The State of ERP: Less Risk, More Return - ERP systems today drive almost every critical business function and process, and companies have a right to be wary about the impact of upgrades on performance. More mature ERP systems and practices are reducing concerns.

1. The State of ERP TechWeb September 2008

6. ERP Encompasses Everything Which business functions/processes are supported by your ERP system? Multiple responses allowed Add-on functionality , such as supply chain and human capital management, has played a large part in ERP’s growth. ERP has migrated to the front office and beyond to help companies run and optimize business processes that touch customers, business partners and employees. The State of BPO The State of ERP Accounts payable/receivable Order processing Order fulfillment Shipping/invoicing Sourcing and/or purchasing Preparation of balance sheet Supply chain planning and control Human resources Manufacturing and materials mgmt. Warehouse management BOM processing Logistics management Sales forecasting Business analytics Business performance management Employee self-service Quality management Project management Compliance management Customer prospecting Corporate organization management Database marketing Support for telemarketing Other 88.9% 69.5% 65.4% 64.9% 58.7% 57.7% 50.6% 47.4% 47.4% 46.7% 44.5% 40.3% 31.9% 31.7% 31.2% 28.8% 26.3% 25.3% 21.1% 18.2% 16.5% 12.3% 10.3% 4.9%

7. Packaged ERP Software Dominates What type(s) of ERP software does your organization use? Check all that apply. Multiple responses allowed Most companies still are running their commercial ERP applications in-house, but there’s emerging interest in the software-as-a-service model, which has traditionally been appealing to smaller businesses. The State of BPO The State of ERP Packaged software that we run in-house using internal IT resources Custom-built software that we run in- house using internal IT resources Packaged software that is maintained for us by external managed services provider Packaged software that we run in a hosted or software-as-a-service environment 81.2% 24.0% 10.1% 8.4%

8. Nearly Half Use Oracle and Nearly One-Third SAP Which vendor’s ERP software do you currently have implemented in your organization? Check all that apply. Multiple responses allowed Not surprisingly, the two ERP behemoths hold sway among respondents. But Microsoft is an up-and-comer. Its Dynamics product has traditionally appealed to mid-market organizations. The State of BPO The State of ERP Oracle SAP Microsoft Infor (formerly SSA Global and The Baan Corp.) Lawson Software The Sage Group Epicor Software Agresso Other 42.9% 29.8% 18.1% 5.8% 5.8% 3.3% 3.0% 0% 27.3%

9. Majority Have Been Using ERP for Seven Years or More How long has your company been using ERP applications (either packaged or home-grown)? Select only one. One year or less 3.5% One to three years 14.0% Four to six years 22.7% Seven to ten years 22.8% More than ten years 37.0% Only one response allowed The respondents to this survey are seasoned ERP customers, and understand that, as with any IT system, enhancements are a necessary and vital part of progress. The State of BPO The State of ERP

10. Over Half Have Completed or Are in the Process of a Major Upgrade Have you ever done a major upgrade or replacement of your ERP applications or do you plan to in the near future? Select only one. We have not upgraded or replaced our ERP application in the last one to two years and have no plans to do so in the next 18 months.* 20.8% We have completed a major upgrade or replacement in the last one to two years. 40.9% We plan to conduct a major upgrade or replacement in the next 18 months. 21.6% We are currently conducting a major upgrade or replacement. 16.7% Only one response allowed Only about one-fifth of respondents have not tackled an ERP upgrade or replacement project in recent years, and have no expectations of doing so. The State of BPO The State of ERP *Note: The respondents who have neither upgraded, nor have plans to, did not answer subsequent questions specifically about upgrades.

11. Nearly All Upgrades Were Both Functional and Technical What is/was the nature of your upcoming or recent upgrade? Select only one. Functional upgrade 5.5% Both functional and technical 83.7% Technical upgrade 10.8% Only one response allowed Much has been happening in ERP technology, including the move to SOA (service-oriented architecture) platforms. But new functional abilities are as much of a driver as new technology capabilities. The State of BPO The State of ERP Slides 11 through 21 based on 320 respondents who have done a major upgrade or replacement of ERP applications

