environment, and have an ERP road map that addresses their organization’s long-term business needs.

This TechWeb study explored what factors are influencing corporate ERP upgrade strategies, and how organizations hope to use them to enable the next wave of transformation. Additionally, questions addressed companies’ concerns about issues ranging from cost to risk, and other factors that influence the business value they obtain from these applications. Finally, it also addressed the requirements and practices necessary for a successful ERP upgrade.

The State of

ERP


Methodology

Timing: In late August/early September, TechWeb conducted an online study on ERP implementations and upgrades. Between August 19 and September 6, 2008, TechWeb sent e-mail invitations to an Nth name sample asking recipients to participate in a brief survey. The sample was drawn from North America, and only those who had agreed to be contacted by TechWeb for research purposes were utilized.

Questionnaire: The questionnaire was developed by TechWeb and the sponsor company, Satyam.

Fielding: E-mails were sent to subscribers inviting them to participate in an online survey. An embedded URL directed respondents to the survey hosted by our Web survey host partner, SurveyGizmo.

Incentive: Those who completed the survey could opt in to enter a drawing to receive one Garmin GPS Receiver. TechWeb research was responsible for all phases of programming the survey, coding and analyzing the survey responses. These procedures are carried out in strict accordance with established market research practices.

Response: A total of 400 respondents completed the survey. Data is based on these 400 respondents unless otherwise noted. The total study base of 400 respondents yields a margin of error of +/- 4.9 percent.

The study base includes only those respondents who specified that their role in the development, implementation, monitoring or modification of their company’s software design strategy with respect to enterprise resource planning (ERP) was in an advisory, software architecting, software testing or decision-making role. Additionally, only those who specified that their company had an ERP system in place that supports all, most or some of their major business functions/processes are included as part of the final respondent base.

The State of

ERP


Conclusions

The State of

ERP

Implementing and upgrading ERP has long been a bear —expensive, disruptive and inherently risky. But times are changing: 54 percent described their upgrades as exceptional or very close to it.

One-third of respondents see their upgrades as a way to strengthen their transformation or innovation strategy, while other top reasons compelling them to upgrade include optimizing business processes, cited by 38 percent of respondents.


The State of Enterprise Resource Planning

STUDY FINDINGS


ERP Encompasses Everything

Add-on functionality , such as supply chain and human capital management, has played a large part in ERP’s growth. ERP has migrated to the front office and beyond to help companies run and optimize business processes that touch customers, business partners and employees.

Add-on functionality , such as supply chain and human capital management, has played a large part in ERP’s growth. ERP has migrated to the front office and beyond to help companies run and optimize business processes that touch customers, business partners and employees.

Which business functions/processes are supported by your ERP system?Which business functions/processes are supported by your ERP system?

The State of

BPO

The State

of ERP

Accounts payable/receivableOrder processing

Order fulfillment

Shipping/invoicing

Sourcing and/or purchasing

Preparation of balance sheet

Supply chain planning and control

Human resources

Manufacturing and materials mgmt.

Warehouse management

BOM processingLogistics management

Sales forecasting

Business analytics

Business performance management

Employee self-service

Quality managementProject management

Compliance management

Customer prospecting

Corporate organization management

Database marketing

Support for telemarketing

Other

88.9%

69.5%

65.4%

64.9%

58.7%

57.7%50.6%

47.4%

47.4%

46.7%

44.5%

40.3%

31.9%

31.7%

31.2%

28.8%

26.3%

25.3%

21.1%

18.2%

16.5%

12.3%

10.3%

4.9%

Multiple responses allowed


Packaged ERP Software Dominates

Most companies still are running their commercial ERP applications in-house, but there’s emerging interest in the software-as-a-service model, which has traditionally been appealing to smaller businesses.

Most companies still are running their commercial ERP applications in-house, but there’s emerging interest in the software-as-a-service model, which has traditionally been appealing to smaller businesses.

What type(s) of ERP software does your organization use? Check all that apply.

What type(s) of ERP software does your organization use? Check all that apply.

