August 10, 2017

A Changing of the Guard as ERP makes way for MDM?

ERP change

(Data and Information Governance (DIG))

In Part One we looked at how the advent of lawsuits surrounding indirect access could well lead to significant changes in the world of today’s software solutions. As software companies focus on niches and providing expertise in particular sectors, the all in one ERP solutions are looking more and more archaic.

In this second part of the blog we will touch on what the options are moving forward, address the issues around change management and hopefully provoke a discussion in the technology world.

 

So why was ERP created?

At this point we must all be asking ourselves this question? The reasons back then were to centralize manufacturing processes, which expanded to other back office processes with the promise of enabling a single source and view of all information. Primarily financial.

The objective is still the same, to have a single view, but the answer is no longer a single ERP system. There are numerous third parties integrating or interfacing with the ERP and one another. This leads to the data being owned primarily by the ERP (in whatever form they approve of) and will allow SAP to extract significant fees going forward from ‘indirect access’.

While the on-premise ERP world envisaged a full, end to end business process environment contained within a single system, it never fully delivered on that concept. SAP has been trying to compensate for this with recent purchases of cloud companies such as Ariba, Concur, Fieldglass, Hybris, Leonardo and SuccessFactors. All whilst desperately trying to put their ERPs in the cloud.

Why not a Single System?

In today’s world it doesn’t work anymore – at least, the way technology is moving, it won’t work soon.

The ideal is a good one, everything in one system. Ultimately though, it’s simply unrealistic. There are too many small providers who have expertise that a big monolith such as SAP could never hope to rival.

The world has moved to more self-service and integrating front-line users. Businesses change so quickly today and companies merge and divest constantly. The ERP no longer provides a single view and the processes are so broad by industry that it is impossible for a single system and provider to cover everything well.

Using the Latest Technology is a Key Value Driver

With information and data being created so quickly and with so many technological advances, best of breed is the only way forward. Large organizations can no longer afford to be using old, outdated, traditional software. It will only hold them back, limiting their opportunities to use up and coming solutions.

Still, we need to address the dilemma of organizational change management. This cannot be overlooked but there is a solution here, or at least one in the making.

What’s the way Forward?

The CIO needs to get back to the real meaning of Chief Information Officer and not Chief Software Officer, there is a big difference. The business relies on data and information, and in order to do this well, they use processes that ensure consistency, scalability and control.

The software being used is actually irrelevant.

There is a strong argument that organizations need to move their thinking away from the notion that ERP is the solution to a single view and that it should reside at the center of all other systems. There needs to be more lateral thought, why not the ability to make any system connect and talk with any other system, freely and easily? Providing companies with far more flexibility and ability to specialize.

With this in mind, what does this boil down to?

Data and Information Governance (DIG). The key thing to an open and data driven IT architecture is having a central and very well-defined way to manage master and reference data. If this is resolved, then the ‘transactional’ systems that deliver the processes are almost irrelevant. Why?

  • User training and rollout – If each business function can modularly select the SaaS products which they like, it changes the game for system implementations. It’s a smaller community, invariably a better UX, which is generally self-taught, and doesn’t require heavy IT involvement or large change management programs.
  • Reporting and analytics – the ability to have a consolidated and single view is vital, but you achieve it just as well, if not better, through simple common master data. This approach allows you to easily connect and bring data together if the core data that you report and analyze your business with are common. There are so many excellent BI, Front-end, Analytical, etc. tools out there – but what they all suffer from is poor data and the complexity is always bringing the data together. This would change.

The last 20 years of ERP have shown that single system does not give you single view, it all boils back to the data structures you report against which matter not the transactions which business process generate. At a corporate/group, sector or function level the interest is in aggregate views along specific reporting structures.

Is the Burden just with the CIO?

The CIO is just one of the major players here but the situation is bigger than one person. There needs to be a mindset shift by business users that they need to be involved in data and information governance daily. This topic is too broad to cover here but we will be releasing a white paper dedicated to how you can achieve this so stay tuned.

In Summary

SAP indirect access should be a wakeup call before it’s too late. ERP is now rapidly becoming a transactional system which leads to a crippling long-term total cost of ownership with high switching costs.

Digital transformation is about rethinking the way an organization operates. This needs to start with rethinking the whole notion of what ERP and many software suites actually offer. Are they putting your business first, are they putting the customer first, or will they do anything to lock you into their software and out of anything even vaguely competitive and creative?

Innovation is the key to the success of any business, economy or even sports team.

If you want innovation in Enterprise software while minimizing the cost of change and organizational impact a rethink is needed. The new approach is to embrace multiple systems which work from a core set of master and reference data. This provides a consistent view of data and information while keeping organizations nimble and providing them the ability to swap software out as demands change. It liberates flow of information and ultimately aligns your functions better.

A silo, by definition, is a single system, to remove silos is not achieved by forcing many individual systems into another bigger silo but by finding a way for systems to never become silos.

by Costas Xyloyiannis

Chairman & CEO

With HICX since its formation in 2004, Konstantinos has been instrumental in building it into a leading Supply Base Management company. He is responsible for setting the company’s strategic direction as well as overseeing the growth and expansion, strategy, planning, execution and overall performance of the company.
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