Managing ERP Applications for Strategic Advantage


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Managing ERP Applications for Strategic Advantage

  1. 1. Managing ERP Applications for Strategic Advantage by Julian Bossong Senior ERP Product Manager USi
  2. 2. Managing ERP Applications for Strategic Advantage Table of Contents USi Executive Overview .................................................................................. 1 1 Barriers to ERP Success .................................................................................. 2 2 The ASP Model ................................................................................................ 7 3 Conclusion ...................................................................................................... 12
  3. 3. Managing ERP Applications for Strategic Advantage USi Executive Summary Unleashing the Power of ERP Never before has so much been riding on good decision making. In this economy, there’s simply no room for mistakes. Even a small error can have a large, lasting impact on a bottom line that’s being watched more closely than ever. That’s why robust enterprise applications have become necessities for mid-to-large companies. As these organizations strive to meet cost-cutting initiatives, they look to ERP applications to deliver the accurate information needed for sound decisions about both financial and human capital. But managing ERP applications in a way that unleashes their STRATEGIC GOALS full potential and ROI requires an enormous amount of time. In fact, companies are spending more time on application FOR ERP management and support than on any other activity involved in ERP implementations. • Better manage and mobilize a diversified workforce. The problem is, this continuous commitment draws an organization’s attention away from realizing the strategic goals • Increase employee, customer, of ERP applications. Companies are so caught up in managing and partner satisfaction. and supporting the applications, they have no time or resources left to fully leverage them for true business advantage. Hiring • Align workforce assets with more internal help is hardly the answer, as the sophisticated corporate initiatives. level of ERP application expertise needed to do the job right is in short supply. • Leverage real-time information to cut costs. In an effort to concentrate on what matters most, many companies are outsourcing application hosting and management to an Application Service Provider (ASP). Because ASPs have proven technology, methodology, and ERP application expertise already in place, ASP customers can move attention away from the day-to-day management of applications and technology and towards more value-added activities that turn the promise of ERP into profits. This paper will explore the challenges companies face in managing ERP applications and the factors keeping them from realizing their full business potential. It will also present how the reliable, efficient, and cost-effective ASP model frees companies to make solid business decisions in a time when there’s absolutely no margin for error. 1
  4. 4. Managing ERP Applications for Strategic Advantage Barriers to ERP Success The Demands of On-Going Management What’s keeping companies from fully realizing ERP benefits? Research from firms such as META Group indicates that ERP implementations require IT departments to spend the vast majority of their time and budgets on application management.1 In fact, during a typical three-year ERP application lifecycle, the implementation stage could represent as little as 10 percent of the total period. The remaining 90 percent is taken up with "post-go-live" activities: on-going management. 10% Implementation is just The bulk of each Enter pr ise’s ERP lifecycle is spent on the beginning. maintenance and functionality issues. Troubleshooting Processes Struggling with Patches, Figuring out how a new business process Fixes and Updates just changed the application? These come out constantly, who is able to apply them quickly and efficiently? Struggling with New Reports The senior execs want a new kind Assisting Users of report. Who can help with that? New users are hired and need training on our system. Who can do that? Managing Interfaces Partners now want to exchange data. Maintaining Performance Is that possible? Hardware, network, OS and database 90% optimized for PeopleSoft. Is someone Dealing with Scale focused on this? We buy another company. Who can integrate the employees into our Securing PeopleSoft environment? A new vulnerability develops. Who is on top of this? Typical Three-Year Application Lifecycle for ERP Applications These on-going management activities greedily consume the time and efforts of IT resources charged with supporting ERP applications. Compounding this pressure are demands from the business managers who need to use the information captured in ERP systems. 2
