Some ERP industry analysts predict that due to uncertain economic conditions, many companies will avoid investments in new ERP software in 2009. Indeed, some also predict that IT capital spending will drop slightly in the next year, adding pressure to companies that are considering large investments in new ERP systems. Even at Panorama Consulting, we are seeing more companies than usual approach us to help them get more out of their existing systems since some are not in positions to invest in a new ERP infrastructure.
However, other data points tell a different story. Even though we are seeing an increase in the number of companies wanting to optimize their current systems, we are also seeing an increase in the number of companies wanting to use the downturn as an opportunity to use available resources to implement new enterprise software. Further, a recent poll on our web-site indicates that 55% of respondents are planning to either start or continue implementing new ERP systems in 2009. Another 9% are planning to upgrade their current systems in the next year, while 27% plan to make improvements to their current system. Clearly, these results don’t indicate massive avoidance of investments in ERP in the next year. (Click here to share your input via the poll).
There are several qualitative reasons why many companies see 2009 as an ideal time to select and deploy new ERP enterprise software. First, a slower economy affords many companies with available resources and employees to help implement the software correctly. Second, because many ERP software vendors are aggressively pricing their solutions in response to a slowing economy (originally outlined in this blog), some companies are able to procure an ERP solution at a lower cost than they might have in years past. Finally, there are winners in every downturn, and this one is no different. Some companies are continuing to grow in spite of or as a result of the current economy, and these companies are investing in enterprise software that can help them scale for growth.
To be certain, even though many companies are likely to implement new ERP systems in 2009, we are going to see the need for more quantitative rationalization of these investments than we have in years past (aka ERP Benefits Realization). Gone are the days of implementing ERP at any cost, with or without the results to show for it. The focus of operations and IT executives in 2009 will be to identify specific and measurable ways that ERP will help improve business operations before making a decision to move forward. Although we assert that this should be the case regardless of the economic environment, it is better that companies realize this during a recession rather than never realize it at all.
In addition, we think that some companies will start to redefine the meaning of ERP and how they plan to deploy it. Software as a Service (SaaS) and open source will likely appeal to some companies as potential lower cost and lower risk alternatives to traditional ERP. However, as we outlined in a recent blog entry, there are risks that need to be considered along with these two types of ERP offerings.
Clearly, despite some analysts’ gut reaction to the economic slowdown, we don’t expect that a majority of companies will abandon their ERP plans altogether. While they may slightly alter those plans to accommodate current economic realities, there are still a large number of companies that will capitalize on a slow 2009 and use this as an opportunity to leverage ERP to position them for a strong recovery.