The State of

BPO

The State

of ERP

Packaged software that we run in-house using internal IT resources

Custom-built software that we run in- house using internal IT resources

Packaged software that is maintained for us by external managed services

provider

Packaged software that we run in a hosted or software-as-a-service

environment

81.2%

24.0%

10.1%

8.4%



Nearly Half Use Oracle and Nearly One-Third SAP

Not surprisingly, the two ERP behemoths hold sway among respondents. But Microsoft is an up-and-comer. Its Dynamics product has traditionally appealed to mid-market organizations.

Not surprisingly, the two ERP behemoths hold sway among respondents. But Microsoft is an up-and-comer. Its Dynamics product has traditionally appealed to mid-market organizations.

Which vendor’s ERP software do you currently have implemented in your organization? Check all that apply.

Which vendor’s ERP software do you currently have implemented in your organization? Check all that apply.

The State of

BPO

The State

of ERP

Oracle

SAP

Microsoft

Infor (formerly SSA Global and The Baan Corp.)

Lawson Software

The Sage Group

Epicor Software

Agresso

Other

42.9%

29.8%

18.1%

5.8%

5.8%

3.3%

3.0%

0%

27.3%



Majority Have Been Using ERP for Seven Years or More

The respondents to this survey are seasoned ERP customers, and understand that, as with any IT system, enhancements are a necessary and vital part of progress.

The respondents to this survey are seasoned ERP customers, and understand that, as with any IT system, enhancements are a necessary and vital part of progress.

How long has your company been using ERP applications (either packaged or home-grown)? Select only one.

How long has your company been using ERP applications (either packaged or home-grown)? Select only one.

The State of

BPO

The State

of ERP

One year or less3.5%

One to three years14.0%

Four to six years22.7%

Seven to ten years22.8%

More than ten years

37.0%

Only one response allowed


Over Half Have Completed or Are in the Process of a Major Upgrade

Only about one-fifth of respondents have not tackled an ERP upgrade or replacement project in recent years, and have no expectations of doing so.

Only about one-fifth of respondents have not tackled an ERP upgrade or replacement project in recent years, and have no expectations of doing so.

Have you ever done a major upgrade or replacement of your ERP applications or do you plan to in the near future? Select only one.Have you ever done a major upgrade or replacement of your ERP applications or do you plan to in the near future? Select only one.

The State of

BPO

The State

of ERP

We have not upgraded or replaced our ERP application

in the last one to two years and have no plans to do so in the

next 18 months.*20.8%

We have completed a major upgrade or

replacement in the last one to two years.

40.9%

We plan to conduct a major upgrade or replacement in the

next 18 months. 21.6%

We are currently conducting a major

upgrade or replacement. 16.7%

*Note: The respondents who have neither upgraded, nor have plans to, did

not answer subsequent questions specifically about upgrades.



Nearly All Upgrades Were Both Functional and Technical

Much has been happening in ERP technology, including the move to SOA (service-oriented architecture) platforms. But new functional abilities are as much of a driver as new technology capabilities.

Much has been happening in ERP technology, including the move to SOA (service-oriented architecture) platforms. But new functional abilities are as much of a driver as new technology capabilities.

What is/was the nature of your upcoming or recent upgrade? Select only one.

What is/was the nature of your upcoming or recent upgrade? Select only one.

The State of

BPO

The State

of ERP

Functional upgrade 5.5%

Both functional and technical

83.7%

Technical upgrade10.8%


Slides 11 through 21 based on 320 respondents who have done a major upgrade or replacement of ERP applications


Drivers for ERP Upgrades – New Features, More Optimization, and Transformation

All Drivers

Top Driver

Our product vendor has ended support for the version that we are currently running

31.5% 19.9%

We wanted to add new features and functionality to our ERP applications 53.9% 17.6%

We needed to integrate a variety of disconnected ERP applications so decided to upgrade at that time

21.4% 10.3%

Our vendor(s) introduced new upgrades, and we were staying on track with the upgrade schedule

18.5% 7.3%

We wanted to optimize our business processes 37.7% 6.3%

We have an ERP Roadmap, and upgrade was a part of it 26.8% 5.8%

We believe that this upgrade will strengthen our company's transformation or innovation strategy

33.5% 5.3%

We wanted a single instance of our ERP applications globally 19.2% 4.3%

Our company went through a merger/acquisition, and our ERP applications needed overhauling to support this

12.8% 3.0%

We wanted to eliminate all or most of our custom, home-grown software within our ERP implementation

24.6% 2.8%

We wanted to consolidate all the data that's leveraged by our ERP applications into a single repository for improved data management

20.2% 2.3%

The State of

BPO

The State

of ERP

Companies are expecting a lot out of their ERP upgrades. But the top driver for upgrades has less to do with functionality and innovation, and more to do with forced marches. Nearly 20 percent say the end of support for their ERP product mandates an upgrade.

