Survey: ERP costs more than measurable ROI

ERP projects typically cost users more than they pay back in measurable financial benefits, according to a survey released last week by Meta Group.

The survey of 63 companies with enterprise resource planning (ERP) systems turned up an average negative value of $US1.5 million when quantifiable cost savings and revenue gains were balanced against spending on hardware, software, consulting and support, Meta Group said.

That doesn't mean users should just say no to ERP, said Barry Wilderman, an analyst at the consulting firm. The software can help deliver important, intangible benefits such as better customer service, and it's a key foundation for high-payback applications such as supply-chain planning, he added.

But users proposing ERP investments need to make clear to executives that a quantifiable return may not be in the cards "or else you're going to get killed", Wilderman said.

The findings square with the experience of Green Mountain Coffee, which has used a PeopleSoft ERP system since 1997.

"If you scratched out on a piece of paper what the financial impact has been, you'd probably come up with a negative number," said Green Mountain CIO Jim Prevo. "But I think without a doubt you'd find people agreeing it was the right thing to do."

Green Mountain used the ERP system warehouses in areas where it was shipping via delivery services. This month, it plans to launch an extranet that lets buyers order online. The moves should cut costs and improve service, but quantifying the second half of the equation "is a tough thing to nail", Prevo said.

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