ERP systems cost more, offer less
It's a real challenge for business information to move beyond dealing with historical information to enabling decision-makers to create the future, said Sappi chairman Jock McKenzie, in his opening address at the ITWeb BI conference, in Bryanston, Sandton, this morning.
McKenzie, who is a former CEO of the Uhambo Project (a Sasol/Petronas joint venture), MD of Caltex Oil SA and CEO of Caltex, pointed to four types of information that is critical to decision-making: financial data, operational, political and economic environment information, and competitive information.
As a board member of many large organisations, McKenzie says access to financial data is pretty good - timeous and generally accurate.
“The challenge is that it is all historical and yet executives make decisions about the future based on it. It is like trying to drive with only the rear-view mirror - you can see where you came from, but not where you are going.”
Every ERP system I've been involved with has offered lower than expected.Jock McKenzie, chairman, Sappi
Current operational data should be easy to access, but it's not, says McKenzie. “Decisions are made in 70-80% of the cases on financial data and only 20% on the underlying operations data that is driving the financial data. Executives need financial and operational information concurrently.”
McKenzie also commented on the plethora of data and forecasts on political and economic environments that is not of much use. “I receive an inordinate amount of information and very little intelligence. What analysts were recommending 18 months ago was 100% wrong.”
Obtaining competitive intelligence is also a challenge. “Lots of information is available on the current performance of competition and easily available in the public domain, but where are they going from a strategic perspective?”
McKenzie cautioned about the cost of implementing and the expectations of ERP systems. They invariably cost more, take longer and the functionality is lower than expected, he noted.
“Every ERP system I've been involved with has offered lower than expected. I am not blaming systems providers alone - also to blame is the business executives' input that is lacking in the front-end of many of these systems. Executives and operational experts need to be involved and you need to integrate intelligence from both these sides.”
Businesses often fail to extract the value from the costly IT implementations. In his experience, users of the system can be accessing as little as 10% of the functionality as user training lags far behind the technological capabilities of the system. “What you paid is 100%; it's a people and training problem if you are not using it.”
A “personal bugbear” for McKenzie is that “once you have spent all that money, you are tied in to the vendor's every upgrade - you need to realise it's difficult to get off of the system, so think of the implications when you are committing to it.”
He pointed to the example of the 80s and 90, when large businesses spent “inordinate amounts of money on IT, and I can think of very few examples where lasting competitive advantage was created though IT. What I have learnt is that it's better to be agile and fast followers than on the bleeding edge of tech adoption.”
As for future challenges, McKenzie highlighted the proliferation of volume and sources of data. “The ability to analyse and present the data to decision-makers lags far behind the data proliferation. The challenge is to achieve inter-connectivity of all applications and seamless inter-relating to your staff, customers, suppliers... while making sure governance and protection of personal information is in place.”