ERP Then and Now - A Manager's Perspective

1. ERP Then and Now:
A Manager’s
Perspective
Thursday, February 26, 2015 1

2. What Defines an ERP?
Thursday, February 26, 2015 2
• Integration
• Parameterisation
• Standardisation (of business
process)

3. Example of Integration
Thursday, February 26, 2015 3
Purchase Requisition
Purchase Order
Goods Receipt
Invoice Receipt
Payment
Basic Purchase Cycle
User Dept
Purchase Dept
Stores Dept
Accounts
Dept
Stock
Accounting
3 Way Invoice
Verification
Accounts
Dept
Impact on Accounting
Dis-integrated
purchase and
accounts processes
leading to
discrepancies
Non integrated purchase and accounting process

4. Example of Integration
Thursday, February 26, 2015 4
Purchase Requisition
Purchase Order
Goods Receipt
Invoice Receipt
Payment
Basic Purchase Cycle
User Dept
Purchase Dept
Stores Dept
Accounts
Dept
Stock
Accounting
3 Way Invoice
Verification
Accounts
Dept
Impact on Accounting
Integrated purchase and accounting process in SAP
Material
document
Accounting
document

5. Integration is not absolute!
Thursday, February 26, 2015 5
Volume of
transactions
No Software is 100% integrated and no software is 100% disintegrated. It is only a
matter of degree.
Good ERPs typically integrate “core” business processes. Non core processes (the “long
tail”) may still be outside the purview of an integrated ERP.
Business Processes
Core Processes
under an
integrated ERP
Long tail of non
core processes

6. What is “Parameterisation”?
Thursday, February 26, 2015 6
Parameterisation can be compared with the building blocks of
“Lego toys”. In a parameterised software, a trained professional
can map business processes from various companies and
industries by changing the relevant “parameters” and without
changing codes.

7. Example of “Parameterisation”
Thursday, February 26, 2015 7
Schematic Example of “Parameterisation” in SAP.
The example shown is only for explaining the concept, it may not be technically accurate.
Movement
Type
Valuation
Class
Account Dr. Account Cr.
101 3000 1012345 2378908
261 3003 1037823 2984576
These are like “Lego Blocks”, Greek to a normal user, but well known
terms to an SAP super user who can use these for “making” processes
Using relevant “Lego blocks” like Movement Type, Valuation Class, etc., a trained SAP
Consultant can create an integrated process for any type of movement of any type of
material in any type of industry and the corresponding accounting treatment. He/she can
do this without having to change any source code.

8. Configuration vs. Customisation
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Configuration of ERP Packages can be done using parameterisation features of the ERP.
More parameterised an ERP is, there are higher chances of mapping any business
process of an organisation.
Customisation is NOT configuration. Customisation is writing programs to manage
business process that cannot be handled through configuration.
Industry
Process
Company
Process
ERP
Process

9. Why is Customisation not Recommended?
Thursday, February 26, 2015 9
• It takes time and effort, costs money (more than configuration)
• The quality of code may not be as good as product vendor
• Testing may not be as rigorous as the product vendor
• The code may get over written and has to be re-written if the ERP software is
upgraded
You may still have to customise the ERP under certain circumstances e.g. if the
business requirement is of statutory nature and it cannot be mapped in SAP
through configuration

10. Standardisation of business processes
Thursday, February 26, 2015 10
• When you implement a world class ERP be prepared for the fact that even
though ERP will not drive your business, it is going to drive your business
processes.
• You cannot implement ERP without changing your business processes.
• Good ERPs will help you to improve your processes because these ERPs have
the capability by which such improved business processes can be configured in
the ERP software
• After a company implements an ERP it is very common that users start talking
in ERP terminology for their normal business processes.

11. Genesis of ERP
Thursday, February 26, 2015 11
Automation of individual departments created “islands of automation”. Building bridges
between the islands was difficult and expensive in pre- SoA era. Business was not realising
benefit of automation because of inconsistent and fragmented business information available
from different departments.
ERP proposed an integrated system with a central database and unified processes that enable
business to get one information from all departments thereby facilitating decision making.

