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   Kaytek IT - ERP Consulting Perspectives |
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Average Life Of An ERP System
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Kaytek IT - ERP Consulting Perspectives |
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Globally, Organizations are making huge investments in ERP solutions. Some people feel that ERP solutions have a life span of only 5 to 7 years in any organization. This would make necessarily impact the ERP ROI calculations. Maybe our respective understanding of lifespan differs. I am not referring to the lifespan as defined by the technology vendor but that of usage within an organization. Perhaps they are talking of A Specific ERP- Version Number Instance's Life span of 5-7 years. Then, maybe Version Upgrades (within the same ERP Manufacturer's Product) should also become the focus for the ROI Analysis. Atleast in India, An asset's (including an ERP system's) lifespan from an organizational perspective would be for both functional and technical utility for much more than 5-7 years, in my humble opinion.  Consider the following crucial SAP facts : SAP has moved from R/1 (earlier called
as R) to R/2 to R/3 (and the respective R/3
Version Number Increments over a period
of 32 Years (since SAP's founding in 1972). It would be a good bet to assume that many of their earlier R/1, R/2 customers have perhaps migrated to R/3 and are using the same even today and plan to continue to do so over the span of their organizational lives. |
My further assumption is that atleast between their 3 ERP Products - R1, R2 and R3, SAP would have provided Data Mapping and Conversion Interfaces and Services for their customer's eliminating possibly a huge pain point in SAP Product and Version Upgrades. As per a 1999 Wharton School ERP Research
Study, the average calendar time taken for ERP
Implementations in the US was about 21 months
with benefits accruing only after 31 months. In an old Information Week article, Barry Wilderman, an analyst with the Meta Group, says it's
not unusual for ERP investments to result in a negative ROI
over a five-year period. With such long ERP installation and Payback time spans, perhaps it is difficult to visualise their average lifespan of only 5 to 7 years. SSA's Managing Director in Mumbai had spoken
of ERP Implementations as being 'Organizational
Brain Surgeries'. It is difficult to digest the fact that Brain Surgeries are needed every 5-7 years. They are painful, costly and detrimental to one's overall body health. Somebody had compared purchase of a Car to that of an ERP system. Perhaps the analogy between the Car and ERP holds good only to the extent both the Roads (On which Cars travel ) and the final destination (where one wants to reach ) remain the same. Email Us : Can we help extend the life of your organization's ERP system ? |
In case of ERP's unfortunately, the promised movement from Organizational's Painful Current Reality Today (before ERP) to A Future Brighter Vision (promised after ERP) sometimes derailed. Even in the age of changing business scenarios, should not the new business approaches have been perhaps thought out and crystallised at the time of preparing the ERP Future Vision ? By possibly a change of Car Drivers (The ERP Teams ), the change of destination (New ERP Objectives) and also in some cases , the non-availability or the complete disappearance of roads( changes in industry landscape and structure). Lastly, for those interested, there are various online articles that give tips on how
lives of ERP installations can be perhaps extended.
We are still not convinced that an ERP in an
organization would have a lifespan of only
5 to 7 years.( especially so in the case of
Governmental Groups where decision
making is usually slower than the Private
Sector). There is an old adage in business that you make money on a new venture only after 1000 days (or roughly 3 years.) It is a pity if organizations chose to waste resources via churn of ERP systems, rather than optimize & leverage on the same. Disclaimer: No affiliation to any organizations above. All trademarks & service marks recognized. |
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