ERP's Paralysis Problem and the Repercussions for Businesses Everywhere

Another ERP survey, another indictment of ERP's failings to the business. But this one is costly.

CIO.com, Thomas Wailgum in News

There's a growing movement underway to rid the business world of the acronym ERP.

For real.

In fact, executives at SAP—the ones who practically invented the concept and related terminology—are among those leading the charge. (See The Future of ERP for more.)

The reason? ERP is an outdated, almost meaningless piece of IT jargon that crudely attempts to encompass all that enterprise systems have become and will be for today's and tomorrow's large, midsize and even small companies, but falls woefully short: No one does just ERP anymore.

Another reason to deep-six ERP is to ensure that there is no future association between next-generation business applications and the long-standing failings of monolithic ERP software deployments. And, of course, to put as much distance between next-gen software and ERP survey results, such as the findings from a December 2009 study conducted by IDC and sponsored by ERP vendor Agresso.

The survey, based on the ERP experience of 214 business executives across a wide variety of midsize and larger industries, found that today's ERP systems "are not providing businesses with the architectural agility necessary to support businesses adequately in today's high-change, global environment."

That's not too shocking. But what is notable about the results (and what makes them different than your garden-variety ERP study that shows sky-high TCO, or application performance problems, or unfavorable implementation odds), is that this survey actually quantifies ERP system-related failings directly to business disruption—expensive, unpleasant and career-killing business disruption.

"Survey respondents said that the inability to easily modify their ERP system deployments is disrupting their businesses by delaying product launches, slowing decision making and delaying acquisitions and other activities that ultimately cost them between $10 million and $500 million in lost opportunities," according to the survey report. (That's a substantial gulf in "lost opportunities," but we'll chalk that up to the size differences in companies surveyed.)

That related impact is costly: 21 percent of respondents reported declines in stock price; 14 percent suffered revenue losses tied to delayed product launches; and 17 percent encountered declines in customer satisfaction.

A couple of verbatim responses from respondents should make the hairs on the back of your neck stand up: "Capital expenditure priorities are shifted into IT from other high-payback projects" just to perform necessary ERP changes, noted one respondent. Said another: "Change to ERP paralyzes the entire organization in moving forward in other areas that can bring more value."

I don't have an MBA, but I'm pretty sure that paralyze is not a word you want associated with your department right now—or ever.

Today's business environment is, of course, changing much faster than most businesses can keep up with, and any type of technology that impedes the ability to adapt and be flexible is most unwelcome. Which leads to another interesting data point from the survey: ERP systems are constantly being modified, updated and, well, changed. Just 3 percent of respondents had not made changes to their ERP systems, and nearly half (43 percent) are continuously making changes as needed.

As the sun finally sets on the first decade in the new millennium, it's high time we say good night to ERP. A new day will be starting soon, and the blemished legacy and failings of ERP's nearly four-decade-long reign will be a distant memory.

SAP, Sybase plan iPhone, Windows Mobile software

By Jim Finkle , Reuters, Wed Mar 11, 2009 11:30am EDT  

 BOSTON, March 11 (Reuters) - Software makers SAP AG (SAPG.DE) and Sybase Inc (SY.N) have teamed up to make it easier for businesses to run SAP's business management software on mobile devices including Apple Inc's (AAPL.O) iPhone.

SAP (SAP.N), the world's biggest maker of business management software, is already working with Research in MotionLtd (RIM.TO) (RIMM.O) to develop programs for its BlackBerry devices. 

This is the first time the German software company has announced plans to customize its software for other devices.

Sybase, which already sells programs that let businesses "shrink" applications so they can more easily run on mobile devices, will customize its software to better work with SAP's complex business management programs.

The two companies, which announced the move on Wednesday, will initially focus on the iPhone and on smart phones that runon Microsoft Corp's (MSFT.O) Windows Mobile operating system.

"SAP wants to provide customers a broad choice of mobile solutions," said company spokesman Saswato Das. "Ourpartnerships with Sybase and RIM will accelerate the transformation to a fully mobile workforce."

The SAP/Sybase products will be available in the second half of 2009, Das said.

(Reporting by Jim Finkle, editing by Matthew Lewis)

Analyst: Asia CIOs more business-savvy than American CIOs

Computernetwork.com, By Melissa Chua , MIS Asia , 03/06/2009 

Analysts from research firm Gartner expect chief information officers (CIOs) in Asia to play a more integral role in transforming their companies' business processes with the use of IT this year, compared to their counterparts in North America. 

