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Considering ERP complexities

The intricacies that come with integrating an enterprise resource planning project is changing customer demands.

By Ilva Pieterse, ITWeb contributor
Johannesburg, 01 Mar 2011

Deploying an enterprise resource planning (ERP) solution within an organisation is a multi-faceted feat, and its intricacies should not be ignored. Hedley Hurwitz, MD of Magix Integration, says: "The vendor sales pitch often glosses over the complexity and the dependency of integrating the new solution with legacy and third-party systems.

"Underestimating this aspect of an ERP project only leads to problems and vast cost overruns."

“We're meeting more and more companies that don't want just ERP.”

Swati Desai, country manager, HansaWorld SA

Companies generally deploy ERP in waves," says Ian Huntly, CEO and MD of Rifle-Shot Performance Holdings. "Which confirms the sheer volume of the work involved."

According to Swati Desai, country manager of HansaWorld SA, there has been a surge in demand for ERP solutions that offer more than just the basic business system components, such as customer relationship management, document management and other vertical solutions.

In the South African market, the integration problem is exacerbated by a lack of skills, Hurwitz believes. "Companies often find their ERP partners have all the skills required to customise the new software, but have no idea how to integrate it into the legacy applications that company relies on." At the same time, he says, in-house developers also have no idea how to adapt the legacy system that someone else developed and customised years ago, someone who has since left the company.

Uncertain times

10 questions for a successful two-tier ERP strategy

By Kevin Pentecost, territory manager Africa, Epicor Software
Most solutions have a 'sweet spot' where they can deliver the maximum benefit at their lowest total cost of ownership (TCO), but almost no solution is a perfect fit for all environments. A two-tier ERP strategy overcomes this issue by combining a tier-one solution for larger sites with a tier-two solution for smaller or more rapidly changing locations within a single integrated environment.
But what do businesses that are considering a two-tier strategy need to ask their vendors in order for this to be implemented properly?
1. Scalability - How scalable is your ERP solution in terms of numbers of users and supporting hardware?
2. TCO - What is your typical TCO for small and medium-sized subsidiaries?
3. Global functionality - Does your software support compliance and account requirements like IFRS, and local manufacturing regulations in the countries we intend to operate in?
4. Data consolidation - Can we consolidate data from across the business into the tier-one system we are already using?
5. Standardisation - Can we standardise on one version of your product across borders?
6. Support - What are the support costs and terms for your software in the countries we operate in?
7. Infrastructure - How can we get your software to work on the technical infrastructure we have in less developed countries?
8. Reporting - Can we run local and global reports to see how our business is performing?
9. Implementation - How do you ensure the software is set up in the same way in the various countries we operate in?
10. Upgrades - What happens when we want to upgrade our software?

"SA's competitiveness has been dropping," says Huntly. "We don't have the right tools for the job." Furthermore, he says medium-size to large companies have experienced several staff and budget cuts.

Desai says some companies held back from buying ERP in uncertain economic markets, and so as the outlook becomes more predictable, this pent-up demand is releasing. "However, even those companies that have downsized need greater efficiency."

Hurwitz believes the ideal of having one application that handles all business functions and ensures there is only one data record is definitely worth pursuing. "If implemented correctly, a system like this can deliver the financial, productivity and service delivery benefits every company desires," he says.

Desai adds: "We're meeting more and more companies that don't want just ERP, as they understand the complexities of hooking together their different systems, and the benefits brought by having everything in one application. Several of our prospects are specifically looking to increase their revenues through becoming more CRM-driven, which requires a system where there is a close interaction between queries on sales and business activities, and the CRM tools such as e-mail shots."

"Effective changes can be implemented when all the parties involved understand the integration work required to ensure seamless interoperability between legacy and new systems from the start," says Hurwitz. "In fact, it is advisable to include the integration partner in the procurement process to ensure all parties work together on a common goal."

In this way, Hurwitz believes, the ERP partner can implement the optimal solution making use of the latest technologies and methodologies, while the integration partner can ensure the legacy systems support the performance of the new solution.

