Maybe It

Enterprise resource planning (ERP) is now comfortably on the backlash side of the hype cycle. Various studies and articles decry the number of failed implementation efforts and the lack of quantifiable ROI, even for companies that pulled off these gargantuan projects without crashing their businesses.

On top of that, formerly high-flying ERP vendors such as Baan Co. NV, System Software Associates (SSA) and J.D. Edwards & Co. have suffered severe slumps in their financial performance, with Baan and SSA being acquired by other companies in the industry.

Today’s media darlings are trading exchanges – electronic marketplaces that aggregate suppliers and buyers in an attempt to wring inefficiencies out of the purchasing process.

But hold on a minute. How much efficiency can exchange participation bring to a business that doesn’t know what it needs to buy?

“There is going to be an advantage for companies that have a good, clean source of management data,” says David M. Schneider, a Los Angeles-based partner who leads all electronic market activities and the strategic change practice for consultancy PricewaterhouseCoopers.

And that’s exactly what ERP systems are designed to provide – good, clean, consolidated management data, including a look at inventory levels, purchasing plans and that sort of thing.

“If the Internet is a bridge, but it connects to a dirt road when it reaches your company,” then electronic exchanges won’t provide the cost benefits they could, Schneider says.

So those who have toiled and sweated through ERP implementations shouldn’t think the final word on ROI has been written yet. Further benefits in the increasingly interconnected business world lie ahead.