Why CEOs and CFOs hate IT and ERP

The number of articles that talk about problems with IT seem to proliferate. Many surround the same issues: cost, complexity and customization.

In this article, the writer references a CFO research Services survey of 157 senior finance executives, which specifically looked at initial and ongoing ERP system ownership costs. While many companies may balk at the inital costs, they normally overlook implementation costs (which can be much more) and react again at ongoing maintenance. They particular react to customization.

Even if you don't fit the size and complexity of these companies and their needs ($100 million plus), the same issues apply to you. The numbers just have more zeroes.

Let's look at each of these in detail:

• Cost issues arise because most software sales are focused on the purchase price. The purchase price is only one small part of the cost (see my article on the subject), I think the real issue is expectations. If the purchase price is $10,000, you expect to pay $10,000. If the total cost is $50,000, you have a problem. Yet, if going in, you expected a return of $100,000 a year, then $50,000 may not be an issue. In most cases, nobody looks at the potential of a $100,000 return, because they are trying to justify $10,000. Surprise!
• Complexity creates problems with productivity and this costs you money. If you provide an easy to use aand easy to learn solution, people will become productive more quickly, saving you time and money. In most cases, there is no focus on people. All of the focus is on technology implementation. People are left to fend for themselves. Even the training leaves a lot to be desired. This creates frustration, productivity loss and increased cost and even reduced value. Computers can do complex things easily, whereas people make mistakes when performing complex activities. We should be using computers to simplify activities.
• Customization is a common occurrence in most medium sized companies. Software is purchased and then modified or extended so that the company can maintain existing operating methods. This is a cost that is of questionable value. Every business operates a little differently. Software products are developed around an assumed business process. The customization is required when you don't want to use the process that comes with the software. There are many reasons to use the process that comes with the software. First, you don't need to modify the software or create special routines (less cost). Second, in many cases, the process is best of breed (you will be better off using it). Third, when improvements are made to the software, you will be able to take advantage of them (You won't need to look at new software again). There is one reason why you may want to customize: Your process is more effective and costs less that the one that comes with the software. Don't lose this benefit. This may also be a reason to choose different software.

To see the referenced article.