Canadian companies are well-suited to ride what Deloitte Consulting calls the “second wave” of ERP implementations.
Deloitte identified two distinct phases of ERP implementations in a recent report, entitled ” ERP’s Second Wave, Maximizing the Value of ERP-Enabled Processes.” Going live with an ERP platform comprises the first wave – a process that’s already complete in many industries, Deloitte found. But it’s the so-called second wave, when companies refine their ERP platforms to yield competitive advantage, that’s preoccupying those that have moved beyond the go-live stage.
Bruce Parker, Canadian partner responsible for the manufacturing industry for SAP with Deloitte Consulting/ICS in Toronto, said with an overwhelming number of middle-market companies, Canadians are experts in rapid, inexpensive ERP implementations — and thus able to reap the rewards of the second wave.
“We’re getting very good here at rapid implementations and in our ability to roll in a lot of these (second wave) principles,” he said.
Of the companies surveyed for the report, nearly half said their ERP initiatives will be a never-ending process involving numerous tweaks and add-ons as the business changes — and that’s key to understanding the second wave, Parker said.
Though there are many reasons companies implement ERP, Deloitte identified three as the most common: to cut operating costs, to better track inventory and to improve the “visibility” of a company’s information — goals that are often realized, according to the report. And companies want quick results; 46 per cent indicated that they expect to see benefits within 12 months of going live.
But Deloitte said this is unrealistic, pointing to change management as the biggest obstacle to smooth implementations. “These things are about people, not so much the technology,” Parker said.
Ironically, it’s the people that ultimately drive competitive advantage from ERP, Parker added. “Companies start to realize that the shift of ownership of the process to the end users happens in a hurry with totally integrated ERP systems, and it’s their ability to empower those people…that really gives them competitive advantage.”
The report also found that ERP-related technology ultimately puts the teeth in ERP backbones. Many companies in the Deloitte report said they’ve turned to EDI, data warehousing, human resources and sales force automation solutions to complement their systems.
And that means deriving competitive advantage from ERP is a long-term affair. “Companies are now finding out that to extend their definition of ERP, they’re going to have to look at some strategic pieces to bolt-on to ERP, or put in some advanced functionality that ERP vendors are offering now,” Parker said.
Deloitte also concluded that ERP implementations are virtually mandatory for companies which want to run their businesses more efficiently, streamline processes and give employees a means to see their companies as a cohesive unit.
But Parker warns that dealing with the conflicting needs of first and second wave customers will put pressure on ERP vendors. “It’s very difficult to cover both these angles, and there’s lots and lots of companies that still need to go through their first wave implementation.”
John Lyons, business partner manager with J.D. Edwards Canada Ltd. in Willowdale, Ont., said the post-implementation rigidity of ERP systems prompted his company to launch the ActiveEra suite, which allows users of the J.D. Edwards OneWorld ERP suite to make changes when they want.
“[ActiveEra] allows our customers to make changes to their business processes or IT configuration post-implementation,” Lyons said. “It incorporates new companies they acquire, or changes from two to three-tier distribution models…those changes can be made with our software after the implementation.”
Colleen Niven, vice-president of worldwide marketing with Atlanta-based Geac Computer Corp., makers of the SmartStream and EnterpriseServer line of ERP products, said the issue of change management is something she’s heard many times.
“That’s usually the biggest hurdle when a new system is implemented. The IS organization and senior management have decided they want to bring it in, but the [end users] are a little hesitant,” she said.
Parker expects ERP vendors will continue to change as they adapt to new user concerns, especially in the area of application support.
“I think what will happen is companies will build up centres of expertise, or they will decide to completely outsource that type of activity, and we’ll see some new competition springing up to supply those services.”
Deloitte & Touche’s 12 Best ERP Practices:
Focus on capabilities and benefits, not just going live
Align the organization on the true destination: keep staff informed, set milestones, and focus on the next goal.
Achieve balanced people, process and technology changes across all areas
Use the business case as a management tool: it should change with the project and be used to set post-implementation targets
Apply planning and program management practices throughout the program life cycle
Transition project roles to a way of life: When you go live, roles change; prepare people for this shift
Build and leverage process expertise: important after go-live – create a centre of excellence or leverage your implementation staff
Extend capabilities beyond the ERP function: look at complementary applications that will help generate ROI from your ERP backbone
Promote post-implementation commonality: promote commonality before and after you go live
Teach the organization to use the new capabilities
Assign clear ownership of benefits: is it the business unit leader, the project sponsor or someone else?
Define metrics and manage them