Assessing the need for an enterprise resource planning system

If you have data discrepancies among departments or are in need of automated tasks, it might be time to look at an enterprise resource planning system.

An enterprise resource planning (ERP) system can be a good way to organize and manage the internal and external resources that keep your business humming. An ERP system can also be a complex addition to your organization, and midmarket businesses in particular must decide whether they are ready to capture and leverage efficiencies enabled by an ERP implementation vis-à-vis the expenditure of capital and effort.

ERP's ultimate goal -- its delivery -- is to unify the enterprise's common purpose, assets and information. It provides an overarching system of control and facilitates sharing to eliminate redundancies.

A common example is a customer service center that contains a record showing one version of a customer's status (orders, billing, payments, etc.), and a finance department in the same enterprise with different status information. This discrepancy may reflect a recent change made by the finance department, and the true status may not yet be available to other departments. As a result, customer service cannot serve accurate information.

ERP can eliminate these silos and reduce waste, allowing the organization to save time and repurpose information across the enterprise for greater efficiency.

With these goals in mind, here are two areas to consider when evaluating your midmarket organization's need -- and readiness -- for an enterprise resource planning system.

Survey your organization's ERP needs

In determining your enterprise's potential degree of improvement with an enterprise resource planning system, the IT leader must survey the business, all processes and any allied resources in concert with capable business partners. Sanctioning, supporting and ensuring companywide participation in the survey is absolutely necessary to secure strong buy-in withIT governance. By working together, the business and IT can better understand the needs and expectations of the users and, as appropriate, present this information to senior executive management. Start by asking the following questions:

  • Does your organization struggle with competing (erroneous) data among departments for common entities, such as customers, budgets, statuses and priorities?
  • Do various departments in your organization appear to be siloed, with resulting limits of coordination and share?
  • Do you sense an inhibition to collaboration, both in terms of ability and culture?
  • Do you have redundancies of effort, such as employees entering the same data in more than one system?
  • Do users sometimes work at cross-purposes, requiring time-consuming redos?
  • Do you seem to have an overabundance of manual tasks that can be automated -- for example, batch routines that await manual input from another discrete system?
  • Is workflow in your organization murky and badly documented?
  • Are some assets underutilized? For instance, you may find that a new server was procured for an emerging requirement, only to discover that space, processing and bandwidth already exist on present, even idle, resources.

Chances are your enterprise struggles with some redundancies, silos and a ceiling on efficiency, so you should consider the variety of departments that must track resources, workload and performance:

  • Marketing and sales.
  • Cash receipts, cash disbursements and purchasing.
  • Business reporting/financial statements.
  • Production and logistics.
  • Systems and allied structures, management and processing.
  • Human resources.

Look for areas of redundancy, wasted effort and duplicated resources across these areas. If you sense that there is enough weight for some measure of improvement, then compare that potential with impacts and changes that the ERP system presents to the business.

How an ERP system affects the business

As the IT leader, it's up to you (in conjunction with your business counterparts) to weigh the potential for improvement against a number of changes, because an enterprise resource planning system transforms the way business is done. Departments and individuals may no longer have sole discretion over data, processes or even formerly discrete resources. Certain authorities may retain securities and power over process, but a wider audience will be able to view the data, and processes may be splayed open for all to see. This transparency allows strategic planning and assessment to be more accurate and readily available for senior executives.

If you sense that there is enough weight for some measure of improvement, then compare that potential with impacts and changes that the ERP system presents to the business.

Understand that as potentials for efficiency are exposed, and as once-independent departments are now measured against a standard, company-wide system, many individuals and departments will also feel exposed. With ERP, whatever measure of independence some departments had, they can expect to lose some, and you may experience some pushback from users.

Also, consider the following:

  • The ERP system will need to be administered and managed by both the business and IT. Depending on the size of the organization, IT may require a full-time administrator, as well as a bolstered help desk presence to support the business' use of ERP. A qualified IT person will also have to manage the vendor (including a post-implementation evaluation).
  • Functional areas may be broken apart and rebuilt. Jobs might be eliminated, and other jobs might reform or consolidate.
  • Business elements will have to understand new interfaces, new workflows and new collaboration methods.
  • The business will have new integrated reports, metrics and judgments of performance.
  • The enterprise must budget time and money for training and an adjustment period.
  • Perhaps the greatest challenge: The business culture will change. The IT leader must have strong business allies, with consensus and willingness throughout the enterprise to support the major business change.

When assessing an enterprise resource planning system, keep in mind the ultimate payoff: Processes become more efficient. ERP consolidates data into a central repository, enabling access to real-time, accurate information. Resources such as physical assets, time and staff are maintained by a single system of control, enablement and leverage.

With proper enterprise resource planning, waste and inefficiency are driven down, while productivity and returns are driven up. Take the time to determine your needs and expectations for the best fit.

David Scott is a Fortune 100 IT professional. He is the author of the book I.T.WARS: Managing the Business-Technology Weave. Contact him at David-Scott@david-scott.net.

This was first published in November 2010

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