ERP Ahead

ERP may have grown up with a chip on its shoulder thanks to a number of controversial failures, but the market has come a long way since then. Nathan Statz reports on the once treacherous realm of the ERP project.

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By  Nathan Statz Published  April 25, 2009

ERP may have grown up with a chip on its shoulder thanks to a number of controversial failures, but the market has come a long way since then. Nathan Statz reports on the once treacherous realm of the ERP project.

There are many reasons why CIOs look at Enterprise Resource Planning (ERP) and most of them have nothing to do with the promises that come in flashy bullet points at trade show presentations.

The technology has grown up with a bad reputation; there was once a statistic that was banded around saying that four out of every five ERP projects fail. Much like a bad restaurant experience where you tell everyone about the fly in your soup or the rodent that scurried under the table, once the mud has been flung it tends to stick.

That statistic is either outdated or definitely too negative, what must happen is a company has to adopt the technology and the project with the right mindset.

The vermin that spoiled the broth of ERP's reputation was the media reports of dramatic budget blowouts, like in 2005 when the US Navy admitted they had sunk $US 1 billion into failed ERP projects since 1998. Countless other examples exist such as in 2008 when Waste Management sued SAP for a $100 million reimbursement on its failed ERP implementation.

There is nothing the media likes more than a controversy to attack with medieval ferocity and ERP was a juicy meal when poorly planned projects went south. The dramatic cases of failure still come up in conversation, as do the statistics about how many projects fail, but the opinion of the industry is that those types of statistics are incredibly out of date.

"If it would happen that four out of every five ERP projects fail then we would not have a market, there would be a moment where customers would say why should I go through with a more secure failure," says Sergio Maccotta, managing director for MENA at SAP.

Maccotta believes that it is definitely not the case today, with there being more knowledge in the market and a stronger emphasis on best in class implementations and support.

"That statistic is either outdated or definitely too negative. What must happen is that a company has to adopt the technology and the project with the right mindset," says Maccotta.

For organisations looking into ERP, there is a wealth of information available and not only from the lips of vendors.

"I can explain this to the customer but at the very end I am also the provider, so I am supposed to speak positively about my solution, but the customers on the contrary do not have too," says Maccotta.

The ability to speak with customers who have been through - or are in the midst of - a major ERP implementation is something that was not so widespread when the media bloodletting over ERP was going on.

While talking to a vendor often guarantees you that you will be chatting to someone who knows the product intimately, a much clearer picture is painted if you talk to someone who is actually using it. An added bonus is that customers will not be thinking about the hefty commission that will end up in their pocket when you sign on the dotted line.

For Sultan Al-Otaibi, manager of academic information systems at the information technology centre at King Fahd University of Petroleum and Minerals, the nuances of an ERP project are well known. The Saudi-based university is in its second year of an ERP implementation, which is when Al-Otaibi believes the real benefits start to shine through.

"The first year of an ERP system you need to struggle and fix things here and there. After that you will see the benefits of that system," he says.

Al-Otaibi and his team kicked off their search for an ERP system by scouring the market, often consulting analyst firms like Gartner for advice.

"For the vendors, the first thing we looked at was the organisation of the company - is it a strong company, is it going to stay for a long time, the history of the company and their support," continues Al-Otaibi: "sometimes you find good products but without good support you can't take it."

The university is actually running two ERP systems, one for student admissions and administration and another separate system for finance and human resources. Al-Otaibi explains that this was to account for the fact you often find one system that is great with the administration, but it will not be so strong with the finance side of things.

"We integrated both systems using a portal link. There is no trouble with it, you need to do some extra work but it is not that difficult and this is one of the things you look at when selecting your ERP - the integration with other systems," he adds.

Dileep Somani, CIO of the OTE group, believes that ERP can be a good thing, but it should be treated as the starting point and not the solution to every problem.

Rapid fire

Do you think the statistic that four out of every five ERP projects fail is outdated?

SAP: "If it would happen that four out of every five ERP projects fail then we would not have a market, there would be a moment where customers would say why should I go through with a more secure failure." - Sergio Maccotta, managing director for MENA at SAP.

Microsoft: "I think it is a bit outdated, a lot of organisations like Microsoft are making it an easier to manage a solution, we are reducing the risk of failure, I would say the success factor is much bigger." - Tamer Elhamy, business lead for Microsoft Gulf.

Raqmiyat: "There are different way of looking at it, for example does failure mean that the project did not finish on time, or did not finish on cost, or does it mean that everything is fine but the adoption rate of the initiative is very slow within the organisation. All of these things could constitute a failure, so really it is a perspective of what you are talking about to mean failure." - Navneet Tandon, vice president of ERP and services at Raqmiyat.

IFS: "We have had no failed implementations in the greater region. In the Middle East we are personally involved in the projects so we would not let the project fail. I don't know where that stat comes from, but it can't be true, I can't believe it to be true, certainly not in this day and age." - Ian Fleming, managing director of IFS in MENA and South Asia.

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