Are you doing it Right? ERP and Business Objectives

Vijay Reddy

INDIA: According to a study by Gartner on ‘Adoption of Cloud ERP, 2013 Through 2023’, which extensively investigated about companies ranging in size from $10 million to $10 billion across North America, EMEA, APAC and Latin American markets, has revealed that cloud ERP is the potential replacement for aging core ERP systems that are out of support or running on an old technology platforms such as mainframes. In ‘The Rise of the Postmodern ERP and Enterprise Applications World’, Gartner predicts that by 2018, at least 30 per cent of service-centric companies will move the majority of their ERP applications to the Cloud.

Since ERP implementations can impact business functions it is imperative to ascertain the true value of incorporating ERP systems within an organization. The duration and success of implementations, however, will depend on a variety of factors. While the technology matters, the key to a successful ERP strategy is built around the business needs and the goals to be accomplished.

ERP meeting business objectives

The value from ERP is not just confined to its actual IT implementation phase but also needs long-term business strategy for improvement of business. For meeting business objectives ERP platforms must have a certain level of customization and collaboration of executive and business management with IT. It is necessary to establish key performance measures, set targets for those measures, and track performance after the system is up and running. In order to utilize ERP platforms for meeting business objectives IT vendors must be careful in planning and development of a road map with business thereby helping ease cost constraints by taking inventory of existing technology and business application portfolios as well.

ERP helps the enterprises by enabling organizational integration, and by eliminating silos of data and empowering units or departments across verticals to partner with one another on mutually shared objectives.

Key to deriving business benefits from ERP solution depends on two factors: one, the selection of the right ERP software package that meets the industry and organizational business requirements.

Second is a well-designed implementation plan. ERP implementations require commitment of resources and time by senior business managers to ensure success and alignment with business objectives. ERP solution can be implemented in one of the two ways; one, by installing the on premise ERP software and customizing the same to meet the specific business objectives of the organization. The alternative is to subscribe to cloud-based ERP solution.

Cloud-based solution does not require expensive upfront investments in IT hardware and servers, and the associated resources to manage and maintain. With cloud-based solutions, product upgrades are delivered seamlessly and the latest features and functionalities are always available for managing the business.

ERP solution - whether on premise or cloud based – requires adequate planning and time to implement. Most of the organizations take the help of experienced, knowledgeable ERP service providers to implement ERP solution. While working with third-party ERP service providers, you need to clearly define the business objectives, performance metrics and determine the ROI before any ERP implementation exercise. ROI determination requires a good understanding of the costs involved and benefits that will be accrued.

Total costs of the solution include components such as software, hardware servers, upgrades, support and maintenance services, training, and application customization and implementation services. Benefits could be improved operational efficiency, cost reduction, enhanced customer satisfaction, or increased revenues or profits due to identification of new revenue opportunities.

A well designed ERP implementation plan should consider three major aspects to successfully meet the business objectives, performance goals and ROI expectations.

1. Participation and involvement of cross-functional teams in the implementation process.
2. Support, commitment and sponsorship from the very top—to ensure business alignment, priority setting, resolve conflicts and interdepartmental differences.
3. Key elements such as organizational change management, training and education.

ERP implementation can lead to potential changes in the organization to the business processes, roles of people, organizational procedures etc. These changes need to be managed carefully through change management initiatives including assessing the impact of the change, effective communication planning and execution. Training and Education initiatives such as functional, technical and process training are necessary to create end user buy-in ,enable the end users to adopt the new system quickly and contribute towards achieving business benefits envisaged at the beginning of the ERP implementation journey.

ERP implementation is only the beginning of a journey towards enhancing the operational efficiency of the organization and continuous business improvement. In this journey it is important to set up a mechanism to track and monitor the results in order to fine-tune and continuously improve the business processes and alignment of IT with business goals.

(Vijay Reddy is Global Client Director of Invenio. Views expressed here are of the author and CyberMedia does not necessarily endorse them).