The changing face of ERP

“ERP is eVolving.” A colleague of mine at the end of a long day and a half planning session wrote that on the white board as everyone headed off to airplanes, home and real life. It was Saturday after all. It’s a pity he didn’t write that sooner and hijack the meeting into consideration of what that means to the IT industry.

Let me throw out a few ideas and try to light a spark of discussion in this brave new millennium.

The major enterprise resource planning vendors, PeopleSoft, Oracle and SAP, have all come up with variations on the theme of Web enablement and browser-based applications. For lots of money, you can even use the portals that the ERPs will thrive on.

All of which begs the question, “Why would a company recreate its entire technical infrastructure for applications that most companies consider overhead?” We’ve all heard the argument that financial systems, payroll and HR don’t contribute to the bottom line. Even if they run more efficiently and reduce administration costs, it’s still an overhead expense. Seems to me the argument that browser-based is the wave of the future and is more efficient is the same argument made in the heady early days of client-server.

The ERP vendors did a superb job of improving administration, but they were and still are a “one size fits all” solution. The trouble is that one size doesn’t fit all as those of us who have tried to modify systems to accept business rules driven by a complex collective agreement know to our sorrow.

Add the fact that all of the vendors have an aggressive upgrade schedule that means reinstalling the changes almost every year and you have a situation where we never get around to installing all of the supplied functionality. Perhaps now is the time to look for the return on investment of our ERPs and install the functionality that’s going to make our administrative systems deliver at least some of the benefits we were promised. Then we can think seriously about the latest versions.

Now is also a good time to look at our operational system. The ones that do affect the bottom line. What systems do we have to support our sales efforts? A recent industry survey stated that the cost of sales in a well-organized company was eight to 10 per cent. The point being made was that most companies are not that good and the cost of sales is more likely 12 to 15 per cent. The bright new world of e-commerce was supposed to reduce that but it didn’t, at least not yet. Maintenance on the e-commerce systems, Web purchasing and selling only added to the infrastructure costs and didn’t replace the majority of sales systems or sales incentives.

Not very many of these systems interact well with the ERPs, particularly if your company took a financial solution from one, an HRMS from another and a CRM from somebody else. Mind you, there are vendors that would argue that a mix of systems isn’t an ERP. That’s one example. Another one is the health care industry. Hospital administration is being forced into efficiency by combining hospitals, reducing duplication of services and combining administrative systems.

If you look at the business that drives hospitals, it’s patient care. Hospital supplies are a huge variable and depend on the hospital specialties and a tremendous purchasing and inventory effort. Similarly, patient records last for the life of the patient. Data warehousing and archiving is a challenge in a hospital environment. Where are the integration points with the administrative systems, particularly the standard ERPs?

There isn’t room in this one column to discuss the merging of telephone companies with cable and wireless. Nor is there room to discuss the constraints of deregulation, compliance reporting and customer demand on utility companies. The point of all this is that ERPs are not dead, but they aren’t the total answer. They never were. Integration with business and operations systems is necessary but who is going to do it? It won’t be the ERP vendors, because they don’t know the business constraints, nor do they know the business systems very well. That leaves the folks in the front lines that have to figure these things out, build the ROI and make the effort. The evolution of the ERP belongs to us.

Horner is a partner at Sierra Systems Group Inc. in Vancouver. He can be reached at