Manufacturers Don't Use Most of Their ERP Software's Features, Says Aberdeen

Published: September 21, 2006

by Timothy Prickett Morgan

Based on a detailed report put together by Aberdeen Group and commissioned by a bunch of ERP software suppliers, companies with ERP software don't use most of the features that have been painstakingly woven into their software.

Aberdeen based its analysis on a study of more than 1,000 manufacturers. The study was underwritten by Infor, Lawson Software, Plexus Systems, QAD, and SoftBrands, and presumably they provided some of the customers that Aberdeen talked to as well as the cash to do the survey and report that resulted from it. Aberdeen also talked to customers using other ERP suites, including those who have deployed Oracle and SAP suites.

According to the study, called "The ERP in Manufacturing Benchmark," two thirds of the manufacturers surveyed said that they make their choice of which ERP software to use based on features and functionality, but then, on average, they use only 27.6 percent of the functionality encompassed in that ERP software. Aberdeen's researchers found that Lawson's customers use the highest percentage of the functionality that they acquire, and that SAP customers implement more modules than customers using Oracle software, but then SAP shops use fewer of the available features they acquire than do Oracle shops. Infor and QAD have relatively new ERP implementations, and about two-thirds of the users of the Plexus Online ERP suite are under five years old. (I had never heard of Plexus Systems, the creator of that suite, so this does not surprise me.)

The survey data indicates that about a third of the ERP suites installed are between 5 and 10 years old, with another 18 percent of the software being between 2 and 5 years old. Another 18 percent had ERP software that was between 10 and 15 years old, and another 13 percent had software that was in excess of 15 years in age. Only 9 percent had software that was younger than 2 years in age, and 9 percent of those companies surveyed had no ERP software at all.

One of the most interesting things in the report shows a distribution of the number of ERP systems installed at a company, distributed by the size of companies--small, midrange, and large enterprises. About 88 percent of small companies have a single ERP system, and only 6 percent have two and only 4 percent have three. When you get up into midrange manufacturers, there is a proliferation of ERP systems. Only 58 percent of manufacturers have a single ERP system, 22 percent have two systems, 10 percent have three systems, and 4 percent have four. The proliferation is even worse at larger organizations. Only 20 percent have a single ERP system, 18 percent have two systems, 22 percent have three systems, 9 percent have four systems, and a mind-boggling 31 percent have more than four systems installed. (Aberdeen says a small company has $50 million or less in annual sales, while a large enterprise has $1 billion or more in sales; anything between those figures is a midrange shop.) The proliferation of ERP suites was caused by mergers and acquisitions or by allowing divisions of larger manufacturers to pick their own ERP systems. It comes as no surprise that 84 percent of large manufacturers and 67 percent of midrange companies surveyed said they planned to consolidate their ERP systems. Which means a lot of software licensing is on the line. This is going to be a huge battle for budget dollars.

"The chief ERP implementation challenges were associated with the alignment of business processes with software capabilities," says Cindy Jutras, who is vice president of manufacturing and ERP research at Aberdeen. "Companies struggle to balance customization-related issues with business process re-design amidst costs associated with upgrades, replacements, consolidation, and latent integration costs."

You can get a copy of the 43-page report, which is extremely interesting, at www.aberdeen.com/summary/report/benchmark/RA_ERP_CJ_3361.asp.