  5. 5. Managing ERP Applications for Strategic Advantage IT and their business counterparts know the information is "in there." However, bogged down with troubleshooting problems, assisting users, and maintaining performance, IT staff can't see beyond their day-to-day management responsibilities to help business managers get the information they need. Why is application management so demanding? What follows are examples of what's involved with performing these on-going activities − which literally begin within seconds after the applications go live. What will result is a clear picture of why companies are spending more time looking for ERP data than they are leveraging it. Troubleshooting Processes What effect will new business processes have on ERP applications? The closer ERP applications mirror the flow of business, the greater their value and ROI. But, by nature, business is fluid. Product lines change, companies are bought and sold, new management enters the scene, new initiatives A company can spend a come into play. All of these changes can have a drastic impact considerable amount in on business processes. That's why it's imperative for the ERP applications that support these processes to adjust with them. purchasing ERP software, but then jeopardize the return on But IT staff is pressed for time as they try to implement the that investment by not application changes while attempting to keep up with daily management tasks. The job becomes increasingly difficult if the leveraging the application to ERP applications have been heavily customized to meet its full strategic potential. specific needs. The higher the customization level, the harder and more time-consuming the changes. Struggling with New Reports Senior executives want a new kind of report. Who can help with that? Both business managers and IT have the best intentions: They want to give senior management the information they need to make informed decisions. Very often, neither of these sources are familiar enough with the applications to extract the necessary information, nor do they have the time to find out. At that point, the applications have lost their strategic value to the company. For example, if executives want to institute a training program to educate managers about addressing employee issues before they lose both the employee and the intellectual capital they've invested in, they may ask HR to create a report to reveal organizations with the highest turnover rates. Or, if revenues are low, they may ask for a report showing the real-time financial status of the company to cut costs before the quarter ends. Everyone knows the data is captured within the ERP applications, but no one knows how to unleash it. 3
  6. 6. Managing ERP Applications for Strategic Advantage Managing Interfaces Partners now want to exchange data. Is that possible? The ERP applications at many companies are part of a complicated network of interfaces. These interfaces enable data to flow to and from other applications that support internal benefit, payroll, or financial systems. If an employee taps into an e-application within an ERP package to change the number of dependents, he expects the next payroll stub to reflect this change. If it doesn't, this signals a "disconnect" in the information flow. The job − and a time-consuming one − is to find out where the disconnect occurred. This web of interfaces can be further complicated when companies use service providers to handle payroll or benefits administration. For example, a company partners with a new payroll provider who guarantees next-day payroll delivery. To meet this deadline, the partner requests an electronic interface between the company's and the partner's systems. On payday, some employees are without a check. The disconnect could be anywhere on the process chain, from the internal benefits system to the outsourced payroll system. Again, this problem resolution takes time and employee satisfaction is at stake. Struggling with Patches, Fixes, and Updates These come out constantly, who's able to apply them quickly and efficiently? With upwards of 500 patches and fixes generated for most ERP applications each year, the sheer volume of changes means implementation gets delayed or, worse, not done at all. Combined with service packs, tax updates, and multiple updates to the underlying application code, it’s easy to see why IT says they don't have time to implement the changes. Further, they often lack the application expertise to determine which are critical to application functionality and which are "nice to have." All this means a company can spend a considerable amount in purchasing the software and updates, but then jeopardize the return on that investment by not leveraging the applications to their full strategic potential. Dealing with Scale Another company is purchased. Who will integrate new employee data into the ERP environment? These days of mergers and acquisitions leave companies with the daunting task of moving the data associated with hundreds or thousands of new employees into existing benefit and payroll systems. IT staff must face this challenge from both a technical and a strategic approach. First, they need to expand the ERP software to accommodate new personnel and financial information. Failure to do so could result 4
