ERP: How and Why You Need to Manage It Differently

ERP: How and Why You Need to Manage It Differently

CIOs say that for ERP to have a viable future inside their companies, stretching out price increases isn't enough

New Technology Tricks

ERP isn't much different today than the technology early adopters installed 15 years ago. But new technologies make traditional ERP seem dated. "The concept of ERP is not dead, but the technology under it is," says Bill Brydges, managing director of the ERP practice group at the consultancy MorganFranklin.

Cloud computing, mobile applications, social knowledge sharing and predictive analytics present trouble spots for CIOs trying to move ERP systems into the future. The pay-as-you-go, elastic economics of cloud computing are coaxing CIOs to question how ERP should be delivered. They also wonder, with other parts of the enterprise becoming accessible via cell phone, which parts of the ERP system can and should be available in the palms of users' hands. And there's a screaming need for better analysis tools to make sense fast of the data generated by ERP suites (Read "A New Source of ERP Value," for more about ERP-based analytics).

With their significant investment in existing code base, ERP vendors can't keep up, Brydges says. It's a classic problem: They have a legacy core to tend and it's not like every module in an ERP suite can be smooshed onto a Blackberry or an iPhone.

"Technology has gotten out ahead of them," he says, forcing the vendors to open application programming interfaces to let newer tools from other suppliers fill gaps. Integration, however, falls largely to CIOs.

Cloud computing looms as one of the "interesting disruptions" in IT now, and ERP is no exception, says Clayton Christensen, professor of business administration at Harvard and an expert on disruptive innovation. Christensen warns ERP vendors that many companies in industries such as automobile and steel have gone down at the hands of low-cost competitors, but what's trouble for ERP firms could present an opportunity for CIOs.

Some CIOs are looking for cloud services from their ERP vendors to get out from under the upgrade-and-compatibility testing grind. But so far there's no option to put mainstream ERP systems in the cloud, causing customers to miss out on a way to cut the cost of operating their biggest, perhaps most basic systems. Newer vendors, particularly those whose business model is software as a service, may be able to pick off parts of the ERP market by offering specific cloud-based modules, much the way Toyota began to peck away at U.S. carmakers decades ago, Christensen says.

General Motors looked at Toyota's subcompacts and said it didn't make sense to compete to defend the least profitable segment of the market. "So they kept giving away those least profitable tiers one by one as Toyota grew," he says. "Where are they now?" Harten, the Haworth CIO, would like to add mobile functionality to her SAP ERP system. Haworth provides interior solutions for customers, including furnishings, raised access floors and modular walls. To speed the process, Harten explains, Haworth employees or outside dealers and installers could use mobile devices during walk-throughs to record "punch-list" items to be corrected, ordering them in real-time via an interface into the company's SAP system. Except they can't. The software doesn't exist. "Should SAP not provide the necessary APIs to accommodate our time line, we will need to develop alternative solutions," Harten says. "My number one request is that SAP head in that direction." SAP, Oracle and others have said building APIs to popular mobile devices is on their agendas, but their time frames are vague.

Choice Hotels has used PeopleSoft Financials for 12 years and PeopleSoft Human Resources for eight. Now the hotelier wants more Web functionality from both. So many resumes and other information from job applicants are processed online that converting Web forms to work in the existing human resources software bogs the process down, says VP of IT Galonis.

Specifically, she is considering SaaS or cloud-based products for talent management, recruiting and succession planning from vendors other than Oracle, which owns the PeopleSoft line of software.

Getting these capabilities via cloud computing would let Choice Hotels shed on-premise infrastructure and redeploy IT staff currently caring for those servers and software to more valuable roles, she says. Being selective is critical, though, because she wants to be sure that new software and services work with the core PeopleSoft systems. Choice Hotels also plans to refresh its employee intranet to promote more knowledge sharing and interactivity among users via wikis and blogs. Galonis may bring in Microsoft Sharepoint for these features, she says, to fill in what's missing from the PeopleSoft applications.

Galonis will decide which way to go this year. Changing and customizing ERP software is a big task. But supplementing her core ERP systems with individual packages or services from other vendors would let her IT department serve employees and job candidates better, she says, supporting the company's plans for growth. "We would be able to move more quickly and react to demands."

The Once and Future ERP

CIOs have to take charge of what the future of ERP is going to be. Treating ERP as legacy IT may be hard for some who have invested so much time and energy planning, implementing and tweaking these systems. But adopting this mind-set will help CIOs move ERP--and their companies--ahead. Modifying the base applications judiciously, if at all, will minimize expense and time devoted to software that now provides the most basic functionality. Everyone does accounts payable, notes Stanec at Piggly Wiggly, so don't waste time customizing it.

A solid stance on maintenance--forcing vendors to sell you on its value, rather than just sell you a deal--will push customers ahead financially, says Tracy at Dana Holding. Other CIOs may want to consider dropping maintenance fees to primary ERP vendors if they, too, feel other resources can fill the gap, using instead a wealth of resources available online. Unlike vendors, he says, "People love to share their knowledge."

Meanwhile, Christensen advises, CIOs need to keep making noise about bringing in upstart vendors that offer the technology the big guys don't. CIOs Galonis at Choice Hotels and Harten at Haworth are doing just that as they pressure their current vendors to hurry up with new capabilities.

Further out, Stanec, for one, dreams of seeing ERP vendors develop packages that help companies generate revenue. "Then," he says, "we'd have something interesting to negotiate."

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