New IDC IT Survey: Businesses Losing Between $10M and $500M For Disruptions Tied to Rigid Systems: Product Delays, Missed Opportunities Accompany Slow ERP Change Capabilities

A new technology industry white paper ⁽¹⁾ featuring the experiences of 214 business executives across a wide variety of mid-sized and larger industries reports a major failing in the technology infrastructure that companies have often spent millions of dollars to implement. The survey, sponsored by Agresso and conducted by IDC, a global provider of market intelligence and advisory services, found that today's enterprise resource planning (ERP) systems are not providing businesses with the architectural agility necessary to support businesses adequately in today's high-change, global environment.  The survey was released December 4 at a technology analyst conference in Boston. 

Survey respondents said that the inability to easily modify their ERP system deployments is disrupting their businesses by delaying product launches, slowing decision making and delaying acquisitions and other activities that ultimately cost them between $10M and $500 million in lost opportunities.  

The impact is significant:   20.9% of respondents reported declines in stock price, 14.3% had revenue losses tied to delayed product launches and 16.6% had declines in customer satisfaction. 

"Change to ERP paralyzes the entire organization in moving forward in other areas that can bring more value," said one survey respondent.  Another added, "Capital expenditure priorities are shifted into IT from other high-payback projects" just to perform needed ERP changes. 

According to the survey, today's fast-paced business environment requires organizations to continually accommodate their technology support systems.  Only 2.8% had not made changes to their ERP systems, and the ERP modification rate for the remainder is staggering:

• 43% are continuously making changes "as needed"
• 16.8% are making changes monthly
• 14.5% alter their systems daily or weekly
• 12.2% undertake change annually 

Since mid-sized businesses are already spending $1.2 million annually to undertake these system changes⁽²⁾ the additional high costs attached to associated business disruption is significantly impacting bottom-line performance. 

"It's not unrealistic to say that the wrong ERP choice in a high-change industry spells disaster," said Ton Dobbe, VP of Product Marketing for Unit4Agresso. "Companies operating in industries that are highly regulated, consolidating via M&A activity, often changing leaders, or the need to adjust their ERP selection criteria appropriately when choosing new systems. 

IDC analysts agree.  "IDC believes that while business change is an inescapable constant, organizations may lack an understanding of the potential cost and impact of business disruption tied to adjusting their ERP system," states the IDC White Paper.  "For ERP buyers in high-change environments, this means that ‘architectural agility to support ongoing change,' may be the single most important buying criteria to minimize change-related revenue loss, business disruption, stock price declines and the lost business opportunities." 

Five Leading Areas of Business Change and ERP Disruption

Survey respondents ranked the most frequent business disruptions tied to making ERP changes to support five leading areas of business change.  Included below are the top three repercussions from business disruption directly attributed to their underperforming ERP solutions: 

• Regulatory Requirement Changes:

      - 20.9% observed a drop in customer satisfaction

      - 19.7% had a decrease in stock price

      - 17.9% had to pay fines for non-compliance

• Reorganizations/Restructuring Change:

      -  22.6% had a decrease in stock price

      -  17.9% had to pay fines for non-compliance

      -  16.2% missed an opportunity for or had to delay a merger or acquisition

• Merger or Acquisition Change:

      -  21.1% had a decrease in stock price

      -  19.6% missed an opportunity for or had to delay a merger or acquisition

      -  17.0% said they lost market share

• Financial Management Driven Change:

      -  19.4% had a decrease in stock price

      -  18.9% missed an opportunity for or had to delay a merger or acquisition

      -  17.1% had to pay fines for non-compliance

• New or Changed Business Process Change:

      -  21.7% had a decrease in stock price

      -  16.7% had to delay a product launch or increased the time to get it to market

      -  15.6% reported a decrease in operational efficiency

Download your FREE copy of this IDC White Paper

⁽¹⁾ IDC White Paper sponsored by Agresso, Modifying and Maintaining ERP Systems: The High Cost of Business Disruption, Doc # 220988, December 2009

⁽²⁾ CFO Magazine Survey, "The High Cost of Change for ERP", April 2009