Unfortunately, IT departments are guilty of showing preference to brand names that offer the best promises, according to Hurwitz, instead of understanding business needs and developing a solution based on delivering value. "Even worse, this problem usually becomes critical late in the process and this leads to ongoing costs, over-customisation of the ERP solution and the result is a bespoke application where the business only owns half of the source code, putting the company in a risky future predicament," says Hurwitz.

"The industry has seen huge growth in China where companies are opting for a specialised environment rather than big name companies," says Huntly.

At the core

Shedding light on recent events' effect on the ERP market

Conrad Steyn, MD of Barnstone
The first half of 2010 proved to be slow for the ERP market for a number of reasons, many of which were knock-on effects of the economic downturn experienced last year.
* Residual caution following a very tumultuous 2009 contributed in part to the slow start.
* Many companies had adopted a conservative 'wait and see' approach and became more inward facing with a focus on streamlining business processes and containing costs.
* Investment from an ERP perspective was judiciously spent on enhancing existing solutions to optimise the business as opposed to expenditure on new releases and large scale-deployments.
* Attracting and retaining key skills becomes even more critical during periods of uncertainty, so significant investment shifted towards talent management and employee retention programmes.

Now, 2011 looks promising as the economy continues to recover; the following predictions are expected for the coming months:
* With the deployment of ERP solutions being driven both by highly educated, ERP-savvy users as well as a need for entry-level type solutions, ERP solutions look set to continue diversifying product offerings to appeal to the different levels within the market.
* Enterprise-level users will still offer opportunity for the provision of highly optimised solutions but the real value will come from the emerging mid-market and SME segments.
* Technology developments in terms of better connectivity and the provision of cloud-based services will also aid smaller organisations (and even the larger ones) with the adoption of ERP solutions. The option of having software delivered as a service eliminates traditional barriers of entry around the hefty cost of infrastructure and deployments and makes a proliferation of services and functions available on a pay-per-use model.
* Improved bandwidth and connectivity is opening up this channel even further for operations situated in remote locations which were previously unable to access these solutions.
* Another factor to consider is the current speed of implementation. As solutions become more commoditised and easier to deploy, implementations are now faster. As a result the challenge shifts from the ERP system to the personnel and processes within the organisation, and their ability to acclimatise to and successfully adopt the new ERP environment. This is prompting service providers to focus not just on functionality, but also on the user interface and business process optimisation.

"One of the means by which we're delivering increased efficiency is through better use of new technology," says Desai. "For example, many of our customers are seeing significant benefits from using real-time barcoding for stocktaking, put away, and picking and packing processes, while others use mobile phones for everything from timesheets and management reporting to point-of-sale (POS), for reducing queues and bringing salespeople out from behind the counter."

Desai believes good technology is at the heart of the successful implementation of ERP, or more advanced systems such as an integrated business platform. "For example, if you have multiple sites, you may choose an ERP or POS system that has every feature you require, but if it runs too slowly over the wide-area network it will be unusable. Many companies over-complicate their selection process by getting too quickly into the detail, and missing the more important technology questions - such as can the system scale to the required traffic, will it run fast enough over the likely infrastructure, and can it run at all on required operating systems or devices?

“The better, modern systems out there are all customisable, and so can very likely bridge the gap between standard functionality and the plethora of small features a company deems essential to operate, but they can't address technology gaps without putting the project at significant risk of failure."

Desai believes IT people love over complicating things. "There is a solution out there for most problems, and the strong resellers can work many of them out. However, solutions with a good technology set at their core remove the risk to the customer of this approach. Would you rather buy from a vendor who is already deploying real-time mobile barcoding in a single application, or one who understands the theory of cobbling together a third-party customised solution on a local device with a messaging protocol and interfacing both external applications with their core ERP system?" she asks.

"Although CRM uses modern technology ie, social media, financial functionality doesn't need that - it uses the same principles as 20 years ago,” says Huntly. “Be careful when considering the benefits of the latest technology - make sure what it is you need it for. Needlessly, it can just be a distraction that can cause failures."

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