What happens to long-time analytics software vendors if enterprise resource planning (ERP) vendors now offer high-quality, cost-effective analytics applications, as they claim? David McWilliam, MD of Cognos in SA, explains why ERP vendors are finding it tough going in this alien domain.
For a long time customers have challenged ERP vendors to extract data from operational systems and make it available for meaningful and volume reporting or analytics. Almost every single company that has deployed an ERP solution is looking for an analytics component to its business for a number of reasons, not least of which is corporate performance management (CPM).
Gartner defines CPM as the combination of methodologies, metrics, processes and systems used to monitor and manage the business performance of an enterprise. Understanding the convergence between these aspects of CPM is key to enterprise success - enterprises that effectively deploy CPM solutions will outperform their industry peers.
ERP vendors, whose software is ideally suited to gathering operational information, not sharing it, have responded to the challenge by building analytics extensions to their systems. They are not specialists at analytics, but it is something they are beginning to offer customers that expect expensive ERP solutions to fulfil all their needs.
Another problem that ERP vendors face is the approach they use in deploying their software. This is typically performed around a specific data store, and there is comparatively little room to manoeuvre in this regard.
The analytics specialist companies take a top-down approach, seeking the real management needs as far as information in the organisation is concerned. The result is world-class analytics tools from the bigger vendors that have been in the game as long as 20 years, and a set of tools for analysis and reporting.
Those tools extract the data from various databases spread throughout an organisation, collate it into a central store, and then begin manipulation or querying, leaving the ERP solution to interface with a data store it prefers. The net result of employing a specialist analytics solution is that a company gets a set of tools management can use to answer any question, irrespective of the data source and ERP solution. In that way, the real intellectual capital input in an analytics project occurs beyond the data warehouse.
If you had to reverse the argument, and it was the analytics vendors making a claim that they could do ERP, vendors would quickly point out that they would have 20 years of work to play catch up with. The same applies to them going into the analytics field, which requires specialisation and experience.
ERP vendors have entered the analytics fray due in part to customer criticism that they have paid a huge amount for their operational system and they want to be able to analyse the data; and because this is viewed as a growth area.
That success stems from customers such as a large local life insurer using a balanced scorecard application to run its executive meetings; the management process it follows is to ask: "What are the critical issues in the organisation?" At the highest level there are probably 30 critical metrics that need to be measured constantly, and that life insurer is using an analytics system to monitor them. The insurer gets visibility from the system and accountability so that managers can drill down, get to the root of the problem or problems and solve them.
An ERP vendor would never go to that level today. They can aggregate the information from their systems and maybe even build a data warehouse, but the proper preparation and analysis of the data they should leave to the professionals.
What I would like to see in this space is a scenario, unlike the present one in many instances, where analytics vendors work closely with ERP vendors to deliver better results for customers.
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