12. Drivers for ERP Upgrades – New Features, More Optimization, and Transformation What are the primary drivers behind your current (or planned) upgrade or replacement of your ERP technology? Please check all that apply in the first column. Which of these is the topmost driver behind the current or planned upgrade? Select only one in the second column. Multiple response Single response Ranked and sorted on primary driver Top three in each column notated in red; responses continue on next slide.. Chart 1 of 2 All Drivers Top Driver Our product vendor has ended support for the version that we are currently running 31.5% 19.9% We wanted to add new features and functionality to our ERP applications 53.9% 17.6% We needed to integrate a variety of disconnected ERP applications so decided to upgrade at that time 21.4% 10.3% Our vendor(s) introduced new upgrades, and we were staying on track with the upgrade schedule 18.5% 7.3% We wanted to optimize our business processes 37.7% 6.3% We have an ERP Roadmap, and upgrade was a part of it 26.8% 5.8% We believe that this upgrade will strengthen our company's transformation or innovation strategy 33.5% 5.3% We wanted a single instance of our ERP applications globally 19.2% 4.3% Our company went through a merger/acquisition, and our ERP applications needed overhauling to support this 12.8% 3.0% We wanted to eliminate all or most of our custom, home-grown software within our ERP implementation 24.6% 2.8% We wanted to consolidate all the data that's leveraged by our ERP applications into a single repository for improved data management 20.2% 2.3% The State of BPO The State of ERP Companies are expecting a lot out of their ERP upgrades. But the top driver for upgrades has less to do with functionality and innovation, and more to do with forced marches. Nearly 20 percent say the end of support for their ERP product mandates an upgrade.

13. Drivers for ERP Upgrades (continued from previous slide) What are the primary drivers behind your current (or planned) upgrade, or replacement of your ERP technology? Please check all that apply in the first column. Which of these is the topmost driver behind the current or planned upgrade? Select only one in the second column. Chart 2 of 2 Drivers Top Driver We wanted to introduce collaborative solutions like Supply Chain, CRM, SRM, etc. 16.3% 2.3% We are upgrading our ERP applications to support a service-oriented architecture (SOA) model 10.1% 1.8% We are upgrading our ERP applications to support Web services 15.5% 1.8% We wanted to add new ERP modules, so decided to complete a comprehensive upgrade as well 18.5% 1.5% We wanted to be more agile and be able to add or expose new functionality 26.8% 1.3% We want to meet certain regulatory compliance mandates 16.3% 1.3% We wanted to be able to create composite applications from existing ERP functions in order to support new and/or evolving business processes 9.4% 1.0% We wanted our ERP applications to support event-driven capability and thus trigger a business process or workflow 15.5% 0.8% We wanted our ERP applications to provide users (internal and external) with a consistent experience. 20.7% 0.8% We wanted to be able to vary ERP functionality based on context, such as the user's roles, customer description or information accessed 14.0% 0.8% We want to handle most ERP functions in a hosted software-as-a- service model 4.7% 0.3% The State of BPO The State of ERP

14. Majority Rate Success of Upgrade as a “4” or “5” on 5-Point Scale How successful would you say your ERP upgrade has been so far? Please use a scale of 1 to 5, where 1 is “unsatisfactory” and 5 is “exceptional.” 1 - unsatisfactory 1.5% 2 2.8% 3 16.0% 4 39.7% 5 - exceptional 14.2% Can’t answer, not far enough along yet 25.8% The State of BPO The State of ERP Most respondents — 54 percent — described their upgrades as exceptional or very close to it, while very few — less than 4 percent ― characterized their ERP upgrades as failures.

15. Majority Cite Accessibility of Business Info as Biggest Benefit Multiple response How will/did the change to your ERP applications upon completion of the upgrade benefit your company? Please check all that apply. Business information will be more accessible and sharable across different departments/business lines/with partners and customers 60.1% Processes will be optimized so we will be able to respond more quickly to changing business conditions 50.9% We will be more agile as a business because we will be able to add or expose new functionality and/or vary that functionality based on context, such as the user's roles, customer description or information accessed 34.6% Maintenance costs will be reduced because we won't have to support multiple instances of ERP applications 33.3% Our total cost of ownership (TCO) will be reduced 33.3% We will have a more comprehensive view of our customers, their needs and their profitability to our company 33.0% We will have a more efficient supply chain 32.4% Maintenance costs will be reduced because we won't have to support custom, home-grown software 29.6% We will improve our ability to adhere to regulatory compliance mandates 25.2% We will be able to reduce costs related to procurements, sourcing 23.9% The State of BPO The State of ERP Survey respondents singled out several benefits, but at the top of the list is the ability to more easily access and share business information across different departments and business lines, and with partners and customers.

16. Disrupting Current Business Ops Is #1 Concern; Too Costly Is #2 Multiple response Single response Ranked and sorted on top concern Top three in each column notated in red. What are/were the major concerns your company has about your current or planned ERP upgrade? Please check all that apply in the first column. Which one of these would you rank as your top concern? Please select one. All Concerns Top Concern It will disrupt our current business operations 48.8% 30.5% It will be too costly 45.1% 21.3% It will take too long 48.5% 13.3% Poorly documented business processes, so it is difficult to figure out how to improve them 23.3% 8.3% The upgrade won’t benefit our business functions/processes (vendor “forced march”) 20.6% 7.7% There will be integration difficulties/technical issues with other software in our organization 32.6% 7.4% The upgrades will require extensive end-user training 32.1% 5.3% We aren’t getting executive buy-in/sponsorship 10.0% 3.8% Unproductive interactions among IT and line-of-business managers 12.0% 2.4% The State of BPO The State of ERP Upgrading ERP systems, no matter how routine, is never effortless, simply because ERP systems are complex and because they affect core processes that companies use to run operations.

