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ERP: Still A Challenge After All These Years

Enterprise-resource-planning software implementations have often been fragmented and departmentalized, and different applications have had varying levels of success. Financial and human-resources applications have been the most successful in supporting the needs of most types of businesses, while companies have struggled to implement packages that support the core production and product/service delivery operations.

As a result, ERP software providers have expanded their product footprints to address deeper industry-specific operational requirements as well as historic best-of-breed applications areas, such as customer-relationship management and supply-chain/supplier-relationship management.

Recent Forrester survey data shows that investment in ERP and enterprise applications in general remains the top IT spending priority for 2005. A major driver for many large companies is regulatory compliance imperatives, such as Sarbanes-Oxley for public companies and FDA Part 11 for biotechnology and pharmaceutical organizations. Regulatory compliance continues to serve as a catalyst for some overdue systems consolidations and upgrades to achieve better controls. At the same time, companies recognize that support and integration costs may be reduced by consolidation to fewer systems and application instances and are also driving toward shared services. Finally, another driver is modernization of hardware and software, as most systems were deployed in the mid- to late 1990s.

Most large companies have complex ERP environments consisting of customized packages from multiple vendors, as well as an array of internally developed software that must integrate with the packages. However, businesses face the following ongoing ERP software challenges:

  • There's a perpetual gap between package functionality and business needs. Companies address the gap by customizing the software, building extensions, or buying specialized, best-of-breed packages. These remedies limit flexibility as business needs evolve and increase implementation and integration costs--customization and integration comprise about a third of the cost of the initial implementation.
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