Green shoots? ERP & enterprise solutions investment recovers
From the National Computing Centre, Manchester, UK.
For Issue January 10th 2010
In the current economic environment where IT budgets are still being scrutinised closely, there is one glimmer of optimism with a marked improvement in the development of enterprise software and ERP applications. That’s according to research by the National Computing Centre’s Evaluation Centre, an interactive online service guiding IT buyers in the selection and use of business software, services and technology.
In an equivalent survey last year, 24% of companies had put on hold all projects – while this year no company has put all its projects on hold. What’s more, 20% of companies have increased their investment in applications, compared to just 6% last year; while 27% say there has been little or no effect on their investment.
However, we are not quite out of the woods yet - 53% of organisations have some projects on hold or being re-evaluated, compared to 41% last year.
Two areas clearly stand out for driving investment in enterprise solutions. The first is the need to improve operational effectiveness and efficiency of the organisation, mentioned by 84% of respondents. Equally important is the need to provide improved management information (84%) to allow employees more insightful information on all aspects of the business. Also highly placed (75%) is the requirement to provide improved internal integration between applications and business processes.
Steve Fox, NCC Managing Director, comments: “It is vital that companies continue to invest in their core enterprise solutions to provide management with the right information to successfully position their company in a demanding marketplace.”
In order to meet their requirements, many companies have customised their enterprise or ERP software. The degree of customisation varies greatly, with 13% making ‘very significant’ changes, 34% ‘significant’ modifications and 13% ‘moderate’ changes. In contrast, 28% have made only ‘minor’ changes and 6% none at all.
In addition, there are mixed views on how difficult it is to customise the software to reflect changes in business requirements. A slight majority say that it is either ‘very difficult’ (22%) or ‘difficult’ (34%) to implement changes. This compares to 25% who say that it is ‘moderately difficult’, while 13% state that it is ‘easy’ and only 3% ‘very easy’.
As the level of spending on enterprise and ERP solutions is relatively high, it is surprising that 66% of organisations do not formally measure their return on investment (ROI) from these solutions. Of the 28% who do measure ROI, 67% use a mixture of financial and qualitative measures compared to 22% who only use financial metrics.
In addition, only 6% of companies say they put in place a range of metrics to measure the ongoing business performance of their enterprise solutions. A further 50% do this on occasions but 38% do not implement any performance measurement. The key performance criteria used are improvements in customer service (89%), financial metrics (78%) and improvements in internal productivity (61%).
Companies are expecting to continue investing in new enterprise applications over the next 12 months – 50% plan enhancements or upgrades to their existing ERP or standalone systems. New ERP packages are planned by 28% of companies while 19% are investing in bespoke development and 13% in new standalone packages. A further 16% are buying third-party additions to existing ERP or standalone packages.
Over 100 companies were interviewed for this year's survey on ERP and enterprise solutions. A substantial proportion of respondents (40%) are from the manufacturing sector, which was the original base for ERP solutions. But many other sectors use enterprise solutions, including the public sector (16%), defence (9%), distribution & logistics (6%), IT & telecoms (6%) and retail (6%).
The respondents represent a spread of different sized companies, with 6% having in excess of £5 billion turnover, 6% in the £1 billion to £5 billion bracket and 16% in the £500 million to £1 billion range. In the mid-range, 41% have a turnover between £100 million and £500 million and 12% £50 million to £100 million. At the smaller end 19% have a turnover of between £10 million and £50 million.
The survey is available from www.evaluationcentre.com/erp_software/home.go
NOTE TO EDITORS
About The National Computing Centre (NCC)
The National Computing Centre (NCC) is an independent membership organisation that helps IT decision makers deliver effective solutions to business problems. We bring together users, experts and vendors to share experiences and develop best practices.
About the Evaluation Centre
The Evaluation Centre (www.evaluationcentre.com) is a free to use, interactive service for end users and consultants designed to assist them in the procurement process for software, services and technology.
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