The savings are expected to be delivered by the end of 2004 following the completion of the project, which involves migration of business systems from a vast number of legacy and bespoke systems to a unified client-server environment based on Compaq, Windows 2000, Oracle and IFS ERP software.
Steve Walton, MG-Rover's business systems manager, said, "The first module to be fully implemented was purchasing. We have reduced support costs from about £220,000 per annum to about £30,000. We expect a reduction in costs from £200,000 to £20,000-£25,000 per year in the [ongoing] finance module implementation.
"Overall, we expect total savings of about 40%."
The company plans to roll out IFS modules for warranty, payroll, bills of materials, human resources and administration, and similar savings are expected.
MG-Rover's IT department faced a massive task in rationalising the legacy environment at six sites and coping with a history spanning various incarnations of the company from the nationalised British Leyland, through the Rover Group and the later takeover and subsequent disposal by BMW.
When MG-Rover emerged from the BMW Group, the IT department first had to clone data for the successor companies, renegotiate software licences and then set about unifying what remained.
Walton said, "The systems that supported the business were clumsy and cumbersome, were up to 20 years old and included every kind of database and operating system you could think of."
ERP systems are being standardised around IFS modules to minimise costs arising from fixing interface faults, which Walton said previously accounted for 60% of IT department costs.
Simon Bragg, an analyst with ARC Consulting, said, "Many say that there is no return on investment on ERP. However, many users do not appreciate what would have been the extra costs of maintaining a landscape of disparate, hand-crafted bespoke packages.
"That the ERP market is in decline is not because 'it doesn't work', it is just that the ERP suppliers have already replaced most of the legacy systems."