Study Finds ERP/ERM Systems Costly; ROI Difficult To Measure

Ninety percent of the benefits associated with enterprise resource management (ERM) systems come from cost reduction, according to a study by the Meta Group Inc., an information technology research firm in Stamford, Conn. ERM is Meta Group's description for software that goes beyond enterprise resource planning (ERP) and includes tracking, reporting, and predicting the resource needs of the company. The study of more than 60 organizations that had recently implemented ERP/ERM systems also found that the average time to install the system is 23 months for most companies. Total cost of ownership for these systems ranged from 0.4% of the company revenues (for Lawson Software projects) to 1.1% for Baan implementations. The market leader, SAP AG, fell roughly in the middle, at 0.67% of revenues. "To say that implementing ERM solutions requires an enormous commitment is an understatement," says Peter Burris, Meta Group senior vice president and co-research director. "They are expensive, time consuming, and require change in virtually every department in the enterprise." The study found that companies achieve the greatest rewards through fundamental business transformation. "Enterprises must evaluate the broader impact of ERM on supply-chain economies, customer loyalty, application interoperability, and faster business cycles because traditional measurement methods centered around cost reduction are not effective in measuring the true value of ERM solutions."