Most ERPs Are Underutilized, Says Ventana

by CXOtoday Staff    Jun 05, 2006

A recently released study from research and advisory firm Ventana Research has revealed that most companies across the globe are currently underutilizing their Enterprise Resources Planning (ERP) systems.

The study found that despite investing heavily in ERP software, most organizations fail to use the well-established capabilities of these systems in ways that could reduce their costs, improve customer satisfaction and support their strategic initiatives.

“A CFO would demand to know why their company was running a factory only one shift when it could be operated profitably for two or three, but that’s exactly what most of them are doing with their ERP systems without even realizing it,” opined Robert Kugel, Director, Financial Performance Management Practice, Ventana Research.

This view is far from the 90’s cynicism when ERP deployments were measured against the ROI (return on investment) criteria. Back then, more often than not ERP deployments failed this test primarily because of high implementation costs and added expenses for ongoing maintenance and upgrades fee that they required.

However, 90′ are gone for good and with it the skepticism over ERP benefits. Organizations, world over, have realized the positive operational and financial impact ERP systems can have.

But now a new debate over whether organizations are in fact utilizing the ERP capabilities to the fullest has replaced the cynicism of the 90’s. According to the Ventana Survey, which considered analysis of 391 validated respondents, the answer is ‘No’.

Ever since the 90’s ERP boom, which resulted in significant savings in companies’ financial operations and better manageability very little progress has been made, suggests Ventana. According to the research firm organizations realizing greater value from ERP systems is a matter of focusing attention on the effective use and alignment of people, process and technology.

Kugel said that finance executives are often unaware of the impact ERP tends to have on efficiency and consequently, overlook opportunities to use the full capabilities of the software that could generate further savings.

The study identified process automation and integration as proven ways to cut operating expense, increase cash flow and reduce error and fraud and called on organizations to use both financial and non-financial metrics to set objectives in order to further enhance performance.