Friday, December 16, 2005

One size does not fit all

An article in Computer Weekly today by Martin Fahy contains some excellent insights into why "single instance ERP" is mostly a fantasy. An academic, he has conducted a survey of CFOs and his research has unearthed found some interesting findings. Firstly:

"CFOs and senior finance executives prefer technology architectures that are robust across a wider ranger of organizational circumstances"

Spot on! One of the limitations of ERP systems is that they impose a rigid business model - indeed this was one of the selling points: "sweep away all that inefficient duplication and standardize around a single set of processes". The trouble with this is that businesses do have unique requirements in particular territories or markets, and are at different stages of development. What may make sense in a mature market such as Germany make not do so in a fast-growing developing market like China. The more widely the scope of a single ERP implementation, the longer it takes to implement and the more functionality that needs to be loaded onto the project. Changing this becomes ever more difficult given its scale, making the business less reactive to changing circumstances since its business processes are essentially frozen.

"CFOs in particular are skeptical about making further investments in second wave ERP until payoffs from the first wave of implementations is realized"

This is a woefully under-discussed topic. Lots of people made money in the yah-fuelled ERP boom of the 1990s: certainly vendors like SAP and Oracle, and definitely the consulting firms that implemented these systems. Yet how often have these systems actually delivered the returns that they promised? Since a pitiful 5% of firms actually carry out regular post implementation reviews (according to Aberdeen) few people really know, but my own experience at two multi-nationals would suggest this is not a topic that executives want to highlight. At one company I am familiar with, an ERP consolidation project is underway that is estimated to cost a billion dollars, and will take eight years. Given the track record of projects that size, it is hard to be optimistic that something won't change in that timeframe that will affect the project.

"users tend to find ERP functionality cumbersome, complicated and not in keeping with their established work patterns"

Indeed. I have written elsewhere about this.

In my view, CIOs spend too much time worrying about "simplifying" core infrastructure, where benefits are at best difficult to pin down, and not enough on truly value-added initiatives that business people can relate to, such as ones that enable better customer understanding.

The study concludes that "For the foreseeable future single-instance ERP will be a popular rhetoric, but a scarce reality". Given the real and very high costs of getting there (Nestle, the poster child of single instance ERP reportedly spent USD 3 billion dollars on this) and the ever-elusive payback, one wonders how any of these initiatives ever get signed off at all.


Anonymous Anonymous said...

Another insightful seeing-woods-in-the-tree, and calling-a-spade-a-spade comment that I truly enjoyed reading.

Having been in DW/BI business for quite a long period of time, I totally agreed with you!

5:51 AM  

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