  7. 7. Managing ERP Applications for Strategic Advantage in late paychecks or inaccurate financial reports. Then, they must align these new workforce assets with corporate initiatives. Lacking the time or resources needed to do the first task, they are overwhelmed with accomplishing the second. New web-based, self-service applications also put scalability demands on ERP systems. A simple change in healthcare providers, requiring employees to log in and sign up, can bring a system to its knees. There must be knowledgeable resources ready to deal with growth resulting from constant business change. Assisting Users Users constantly have questions about application functionality. Who can answer them? As IT and business managers struggle to keep up with on- Nearly 90 percent of user going demands, questions start to flow to "power users." Known questions in a typical ERP to everyone in the organization as "ERP gurus," these support icons field a constant barrage of "How do I?" questions from environment are related to new users or those who rarely use the applications. They could application functionality, at a be a significant resource for tapping into the strategic value of the applications, but they are too busy supporting users to time when ERP application apply their expertise to a higher corporate purpose. expertise is hard to find. All this means a company can spend a considerable amount in purchasing the software and updates, but then jeopardize the return on that investment by not leveraging the applications to their full strategic potential. Maintaining Performance Are hardware, networks, operating systems, and databases optimized for my ERP system? Is someone focused on that? Maintaining performance in an ERP environment takes constant supervision. Global implementations highlight this need as users around the world access the applications 24x7. The problem is that most companies lack the expertise and tools for on-going monitoring and management. The tool sets that provide these critical capabilities, such as 24x7 monitoring and configuration management, are expensive. Further, to provide true value, these management tools must be customized and tuned to support each ERP application, again, challenging IT staffs and budgets. 5
  8. 8. Managing ERP Applications for Strategic Advantage Ensuring Security A new vulnerability develops. Who's on top of this? ERP security has become a pressing issue as businesses become more reliant on electronic transactions and processes. Exchanging information with partners and customers over the Internet adds immeasurable business value. If not managed correctly, it also brings immeasurable business risk. Data must be protected from accidental or intentional misuse by people inside or outside of an organization − from the dreaded hacker to employees we see every day. If critical ERP information is compromised, companies not only lose revenue, they lose credibility. The latest security technology, policy, and procedures must be in place to protect every layer, from the application to the physical wire. This adds to IT’s already full plate as they busily try to keep up with all the other application management activities. Competing for IT Attention Another factor that keeps companies from fully leveraging ERP benefits is the perception that HR applications are non-critical. Finance applications suffer this perception, as well, viewed simply as systems that track money, not make money. This frustrates business owners who are responsible ERP applications have taken their for these operations. Pitted against the demands of transactional systems viewed as impacting the rightful place in the world of critical bottom line, these business owners have little or no business applications, but IT is still bargaining power with IT. without the resources to help Now, more executives see the strategic value of business owners leverage them. these ERP systems − and consider the information within them as corporate gold. However, while the status of ERP applications has advanced within the enterprise, IT has been unable to respond with the time, expertise, and budget needed to support and manage these applications appropriately. ERP applications have taken their rightful place in the world of critical business applications, but IT is still without the resources to help business owners leverage them. 6
  9. 9. Managing ERP Applications for Strategic Advantage The ASP Model Freedom to Focus on ERP Strategy How can companies free themselves to focus more on strategic initiatives and less on application management and support? In an effort to concentrate efforts on what matters most, many companies are outsourcing application hosting and management to an ASP. With applications deployed and managed efficiently, reliably, and Under the traditional ASP model, ERP applications cost-effectively by an ASP, companies are hosted, managed, and supported at the ASP's data center and users access the solutions over a can devote more mindshare to value- secure Internet connection. More recent options added activities that turn ERP into a allow customers to run the applications at their own site, while the ASP manages them remotely. Under true competitive advantage. either scenario, customers can readily leverage ASP expertise, management, and support services, releasing them from the burden of managing the applications themselves. By providing services for a predictable, flat-rate monthly fee, ASPs also allow enterprises to avoid capital expenditures, amortize IT costs over several years, and enjoy the advantages of cost reliability when unforeseen problems arise, such as the need for emergency data restores. Finding the Right ASP: Beyond Technology When choosing an ASP, proven experience and demonstrated expertise