Mark McDonald, group vice president and head of research, Gartner executive programs, said such a scenario would likely occur due to the relatively compact corporate hierarchies in Asia. Results from a recent Gartner survey showed 54 per cent of CIOs in Asia report directly to the chief executive officer (CEO), compared to just 38 per cent worldwide. Seventy-five per cent of CIOs in Asia also reported having responsibilities outside of IT. 

"In Asia, it's not unlikely to find a CIO who comes to the job from some other part of the business," said McDonald. "Executives teams here have the tendency to know each other very well, and we find that CIOs in Asia Pacific are much more business-savvy than in North America," said McDonald. 

Gartner surveyed 1,527 CIOs worldwide, from September 2008 to December 2008. Seventy-one respondents were from countries in Asia, such as Hong Kong, India, Malaysia, Singapore, Taiwan, Thailand and the Philippines. 

Budget growth and use 

The survey also showed that CIOs in Asia expect their IT budgets to grow this year, despite challenging operating conditions. CIOs in Asia expect an IT budget increase of 5.32 per cent, compared to the global figure of 0.16 per cent. 

CIOs will need to utilise their IT budgets to restructure the organisation, McDonald said. "Enterprises expect IT to contribute results in an uncertain economy. This is more true in Asia, where CIOs plan to allocate 24 per cent of their budget to growing the business and 20 per cent to transforming the business." 

CIOs in Asia listed business process improvement, cutting enterprise costs and improving enterprise workforce effectiveness as their top business goals for the year. 

"CIOs today are going back and fundamentally rethinking and restructuring what IT is about," said McDonald. "And the reason behind this need to restructure and change IT is because the challenges we all face can be summed up in two very important words: volatility and uncertainty." 

Technology priorities 

According to the survey, CIOs will continue to invest in technologies outside of core infrastructure. CIOs in Asia ranked business intelligence applications, enterprise applications (ERP, CRM and others) and collaboration technologies as the top three technology investments to make for the year. 

Gartner said such investments are "expected to pay extra dividends by responding to new regulatory and financial reporting requirements".

Open-source ERP grows up

Open source is picking up momentum in the ERP market because of its flexibility and relatively low cost

Infoworld.com, By Robert Lemos, CIO.com, April 22, 2008 

Can open-source software find a home in mission-critical systems? Based on momentum in the open-source ERP (enterprise resource planning ) market, it's starting to look that way, particularly for IT leaders at midmarket and smaller enterprises.

While ERP systems are the heart and soul of the modern business, they've also been an IT bogeyman for the past decade. The software requires long and expensive customizations to fit the business processes of specific industries and companies. Tales of late, costly rollouts haunt IT managers looking to upgrade the way their companies currently do business. Recently, garbage-hauling giant Waste Management filed a lawsuit against enterprise-software maker SAP for $100 million to cover the cost of its failed ERP implementation.

The problem has lingered since the 1990s: In 1997, Nestle USA embarked on an ERP project that took more than six years and $200 million; the company originally intended to spend the same amount on rolling out the system to all offices internationally.

Even when rollouts are done, enterprises find themselves locked into costly licensing and maintenance agreements in a market without much price pressure dominated by two main vendors, Oracle and SAP.

Enter open-source software. Popularized by the growth of the Linux operating system, open-source software allows anyone to view and audit the source code and customize the software. ERP systems require a great deal of customization, making open source a seemingly ideal approach. Companies also appreciate the ability to audit the code that runs their critical systems.

In 2007, former CIO of Capital One Gregor Bailar told attendees at CIO's CIO-08 The Year Ahead conference that he was excited by the potential of open-source ERP systems: "I'd love to have an open-source ERP system that would just wail on what we have," Bailar said.

For small- and medium-sized businesses, the lower cost of open-source ERP systems is often the major selling point, initially. This was the case for frozen food maker Cedarlane. Going with an ERP system created by xTuple (formerly OpenMFG) saved the company "a couple of hundred thousands dollars" from the get-go, says IT director Daniel Baroco. To convince the company's owner to move the company to an ERP system, there needed to be little up front cost for the then-$40-million business, he says.

"You couldn't even put on the table that we were going to invest a million dollars in technology," Baroco said. "For emotional reasons, more than anything."

The impact of the system is obvious today, he says. The company has grown its revenues to $600 million, from $40 million, and the amount of paperwork created to fulfill orders has dropped significantly. In 2004, workers typically had to fill out 1,000 invoices per day, sometimes creating three invoices for the same order. Today, the company has reduced that number to 400 and can track food wastage; that's data it didn't have in 2004.

