I gave a keynote presentation last week at the Manufacturing ERP Experience
conference in Chicago. You can watch the full presentation
by clicking on the image to the right.
Because the primary attendees were end-users and prospective buyers of ERP systems, I wanted to share something on current ERP trends and best practices for success.
But this presented a challenge: I've been speaking about ERP for over 20 years. How would a presentation on this subject be different today than one I would have given 20 years ago?
So, during the keynote, I thought of at least three ways in which ERP is different today, and one way in which it is still the same.
ERP as a Platform
Twenty years ago, ERP was viewed, in effect, as the final destination. For example, CRM was not yet popularized (Siebel was founded in 1993). In most companies, business intelligence was limited to report-writing or custom-built data warehouses. Mobility apps and collaboration systems were a long way off in the future. Even email was not well-established in business communications. So, ERP was where most of the action was, especially in the manufacturing sector, where it has its roots.
Although ERP was a hot topic in the early 1990s, today we understand that ERP really doesn't do all things equally well. Even the acronym "Enterprise Resource Planning" (an evolution of "Material Requirements Planning" and "Manufacturing Resource Planning" systems of the 70s and 80s) is a misnomer. ERP is not primarily a planning system, it's a transaction processing system. Its benefits are primarily in standardizing and automating business processes. To perform what-if planning, or to understand trends hidden in the data, or to gain a 360-view of customers, for example, you need to go beyond ERP.
Does that mean ERP is just one of many investments that an organization can choose to make in enterprise systems? Not at all. ERP plays a unique role in the applications portfolio, as the foundation for so many other things that organizations want to do.
Sure, you can go out and implement CRM as a standalone system, but CRM works better when it is integrated with ERP for end-to-end business processes. Some organizations have implemented supply chain management without ERP, but SCM is more powerful when it builds upon ERP as the system of record. Likewise, business intelligence systems, collaboration systems, and mobility apps add more value when they have ERP as their foundation.
Today, ERP is critical as the transaction processing hub of the organization and the system of record for major organizational entities, such customers, suppliers, people, orders, and accounting entries. In many respects, we can think of ERP as the new IT infrastructure, as a standard platform for building out the rest of an organization's enterprise applications portfolio.
Recognition of the Risks of ERP
The second way I think things have changed is in how organizations perceive the risks of ERP. Everyone has read about he horror stories of failed ERP implementations. Names like Hershey, Waste Management, and Nike are well-known examples. Many times the understanding strikes closer to home: most business leaders by now have either experienced for themselves, or heard from their peers, what can go wrong with an ERP implementation.
This wasn't the case 20 years ago. Executives often believed the hype of software vendors who claimed that implementation could be rapid or painless, or that business leaders could go about their jobs while the vendor, or a systems integration partner, did the hard work for them.
Very few executives believe this any more.
General Acceptance of Key Success Factors
Similarly, twenty years ago, executives were quicker to believe that new software could solve their problems, or that systems could be customized to match how the organization did business in the past. ERP projects were often viewed as "computer projects," not business projects.
Today, I find that business leaders have a better understanding of best practices for successful ERP implementation. They realize that ERP means changing now the organization does business. They usually recognize that top management needs to be committed and that it will require participation by all affected functions. They often realize that it is best to pick a system that fits the business, and as much as possible to avoid customizing software code.
But Outcomes Have Not Improved
So, if ERP plays a critical role, and executives understand the risks and best practices, then organizations must be more successful with ERP today then they were 20 years ago, right?
Sadly, I don't think this is the case. According to our 2011 survey, 38% of ERP projects exceed their budgets for total cost of ownership. Furthermore, as I indicated in my keynote, the risks of ERP go beyond cost overruns: ERP is particularly subject to functionality risks (the project was within budget, but the system doesn't satisfy key requirements), adoption risks (the project was within budget, but the organization is not fully using it), and benefit risks (the project was within budget, but the expected benefits are not realized).
So, what is the answer? The answer is that business leaders need to be reminded again and again about these lessons learned, and they need to execute on these best practices. So, while I could have given (and did give) much of this presentation 20 years ago, the lessons are still relevant.
You can watch a video excerpt of my presentation at the top of this post. The complete presentation is also available
on Youtube. And, if you'd like a copy of the slides, please email me. My contact information is in the right hand column.
Four problems with ERP
Solving the four problems with ERP