Substantial research conducted by Gemini Consulting into the Enterprise Resource Planning (ERP) industry has found that 50% of South African companies have problems implementing ERP systems in their organisations.
The research, released by Gemini this week, looked at international trends in the ERP market as well as the problems facing South African companies in implementing ERP systems.
Internationally, the average ERP implementation period takes nearly two years and costs over 10 million dollars. Despite this, the worldwide ERP market revenue has shown dramatic growth and is worth 14,3 billion dollars today.
In South Africa, problems associated with installing ERP systems caused companies to spend up to two years making it work and costs millions of rands - in some cases doubling the original implementation budget, Gemini found.
Of the SA companies interviewed by Gemini, 42% experienced business disruption, additional costs and lost business opportunities due to the implementation of their ERP system. An equal 42% had successfully implemented the system and had realised the expected benefits, whilst 16% of companies were still busy implementing the system.
Rudy Absil, managing consultant at Gemini Consulting, says successful ERP systems have changed the way businesses operate by enabling them to use a single back office system.
"To be successful however, requires best practice implementation in which companies address flows, processes, capabilities and culture along the value chain," says Absil.
"According to our research, 90% of companies experienced user resistance to ERP systems, and to make things worse, only 40% had any significant change management programme in place to address this.
"This resistance added significantly to the implementation costs, due to lower productivity, retraining backlogs and efforts trying to prove that the new systems did not work."
Absil says most ERP problems result from a lack of high level central ownership and understanding within companies. Few companies develop a detailed benefits case for the system implementation, let alone track the realisation of benefits. According to Absil, the reengineering of business processes is an integral part of achieving benefits from ERP systems. "Of the problematic implementations, 88% did little, if any, reengineering. On the other hand 60% of the successful projects had significant reengineering done during implementation.
"In these cases, change management programmes were an integral part of their project. These resulted in significant benefits such as cost savings, reduced debtor periods and stock levels and other efficiencies, saving millions of rands," says Absil.
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