Integrating IT asset management with ERP

"What do we have? Who`s using it? What is it really worth?" The struggle to manage capital assets for maximum utilisation and the greatest bottom line benefit centres on these questions. In large companies, the process of procuring, allocating, tracking and managing assets is a massive undertaking, with a major factor on the balance sheet.

In recent decades, enterprise resource planning (ERP) applications have been developed to consolidate the operational and financial management of capital assets by providing a wide range of integrated products.

Ultimately, ERP systems gather information from various business lines, which is rolled up into the balance sheet. Company officers then must sign off on the validity of the data in that balance sheet. This makes ERP a fundamental and strategic element of today`s large organisation; almost no major company can function without it.

From a corporate finance point of view, ERP systems are good at procuring and managing most types of fixed assets. On this basis, it`s easy to assume that these capabilities are also sufficient to manage IT assets.

However, there are unique elements in the management of IT assets that call for specific and detailed processes - at an operational and financial level - which go beyond traditional ERP capabilities.

Companies must now be able to prove that effective operational and fiscal processes are in place.

Inana Nkanza, MD, iLayo Software Solutions

In effect, one of ERP`s strengths - its ability to standardise how different types of corporate assets are bought, distributed and accounted for - becomes a weakness when it comes to the complex, dynamic and demanding world of IT. The unfortunate result is that the bottom line can be compromised due to over-payment for, and under-utilisation, mismanagement and incomplete accounting of IT assets.

IT asset management has emerged as a set of disciplines to control costs, manage inventory and improve IT asset use across the organisation. The goal is to manage the asset lifecycle, from request and procurement through to retirement.

Commonly considered an operational discipline, IT asset management now has strategic implications that bridge IT operations objectives and corporate finance objectives. The merging of these objectives raises an important question: what value does an IT asset management practice bring to the broader landscape of an ERP implementation?

Consider the level at which ERP implementations are capable of maintaining the financial integrity of IT assets. Besides simply procuring and accounting for them, the ERP system should support processes that prevent over-purchasing, ensure full asset utilisation, and provide an audit trail that demonstrates strong internal controls. In fact, few ERP systems are implemented to provide these capabilities. With IT assets accounting for a significant percentage of a company`s capital investment, this is not a trivial matter. Effectively managing IT assets requires specific and detailed operational and financial processes, which ERP suites simply cannot address.

Most ERP systems either lack the capability, or are not implemented specifically to exercise sufficient control over IT assets. The systems support strategic and financial reporting requirements. They are not designed to support the level of detail required to manage IT assets through their lifecycle, nor can they gather all the pertinent historical information needed to substantiate and justify current and future IT-related spending.

Best practices in IT asset management have always pointed to managing the lifecycle of an asset: tracking and managing costs, location, ownership, value and retirement. The challenge, then, is finding a way to exchange that granular information with an ERP system to ensure accurate reporting and documentation of internal controls. Government regulations make this challenge more urgent.

Companies must now be able to prove that effective operational and fiscal processes are in place. The solution is to integrate IT asset management information and processes with existing ERP processes, creating straightforward connections among fixed assets, procurement and human resources. This provides the detailed financial information and documented processes critical to financial managers.

The unique, complex and costly nature of IT assets makes it necessary to implement a detailed and granular system for tracking and managing assets throughout their lifecycle. ERP systems support procurement and fixed asset accounting at a macro level, while the micro level detail provided by IT asset management is mission-critical for cost management and regulatory compliance. Integrating the two systems is a matter of significant value to the organisation.

This integration has three major benefits:

* Cost savings: IT asset management provides the detail required to analyse and understand the true total cost of ownership for assets (and related services), from procurement through to disposal. This information lets IT and individual business units manage costs through better use of assets and ensures the ERP system is kept accurate.

* Service improvements: Integrating IT asset management with HR allows the IT organisation to time its requirements to specific events (eg, provisioning a new hire), assuring that each employee has the right assets at the right time.

* Risk mitigation: The need for financial reporting accuracy and documented internal controls is of paramount importance for senior executives. IT asset management practices enable the collection of key lifecycle management data so the organisation can better leverage the ERP system to mitigate risks associated with fiscal irregularities and audits.

In short, connecting the IT organisation`s existing asset management practice with the ERP application creates a powerful synergy from both an operational and financial point of view. It helps finance, the IT organisation and HR see technology assets in new and more productive ways, and provides the organisation with crucial support and process documentation data for navigating a changing regulatory landscape.