Why have Enterprise Resource Planning systems also called Enterprise Systems been so successful among so many companies.

ERP systems or ES have come to be known as the panacea of not only the information and systems problems that a company, global or local, might face but also as key drivers in defining corporate strategy. This is primarily because of the following benefits of ERP systems:

Easier access to reliable information

An integrated ERP system provides an opportunity to improve data reporting, to ensure accurate, consistent, comparable data for use across the different business units of the organization.

 Elimination of redundant data and operations

At the core of any ERP system is the centralized database system where all the data is maintained. Thus data entered from anywhere in the organization is stored in this central database and can be accessed by all the functional areas. This eliminates re-entering of data from one application to the other, reduces the operational expenses for the company and helps to streamline the flow of data entry and access.

Reduction of cycle times- ERP allows business decision to be analyzed enterprise-wide. This results in time reductions for receiving and disseminating information from one business unit to the other in the organization, which in turn helps reduce cycle time, improve on time delivery.

Imitation of the best practices of the organization- A successful ERP system not only provides technological advantage but also mimics the strategy of the company to translate technological wizardry in systems to net profits on the balance sheet of the company through business process reengineering.

Allowance for flatter organization- With the advent of ERP system, information is available across all layers of an organization and this leads to leaner and meaner organizations in this information age and redundant processes and layers are done away with.

Standardization of information- The configuration tables of any major ERP system ensure that the nomenclature of parameters remains constant and is used in the same manner by each division in the company. For example it helps in defining measures like net profit the same way in each business unit across the company in its financial module or ensures that each part/component has a unique order number which can be used by the sales executive at the point of sale and the machinist on the shop floor in manufacturing. 

Capacity to meet growth needs of the organization- ERP systems are scalable and designed to respond quickly to meet the new business demands. They can be easily changed or expanded without disrupting the course of business.

Why have Enterprise Resource Planning systems been failures in some companies?

ERP systems are complex pieces of software and their installation requires large investments in time, money and expertise. The technical challenges are not the one primarily responsible for failure of ERP systems but the biggest problems are the business problems:

Companies fail to reconcile the technological imperatives of the enterprise systems with the business needs of the enterprise itself. This leads to nothing but aimless implementation of the ERP system only to discover later on that the processes are in conflict with the strategy of the company. It also means elongated or never attainable ROI periods for the company.

The implementation itself is very time consuming, expensive and arduous task. More than the technological aspect it is riddled with organizational issues like changing the culture, dealing with internal politics and the need for general consensus to accept the company wide information processing system. These factors only prolong the implementation process.

ERP systems force their customers to re-engineer current practices to fit within the processes described by their modules. Selecting the wrong ERP software could lead to an unwilling commitment to an incompatible architecture and applications.

There is risk of outsourcing the IT department within the company if all of the enterprise systems are handled by a single vendor. It is possible in such cases that the system improvements and upgrades do not follow the business cycle.

It is a tendency of many companies that implement ERP to try and incorporate all the features of the software without assessing its value to the company.

ERP systems that are not easy to use and navigate or the users haven not been trained on it for a sufficient time can simply be rejected by the users in the company.

The selection process and purchase decision of an ERP software package is sometimes handled by incompetent people who have insufficient knowledge, so errors committed even before the implementation has kicked off can be irreversible in the later stages of the project.

Budgetary constraints or poor resource allocation can prove to be roadblocks for successful implementation and functioning of the ERP systems.

The lack of local support infrastructure, unclear annual maintenance agreements and scarce availability of reference sites of the ERP vendor can all lead to failure of ERP systems once they are implemented

Lack of integration between the various components of the ERP system, in case of a multi vendor system  or  with best of breed system and legacy systems can lead to compatibility issues that restrict the seamless flow of information across the organization

As it been rightly said of ERP systems: If the management does not carefully control the development of an enterprise system then the management might find itself under the control of the system. Choose the right one after doing a proper analysis.

Robin Trehan is a managing director and vice president at CBK Business www.cbkfamily.com & National Hotel Exchange www.nationalhotelexchange.com. He can be reached at robin@cbkfamily.com