Before the onset of the recession and the meltdown in the financial sector, for businesses addressing change meant adapting to more cash coming in and what to do with it to keep investors happy or adapting to unprecedented growth – one of those “good problems to have”. Organizations were looking at 3, 5, and 7 year strategic plans with upwards of 20% growth year over year. A company doing $100 million in revenue might have had plans to double in size in four or five years.
As businesses were growing, building their customer base, and hiring, they may also have been planning to implement lean manufacturing or otherwise improve a host of business processes, from financial and R&D to product management, sales, and marketing. Along with the business processes improvements, IT managers were retooling their IT systems, upgrading their infrastructures, improving performance and security, or adding functionality for a host of business users.
But as the recession took hold the optimistic forward-looking projections changed. Revenues dropped precipitously and survival tactics were implemented across the board. Companies cut their work forces. Cost centers like Finance, HR, and IT gave up headcount. Even R&D headcount, usually the last to go, was reduced. New products in the pipeline were pared to the bare minimum. Manufacturing shut down to reduce WIP and labor costs. Purchasers cut orders to reduce inventory. Marketers cut back on tradeshows and direct campaigns, redirecting scarce funds to less costly online programs. Sales organizations were consolidated, products heavily discounted, and travel budgets reduced. Across the board employees were furloughed and salaries were cut. Performance-based bonuses were first severely cut and later completely eliminated.
At the same time that companies hunkered down in survival mode, the business environment continued to change. Markets changed, customers changed, and financial or other regulatory requirements changed. Technology changed as well. In the middle of the recession Oracle released upgrades to R12 which included new “global” functionality, important bug fixes, and improvements. Other technology vendors in the ERP ecosystem released new products. Despite the changes and even with significant loss of headcount, IT managers somehow continued to deliver and support IT to their internal or external customers.
Below we examine how the economy impacted five key business metrics: Productivity, Inventory, Days Sales Outstanding (DSO), Customer Satisfaction, and Retention, how organizations responded as the recession unfolded, and the effects they had – or should have had – on ERP systems. Read more…