While no one can dispute the importance of enterprise resource planning (ERP) systems to organizational performance and competitiveness, executives in charge of these systems are under intense pressure to stay within or trim budgets. Close to half of the executives in a new survey say they have held off on new upgrades for at least a few years. In the meantime, at least one out of four enterprises either are scaling back or have had to scale back their recent ERP projects due to budget constraints.
The survey included responses from 266 enterprise application and business managers involved with or knowledgeable about their organization’s budgeting process, conducted among members of the Oracle Applications Users Group (OAUG). Fielded by Unisphere Research, a division of Information Today, Inc., in partnership with Fujitsu America, Inc., the survey tracked the levels of work, time, and financial investments organizations are making to keep up with the rapid evolution of ERP features and capabilities.
A majority of respondents, 71%, either are in the process of or planning an ERP upgrade, or have just completed an upgrade. As this is a survey conducted among the OAUG membership, a majority of environments are Oracle E-Business Suite implementations. About one-tenth of sites include PeopleSoft implementations. Overall, 95% of respondents have a role in either directing or influencing ERP upgrade decisions.
While ERP upgrades are technology-intensive projects, many ERP upgrades tend to be driven or supported outside the IT department, the survey finds. Half of the respondents report that portions of their ERP upgrade budgets come from outside of the IT departments, and in these cases, funding comes from finance (53%), the general corporate fund (38%), or operations (24%).
Line-of-Business Funding Sources for Oracle ERP Upgrade Projects (Other than IT)
Finance/accounting - 53%
General corporate fund - 38%
Operations - 24%
Production/supply chain - 19%
Human resources - 18%
Sales/marketing - 10%
Customer service/fulfillment - 8%
Don’t know/not sure - 13%
Other - 4%
ERP upgrades are often big-budget projects and thus likely to be subject to changing financial conditions occurring within organizations. While a majority, 57%, say financial conditions have not affected their projects, close to one-fourth of respondents report that their original ERP upgrade budgets have been scaled back over the past year due to economic circumstances.
Is Original 2012 ERP Upgrade Budget Affected by Financial Conditions?
Yes—budget has been increased - 8%
No—budget has been unaffected - 57%
Yes—budget has been reduced - 21%
Project canceled altogether - 3%
Don’t know/unsure - 9%
There are two ways the financing of ERP upgrades may be impacted. Changes in the economic circumstances in the organization at large may force budget trimming and, as a result, change the plans, scope, or timing of the upgrade project. Within the operation itself, unexpected changes or glitches in the process may result in budget overruns. In both cases, however, a majority of respondents report their projects have been or are being delivered according to original plans.
ERP systems upgrades are often projects that extend over a range of months. For a majority of respondents, 56%, an ERP upgrade implementation timeline extends beyond 9 months, the survey finds.
It’s notable that close to two-thirds of respondents report that their projects have been or are being delivered on time and on budget. About a third, however, tend to require reassessments of the current application environments, or running over budget. (The issues that caused projects to be delayed or over budget were out of the scope of the survey.) Eighty percent of respondents say there is some disruption to their business as a result of their upgrades, but in most cases, these disruptions don’t last more than 5 days.
Respondents are divided on whether they will be using the upgrade to expand functionality or to simply make a technical upgrade. Forty-four percent say the purpose of their current, planned, or recently completed upgrade was technical or to add new systems features. Financial and procurement applications are the areas being targeted the most for upgrades.
From an economic perspective, for 65% of respondents, ERP upgrade projects have gone, or are going, pretty close to plan, unaffected by budget cuts or related issues. Another 5% even report their projects were accelerated ahead of schedule. Still, there are a number of sites that have been negatively affected by their organizations’ financial situations. One-fourth of respondents, 25%, have had to delay projects due to economic pressures. Actual postponements or cancellations of projects have been rare, however.
Today’s enterprise resource systems are designed to be open and compatible with all the networks and clients that make up today’s IT infrastructure. They deliver powerful analytics and are capable of ingesting and processing big data from any and all systems. They either run in or support the cloud and support the social enterprise. For many organizations, investing in the latest capabilities is delivering additional business value.
To download a copy of the survey report, titled "The ERP Investment Climate—2012 OAUG Survey On ERP Upgrade Economics," go to http://pages.email.fai.fujitsu.com/ORACLE/ERP-download.