ERP Dead Last in Economic Experience in 2018

February, 2018

Despite its maturity, enterprise resource planning (ERP) systems continue to struggle to demonstrate return on investment (ROI). Moreover, as shown in Figure 2 of the Computer Economics Technology Trends 2018 study, ERP not only has the lowest ROI rating of all the technologies in our study, but organizations also struggled with cost certainty.

The study polled 219 IT organizations on their experience with 14 leading technologies and ranked them based on their risk rates (how often they came in at the expected cost or less) and reward rates (the percentage of companies reporting that they broke even or saw a positive return on investment). Relatively speaking, ERP was worst in both risk and reward. This is not to say that no companies saw a positive return on investment or found a way to come in under budget with ERP. It is just that, among all the technologies, this happened the least often with ERP. 

Interestingly, the poor ROI and cost success have not deterred companies from investing in ERP. The technology comes in second in new investment, closely behind business and data analytics.

“This year, we’re seeing strong investment across most technologies in the study,” said David Wagner, vice president for research at Computer Economics, an IT research firm based in Irvine, Calif. “Companies are taking advantage of a strong economy to invest in the new capabilities and flexibility that cloud and SaaS technology has to offer. Organizations these days have no choice but to invest in ERP as the backbone of their application portfolios At the same, they need to spend a lot more attention on making those investments successful. With so much new investment, process improvement and change management are essential.”

TechTrends fig 2 - ERP Dead Last in Economic Experience in 2018

On the other side, IT financial management systems showed the best combination of cost success and ROI. IT financial systems had the best cost success rating of the technologies in the system. Other successful systems included infrastructure as a service, artificial intelligence (which is new to the study this year), and software as a service.

Each initiative falls into one of nine sectors, representing low, moderate, or high reward, and low, moderate, or high risk. The findings are as follows:

  • Low Risk/High Reward: Technologies with the most successful economic experience profiles are in the low-risk, high-reward sector. Seven technologies are in this category. For the most part, organizations are achieving success with these technologies. IT financial management systems (1), IaaS (2), artificial intelligence (3), software-defined networking (5), mobile applications (6), and mobile and wearable devices (7) are a group of technologies that all IT executives should be tracking closely because of their positive risk-reward characteristics.
  • Low Risk/Moderate Reward: Internet of Things (10) is the only technology that falls into this sector. With technologies in this sector, cost is predictable, but return on investment is sometimes difficult to measure or is unclear.
  • Moderate Risk/High Reward: The technologies in this sector have uncertain costs associated with them, but they usually exhibit a return on investment in the end. Five technologies are in this group: SaaS (4), e-commerce (8), business and data analytics (9), SCM (11), and CRM (12). Business application implementations can be difficult to bring in on budget without strong project management, and most of the technologies in this area require significant coordination with end users to be successful, which can sometimes lead to unforeseen costs.
  • Moderate Risk/Moderate Reward: The only technology in this sector is HCM (13). Like most large software deployments, HCM lacks some cost certainty. Additionally, HCM often has a “soft” ROI. It is difficult to measure some of the goals of HCM software such as improving recruitment and career development.
  • High Risk/Low Reward: The sole technology in this sector, ERP (14), has a poor track record in these areas, and consistently so. ERP success requires user adoption and willingness to change, which increases the risk of failure. Because these systems are an essential part of the application portfolio of most organizations, the high-risk/low-reward nature does not mean organizations should not invest in ERP. Rather, it means that they should focus on mitigating the risks as well as managing the people side of change.

The full study is designed to give business leaders insight into the staying power of 14 technologies that are currently top of mind for many companies. It provides a glimpse into how quickly an emerging technology is being adopted, how deeply more-established technologies are penetrating the market, and how positive the customer experience is with each technology. The study also delves into the specific types of solutions under consideration.

By understanding the adoption trends, investment activity, and customer experience, business leaders are in a better position to assess the potential risks and rewards of investing in each of these technology initiatives. They also can gain insight into just how aggressively competitors and peers are investing in these initiatives.

For the first time this year, the study also takes a quick look at an additional 12 new technology on the near horizon. These include blockchain, digital currencies, robotic process automation (RPA), chatbots, artificial intelligence, drones, autonomous vehicles, virtual reality, augmented reality, quantum computing, IPv6, and biometrics authentication. The study evaluates whether IT decision makers are familiar with these, whether they see a potential use for them, and whether they have already implemented them or have them installed.  

Sample pages from the full study are available for free download.

This Research Byte is a brief overview of our study, Technology Trends 2018. The full report is available at no charge for Computer Economics clients, or it may be purchased by non-clients directly from our website (click for pricing).