"I was really undereducated in the open-source thing at the time," Baroco said. "I became a fan of open-source because of this."

Small and midmarket businesses, such as Cedarlane, are the best prospects for open-source ERP implementations, says Ned Lilly, CEO of xTuple.

"The sweet spot for us is the $20 million to $50 million company that is hitting their head on the ceiling of trying to work on QuickBooks," Lilly says.

Lilly does not expect to convert many customers of traditional leaders such as SAP and Oracle, but for smaller companies that are worried about cost and the complexity of traditional implementations, open-source solutions are becoming a clear choice, he says.

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Microsoft Partners Wary Of Salesforce-Google CRM

By Kevin McLaughlin, ChannelWeb

5:05 PM EDT Mon. Apr. 14, 2008

Salesforce.com and Google (NSDQ:GOOG) on Monday unveiled a new offering that marries office productivity apps with CRM and looks like a pre-emptive strike against Microsoft (NSDQ:MSFT)'s upcoming Dynamics CRM Live service.

The imaginatively named Salesforce for Google Apps service blends Salesforce CRM with Gmail, Google Docs, Google Talk, and Google Calendar. Salesforce is offering the service to subscribers free of charge, and this summer will introduce a $10-a-month supported version that includes end user phone support, unified billing, enhanced APIs, and wider access to third party applications.

Clarence So, chief marketing officer at Salesforce.com, San Francisco, says the deep integration between Salesforce and Google is the result of the two companies' similar approaches to delivering applications and services over the Internet.

"The real value is that now you can run your entire business in the cloud," said So.

Microsoft by June plans to roll out Dynamics CRM Live, an on-demand version of its Dynamics CRM software that will see the vendor employ its time-tested strategy of pricing competitors out of the market. Microsoft, which raised hackles last year by revealing plans to sell CRM Live directly to end users, will give partners a recurring 10 percent margin on subscription fees for all customers they refer.

Microsoft CRM partners told ChannelWeb they're not overly concerned by Salesforce for Google Apps, but some admitted they plan to keep an eye on the offerings that emerge from the relationship between the two companies.

The prevalence of Outlook and the overall difficulty of CRM implementations give Microsoft a solid position in the CRM space, but solution providers would be wise not to underestimate the Google-Salesforce collboration, says Jerry Weinstock, President and CEO at Internet Business Initiatives, Lenexa, Kans.

"The Google-Salesforce pairing is potentially powerful, and could eventually become a formidable competitor to CRM Live," said Weinstock.

But Mike Ritsema, president of i3 Business Solutions LLC, a Grand Rapids, Mich.-based solution provider, says that while the 'Googleization' of various business applications is a logical step, it's not likely to catch on with businesses that require advanced functionality.

"I'm sure that there's a ready market for the Google/SalesForce integration of technology. [But] I also believe that the there is another substantial customer set that will find the rudimentary functionality of Google Apps to be inadequate for their business requirements," said Ritsema.

Yacov Wrocherinsky, CEO of Infinity Solutions, New York, says the announcement helps create more awareness for the CRM industry as a whole, but he doesn't believe the Google-Salesforce partnership will ever threaten Microsoft's position in the market.

"Microsoft still owns the stack, and they're not going away. I don't see a lot of people using Google Apps for business and commercial tasks, and I don't envision that everyone is going to trust Google to do those things."

Daniel Duffy, CEO of Valley Network Solutions, a Microsoft Gold partner in Fresno, Calif., agrees with the idea that some businesses won't feel comfortable entrusting Google with their email, calendar or business documents.

"The industry likes to beat on Microsoft, but honestly, Google has their own challenges with customer privacy and data retention issues," said Duffy. "I believe that as more people embrace these sorts of services, we're setting ourselves up for an eventual nasty surprise when this data is compromised or abused."

The Google-Saleforce partnership is likely to continue to raise the level of competition in the CRM market, but is less of a near term threat to Microsoft, says Frank Lee, president of Microsoft CRM specialist Workopia, San Francisco.

"Salesforce and Google haven't reached critical mass yet, and they've got a long way to go," said Lee.

