Sixty percent of midmarket firms plan to deploy an integrated ERP suite within the next year as the fragmented approach gives way to more cohesion.
Posted Oct 25, 2005
While midmarket organizations are extending beyond their cost-shrinking stances to more revenue-generating mindsets, 53 percent contend that the ROI from their ERP solutions translated into less than 50 percent, an Aberdeen Group report says. These stats, according to "ERP in the Mid-Market Enterprise: The 2005 Benchmark Report," are an indication that today's deployed solutions are falling short of the midmarket's business requirements or expectations, or that these organizations are not using their ERP solutions to their full advantage.
Midmarket organizations, which Aberdeen classifies as falling within the range of $50 million and $999 million in annual revenue, "sometimes don't get the functionality that they really need usually because of costs," says Katherine Jones, Aberdeen HCM research director and author of the report. Underperformance can also be attributable not to the software, but to the hardware infrastructure, Jones says. "[Midmarket organizations] don't get enough computing power to actually support their enterprise and then sometimes what we see is a very, very fragmented environment. They have bits and pieces of software all over the place, usually software that is very specific for a task, but then it's not integrated." Report findings reveal that although 26 percent currently deploy an integrated ERP suite, 60 percent plan to within the next 12 months.
It is important to note, however, that in the midmarket revenue growth outpaced decreasing operating costs as the prime concern, a shift from the 2004 installment of the report. Cost-cutting initiatives still are a top concern for midmarket organizations, as 51 percent of those surveyed remain focused on curtailing outlays, but about 78 percent have turned their attention to spurring revenue, according to the report. "This year they're crawling out of the cocoon and saying, We need to invest in our business," Jones says.
Regarding plans for the next 12 months, about 73 percent of midmarket organizations tapped their hiring management systems as the deployment that will remain the same within their technology stack, while 49 percent of respondents indicated that they have no plans to change their CRM systems. Twenty-six percent plan to upgrade their CRM system, 12 percent plan to replace their current system with an ERP solution, and 11 percent plan to replace it with a best-of-breed solution. One percent responded that they plan to move to ASP, while an additional 1 percent plan to outsource.
The report also identifies the top five challenges faced by midmarket organizations, but the obstacles are applicable to companies of all sizes. The pressure to increase customer satisfaction and revenue generation garnered the most traction with respondents (64 percent), followed by staying competitive (59 percent), an ongoing corporate need to cut back on overall expenditures (41 percent), fragmented business applications (27 percent), and executive pressure to create a more productive workforce (20 percent).
To keep these pressures at bay, part of the midmarket's efforts includes a progression from dressing up battered deployments. "Many of them realize that gluing together the old stuff is not the answer, [nor is] going out and buying more piece-point solutions and creating the same problem with new software," she says. "They recognize that they should be looking for an integrated ERP suite that already has the workflow and the underlying processes. The return will be better for them, because it moves them ahead as opposed to putting money into band aids and glue guns."
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