ERP II – Deja-vu?

Large companies the world over rushed to get their ERP implementations completed to beat the Y2K deadline. A bizarre trend is now emerging: the re-implementation of ERP, otherwise known as ERP II.
Many large corporations found that, having spent huge sums of money on ERP on the promise of “standard business processes for the measurement of overall business performance” they didn’t quite
manage it the first time round. Instead of having different versions of their corporate data locked away in different systems, now they have different versions of their data locked away in
multiple, incompatible ERP implementations. Will the money for ERP II be any better spent this time around?

It would be interesting to re-examine those former cost benefit cases for ERP: “Ah yes, we can justify this vast expenditure on the standardization of our business processes, which will have great
savings in the business. And of course our IT budget will be greatly reduced as many of our old systems will be replaced by a new package”. Well, if the holy grail of standardized business
processes did not occur, where are the benefits? Also, has anyone noticed their overall IT support costs dropping massively after an ERP implementation?

One might imagine a certain amount of chagrin on the part of those managers who recommended the ERP implementation, given that the benefits have proved so elusive. Apparently not. Figuring that the
best means of defence is attack, project proposals are now being mooted to “re-implement” the ERP systems in the form of ERP II. Why it is felt any more likely that business processes can be
bludgeoned into standardization this time around when they manifestly did not last time is anyone’s guess.

Perhaps it is time to realize that standardization of business processes across a global enterprise is a pipe dream. While general ledgers may indeed be the same, the idea that markets in Italy are
the same as those in Japan, or that the business process that makes sense in a huge developed country is appropriate for a new market in a small country, is surely absurd. Even if you could
persuade the business managers in a small, developing country to adopt the processes defined in central office, are these not likely to impose unwieldy constraints on the business? And how likely
is it that the central office analyst has thought out a strategy that will work equally well in Beijing as in Baltimore?

Capturing the underlying business transactions through robust ERP systems is a good thing. Using it as a means to stifle innovation and lock businesses in to the processes devised by a software
vendor is not. It makes sense to standardize finance systems – after all, the principles of double entry book-keeping were established by the Venetians. But marketing?

Also, suppose you operate in an environment where you make a lot of acquisitions or divestments (and some large companies make dozens of these a year). Even, suppose, through a Herculean effort you
achieve standardized processes within your own company, you can be utterly certain that your shiny new processes will not be the same as those of the companies you have just bought. How will you
measure your overall business performance now? Let’s see, it takes at least one or two years to re-implement ERP in the acquired company, but we are buying a new company every quarter or so… How
long until the nirvana of standardized processes? You do the arithmetic. You will be chasing your tail forever.

Standardization initiatives miss the point. What is mostly required is not the rigid standardization of business processes for its own sake, but the ability to see how the business is performing
even though the businesses in different countries are not the same. A modern data warehousing strategy that manages the inevitably different business structures in varying countries will in turn
allow “apples and apples” comparisons despite the diversity of systems. For example, you should be able to see the overall profitability of products by channel, customer or geography, even though
the underlying data structures in the source ERP systems are different.

As long as you have the architecture and software in place that allows you to analyze data even across differing structures that change, you simply do not need to force all your operating companies
into a straightjacket. But don’t tell that to the management consultants who are about to make a second fortune by re-implementing the ERP systems they put in the late 1990s; they might not like
it.

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About Andy Hayler

Andy Hayler is one of the world’s foremost experts on master data management. Andy started his career with Esso as a database administrator and, among other things, invented a “decompiler” for ADF, enabling a dramatic improvement in support efforts in this area.  He became the youngest ever IT manager for Esso Exploration before moving to Shell. As Technology Planning Manager of Shell UK he conducted strategy studies that resulted in significant savings for the company.  Andy then became Principal Technology Consultant for Shell international, engaging in significant software evaluation and procurement projects at the enterprise level.  He then set up a global information management consultancy business which he grew from scratch to 300 staff. Andy was architect of a global master data and data warehouse project for Shell downstream which attained USD 140M of annual business benefits. 

Andy founded Kalido, which under his leadership was the fastest growing business intelligence vendor in the world in 2001.  Andy was the only European named in Red Herring’s “Top 10 Innovators of 2002”.  Kalido was a pioneer in modern data warehousing and master data management.

He is now founder and CEO of The Information Difference, a boutique analyst and market research firm, advising corporations, venture capital firms and software companies.   He is a regular keynote speaker at international conferences on master data management, data governance and data quality. He is also a respected restaurant critic and author (www.andyhayler.com).  Andy has an award-winning blog www.andyonsoftware.com.  He can be contacted at Andy.hayler@informationdifference.com.

 

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