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Unilever achieves €1bn in savings, IT plays major part

SAP consolidation programme on course and cuts fat from food maker expenditure

Mark Chillingworth, CIO

Restructuring plans centred on the ‘One Unilever’ business transformation programme are reaping benefits, the Anglo-Dutch food and household goods maker Unilever. In its fourth quarter and annual results for 2007, Unilever stated that the ‘One Unilever’ strategy of IT and manufacturing streamlining, and other cost reduction programmes had delivered €1bn in savings.

Unilever said it achieved underlying sales growth of 5.5 per cent in 2007, with an underlying sales growth of 6.1 per cent in the fourth quarter. “The fourth quarter was a strong finish to a good year,” said Patrick Cescau, group chief executive. “2007 marks the third successive year of accelerating sales growth and came with an underlying improvement in margin.

“The reshaping of the business and the acceleration of our change programme are bringing real benefit,” Cescau said of the ‘One Unilever’ programme. Highlighting its benefits, the annual report states that in Europe the roll out of a single SAP enterprise resource management (ERP) system continues and that two-thirds of Europe is on the platform, and full implementation will be completed by the end of 2008.

‘One Unilever’ aims to make Unilever a simplified organisation to work within, with a single converged IT platform. It will also standardise business processes across the three operating regions of Unilever: Asia/AMET (Africa, Middle East and Turkey), Europe and Americas. It is hoped ‘One Unilever’ will increase revenue growth and operational abilities.

In the Americas ‘One Unilever’ saw Argentina, Brazil and Mexico consolidate operations into a single head office in 2007, a move that will be followed this year in the US. In 2007 the US went over to a single SAP system, following in the wake of the Latin American countries. Four of the countries in the Asia/AMET region have also adopted the SAP platform.

The restructuring of Unilever cost €875 million (£655 million) in 2007, with ‘One Unilever’ consuming £405 million. A further £130 million was invested in restructuring the European supply chain. “In 2008 we expect to see a further underlying improvement in operating margin,” Cescau said.

In May 2007 Unilever signed a Global Enterprise Agreement with SAP, which gives the maker of Dove Soap and Knorr soups greater access to SAP technology, as well the opportunity to collaborate on best practices. “This agreement enables us not only to accelerate business transformation, but also drive significant IT simplification as we move toward our destination IT architecture,” Neil Cameron, Unilever CIO told IDG reporters in May.

Related Article:

Nestlé's CEO to Wall Street: I did it my way

SAP brings hosted ERP to Asia

By Victoria Ho, ZDNet Asia, Tuesday, January 29 2008 07:30 PM

SINGAPORE--SAP has brought its hosted ERP (enterprise resource planning) suite to the region.

Announced Tuesday, the company is releasing its Business ByDesign product to Singapore--the sixth country globally to receive it. The product is currently available in Germany, the United States, the United Kingdom, France and China.

Hans-Peter Klaey, president of SAP's SME division, said at the launch event that Singapore was chosen because many regional offices are headquartered in the country.

SAP is targeting the suite at SMBs (small to medium sized businesses) employing between 100 to 500 staff.

Klaey said that a hosted solution "makes the most sense" for an SMB, because it takes the burden of building expensive infrastructure off the shoulders of the companies that may not have the capital freely available.

Historically, SAP has been in favor of on-premise installations. However, it launched a hosted CRM service in 2006, in a bid to capture the growing hosted CRM market.

Similarly, the company is eyeing the growing SMB SaaS market, which it estimates to be worth some US$15 billion.

According to Klaey, 74 percent of SAP's customers are SMBs, with this proportion expected to go up in the years to come. Having offered only on-premise ERP products till this, Klaey said that he expects this to fill the void in the market for a hosted ERP service that is "end-to-end".

Eric MacDonald, SAP Asia-Pacific and Japan president and CEO of South East Asia, said: "[Business ByDesign] addresses the 'testing out' market--the users who don't have the bandwidth to take on huge IT projects but are interested in trying out a product which gives them improved control."

Klaey did not comment on whether SAP's acquisition of Business Objects would see business intelligence functionality added to the product.

Presently, users' data on the system is hosted in Waldorf, Germany with prices beginning at US$149 per user, per month, for a minimum of 25 users.

ERP Is Dead. Long Live ERP.

Posted by Ben Worthen, The Wall Street Journal

Companies may need to change the way they approach their large corporate systems…again. Several years ago, the conventional wisdom among analysts and consultants was that “Enterprise Resource Planning,” or ERP, applications–large software programs that businesses use for everything from accounts payable to inventory management–were on their way out. But the systems never went away. And today, ERP is more important to businesses than ever.

computerIn a new study, the research firm AMR forecasts that the ERP market—served by companies like SAP and Oracle–will grow 11% a year between now and 2011. “We are seeing a much broader and more pervasive deployment of ERP,” Jim Shepherd, a vice president at AMR, tells the Business Technology Blog. “These systems are moving into every aspect of a company.”