in implementing, managing, and supporting enterprise ERP environments should top the list of qualifications. Look for a provider who extends their vision beyond technology. The ASP should provide a staff of ERP application experts who know and understand the application from a functional perspective, as well as the business principles behind the solutions. This deep level of knowledge can only be gained through years of experience actually supporting ERP applications − not from reading a book or taking a class. ASPs that add the most value are those that go the extra mile to understand the unique needs of the people who use the applications every day, as well as the underlying customer-specific business processes the applications support. Combining this keen understanding with a high level of application expertise, ASPs can help companies unleash the power of ERP data captured within the applications to leverage it for true strategic advantage. 7
  10. 10. Managing ERP Applications for Strategic Advantage When preparing an RFP for ASP services, companies should consider including the folllowing requirements: Dedicated Expertise An ASP should provide a dedicated account team, with an assigned client executive to act as a single point of contact responsible for accountability and escalation. Companies should expect this resource to retain close communication with internal teams, as well as with the ASP's own staff of project managers and support personnel. A high level of ERP expertise should be prevalent at all layers of the ASP team. To gain knowledge of a customer's business, expect the ASP to conduct careful requirements gathering. Ask for the people who will support the application to be an integral part of this process, as well as the actual implementation team. The knowledge they acquire throughout those processes will be invaluable in the day-to-day management of the ERP applications. This transfer of knowledge differentiates ASPs from traditional providers, who often only implement the system. When they leave, the knowledge usually goes with them. On-Going Application Management Services Keeping information accessible to the enterprise on a 24x7 basis takes non-stop, proactive application management and maintenance. To free themselves from routine day-to-day management tasks, customers should require prospective ASPs to provide the following: 24x7x365 Monitoring. To address issues before they impact business operations, the ASP should be able to monitor the entire environment, from networks, servers and firewalls to the application and database layers. This is accomplished through sophisticated management tools that are often outside the limits of internal IT budgets. To operate well across an ERP environment, the tools should be optimized specifically for ERP applications. Integration and Interface Management. With the advent of web services, individual business processes are integrated and immediate. Real-time transactions are performed anywhere by employees, customers, and partners. This is especially true in HR and finance, where it's To achieve the ERP vendor’s vision common to outsource benefits administration and of the real-time enterprise, the ASP payroll to many different vendors. must be able to proactively manage This means applications must be more integrated the ever-changing interfaces than ever before, and at more levels. The chosen ASP should be able to integrate ERP applications between ERP applications and with legacy, third-party, line of business, web, and other enterprise systems. partner systems − whether the applications are located internally, at the ASP, or the partner site. 8
  11. 11. Managing ERP Applications for Strategic Advantage Moreover, the ASP should be able to automatically monitor and manage all interfaces and proactively troubleshoot and correct problems if files are not transmitted as planned. This gives companies an added level of comfort that each connection is operating correctly and delivering the essential information. Change and Growth Management. Having an ASP in charge of change management means companies have the latest and greatest application functionality to support business operations. Given the high volumes of patches, fixes, service packs, and updates with today’s ERP applications, an ASP should have strict change control methodologies in place. With a good knowledge base about their customer's business, the ASP can identify the right changes to apply, fully test them from a technical and functional perspective, implement and document the changes, and then support them. Make sure the ASP will be able to effect uniform changes across the environment efficiently and cost effectively, with no or little disruption in service. As a guideline, ask the ASP to commit to implementing changes within 60 days of availability from the vendor. When the changes are at the business level, not at the application level, the ASP should also know how to scale the ERP applications to meet new demands. That may mean accommodating thousands of employees from a newly merged company, expanding the application to multiple sites, or any other change that affects the application. Here, enterprise- level ASPs are useful because they are well familiar with expanding the application environment to large, globally distributed user bases, and they