The Abcs Of The New Erp

Moderator Dana Gardner • CNET Business Host • President & principal analyst, Interarbor Solutions

Featured guest Brian Sommer • Founder, TechVentive, Inc. • Fmr. senior director of Andersen Consulting‟s (now Accenture‟s) software intelligence unit

Featured guest Michael Krigsman • President and CEO, Asuret, Inc. • ZDNet blogger

ERP = Enterprise Resource Planning • A collection of application software modules/functionality that often includes: – – – – – –

Human Resources Accounting Manufacturing Supply Chain/Distribution/Logistics Procurement Customer Relationship Management

• Solutions often come with their own: – – – – – – –

Analytics Report Writers Business Intelligence Infrastructure Architecture File Management Integration Tools Etc.

Why do companies undertake ERP? • Experiencing inorganic growth or contraction (e.g., merger, divestiture) • Outgrow existing system • Current, old system incapable of meeting new regulatory or other time sensitive requirement (e.g., Y2K) • Using ERP to standardize processes corporate-wide

Goodbye Golden Age Golden Age of Software • 1970 – 2005 • Typical products: – Transaction processing – Automated manual tasks – Internal data focused – License/Maintenance Model

• More toolkit than solution – Great business for integrator

• Built in an age of constraints

Goodbye Golden Age

• • • • •

Started off as a ROI savior for businesses Reduced back office costs from an average of 4% of total revenues to 1.5% today Drove economic productivity statistics from 1960s to mid-1990s Without productivity gains, focus has shifted to TCO not ROI Decades of diminishing incremental benefits are forcing structural change on the industry

Buyers of apps have changed • Top execs now see application software like a refrigerator (replaced only when it wears out) yet vendors want buyers to see it as a fashion item (replaced every season as new styles come out). Vendors aren‟t winning this one. • Top execs see application software as a yawner – It‟s a cost of doing business – It offers tactical not strategic benefits – It is something they have no passion about

Versus

IT buyers/users • What they want from ERP vendors: – Provide innovation scan – Drive idea origination – Apply business lens to technology – Improve processes to 1st quartile performance levels (or better) – Bring them ROI not TCO – Plan for bringing the technology into their world successfully

• Why? They: – Are not technical – Have no time – Need help understanding the business implications of a new solution – Are unfamiliar with other best practices – Need technology that impacts top and bottom line – Are not integrators

The New Age? Hybridized Apps

• Current vendors have tough choices to make:

(Innovative Tech + Business Apps)

– Become a low cost leader – Rediscover how to deliver real ROI not lower TCO

No Leader Emerging

• Low cost leadership only possible if vendors: – Have huge economies of scale (i.e., large install base) – Offer less capital intensive High Cost solutions for clients (e.g., hosting) Solutions – Provide more extensive services (e.g., process re-engineering, process benchmarking, process transformation) Most of the

• No firm seriously approaching novel ways of identifying, integrating and exploiting innovative technologies beyond status quo

Low Cost Leaders

Apps Industry Traditional Functional Apps

Vendors must enable events • TCO not ROI – Settling for a less acceptable solution • Flight of Innovators, Early Adopters from traditional ERP to SaaS & BPO • Switching or upgrading costs are off the charts - $1 Billion SAP installs! • Believe technical innovation is all they need to provide & that „partners‟ will do the rest • Fantasy world – Still expect businesses to operate as they did in 1970

“CEOs want innovation not infrastructure”

–

Marc Benioff

Different buyers will choose different solutions •

Innovators

•

Early Adopters SIs, HR Service Providers, Open Source

• Innovators

• Early Adopters • Early Majority

Custom Systems, Business As Usual

BPO, Shared Services BPO

The market may well move away from traditional providers

SaaS, Hosted Systems •

Early Majority

•

Innovators

•

Late Majority

•

Laggards http://www.valuebasedmanagement.net/methods_porter.html

How innovative will ERP vendors be? Mimicry • Functional Solution • SOA, SOAP, Hosted Product • Comparable functionality to SAP, Oracle, etc. Introducing the Wheel Version 1.0

Derivative • Functional expansion of existing solutions • New enhancements to existing products