Companies are expecting a lot out of their ERP upgrades. But the top driver for upgrades has less to do with functionality and innovation, and more to do with forced marches. Nearly 20 percent say the end of support for their ERP product mandates an upgrade.

What are the primary drivers behind your current (or planned) upgrade or replacement of your ERP technology? Please check all that apply in the first column. Which of these is the topmost driver

behind the current or planned upgrade? Select only one in the second column.

What are the primary drivers behind your current (or planned) upgrade or replacement of your ERP technology? Please check all that apply in the first column. Which of these is the topmost driver


Multiple response Single responseRanked and sorted on primary driver

Top three in each column notated in red; responses continue on next slide..

Chart 1 of 2


DriversTop

Driver

We wanted to introduce collaborative solutions like Supply Chain, CRM, SRM, etc.

16.3% 2.3%

We are upgrading our ERP applications to support a service-oriented architecture (SOA) model

10.1% 1.8%

We are upgrading our ERP applications to support Web services 15.5% 1.8%

We wanted to add new ERP modules, so decided to complete a comprehensive upgrade as well

18.5% 1.5%

We wanted to be more agile and be able to add or expose new functionality

26.8% 1.3%

We want to meet certain regulatory compliance mandates 16.3% 1.3%

We wanted to be able to create composite applications from existing ERP functions in order to support new and/or evolving business processes

9.4% 1.0%

We wanted our ERP applications to support event-driven capability and thus trigger a business process or workflow

15.5% 0.8%

We wanted our ERP applications to provide users (internal and external) with a consistent experience.

20.7% 0.8%

We wanted to be able to vary ERP functionality based on context, such as the user's roles, customer description or information accessed

14.0% 0.8%

We want to handle most ERP functions in a hosted software-as-a- service model

4.7% 0.3%

The State of

BPO

The State

of ERP

What are the primary drivers behind your current (or planned) upgrade, or replacement of your ERP technology? Please check all that apply in the first column. Which of these is the topmost driver


What are the primary drivers behind your current (or planned) upgrade, or replacement of your ERP technology? Please check all that apply in the first column. Which of these is the topmost driver


Drivers for ERP Upgrades (continued from previous slide)

Chart 2 of 2


The State of

BPO

The State

of ERP

Most respondents — 54 percent — described their upgrades as exceptional or very close to it, while very few — less than 4 percent ― characterized their ERP upgrades as failures.

Most respondents — 54 percent — described their upgrades as exceptional or very close to it, while very few — less than 4 percent ― characterized their ERP upgrades as failures.

Majority Rate Success of Upgrade as a “4” or “5” on 5-Point Scale

How successful would you say your ERP upgrade has been so far? Please use a scale of 1 to 5, where 1 is “unsatisfactory” and 5 is “exceptional.”

How successful would you say your ERP upgrade has been so far? Please use a scale of 1 to 5, where 1 is “unsatisfactory” and 5 is “exceptional.”

1 -unsatisfactory

1.5%

22.8%

316.0%

439.7%

5 - exceptional

14.2%

Can’t answer, not far enough

along yet 25.8%


Majority Cite Accessibility of Business Info as Biggest Benefit

Business information will be more accessible and sharable across different departments/business lines/with partners and customers

60.1%

Processes will be optimized so we will be able to respond more quickly to changing business conditions

50.9%

We will be more agile as a business because we will be able to add or expose new functionality and/or vary that functionality based on context, such as the user's roles, customer description or information accessed

34.6%

Maintenance costs will be reduced because we won't have to support multiple instances of ERP applications

33.3%

Our total cost of ownership (TCO) will be reduced 33.3%

We will have a more comprehensive view of our customers, their needs and their profitability to our company

33.0%

We will have a more efficient supply chain 32.4%

Maintenance costs will be reduced because we won't have to support custom, home-grown software

29.6%

We will improve our ability to adhere to regulatory compliance mandates 25.2%

We will be able to reduce costs related to procurements, sourcing 23.9%

The State of

BPO

The State

of ERP

Survey respondents singled out several benefits, but at the top of the list is the ability to more easily access and share business information across different departments and business lines, and with partners and customers.