The reason is twofold: 1) Companies have learned that there really isn’t an alternative to automating the business tasks that these systems perform; 2) Buying separate software for each task–say one program for sales forecasts and another for supply-chain management—makes the collection hard to support and harder to integrate. Shepherd says that so-called “software as a service”–a model in which customers access software over the Internet and store their data remotely on the software vendor’s servers–isn’t a threat to traditional ERP systems that companies own and operate because large companies are just too nervous about having sensitive product and employee data reside on someone else’s servers.

Even companies that already have ERP systems should expect to invest anew in the technology. This is because right now only about half the employees in a given company have access to the systems. Taken together, Shepherd doesn’t see any competitors to ERP arising any time soon. “It’s time to start thinking of these systems as 15- to 20-year investments,” he says.

Innovation and Business Network Transformation

At its Sapphire user conference, SAP talks about how companies eventually must build differentiation around their business networks.

By Jennifer Zaino, bITa Planet, April 24, 2007

Integration is the byword for the next generation business. Process integration, partner integration, acquisition integration, all must come together in the service of business network transformation.

“It’s clear that business networks are now the primary source for new differentiation.” That was the message from SAP CEO Henning Kagermann in his keynote Tuesday morning at SAP’s Sapphire event in Atlanta.

(Source: CIO Weblog)

The mechanics behind that include service-enabling the SAP Business Suite on a business process platform; enabling the fast model-driven creation of composite applications via SAP Netweaver CE (a subset of the Netweaver platform); and by next year offering every six-months enhancement packages from which users can optionally activate content, functional enhancements, new enterprise services, new user interface improvements, and new lightweight composite applications.

The goal, Kagermann says, is to help customers innovate faster while avoiding lengthy, risky and expensive upgrades.

Agility and Speed

“Our product enables business network transformation, so we must innovate across all industries and players of all sizes,” he said. “Innovation for industries will mainly be driven through composites — that’s how we’ll bring the next business practices to market without disrupting the core. If it becomes a best practice we’ll consolidate it to the core.”

Two trends are driving companies to business network transformation, according to Kagermann: the pace of business change and increasing commoditization.

A new acquisition takes place every 20 minutes, he said, and the time to integrate systems is shortening. Meanwhile, a new product hits the market every 3.5 minutes, ripe for copycatting, and leading companies to try to move up the value chain by collaborating more closely with business partners to deliver seamless service bundles to clients.

“Whatever strategy you follow is about agility, speed, and acting fast,” he says. Business network transformation must meet enterprise SOA, in order to quickly make the connections and reconnections companies need as businesses combine or customer demand shifts.

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Toyota's Big Fix: An IS Department Turnaround

How Toyota's CIO radically restructured her entire approach to IT and regained the trust of the business.

By Thomas Wailgum, CIO

April 15, 2005 — CIO — At Toyota Motor Sales USA's headquarters in Torrance, Calif., there's a circular patch of manicured earth that separates the IS building and corporate headquarters. A brook winds its way through lush flowers and pine trees, and a terraced path connects the two buildings.

For many years, this was about the only thing the two groups shared with each other.

For the business execs at Toyota Motor Sales (TMS) peering across the courtyard at the Data building, the deep black windows were a symbol of IS's opacity. These executives felt that IS was unresponsive, and they had little clue where the money was going. "One of the complaints was that we spent a lot of money on IT projects, and [the business] was frequently disappointed with the results," recalls Bob Daly, group vice president of Toyota Customer Services. Daly says badly handled projects-such as a delayed PeopleSoft ERP implementation and a protracted parts inventory initiative-led to finger-pointing between the two factions.

Meanwhile, behind the darkened windows of the Data building, Barbra Cooper's IS staff was buried under the weight of six enterprisewide projects and could barely keep their heads above water. Called the Big Six, they included a new extranet for Toyota dealers and the PeopleSoft ERP rollout, as well as four new systems for order management, parts forecasting, advanced warranty and financial document management. Feeling besieged, the IS group made the mistake of not explaining to the business all the things it was doing and how much it all cost. It was a classic case of mismanaged expectations and fractured alignment.

