ERP is Back

This time, it actually may solve more problems than it causes.

The inside word at IBM is that enterprise resource planning—ERP to most of us—is hot again in the middle market. Even top execs at Big Blue were shocked.

But what surprised them isnt that the market has legs. No one in the upper reaches of the companies that stand to gain from this technology ever doubted that. Its that with big-ticket items down across the board, most people never thought this market would come creeping back so quickly.

This is a good sign for most of us. While the economy continues to gyrate from day to day, rising 400 points on news of Dells strong quarter and dropping 200 points the next afternoon, businesses are still focusing on improving efficiency through technology and preparing for future competition.

ERP, along with customer and/or partner relationship management (CRM/PRM), applications always have been—at least on paper—the most efficient way of running a companys internal operations. And used effectively, there is a clear return-on-investment equation.

The problem many Fortune 500 companies ran into with ERP is that they didnt know how to use these applications effectively. SAPs R/3, for example, isnt something you master as quickly as shrink-wrapped applications, and no company should ever expect to reap the benefits overnight. It requires extensive training in technology that at times can seem counter-intuitive, and it requires ongoing support that sometimes actually gets in the way of normal day-to-day operations.

Thats why many companies that implemented ERP in the past half dozen years didnt see the promised results. Its also why many of them jumped into the CRM/PRM market, because it gave CIOs that pushed for ERP in the first place a chance to show some concrete benefits.

But even more important, ERP requires buy-in across the company because it automates processes that span multiple departments, breaking down fiefdoms that in some cases have existed for decades. This is the ugly side of selling ERP, and its one no one likes to talk about. Politics is a powerful obstacle to change inside many companies, and so is a resistance to change itself. Even the best-intentioned employees unwittingly will resist a change thats larger than their line of sight because they cant envision the benefits.

While many IT departments have been shifted in the past several years to focus on maximizing assets and saving dollars through outsourcing, its been business as usual in other departments. The problem is that within those departments, working relationships and personal friendships have developed, and doing business by process instead of function looks to turn that world on its ear.

Still, that change is coming. The advent of the Internet, coupled with the Nasdaq meltdown, has forced nearly every company in America to rethink its go-to-market strategy. Large companies were the first to the party. Now midsize companies finally seem to grasp what they need to do to compete in the future, and ERP is a way of figuring out how money is spent and where costs can be cut.

In the past five years, corporate America has learned to use the Internet. Over the next five years, companies will shift their businesses to take full advantage of it.