ERP Not a Dead Horse–Just Beat Harder

February, 2019

Last year, we reported that ERP was dead last in economic success. This year is no different. ERP again ranks last in both return on investment and total cost of ownership. Not surprisingly, it also ranks near the bottom in customer satisfaction. Nonetheless, ERP is a core foundational system for nearly all businesses, so business and IT leaders will simply have to continue beating this horse until it gets up and walks on its own.

As shown in Figure 2 of the Computer Economics Technology Trends 2019 study, ERP not only has the lowest ROI rating of all the technologies in our study, but organizations also struggled with cost certainty.

TechTrends fig 2WEB - ERP Not a Dead Horse--Just Beat Harder

The study polled 249 IT organizations worldwide on their experience with 15 new and popular technologies and ranked them based on their risk (cost success rates, or how often they came in at the expected cost or less) and reward (ROI success rates, or the percentage of companies reporting that they broke even or saw a positive return on investment). Relatively speaking, ERP is worst in terms of both risk and reward. This is not to say that no companies see a positive return on investment or find a way to come in under budget with ERP. It is just that, among all the technologies, this happens the least often with ERP.

Interestingly, the poor ROI and cost success have not deterred companies from investing in ERP. Only three other technologies, IT security technology, business and data analytics, and software-as-a-service saw higher rates of investment.

“Cloud deployment has made ERP easier to implement and easier to maintain,” said David Wagner, vice president for research at Computer Economics, an IT research firm based in Irvine, Calif. “However, the cloud has not solved the core problem with ERP systems, which is that they are large complex systems requiring major organizational change. It still takes a lot of work to make them successful.”

On the other side of our risk/reward analysis, mobile devices and wearables show the best combination of cost success and ROI. Other technologies with high ROI and cost success include mobile applications, robotic process automation (new to the study), and enterprise asset management (also new to the study).

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. Mobile devices/wearables (1), mobile applications (2), robotic process automation (3), enterprise asset management (4), Internet of Things (5), e-commerce (6), and IaaS (7) are technologies that all IT executives should be tracking closely because of their positive risk-reward characteristics.
  • Low Risk/Moderate Reward: Business and data analytics (8) 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. SaaS (9) is the only technology in this sector. It is noteworthy, as cost certainty is supposed to be one of the strengths of SaaS.
  • Moderate Risk/Moderate Reward: There are four technologies in this sector. It should be pointed out that most technologies in this sector have ROI that is often difficult to determine. AI (10) is increasingly being embedded in business systems to the point that users often do not realize they are working with it. Supply chain management (11) is technology that has an ROI that is often easy to quantify. HCM (12), like most large software deployments, lacks some cost certainty, and it is difficult to judge its impact on employees or productivity. Security technology (14) does not really have an ROI in a traditional sense. However, security is much like a field goal kicker: You only notice him when he misses.
  • High Risk/Moderate Reward: The only technology in this sector is CRM (13). CRM systems, like many complex software systems, can be difficult to implement. Costs can often get out of hand. However, generally speaking, once these systems are in place a reward can be measured, and if done right it can be substantial.
  • High Risk/Low Reward: The sole technology in this sector, ERP (15), 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 15 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.

The study also takes a quick look at an additional 18 early adopter and future technologies. These include blockchain, digital currencies, digital assistants, drones, autonomous vehicles, virtual reality, augmented reality, quantum computing, biometric authentication, no-code/low-code, electronic tattoos, microchip implants, smart dust, 3-D printing, 4-D printing, self-healing systems, volumetric displays/holograms, and digital twins. 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.

This Research Byte is a brief overview of our study, Technology Trends 2019. 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).