Manufacturing companies weighing up the pros and cons of enterprise software solutions should look beyond purely quantifiable measures of return on investment (ROI) and include qualitative measures such as new business opportunities, improved customer and partner relations, better business process management and faster time to market.
This is one of the recommendations of Enterprise Applications Consulting (EAC) in its Beyond ROI: Enterprise Payback white paper.
"A decision to acquire new enterprise software that relied solely on quantifiable ROI factors would be limited in its ability to predict the ultimate success of the software. That success would include, particularly in the long-term, payback factors that are harder to quantify, and, therefore, more often than not left out of the ROI equation," the report concludes.
While ROI models focused on quantifiables are seen as useful and often necessary, the report maintains that such a focus leaves little room for a discussion of more qualitative success factors that are difficult to fit into a fixed economic model.
"Enterprise software buyers who understand the overall payback that a given product suite can offer their company will be able to make more informed choices that lead to success not just in software deployment, but in overall business functionality," says EAC.
The report was commissioned by global software vendor, Industrial & Financial Systems, whose South African subsidiary, IFS South Africa, is headquartered in Centurion. EAC surveyed a number of users of IFS`s enterprise software suite, IFS Applications, to define the payback being achieved. It found that "unlike most enterprise applications vendors", IFS was delivering both quantifiable returns such as increased inventory turns and lower material costs, as well as qualitative returns.
EAC`s survey measured quantitative and qualitative payback at the IFS sites based on five criteria: managing implementation costs; managing production and business transaction costs; managing business process change and enhancement costs; supporting and enhancing the customer and partner experience; and enabling new business opportunities. Every customer surveyed was found to be realising significant payback in at least three of the five categories.
IFS`s component-based, integrated architecture was cited as a significant payback factor enabling customers to incrementally implement the precise components needed and minimise ongoing systems, data and application integration costs.
Lower business transaction costs were also realisable throughout the lifetime of the product with National Semiconductor reporting that improvements in cash flow meant that the initial cost of IFS Applications implementation was recovered in the first six months.
Major benefits to manufacturers were process and material costs savings. On the inventory side, one customer said his ability to perform, for the first time, a complete resources planning run with IFS, showed an existing two-month surplus in supplies. Another user reported a cost saving of $100 000 in the first year by increasing its inventory turns.
Other reported costs savings include better monitoring and reporting of key business activities, including corporate performance management reporting cycles that took two to three weeks to close, are now said to be completed in a few hours, enabling companies to better react to competition and business changes. Overall corporate performance metrics are enabling companies to improve quality assurance processes and implement streamlined materials buying processes.
Business process management improvements were also reported with customers reporting changes to inventory and capacity management allowing them to provide improved customer services at lower costs.
`Payback is realised among companies of vastly different size and in different vertical markets, which means that the payback potential of IFS Applications is innate in the design of the software itself," EAC concludes.
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IFS develops and supplies component-based business applications for medium and large enterprises and organisations. IFS Applications, which can be implemented step by step, is based on Web and portal technology. The solution offers 60+ enterprise application components used in manufacturing, supply chain management, customer relationship management, service provision, financials, product development, maintenance and human resource administration. IFS offers customers an easier, more open alternative.
IFS interests in sub-Saharan Africa are represented by the IFS Group in SA. With revenues in excess of R60 million and a staff complement of 90, the group is one of the largest application vendors operating in the region.
A leading global business applications supplier, IFS has 3 000 employees, with sales in 45 countries, and more than 350 000 users worldwide. The company is listed on the Stockholm Stock Exchange (XSSE: IFS).
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