ERP investment depends on cost-saving

Businesses are willing to invest in a new ERP system if it would contribute towards lower total cost of ownership, cost-cutting and cost-saving.

This is according to a recent survey by ITWeb, in partnership with SCT, on businesses' attitudes toward investing in IT systems, specifically ERP systems, during the economic downturn.

The survey was conducted online from 31 August to 21 September last year, with 127 respondents taking part. The majority of respondents were from organisations with 501 to 5 000 employees, in the fields of IT management (42%), and executive management (41%).

According to the survey, Microsoft is the preferred application, run by 32.9% of the respondents' organisations. Some 20% are running in-house systems, while 12.1% use Oracle and 11.8% run SAP.

What business applications are you currently running?

Preparing for upturn

The survey revealed that to enable cost-saving and cost-cutting in the current climate, investment in new systems would be beneficial. According to Alan Yates, SCT director, an organisation should ideally have invested in an ERP system prior to the recession.

"Implementing during a recession, especially if one has not already done so, positions the business to take advantage of the new system during the recovery and upturn," he says.

There are companies out there that know they can do even better than they are doing now, he adds. "These companies are seeing that after coming through the recession, they will need to have systems that position them to take care of their information needs in the next upturn, as well as any subsequent downturns."

The survey reveals that 50.4% of respondents have upgraded their systems within the past year. It also bodes well for IT budgets, with 44% saying they have a budget of R100 000 per month. When it comes to budget allocation, 54.5% of respondents have allocated a budget to business application systems.

When did you last upgrade your business applications?

Cost considerations

Yates says enlightened companies capable of weathering the recession without ERP systems realise that implementing such a system will bring benefits in being able to see and track costs.

"The ERP highlights costs as and when they occur in the process chain," he notes. "Once one sees costs, profits and revenues with the clarity one did not have without the ERP, management of costs becomes much easier and more effective."

The majority (44.8%) of respondents said they expect to see cost-saving and cost-cutting from investing in a business applications this year and 2010. Some 30.2% said the investment will help to review IT and other costs, while 17.2% thought it would lower the TCO.

How could you expect to benefit from a new business application in 2009/2010

According to Yates, the general attitude towards ERP is that most respondents see it as a way of cutting costs, as well as providing better information systems for the future (upturn or downturn).

He says this shows that companies with the foresight and good financial practices to have survived the downturn, but which do not yet have ERP and BI systems, know they have a "systems acquisition window" in which to buy and implement new IT systems. This will better position them for what will be an even more "tech intensive" upturn.

"ERP systems and their allied business intelligence offerings have become essential building blocks for all businesses that are serious about their long-term futures and ongoing growth and profitability," Yates advises.