Can ERP succeed in the cloud?

Enterprise resource planning (ERP) platforms famously require high maintenance at a high cost. Cloud-based platforms, which concentrate on specific business processes, could replace the one-size-fits-all-business-areas ERP at a fraction of the cost. So if you can get the same systems but let someone else look after the back end for you, is old-school ERP doomed?

An ERP system is often the biggest investment a CIO makes – and yet many implementations have failed to help businesses.

According to YouGov, a fifth of CIOs think their ERP system is inflexible and can’t adapt to their business needs. The same number have multiple ERPs with each department having a different database, and 58 per cent described their ERP projects as failures as the software didn’t match their business processes. With a third of CIOs saying ERP isn’t fit for purpose, you wonder if there’s a future for big-iron ERP.

“I have said it before, and I’ll say it again. It is going to take some time, but the death of the enterprise application is beginning. The cloud is the harbinger of that death, and I, for one, can’t wait for it to do its business,” says Clive Longbottom, senior research analyst at Quocirca.

ERP should be massively changed by the cloud, he adds. “Whether it will or not comes down to how buyers and sellers of ERP react – and how organisations see the future.”

There is a counter argument, that cloud computing is not ready to take over from ERP, and ERP is still maturing.

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The most significant cost of ERP systems is not the software but the cost of its implementation. Costs are often escalated by business practises, a lack of training and education and poor project management, CIOs report.

“This leads to badly performing software that has cost several arms and legs to put in place and this creates an aircraft-carrier project mentality: we’ve spent too much already – we’d better keep on spending,” says Longbottom.

A company then keeps investing in the implementation to try and get it all to work.

“If businesses didn’t fall for the moonshine, smoke and mirrors they would realise that they do not need ERP at all,” says Longbottom.

“What they need is technology that supports the tasks that make up the individual business processes that are needed to get as much money into the bank as possible.”