Results of a survey conducted by leading Australian consulting and technology firm, Oakton on the current and future ERP implementation plans of their clients reveal that many organisations have dug themselves an ERP hole.
Key objectives of the survey included understanding the challenges faced by organisations in running their ERP services, and identifying improvements in how they were being delivered to business users.
The survey measured the market’s reflections on these challenges, and looked at the respondents’ experience and plans in moving towards an ERP system as a Software-as-a-Service (SaaS) model.
Oakton’s Shaji Sethu, Executive General Manager - Oakton Applications explains that most of the organisations face multiple problems with overstretched teams, complex customisations and a backlog of expensive upgrades. He observes that very few have taken advantage of the massive reductions in cost and increase in business agility afforded by modern cloud based ERP solutions.
The Oakton survey shows some organisations still believe that more customisations and cosmetic additions will be their future while others have shifted their thinking to service defined functions as a future trend. Advising organisations to start thinking outside the box, Sethu said they must consider enterprise ERP SaaS, which has the potential to dramatically improve business performance and reduce significantly business cost.
Australian businesses and IT executives from multiple industries participated in this survey.
Results and statistics
Clients in general confirmed that large and customised legacy implementations have become a major bottleneck for innovation, with the most common issues cited being scarce internal resources for operations and projects; cost and complexity in licensing; upgrade costs; and questionable return on investment because of the high cost of change.
Existing ERP implementations are still strongly ‘in-house’ with internal customisation often the first choice. Key findings: 80% of organisations maintain their own ERP; 52% of organisations say the right ‘business fit’ is the most important driver in selecting an ERP solution; 80% of organisations do understand licensing models when purchasing their ERP software; 47% of organisations heavily customise their ERP; and customisation is strongly driven by ‘improving business processes’ or ‘unique industry requirements’ for more than 80% of organisations.
ERP in the Cloud is still a new concept with 69% of organisations not currently having their ERP delivered in a Cloud or SaaS model; and 55% of organisations looking to shift IT from a technology-defined to a service-defined function.
Of those looking to shift to service-defined IT, 30% say ‘complexity’ is the main impediment to doing so. While 23% of organisations will consider Cloud-based application deployment (SaaS) when they upgrade or replace their current ERP; only 10% will not be considering Cloud-based application deployment, Cloud-based infrastructure deployment, Hosting or Complete Outsourcing when they next upgrade or replace their current ERP.
The survey indicates there is poor separation of commodity ERP services that must be driven by cost and the business customisations that are driven by value, with 30% of organisations saying Total Cost of Ownership (TCO) is the most important driver in selecting an ERP solution; and 35% of organisations citing reducing cost, complexity and capital investment as key drivers to upgrading or replacing their ERP.
Respondents recognised the need for innovation and responsiveness with an equal split between building more customisations and adopting new digital and mobile interfaces as the likely response. While 34% of organisations believe greater customisation is the right way to get more value from their ERP solution, 30% of organisations would extend ERP to mobile and tablet devices when considering how to make their current ERP more agile.
According to Sethu, organisations that have invested heavily in standardisation of their back office functions and ‘appification’ of front office are realising significant improvement in their bottom line; this is evident in the recent profit announcements from leading Australian organisations. He adds that the alternative is to lose one’s competitive advantage to faster and more nimble start-ups and go out of business.