A just-released research study from Ventana Research reveals that companies are underutilizing one of their key assets: their enterprise resources planning (ERP) system.Large corporations invest tens of millions of dollars in this type of software, which does their accounting, manages inventories and handles their human resources records. Yet most companies fail to use well-established capabilities of these systems in ways that will reduce their costs, improve customer satisfaction and support strategic initiatives, the study finds.

"A CFO would demand to know why their company was running a factory only one shift when it could be operated profitably for two or three, but that's exactly what most of them are doing with their ERP systems without even realizing it," observed Robert Kugel, who directs Ventana Research's Financial Performance Management practice.

Benchmarking data shows that in the 1990s, companies cut the cost of their finance operations significantly. Ventana Research's work points to ERP systems as the source of much of this efficiency. However, little progress has been made recently. Ventana Research estimates the Fortune 500 is currently saving $60 billion annually because of these investments. "Finance executives often are unaware of the impact ERP has had on efficiency, so they have been overlooking opportunities to use the full capabilities of the software to generate further savings," Kugel noted.

The research, sponsored by technology providers Cognos and SAP, investigated companies' attitudes and actions toward ERP and innovation. The findings are based on an analysis of 391 validated respondents. The survey was conducted with the assistance of media partners that included CMP's Intelligent Enterprise, GDS International's CXO Magazine and Business Management US, IT BusinessEdge, Montgomery Research's CFO Project, Penton Media's Business Finance, Reed Business' Manufacturing.net, and TechTarget's SearchOracle.com and SearchSAP.com.

Among the key research findings, Ventana Research determined that:

  • A majority of respondents believe ERP can drive and support innovation in 11 of 12 key functional process areas such as financial and managerial reporting, purchasing and compliance and risk management.
  • Process automation and integration are proven ways to cut operating expense, increase cash flow and reduce error and fraud. Yet only half of the study's participants have implemented an "order-to-cash" system that can accelerate cash collections. Only 30 percent are using image capture which can improve customer satisfaction by cutting the time to respond to inquiries and reducing costs by eliminating unnecessary paperwork.
  • Enhancing company performance requires companies use both financial and non-financial metrics to set objectives. Most modern ERP systems are capable of tracking much more than just accounting data but only 11 percent thought their ERP system captured all or most of the non-financial information they need to monitor employees' key performance indicators.

To learn more, visit www.ventanaresearch.com/connections2006.

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