Survey respondents singled out several benefits, but at the top of the list is the ability to more easily access and share business information across different departments and business lines, and with partners and customers.

Multiple response

How will/did the change to your ERP applications upon completion of the upgrade benefit your company? Please check all that apply.

How will/did the change to your ERP applications upon completion of the upgrade benefit your company? Please check all that apply.


Disrupting Current Business Ops Is #1 Concern; Too Costly Is #2

All Concerns

Top Concern

It will disrupt our current business operations 48.8% 30.5%

It will be too costly 45.1% 21.3%

It will take too long 48.5% 13.3%

Poorly documented business processes, so it is difficult to figure out how to improve them

23.3% 8.3%

The upgrade won’t benefit our business functions/processes (vendor “forced march”)

20.6% 7.7%

There will be integration difficulties/technical issues with other software in our organization

32.6% 7.4%

The upgrades will require extensive end-user training 32.1% 5.3%

We aren’t getting executive buy-in/sponsorship 10.0% 3.8%

Unproductive interactions among IT and line-of-business managers

12.0% 2.4%

The State of

BPO

The State

of ERP

Upgrading ERP systems, no matter how routine, is never effortless, simply because ERP systems are complex and because they affect core processes that companies use to run operations.

Upgrading ERP systems, no matter how routine, is never effortless, simply because ERP systems are complex and because they affect core processes that companies use to run operations.

Multiple response Single responseRanked and sorted

on top concernTop three in each column notated in red.

What are/were the major concerns your company has about your current or planned ERP upgrade? Please check all that apply in the first column.

Which one of these would you rank as your top concern? Please select one.

What are/were the major concerns your company has about your current or planned ERP upgrade? Please check all that apply in the first column.

Which one of these would you rank as your top concern? Please select one.


The State of

BPO

The State

of ERP

While most analysts say spending on ERP is strong, many IT departments still have a hard time making the business case for it.

While most analysts say spending on ERP is strong, many IT departments still have a hard time making the business case for it.

Big Challenge: Making the Upgrade Business Case

How was your experience in defining and justifying the business case for ERP upgrades?

How was your experience in defining and justifying the business case for ERP upgrades?

Extremely easy4.1%

Easy33.9%

Neither easy nor difficult17.2%

Difficult39.5%

Very difficult5.3%


Who’s Handling the Upgrades

Nearly half the companies say they’ll tackle their projects with in-house talent alone, but 60 percent expect to engage a service provider to help with implementation/integra-tion and development, or to offer strategic consulting services.

Nearly half the companies say they’ll tackle their projects with in-house talent alone, but 60 percent expect to engage a service provider to help with implementation/integra-tion and development, or to offer strategic consulting services.

Who is/was involved in helping your company accomplish the upgrade? Please check all that apply.

Who is/was involved in helping your company accomplish the upgrade? Please check all that apply.

The State of

BPO

The State

of ERP


We are doing/will do the upgrade completely in-house, by

our own IT team

We have engaged a services provider to help with the

implementation and/or integration & development

We have engaged a services provider to provide strategic

consulting services

Our ERP vendor is assisting us with the upgrade

46.2%

32.6%

28.0%

24.6%


Consultants Offer Configuration Services Most Often

Interestingly, considering the challenges many find in making the business case for ERP, just 17 percent say they turn to consultants to help them on this front.

Interestingly, considering the challenges many find in making the business case for ERP, just 17 percent say they turn to consultants to help them on this front.

(Asked of those who are working with a consultant.)What are the offerings, areas for support you need/leveraged from your IT

consulting partner?

(Asked of those who are working with a consultant.)What are the offerings, areas for support you need/leveraged from your IT

consulting partner?

