By: Navin Parti
Modern day business is centered on three themes that drive it – Speed & Agility, Innovation and Customer Experience.
ERP’s of any form do not belong in it!
ERP technology evolved over the past few decades from a set of stand-alone, best-of-breed applications to a comprehensive end-to-end integrated suite that many enterprises expected would “do it all.” However, this vision has been rendered obsolete by the fact that, for most enterprises, the end-to-end approach did not deliver the value they expected and was observed as inflexible, slow, and costly to implement and maintain. The horror stories of failed ERP projects are the stuff of legends. As per a recent research, approximately 30% of ERP implementations fail to achieve even half the planned business benefits.
Examples include Waste Management suing SAP for $500 million, Hershey Foods’ 19% drop in profits from a failed SAP implementation, the complete FoxMeyer Drugs failed $100 million ERP implementation, and last but not least the over $1 billion spent by the US Navy on four different ERP systems, all of which have failed. Of course all of these big stores have been doing the rounds for a while now, and are somewhat dated, but the Digital innovation is likely to render this paradigm of development and their vendors irrelevant. What’s going on here?
Firstly, in the digital age Customer Centricity & Flexibility/Agility have become central to business
Businesses are becoming more outward-facing. Traditionally, ERP systems covered planning, manufacturing, sales, marketing, distribution, accounting, financial, human resource management, project management, inventory management, service and maintenance, transportation and e-business as such. Note the lack of any modules covering outward in approaches, such as Customer Experience capture, Journey mapping, Omni channel, end to end mobile experiences etc…
Modern businesses have increasing organizational appetite for digital business initiatives. Regardless of technology, new solutions must support more external interactions and variable interfaces to bring needed agility to enterprise processes. New IT requirements require a fundamental shift away from a single vendor mega suite toward a more loosely coupled and federated application environment.
ERP implementations are rife with duplicated effort, manual integration and inconsistent data. Resolving these issues was one of the benefits of ERP suites.
With Flexibility comes the need to manage multiple areas: integration requirements (for data, processes and applications), the management of multiple vendors, and increased testing frequency, to name a few.
Secondly, cracks in the ERP Foundation Cannot Be Just Patched Over
In many ways, approaching ERP is analogous to constructing a building. Many clients bypass the effort required to properly address fundamental issues underlying their existing ERP deployment — the “cracks in the foundation.” They assume that simply replacing poorly functioning areas with new applications will solve the problems. This is analogous to patching over cracks in a foundation — it may look good for a short while, but will have harmful effects in the long run.
Third, a belief that ERP SaaS Applications will solve all problems.
SaaS buyers usually fail to fully capture functional requirements and consequently fail to recognize the shortcomings of SaaS offerings. Organizations must not be misguided by thinking that cloud-based ERP SaaS applications will solve all of their problems. Understand that cloud does not necessarily equate to quicker, cheaper or easier, and plan accordingly.
The vendors promise delivery of regular new functional updates but there is no guarantee these updates will match your innovation needs. Innovation is a process, not a software application.
Integration is another issue – SaaS vendors often deliver partial integration sold as “prepackaged” integration, which is embraced as fact by LOB leaders eager to adopt a favored SaaS application. This often works in the short term, but fails to meet needs as applications and processes evolve over time. The complexity of long-term integration requirements is thus hidden in the cloud.
Due to the complexity and proliferation of applications and services, integration complexity is and will continue to be a moving target.
Last, Customization has been the main reason that on-premises ERP deployments have become costly and difficult to maintain and upgrade. The inability for individual organizations to customize the shared application code in SaaS ERP creates the impression that it will be much easier and less expensive to maintain.
Possible future directions
A combination of bespoke applications & off the shelf Financial Accounting and technologies now comprise the ERP “solution” for an enterprise, and not necessarily from the same vendor. The accounting world with its statutory requirements and rigidity lends itself well to a one size fits all solution. But since each business survives on its unique personnel, personality and way of doing business, they will develop applications that suit them and not worry so much of the much touted ‘best practices’ hocked by ERP vendors.
Of course as a consequence there are more choices but also more opportunities to make the wrong decision.
Postmodern ERP means organizations will likely begin acquiring applications from different vendors through multiple sourcing methods. Complex multisource ecosystems require enterprises to retrofit a service integration/ management role into their outsourced environments.
The competency required to support postmodern ERP is a skill that most organizations will not have automatically and should be planned for. Enterprises need a way to respond to the increased technology demand presented by postmodern ERP. Gartner’s Bimodal IT could be an approach to address this challenge. Basis this, the organization adopts two approaches to fulfill enterprise demand – one focused on agility & flexibility, the other centered on efficiency, predictability and a step-by-step approach.
Q3 is a leading Software solutions and service provider who believes in providing right-fit solutions options to our customers. Talk to us for these and more consulting issues to get the best out of your IT.