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The Development of Enterprise Resource Planning Systems
• Length of time required for implementation (which causes disruption of business)
• Training (which costs both time and money)
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A large company, one with well over 1,000 employees, will likely spend $100 million
to $500 million for an ERP system with operations involving multiple countries,
currencies, languages, and tax laws. Such an installation might cost as much as $30
million in software license fees, $200 million in consulting fees, additional millions to
purchase new hardware, and even more millions to train managers and employees—and
full implementation of the new system could take four to six years.
A midsized company (one with fewer than 1,000 employees) might spend $10 million
to $20 million in total implementation costs and have its ERP system up and running in
about two years.
A smaller company, one with less than $50 million in annual revenue, could expect to
pay about $300,000 for an ERP implementation, and one with revenue of $100–250 million
could spend around $1.4 million. For these smaller companies, implementations usually
take about 10 months.

Should Every Business Buy an ERP Package?
ERP packages imply, by their design, a certain way of doing business, and they require
users to follow that way of doing business. For a particular business, some of its
operations—or certain segments of its operations—might not be a good match with the
constraints inherent in ERP. Therefore, it is imperative for a business to analyze its own
business strategy, organization, culture, and operation before choosing an ERP approach.
A 1998 article in the Harvard Business Review provides examples that show the
value of planning before trying to implement an ERP system: “Applied Materials gave up
on its system when it found itself overwhelmed by the organization changes involved. Dow
Chemical spent seven years and close to half a billion dollars implementing a mainframe-
based enterprise system; now it has decided to start over again on a client-server version.”
In another example, Kmart in 2002 wrote off $130 million because of a failed ERP supply
chain project. At the time, Kmart was not happy with its existing supply chain software,
and it attempted to implement another product too quickly.
For years, the giant U.S. retailer Walmart chose not to purchase an ERP system, but
rather to write all its software in-house. Walmart’s philosophy was that the global strategic
business process should drive the technology. The company’s IT personnel were
encouraged to consider the merchandising aspect of a process first and foremost, and then
let the technology follow. However, in 2007, Walmart changed its course and decided to
implement SAP Financials. The CIO of Walmart is reported to have said that
implementing SAP’s financial package would enable the company to grow in many
countries, including China.
ERP systems are popping up in some unlikely industries. The government of Singapore is
implementing an ERP project that will link 20 different healthcare providers together under
one system, which is estimated to be 20 percent more efficient and will eliminate a
tremendous amount of duplicate information. Along with the normal modules that an ERP
system contains, such as financials and human resource management, this enterprise
healthcare system will include electronic medical records and clinical management modules.
Sometimes, a company is not ready for ERP. In many cases, ERP implementation
difficulties arise when management does not fully understand its current business
processes and cannot make implementation decisions in a timely manner. An advantage of

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