For about eight months, on Monday morning,he would push the well-worn newspaper clippings under the door frame of my closed office door. They were folded and stained, but the newspaper clippings were marked with telling, cryptic comments. I miss them. I loved his insights.
When I was an analyst at AMR Research, they were gifts from my friend Bruce Richardson. He was helping me lighten up my writing and enjoy blogging. I was new at it, and he always wanted to be SURE that I had plenty of material. He did it again this week; albeit virtually, with his post reflecting on the twenty years of Enterprise Resource Planning (ERP) http://blogs.infor.com/inside/2010/08/erp-turns-20-what-happened-to-the-party.html. Yes Bruce, ERP is 20 years old; and there is no party. There are no trumpets blaring and revelations about value. The press guns are silent. There is also little accountability (from either analysts or software vendors). Do you think that we have forgotten the promise?
I started this blog post originally as “one score and fifty-two days ago, an analyst group brought forth on this planet a concept named Enterprise Resource Planning (ERP) and dedicated to the proposition that all transactions are created equal. Now we are engaged in a great civil war, testing whether the concept, or any packaged application concept, can long endure...” But, I stopped, because I love the Gettysburg address and I did not want to do it an injustice. A decade is a score, and we find that we are embroiled in a battle within the enterprise between Information Technology (IT) groups and the line of business of the value of ERP, and the future of packaged applications. They were purchased against the promise of lower costs, reduced IT risk and delivery of best in class operations. I think that it is time to give the score a score.
I think that it is time to step back and self-assess and give ourselves a score. How did we do against the promise? Instead, as ERP matures, the spend is on go-go marketing. I travel a lot and find that they are everywhere. At every corner, or hallway in the airport, you see a sign. They tout dominance and assume that the promise of packaged applications is a given. Company X installed application Y. Company Z has 9 out of the top 10 companies in industry QRS. However, I don’t find any company holding themselves accountable to the original promise. There is no score. So, I thought that I would share one.
How did we do? If the question is “how did we do on recording transactions, improving revenue recognition, and accounting for assets? I would give the effort a score of B+. If the question is “how did we do on the delivery of supply chain management for the enterprise?” I would give the effort a C-. If the question was “how did we do on building the end to end supply chain?” I would give the effort an F. I fear that we are stuck. The investments in enterprise platforms– traditional ERP, APS, and BI– are not moving us forward in delivering the solution for the end-to-end value chain. Here I share my thoughts and three steps to take now to accelerate progress.
The Score for the Score
- Did we lower IT costs? Sadly, I report that every study that I have conducted as an analyst in a manufacturing or retail industry sub-segment for the last seven years as an analyst says NO. So, quit beating up IT. We all took the plunge. It is what it is.
- Did we reduce risks? Yes, when packaged applications were implemented correctly, the applications delivered on this promise. It allowed us to tackle global markets, accelerate merger and acquisition activity and improve cash to cash processes across businesses. ERP is a foundational element of effective SCM.
- Did we implement best practices? The answer to this question is yes and no. Yes in accounting, yes in order management; but for evolving areas like supply chain, it was hard for a packaged application vendor to hit a moving target.
What do we do now?
The solution for the end–to-end supply chain from the customer’s customer to the suppliers’ supplier requires a rethinking of processses and a redesign. To make this happen, we have to change our assumptions and focus on:
- Rethink architectures. Most companies assumed that ERP would be the backbone for the end-to-end supply chain management opportunity. Unfortunately, it is not that easy. The true backbone has yet to evolve, but my prediction is that it will be a combination of collaborative technologies like Jive or Lithium (at the core) surrounded by a new definition of business analytics to sense and drive an agile response. Today’s supply chains don’t sense and the architectures drive a fixed response.
- Elevate the discussion. It about much more than about data, but the discussions will start there. In the implementation of packaged applications, we did not pay enough attention to data (e.g. data reuse, governance, enrichment) and the translation requirements between trading partners. The new world of decision support supported by new data types –unstructured text, video, channel data–can be used to sense demand, listen to the customer and understand near real-time market changes, but we need to rethink how we use these new types of data in operations to drive a flexible response.
- Reset expectations. Packaged applications assume that there is a supply chain established best practice. It is a moving target. We need to admit that there is no best practice for supply chain. It is evolving. The belief in best practice a score ago, is vastly different than today’s belief.
- Feasible? Economies of scale? The solutions within the enterprise need to be industry-specific. The solutions for the value chain need to be value chain specific based on value-based outcomes. This sounds simple, but it is not. Moving from an industry focus to a value chain focus for packaged applications vendors is a major change management issue, and there is a great unknown if it can be profitable for the software provider.
- Wean vendors off the maintenance drug. Software maintenance has become the drug of choice for software vendors. Guaranteed annuity payments drives the wrong behavior. Stabilize existing projects and push for return on investment of maintenance IT spending. In buying solutions, push for Software as a Service (SaaS) and Business Process Outsourcing (BPO) technologies to break the mold.
To cross the chasm, free yourself from old paradigms. Invest in cloud technologies, innovative SaaS applications, emerging value-chain applications, new forms of business analytics/decision support and collaborative technologies.
What do you think? What score would you give the score on delivering the promise?