know how to do so with little- to-no business disruption. Application Support Services Interface management, report writing, business process changes, and "how to" issues about ERP applications dramatically impact user efficiency each day. In fact, nearly 90 percent of user questions in a typical ERP environment are related to application functionality. The ERP expertise levels of enterprise ASPs vary greatly. Look for an ASP with at least five years of demonstrated Ask for a first-call resolution rate of experience. To resolve problems more quickly, the support at least 50 percent for the "how to" center staff should possess a thorough knowledge of the underlying business processes the applications support, inquiries from functional users. as well as an intimate understanding of the customer's Anything below that indicates business. inadequate application expertise. 9
  12. 12. Managing ERP Applications for Strategic Advantage Companies should be able to choose from an Enterprise Help-Desk-to-Help-Desk solution or an End- User-to-Help-Desk support model, whichever best meets the needs of the business. Dedicated 800- phone numbers and e-mail accounts should be made available to speed service requests. Also important for enterprise implementations are flexible hours of service. Most importantly, ask the ASP for problem resolution stats. Expect a first-call resolution rate of at least 50 percent for "how to" inquiries made by functional users. This will keep employee productivity high and allow them to focus on more strategic activities. Infrastructure Management The ASP's data centers should have the people, processes and systems in place to keep ERP systems up 24x7x365. They should be staffed by highly skilled engineering and operations teams, experienced in managing complex ERP architectures. Services should cover all aspects of the infrastructure, including the computing platform, database administration, network and communications, firewalls and security, storage area network, backup and recovery. Hosting. Rapid implementation cycles have been the hallmark of ASP solutions since the beginning. Because ASPs deploy so many solutions, they should be able to offer a very systematic, repeatable implementation methodology. The most experienced enterprise ASPs can implement an ERP solution in as little as 90 days, compared to internal deployments that can take a year or more. Security. Companies should ask probing questions about the security technologies, policies, and procedures in place and get a thorough history of breaches. Expect the ASP's security to extend to every layer − from the application down to the physical wire. A few of the leading enterprise ASPs now provide an application security guarantee, so companies should not settle for less. Insist on reviewing security certificates from reputable third-party organizations, such as SAS70 or CyberSecure. Some enterprise ASPs have undergone close scrutiny by these organizations, earning certification only after proving that they actually have the right security systems in place to keep confidential employee information and financial data secure. Service Level Agreements (SLAs) for Availability. Many enterprise ASPs offer SLAs, but some cover only certain points along the technology chain. They may offer Ask for actual uptime records 99.9 percent uptime, but only on specific components. If a to see if the ASP has non-covered component goes down and network traffic consistently delivered upon grinds to a halt, the SLAs on all the other components won't matter much to users who need to get their work done. To its availability promise. 10
  13. 13. Managing ERP Applications for Strategic Advantage ensure a high level of availability, companies should make sure their SLA is comprehensive, covering the entire environment. Most importantly, companies should ask for actual uptime records to see if the ASP has consistently delivered upon its availability promise. Performance-Based SLAs. Server power can rapidly decline as hundreds to thousands of users tap into web-based self-service applications. (Some large enterprises support as many as 100,000+ self-service users.) Beyond providing SLAs for uptime and security, leading ASPs should offer guaranteed performance levels for ERP applications. This covers user sign ons, content searches and saves, as well as key business functions, such as mission-critical batch processes. Companies should include this performance requirement in their RFPs to effectively weed out ASPs that may have difficulty keeping up with user demands. Disaster Recovery. Considering recent events, companies should not hold back when asking their prospective ASPs about disaster recovery plans. Many ASPs are familiar with building a solution to prevent data loss from the start, reducing the need for business recovery. If disaster hits and recovery does become necessary, the ASP should have fully tested procedures and backup facilities in place to get customers back in business fast. Flexible Delivery Models You should not be forced into an ASP’s model. Consider what your unique skills and capabilities are, and then demand that the ASP mold its services accordingly. Outlined here are two key areas to consider: Fully Managed or Partial Services. Today's ASPs offer many approaches to providing their services. Companies