August 2, 2005

According to a recent survey of 271 companies, forty-six percent of ERP (enterprise resource planning) seats are unused. The study was conducted by AMR Research.

AMR said that nearly half of enterprise resource planning seats, although paid for, are going unused. Despite the legacy of the buying frenzy, there is still lots of room for ERP growth according to the research company.

This is an artifact of the Y2K ERP buying spree that saw vendors offer discounts on high-volume seat purchases. However, in the wake of the recession of 2001, "[some] companies actually downsized to the point where they had more ERP licenses than employees," notes analyst Jim Shepherd of AMR Research.

It's hard not to contrast this with the On Demand paradigm in which companies pay for the functionality they actually use, but the conclusion to be drawn isn't necessarily that the traditional ERP pricing model is in trouble.

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Instead, the responsibility is shifting to enterprises to more accurately determine what they need and calibrate their purchases to those calculations.

"Even when a company is planning a very large deployment of ERP, it tends to license small quantities of user seats and functional modules just ahead of the actual deployment," says Shepherd.

Despite the eye-catching 46 percent figure, AMR's survey revealed that 71 percent of companies are planning to up ERP spending (with an average budget increase of 14.6 percent) in the next 12 months, and that ERP activity "will quickly consume many of these unused licenses and increase demand for more."

Growth can continue even beyond that. As AMR discovered, only 15 percent of employees in a given enterprise are licensed for ERP, which isn't much "given the scope of modern ERP systems and the level of reliance on software applications for most business processes and job functions....most companies have a long way to go before they are fully deployed."

Source: Line 56