The State of

BPO

The State

of ERP


Configuration services 72.6%

59.7%

49.3%

45.3%

40.3%

18.4%

16.9%

13.4%

Modification adjustments

Testing

Developing IT roadmap including upgrade roadmap

Upgrade assessment

Landscape consulting

Develop business case

Unicode migration


Majority Said Upgrade Took One Year or Less

Almost 70 percent of survey respondents say their upgrade cycle took (or is expected to take) one year or less. Further analysis shows that, not surprisingly, nearly 40 percent of large companies (1,000 employees or more) say upgrades will go on for more than a year (data not represented in this chart).

Almost 70 percent of survey respondents say their upgrade cycle took (or is expected to take) one year or less. Further analysis shows that, not surprisingly, nearly 40 percent of large companies (1,000 employees or more) say upgrades will go on for more than a year (data not represented in this chart).

How long did the upgrade cycle take or do you expect it to take? Select only one.

How long did the upgrade cycle take or do you expect it to take? Select only one.

The State of

BPO

The State

of ERP

Six months or less 34.1%

One year or less 27.4%

More than a year 32.5% One month

or less 6.0%



Half Spending Less Than $500K on ERP Upgrade

Almost a quarter of respondents say their upgrade is costing (or will cost) less than $100,000. Nearly 40 percent will spend $1 million or more.

Almost a quarter of respondents say their upgrade is costing (or will cost) less than $100,000. Nearly 40 percent will spend $1 million or more.

How much did you spend/are you planning to spend on your recent/next upgrade?

How much did you spend/are you planning to spend on your recent/next upgrade?

The State of

BPO

The State

of ERP

Less than $100,000

23.9%


$100,000 to $499,99926.6%

$500,000 to $999,999

11.7%

$1 million to $4.9 million

25.3%

$5 million or more

12.5%


RESPONDENT DEMOGRAPHICS

The State of Service-Oriented Architecture

The State of

BPO

The State

of ERP


Respondent Demographics: All Involved in ERP Decision Making

What is your role in the development, implementation, monitoring and modification of your company’s software design strategy with respect to enterprise resource planning (ERP)?

Select only one.

What is your role in the development, implementation, monitoring and modification of your company’s software design strategy with respect to enterprise resource planning (ERP)?

Select only one.

The State of

BPO

The State

of ERP

35.5%

18.9%

13.2%

12.5%

7.6%

7.4%

4.9%Only one response allowed


What is your organization’s IT budget for 2008?What is your organization’s IT budget for 2008?

Respondent Demographics: IT Budget

Don’t know38%

The State of

BPO

The State

of ERP

Less than $1 million18.1%

$1 million to $4.9 million25.5%




$100 million or more10.7%


Which of the following best describes your job function?

Which of the following best describes your job function?

Respondent Demographics: Job Function

The State of

BPO

The State

of ERP

Don’t know38%

IT management30.2%

Executive IT management

(CIO, VP of IT) 16.4%

Consultant1.7%

IT staff17.4%

Executive corporate management (CEO, president, corp. VP)

6.1%

IT consultant6.1%

General corporate mgmt.

9.3%

Project manager8.1%

General corporate staff

4.7%


Respondent Demographics: Company Size

How many employees are in your organization in total?

How many employees are in your organization in total?

The State of

BPO

The State

of ERP

Less than 1007.4%

100 to 49913.0%

500 to 99911.8%

1,000 to 4,99928.4%

5,000 or more39.4%


Respondent Demographics: Industry

Manufacturing and industrial (noncomputer) 23.5%Consulting and business services 6.5%Education 6.3%Government 6.3%Health care and medical 6.3%IT vendors 5.3%Automotive 3.5%Utilities 3.5%Consumer goods 3.3%Energy and utilities 3.3%Financial services/banking 2.5%Food and beverage 2.5%Telecommunications and ISPs 2.5%Biotech, biomedical and pharmaceutical 2.3%Electronics 2.3%Insurance and HMOs 2.0%Media and entertainment 2.0%Logistics and transportation 1.8%Construction and engineering 1.5%Distribution 1.5%Metals and natural resources 1.5%Retail and E-commerce 1.3%Financial services/other 1.0%Nonprofit 0.8%Chemicals 0.5%Financial services/securities and investments 0.5%Hospitality and travel 0.5%Real estate 0.5%Financial services/insurance 0.3%Other 5.0%

The State of

BPO

The State

of ERP

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