can choose an ASP's complete menu of services, or choose selected services that best suit the needs of specific projects, organizations, or IT staffs. On-Site Management or Remotely Managed Services. Companies can opt to have the applications hosted and managed at the ASP site, or keep applications running in their own data center while they are managed remotely by the ASP. This provides a transitional solution by allowing a company to gradually shift operations to a fully managed solution in the ASP data center. Or, if companies want to blend internal and external resources, they can pick and choose discrete management functions to be handled remotely from the ASP data center and manage the rest themselves. Value-Added ERP Services Beyond application and infrastructure management and support, some enterprise ASP's leverage their ERP expertise and experience by offering services that increase the value of their customers' ERP solutions. For example, ask about these services: 11
  14. 14. Managing ERP Applications for Strategic Advantage ERP Roadmapping. This is a high-level analysis and project plan that blends a company's business initiatives with application functionality and operational requirements. Enterprise ASPs should help companies establish a clear vision of their ERP goals, both now and in the future. Companies should be leery of providers who constantly recommend detailed customizations to meet these objectives. This only makes it more difficult to manage and upgrade the applications. An experienced enterprise ASP will take a more holistic approach, keeping the big picture in view by recommending only those changes that are really necessary to align the applications with current and future business goals. Payroll and Payroll Tax Services. Using the information contained in ERP systems, some ASPs process payroll and even file taxes for the companies they serve. Value-added services like these can free up internal staff for more important activities. Conclusion Turning Strategic Advantage into a Higher ROI IDC recently studied 54 enterprises that were utilizing ASPs for enterprise applications, like ERP.2 IDC concluded that those enterprises using ASPs were achieving tremendous returns on investment because of (1) technology related savings, (2) productivity benefits, and (3) business process enhancements. Those ASPs that focus not only on cutting costs, but on improving their clients' use of the applications will truly help their customers maximize ROI. With the right ASP, IDC determined that enterprises will be able to: Focus on core business Implement more rapidly Scale up or down more efficiently Improve system performance, reliability, and security Access the latest technology Benefit from greater peace of mind and credibility Achieve a more predictable expense structure Increase employee satisfaction, both inside the IT department and throughout the organization Transfer risk of the project's success Achieve greater discipline within their organizations 12
  15. 15. Managing ERP Applications for Strategic Advantage USi: the Leading Enterprise ASP USi, the most experienced ASP in the world, pioneered the ASP concept and has refined it to a higher degree than anyone else. With 140 enterprise clients, the people, processes, and technology that back each ERP implementation at USi are tried and true. USi knows that hosting and managing enterprise applications is about more than technology, it's about understanding the needs of the people who use these applications every day. Every ASP will offer 24/7 support, but USi is the only ASP that provides each client with a highly experienced Solutions Center team. This provides a deep application services offering that helps customers get the most out of their ERP solution. As a result, USi delivers: Improved Cost-Effectiveness. The high level of functional and technical ERP expertise delivered by USi's Solutions Center directly and positively impacts TCO. Proactive management and support means that problems are prevented before they impact costly downtime and decrease ROI. USi customers report lower maintenance and operating costs, often with a savings of 20 percent or more. Increased Efficiency. A first-call resolution record of up to 50 percent for user functionality questions increases the productivity of USi customers, freeing them to focus on managing and aligning workforce with corporate needs and increasing employee, partner, and customer satisfaction. Expanded Strategic Focus. With all of the routine and mundane tasks covered, USi clients have the greater ability to leverage new capabilities within their ERP systems, like self-service functions for managers and employees. Freed from day-to-day management activities, USi customers are able to focus on more strategic ERP initiatives. As a result, they increase ROI as they make dollar- and workforce-wise decisions that keep employees productive, partners and customers satisfied, and the bottom line in the black. 1 "ERP ROI Depends on Ongoing Planning and Adjustments to Meet Changing Business Needs," META Group News Analysis, June 2002. 2 "The Financial Impact of ASPs: An IDC White Paper," 2001. CyberSecure is a registered trademark of CyberSecure, Inc. Corporate Headquarters • USi • One USi Plaza Annapolis, MD 21401-7478 Sales: 800.809.3003 • Fax: 410.573.1906 • • 13