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Unilever Selects SAP as Standard for Global IT Strategy

PR-Inside.com

2007-05-15 11:07:36

VIENNA, Austria, May 15 /PRNewswire-FirstCall/ -- SAP AG today announced that Unilever , one of the world's largest consumer goods companies, has strengthened its long-time relationship with SAP by naming the leading business software company as the global premium IT solution provider to enable and support Unilever's global business transformation strategy.

Unilever signed a Global Enterprise Agreement with SAP in December 2006 to aid its global business transformation project, thus enabling broad access to licensed SAP(R) solutions.

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Run Linux Apps on IBM Unix Servers

Beta software lets users run x86-based Linux programs on IBM's proprietary Unix server hardware.

Todd R. Weiss, Computerworld

Tuesday, April 24, 2007 9:00 AM PDT

IBM and other IT hardware vendors have for years touted the cost-saving benefits of running enterprise applications on industry-standard x86 hardware and Linux instead of on Unix systems that run on proprietary hardware.

That message notwithstanding, IBM Monday unveiled beta software that allows users to run thousands of x86-based Linux applications without code modifications on IBM's proprietary Power-processor-based System p Unix servers. The idea, according to IBM, is that some corporate users like the security, reliability and scalability of Unix while also wanting the benefits of server consolidation.

The beta software, now available for download, will allow users to run their Linux x86 applications in virtualized Linux environments in what is being called the IBM System p Application Virtual Environment or System p AVE.

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New-Style Software the Talk of CeBit

At the computer industry conference in Germany, "service-oriented architecture" emerges as the next big thing in business programs

by Jack Ewing, Businessweek.com

A market analyst, asked about the big trends at this year's CeBit computer industry trade fair in Hanover, Germany, replies: "Lots of buzz words." True enough. And one of the words (or phrases) buzzing loudest was "service-oriented architecture," or SOA.

The term has been around for several years, but this year the business software concept—which refers to applications that are chopped up into LEGO-like modules and delivered over networks to desktop PCs—seems to have reached critical mass.

German software maker SAP (SAP), which began working on SOA in 2003, reports a surge in new customers for SOA products and services in recent months. Peter Ryan, senior vice-president at Sun Microsystems (SUNW) in charge of sales for Europe, agrees: "I think it's here. Lots of people are making huge bets on it in their R&D labs."

Read More ....

SAP delays new mid-market software

Thu Mar 8, 2007 8:56am ET18

FRANKFURT, March 8 (Reuters) - Germany's SAP on Tuesday delayed its new business software for smaller companies until later in the year to allow for more testing.

The world's biggest business software company declined to estimate when exactly the product would be available. Slides presented by Chief Executive Henning Kagermann in January showed a launch was planned for the end of the first quarter.

Hans-Peter Klaey, the new head of SAP's small and mid-sized enterprises (SME) team, said on a conference call the product, codenamed "A1S", was being tested by customers but was not yet ready for the market.

Read More ....

Better Keep IT Simple

BY ELANA VARON, CIO MAGAZINE

Simplicity is the key to better IT, according to a recent study by The Hackett Group consultancy.

Even though world-class IT departments spend 7 percent more per end user on IT than their peers, they return more to the bottom line through reduced back-office costs, according to the study. These top-notch IT departments accomplish this in part by reducing architecture complexity.

That a streamlined architecture can improve IT operations isn't a new idea. But Scott Holland, senior director with Hackett, found that this practice, among others that promote good IT governance (such as the use of project management offices and service models such as the Information Technology Infrastructure Library, ITIL), contributes directly to financial performance. In companies with world-class IT departments, back-office functional groups such as finance, human resources and procurement were able to save between $2.1 million and $5.5 million for every $1 billion in revenue. Meanwhile, the cost of operating these functions, as a percent of revenue, is at least 13 percent and as much as 45 percent lower than at other companies.

One key factor: "World-class companies buy enterprise systems at the functional level," notes Holland. While Holland acknowledges that it could be a stretch for a mid-market company to invest in an ERP system, "there's a price to enter."

Hackett defines world-class companies as those that fall within the top quartile of the consultancy's benchmarks for efficiency (based on use of resources) and effectiveness (based on skills and processes).

In its analysis of data from about 200 companies, Hackett found that the best performing IT departments deployed 31 percent fewer applications for every 1,000 end users.

They were also much more likely to be operating a single ERP system, especially for financial management.

Simplification of the IT portfolio extends to the technology infrastructure. The top IT shops also use fewer development platforms, fewer databases and operate fewer data centers per 1,000 end users.