ERP Systems are Underutilized, Survey Says

Companies are still not fully utilizing one of their largest and most familiar IT investments -- their ERP (enterprise resource planning) systems -- suggests a new study by performance management firm Ventana Research.

At face value, this may seem surprising; companies typically invest tens of millions of dollars in ERP systems to manage their accounting, inventory, human resource and CRM processes. However, Joe Gulino, vice president of ERP at Green Beacon, told CRM Buyer that perhaps as many as 70 percent to 80 percent of his firm's customers were once underutilizing their systems. "They might have been using their finance systems well, but not distribution," he said.

Tightly Integrated

Many firms have said they would like to get more out of their CRM applications as well, he added. "Most people recognize that a tightly integrated CRM application within the ERP system brings out the best value of the investment."

Some companies turn to upgrades as an answer to problems they perceive with their ERP systems. "It can be an opportunity to solve those core business problems that the companies initially wanted to solve but didn't," Guilino said.

These firms tend to look at upgrades as a silver bullet, which does little to address the issue of underutilization.

In other cases, companies are unaware that further savings and efficiencies can be wrung out of their ERP systems. Ventana Research estimates that Fortune 500 firms are currently saving US$60 billion annually because of investments made in the 1990s. However, little progress has been made since then, it said.

Driving Additional Value

The study also reached these conclusions:

• A majority of respondents said they believe ERP can drive and support innovation in 11 of 12 key functional process areas such as financial and managerial reporting, purchasing and compliance and risk management.
• Process automation and integration are proven ways to cut operating expense, increase cash flow and reduce error and fraud. Yet only half of the study's participants have implemented an "order-to-cash" system that can accelerate cash collections. Only 30 percent are using image capture, which can improve customer satisfaction by cutting the time necessary to respond to inquiries and reducing the costs associated with unnecessary paperwork.
• Enhancing company performance requires that companies use both financial and non-financial metrics to set objectives. Most modern ERP systems are capable of tracking much more than accounting data, but only 11 percent of survey respondents thought their ERP system captured all or most of the non-financial information required to monitor employees' key performance indicators.

The research was sponsored by technology providers Cognos (Nasdaq: COGN) and SAP (NYSE: SAP).