17. Big Challenge: Making the Upgrade Business Case How was your experience in defining and justifying the business case for ERP upgrades? Extremely easy 4.1% Easy 33.9% Neither easy nor difficult 17.2% Difficult 39.5% Very difficult 5.3% The State of BPO The State of ERP While most analysts say spending on ERP is strong, many IT departments still have a hard time making the business case for it.

18. Who’s Handling the Upgrades Who is/was involved in helping your company accomplish the upgrade? Please check all that apply. Nearly half the companies say they’ll tackle their projects with in-house talent alone, but 60 percent expect to engage a service provider to help with implementation/integra-tion and development, or to offer strategic consulting services. The State of BPO The State of ERP Multiple responses allowed We are doing/will do the upgrade completely in-house, by our own IT team We have engaged a services provider to help with the implementation and/or integration & development We have engaged a services provider to provide strategic consulting services Our ERP vendor is assisting us with the upgrade 46.2% 32.6% 28.0% 24.6%

19. Consultants Offer Configuration Services Most Often (Asked of those who are working with a consultant.) What are the offerings, areas for support you need/leveraged from your IT consulting partner? Interestingly, considering the challenges many find in making the business case for ERP, just 17 percent say they turn to consultants to help them on this front. The State of BPO The State of ERP Multiple responses allowed Configuration services 72.6% 59.7% 49.3% 45.3% 40.3% 18.4% 16.9% 13.4% Modification adjustments Testing Developing IT roadmap including upgrade roadmap Upgrade assessment Landscape consulting Develop business case Unicode migration

20. Majority Said Upgrade Took One Year or Less How long did the upgrade cycle take or do you expect it to take? Select only one. Only one response allowed Almost 70 percent of survey respondents say their upgrade cycle took (or is expected to take) one year or less. Further analysis shows that, not surprisingly, nearly 40 percent of large companies (1,000 employees or more) say upgrades will go on for more than a year (data not represented in this chart). The State of BPO The State of ERP Six months or less 34.1% One year or less 27.4% More than a year 32.5% One month or less 6.0%

21. Half Spending Less Than $500K on ERP Upgrade How much did you spend/are you planning to spend on your recent/next upgrade? Less than $100,000 23.9% Only one response allowed $100,000 to $499,999 26.6% $500,000 to $999,999 11.7% $1 million to $4.9 million 25.3% $5 million or more 12.5% Almost a quarter of respondents say their upgrade is costing (or will cost) less than $100,000. Nearly 40 percent will spend $1 million or more. The State of BPO The State of ERP

23. Respondent Demographics: All Involved in ERP Decision Making What is your role in the development, implementation, monitoring and modification of your company’s software design strategy with respect to enterprise resource planning (ERP)? Select only one. Only one response allowed The State of BPO The State of ERP 35.5% 18.9% 13.2% 12.5% 7.6% 7.4% 4.9%

24. What is your organization’s IT budget for 2008? Respondent Demographics: IT Budget Don’t know 38% The State of BPO The State of ERP Less than $1 million 18.1% $1 million to $4.9 million 25.5% $5 million to $9.9 million 13.4% $10 million to $49.9 million 23.4% $50 million to $99.9 million 8.9% $100 million or more 10.7%

25. Which of the following best describes your job function? Respondent Demographics: Job Function The State of BPO The State of ERP Don’t know 38% IT management 30.2% Executive IT management (CIO, VP of IT) 16.4% Consultant 1.7% IT staff 17.4% Executive corporate management (CEO, president, corp. VP) 6.1% IT consultant 6.1% General corporate mgmt. 9.3% Project manager 8.1% General corporate staff 4.7%

26. Respondent Demographics: Company Size How many employees are in your organization in total? The State of BPO The State of ERP Less than 100 7.4% 100 to 499 13.0% 500 to 999 11.8% 1,000 to 4,999 28.4% 5,000 or more 39.4%

27. Respondent Demographics: Industry Manufacturing and industrial (noncomputer) 23.5% Consulting and business services 6.5% Education 6.3% Government 6.3% Health care and medical 6.3% IT vendors 5.3% Automotive 3.5% Utilities 3.5% Consumer goods 3.3% Energy and utilities 3.3% Financial services/banking 2.5% Food and beverage 2.5% Telecommunications and ISPs 2.5% Biotech, biomedical and pharmaceutical 2.3% Electronics 2.3% Insurance and HMOs 2.0% Media and entertainment 2.0% Logistics and transportation 1.8% Construction and engineering 1.5% Distribution 1.5% Metals and natural resources 1.5% Retail and E-commerce 1.3% Financial services/other 1.0% Nonprofit 0.8% Chemicals 0.5% Financial services/securities and investments 0.5% Hospitality and travel 0.5% Real estate 0.5% Financial services/insurance 0.3% Other 5.0% The State of BPO The State of ERP