What did you get from ERP and what can you get? Many corporations are still looking for a meaningful return on all their investments in enterprise resource planning systems. While it's easy to blame the vendors, a company's approach to implementing the technology appears to be a common problem.

• Author: Millman, Gregory J.
• Position: Special Report

For many large companies in the late 1990s, faced with the pressures of the looming Y2K and Euro compliance, enterprise resource planning (ERP) systems looked like a quick fix, a kind of panacea, knitting together far-flung systems and different vendors and promising new levels of speed and control. Then, when the compliance deadlines passed and people began to ask what value they'd really gotten for the money they'd spent, the fix too often started to look like a marginally useful placebo.

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"I think that a lot of companies wasted their IT investment dollars," says Garry Lowenthal, CFO of Viper Motorcycle Co. and chairman of FEI's Committee on Finance and Information Technology. You hear it over and over again: companies racing against a Y2K or compliance clock installed technology that they didn't need, never really figured out how to use effectively and all too often customized it to fit processes they'd have been better off abandoning.

While the fad days of ERP have peaked, systems are still running in thousands of companies around the world--many of them still intent on trying to boost their returns on all the dollars spent on the technology. Now, ERP platforms are getting another chance to prove themselves, this time in situations that may have little to do with making a business run more effectively.

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"We've seen a lot of people upgrading, and one of the biggest drivers is corporate governance. In the U.S., it's Sarbanes-Oxley, and in Europe and Asia, it's the International Accounting Standards," says Fred Studer, vice president of ERP applications marketing at Oracle. As a result, after a couple of years of depressed revenues, ERP vendors are looking forward to a return of something more like the good old days.

But it's not exactly deja vu all over again. ERP itself is maturing, and vendors are under pressure. Says Ken Stoll, a partner at Accenture, "In negotiations, when there's value, it's easier to keep your pricing point higher, but when value erodes, it's a difficult sell. That's what we see happening. Price points are starting to erode because the value is not unique value. Initially, an ERP vendor could say, 'You're getting unique value--you're the first in your industry to receive the value of ERP.' They can't say that any longer because everybody has it."

The evidence leaves little doubt that for most companies, ERP has failed to meet expectations or deliver on its value promise. It's hard to find an expert who thinks otherwise. "Based on our data, only a select few companies have gotten value out of their ERP implementations, and those are the world-class companies. The value for the average company is still many years away," says David Hebert, who leads The Hackett Group's business advisory services program in application ROI.

The latest annual survey of financial executives by FEI and Computer Sciences Corp. found that "only a small minority, 10 percent, believe they are achieving a high return on technology investments." Scott Phares, vice president of business services for the application software firm Business Engine says, "I hate to beat up on ERP, but it has the most visibility as the...