Monday, November 17, 2008

Disadvantages of an ERP

Customization of the ERP software is limited.
Re-engineering of business processes to fit the “industry standard” prescribed by the ERP system may lead to a loss of competitive advantage.

* ERP systems can be very expensive leading to a new category of “ERP light” solutions
* ERPs are often seen as too rigid and too difficult to adapt to the specific workflow and business process of some companies—this is cited as one of the main causes of their failure.

* Many of the integrated links need high accuracy in other applications to work effectively. A company can achieve minimum standards, then over time “dirty data” will reduce the reliability of some applications.
* Once a system is established, switching costs are very high for any one of the partners (reducing flexibility and strategic control at the corporate level).
* The blurring of company boundaries can cause problems in accountability, lines of responsibility, and employee morale.
* Resistance in sharing sensitive internal information between departments can reduce the effectiveness of the software.
* Some large organizations may have multiple departments with separate, independent resources, missions, chains-of-command, etc, and consolidation into a single enterprise may yield limited benefits.
* The system may be too complex measured against the actual needs of the customer.

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