Making your company run like a donkey

sorry I could not resist twisting Prof. Andrew McAfee's title for his post Making your company run like a Ducati

Defending ERP systems he says "Companies that go through the hard work of deploying enterprise IT and shutting off some of their pre-existing legacy systems are reducing their complexity, not increasing it." He is right, of course. The problem is the "shut off" over the last decade of ERP has been much lower than the "wall to wall" coverage promised by its salespeople.

In many verticals outside of manufacturing, the ERP vendors did not deliver enough functionality (see how few ERP packages even today have replaced legacy utility billing, telecom billing, insurance claims processing, banking DDA systems and a long list of major applications). And where ERP vendors did deliver vertical functionality, many of the vendors (some vertical specialists did better) priced those "vertical engines" expensively (argument being there are fewer customers to amortize the vertical investment across - and a bit of  "no CIO wants to custom build these any more, so we will justify the premium pricing").

Even within manufacturing, it is amazing how many companies mostly implemented core financial modules of the ERP package. So the complexity reduction that Prof. McAfee talks about has been much lower, on average, than ERP has promised.

In return though, we have paid dearly for the "lowered complexity". We have become dependent on expensive systems integrators and "SAP Basis jockeys". We have been put through a series of forced, often disruptive, upgrades. We have put up with amazingly poor quality from releases like Oracle 11i. And finally, we keep having to buy the license every few years in annual maintenance...

...talking of which, Ray Wang at Forrester and Jim Shepherd at AMR square off on the topic of third party maintenance in this SearchCIO article.

Ray goes ""If I could stop paying maintenance costs and sell those licenses, that would be very interesting. If I could use another provider to give maintenance at half the cost, that would be very compelling, but we don't have either...We don't actually have a perpetual license."

He takes the position I have for a long time -- see here, here, here . Just because you bought a Porsche you do not need to get your car serviced every time at their dealers.

Jim on the other hand goes "While 22% or 15% maintenance tax on the software sounds like a lot of money, (Shepherd) said it's the cost of doing business in a volatile environment subject to changes in both business practices (new regulations, privacy issues, etc.) and in the technology itself."

Jim, if the cost of doing business is so high, show me a software vendor which spends more than 5-7% of its revenues a year on "new" stuff - not bug fixes, not localization - new stuff? Plus, for major upgrades, don't many software vendors expect an incremental upgrade fee?

ERP has paid for a number of software industry Porsches ...we just need to retro-fit them with Ducatis -)