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ERP Modernization: Why It’s a Top Priority for Midsize Companies in 2012

The last great wave of ERP modernization occurred in the lead-up to Y2K, but according to industry experts, a unique set of business, economic, and technological forces are converging to make ERP modernization a top priority once again in 2012.

In February 2012, Oracle gathered a panel of industry experts including Eric Kimberling, president of Panorama Consulting Solutions; Lyle Ekdahl, group vice president and general manager of Oracle's JD Edwards enterprise applications; Jeanne Lowell, vice president of Oracle's E-Business Suite strategy, and moderated by Larry Simcox, senior director of the Oracle Accelerate program —to discuss the building momentum for ERP modernization.

The panelists identified the following forces that are driving this burgeoning phenomenon.
  • Volatile economic conditions
  • Increased scrutiny by equity firms into the IT systems of pre-IPO, high-growth firms
  • Increasingly aging ERP systems that are becoming very expensive to maintain
  • Old systems ill-adapted to transformed business conditions in 2012
  • Faster to deploy, lower overall total cost of ownership (TCO), and lower-risk access to enterprise-class software
Business Conditions: 2000 vs. 2012
Many midsize organizations are running ERP systems that have not been fundamentally re-architected since 2000. And yet business conditions have evolved dramatically in the last decade, from surging mergers and acquisitions to increasingly widespread globalized operations. At the same time, customer service expectations have risen dramatically in the age of the millennial consumer.

"Suddenly there’s a mismatch, as companies have evolved dramatically and yet they haven’t invested in their core enterprise systems to keep up with these changes," says Kimberling.

At the same time, aging systems are becoming increasingly difficult to manage, with many companies devoting as much as 70 percent of their IT budget to just keeping current systems up and running.

"Business leaders at midsize companies tell me that given the challenges of limited capital, they want to turn that 70/30 proposition on its head," says Ekdahl.

More to Gain at Lower Cost and Risk
According to the panelists, midsize companies also have more reason than ever to invest in ERP solutions. Today's solutions are much more robust and feature-rich than solutions developed more than 10 years ago, especially in terms of CRM, business intelligence, and complex manufacturing and supply chain management.

Why do they hesitate? Because many midsize companies have bad memories of slow, expensive, and disruptive implementations, especially if their last big update happened more than 10 years ago. But a range of innovations is making ERP adoption far faster, more predictable in scope, and less risky, according to the panelists. And in 2012, midsize companies have many more implementation choices, including robust new deployment options such as cloud and appliance offerings.

Want to dig deeper? Watch a panel of industry experts on the on the topic of "Modernizing Applications—The Top IT Project."

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