• Evolutionary not revolutionary • Designed for easier transitions for existing clientele or to avoid putting the install base at risk of predation

Innovative • Event-driven Solution • Non-narcissistic, balanced view of business, economics, internal transactions • New methods of data collection, aggregation, synthesis

The New Trinity

Events

Limitless vision

External data

New technologies

Key messages • Competitive and buyer landscapes are radically different than those present during the last great ERP sea change (i.e., Unix/Client Server) • Generic (i.e., cross-industry) solutions are struggling to remain relevant • New technical or economic approaches such as SaaS, SOA, etc. are commonplace and Undifferentiated – worse, CXOs are uninterested • Next buying binge may be great for BPO providers not apps vendors – have CXOs lost passion for back office solutions? • People don‟t deserve the ERP they‟re getting today – They need something better

What are some of the challenges? • ERP implementations are complex, involving business, organizational and technical change • Three distinct agendas must be harmonized: – Software vendor – Implementation partner – Purchaser

• How will value be delivered?

Implemention success or failure • Almost always determined by BUSINESS and ORGANIZATIONAL, rather than TECHNICAL factors • ERP implementations cause considerable change, and therefore disruption, inside an organization • Careful management is critical

ROI of an ERP implementation • Consider implementation costs in addition to software license costs • Implementation costs include services fees to the consulting firm (or software vendor) performing the implementation, training, and support • Failure to consider implementation costs can cause the project to go over-budget and behind schedule

Project initiation & planning issues • • • • •

Unclear or unconvincing business case Insufficient or non-existent approval process Poor definition of project scope and objectives Insufficient time or money given to project Lack of business ownership and accountability

Project initiation & planning issues (cont’d) • Insufficient and/or over-optimistic planning • Poor estimating • Long or unrealistic timescales; forcing project end dates despite best estimates • Lack of thoroughness and diligence in the project startup phases

Technical & requirements issues • Lack of user involvement (resulting in expectation issues) • Product owner unclear or consistently not available • Scope creep; lack of adequate change control • Poor or no requirements definition; incomplete or changing requirements • Wrong or inappropriate technology choices

Technical & requirements issues (cont’d) • Unfamiliar or changing technologies; lack of required technical skills • Integration problems during implementation • Poor or insufficient testing before go-live • Lack of QA for key deliverables • Long and unpredictable bug fixing phase at end of project

Stakeholder management & team issues • Insufficient attention to stakeholders and their needs; failure to manage expectations • Lack of senior management/executive support; project sponsors not 100% committed to the objectives; lack understanding of the project and not actively involved • Inadequate visibility of project status • Denial adopted in preference to hard truths

Stakeholder management & team issues (cont’d) • People not dedicated to project; trying to balance too many different priorities • Project team members lack experience and do not have the required skills • Team lacks authority or decision making ability • Poor collaboration, communication and teamwork

Project management issues • No project management best practices • Weak ongoing management; inadequately trained or inexperienced project managers • Inadequate tracking and reporting; not reviewing progress regularly or diligently enough • Ineffective time and cost management • Lack of leadership and/or communication skills

What are some tips for maximizing value and success? • • • • • •

Define project scope accurately Define clear budget and time specifications Define the ROI clearly Avoid software modifications Use external consultants carefully Change management, documentation, and training are important

How do major ERP vendors facilitate implementations? • On-demand model: SAP Business ByDesign, NetSuite • Traditional model: – Implementation toolkits (includes roadmap and documentation) – Packaged, productized services (fixed-price, time, and scope) – Pre-configured systems (includes tools, documentation, methodology)

Defining ERP deployment success • “Successful” ERP implementations meet the following criteria: – Project completed on-budget – Within timeframe – Fully accomplishing planned scope • Processes now delivering to expected performance levels (e.g., 1st Quartile benchmarks) • Implementation design permits quick, cheap upgrades

Conclusions • Note that these points are all about management, rather than technology. • Projects fail when expectations are not aligned with results; in a sense, that‟s the definition of failure. • Differences in expectations, goals, and priorities are substantial contributors to non-technical complexity, which is the underlying cause of most IT failures.

Questions and Answers

Featured guests

Michael Krigsman

Brian Sommer