12. ERP transformed the IT and
Consulting Industry
Thursday, February 26, 2015 12
• ERP made IT strategic to organisations
• ERP created the position of CIO
• ERP created a new profession
• ERP became the vehicle of large scale Business
Process Re-engineering (BPR) in organisations

13. Benefits of ERP
Thursday, February 26, 2015 13
• It is hard to measure ROI of ERP in hard numbers
• But it is possible to have a qualitative view of the benefits of ERP
Value
Addition
Cost
Reduction
Business
Benefit
Cash
Liberation
Real time confirmation of
delivery date leading to
higher customer satisfaction
Reduction of inventory
Accurate information on
product cost leading to
possible reduction in cost

14. Does ERP Reduce or Increase Manpower?
Thursday, February 26, 2015 14
• ERP enables organisations to extract more business information compared to that what
is feasible without ERP
• More information requires more input data
• Increase in input data post ERP to meet management expectation on information may
increase workload.
Data
input
effort
Before ERP After ERP
Information
output
Additional
Information
Output
desired by
Management
after ERP
Data input effort for same
information output prior to ERP
reduces dues to automation
But there is additional data
input effort required to meet
the expectation for additional
information.
Thus total data input effort
might increase

15. Does ERP Reduce or Increase Manpower?
Thursday, February 26, 2015 15
• ERP redistributes work load between divisions of an organisation
• Thus, though total workload may reduce, workload of specific departments may
increase
• Excess manpower of one department may not be feasible to be deployed in another
department
• Thus, if an organisation does not have appropriate re-skilling, redeployment or
separation plans, it may end up with higher staff post ERP implementation
Workload
distribution
before ERP
Workload distribution after ERP:
Though overall workload of company
may come down, workload on
specific departments may increase

16. Critical Success Factors for
Successful ERP Implementation
Thursday, February 26, 2015 16
• Managing Organisational Change
• Making Business Own the Implementation
• Managing Data
• Mobilisation quality internal manpower for
implementation
• Managing Scope of Implementation

17. What kind of Organisational
Change does ERP Bring?
Thursday, February 26, 2015 17
• Change in business process (and, business process change is
inevitable in ERP implementation)
• Change in organisational roles
• Learning new software (and, learning ERP is not easy!)
• Transparency of information may cause discomfort to many in
the organisation
• Information is accessible to all, given the requisite authority
(and, statutory authorities have full authority to access such
information)

18. Michael Hammer’s Study on
Success of ERP Implementations
Thursday, February 26, 2015 18
Degree of Success
100%0%
No. of
Companies
Michael Hammer identified that the single most important
reason for the “abnormal” distribution is the inability of
organisations to manage change with ERP brings.

19. Why is there always a “fight” on
scope of ERP implementation?
Thursday, February 26, 2015 19
User Defines Requirement Software Programmers Write Code
In Custom Software, there is no or minimal change in process. The users define the
requirement and the software programmers make software according to the requirement
define. If there is any subsequent change in requirement, it is understood by all.

20. Why is there always a “fight” on
scope of ERP implementation?
Thursday, February 26, 2015 20
User Defines As Is Process
“Process
Improvement”
transforms As Is
defined by users
In ERP, business process change puts the ownership of the “wire frame” from where the
final system will be configured under question. This results in frequent changes in scope
during implementation. This leads to delay in implementation too.
Who defines “To Be” ? Users
point to Consultants and
Consultants point to Users.
Some say “Joint Ownership”.
But we know that “We” is the
most dangerous pronoun!
The final system is configured and
customised based on a wire frame
whose ownership was never
established at the time of its creation.
Result – changes to design after
configuration, frequent fights over
change in scope

21. Leading ERPs Today
Thursday, February 26, 2015 21

22. How can I select the right ERP?
Thursday, February 26, 2015 22
• You cannot do it by comparing a laundry list of
“features” of various ERPs. Because, except at a high
level, where most good ERPs are similar, such “features”
can be assessed only after configuring the ERP for your
business process.
• And, for configuring an ERP, you have to buy licenses
and pay consultants for configuring. Thus you have
already sunk a lot of money in “assessing” the right ERP
for you. In order to assess multiple ERPs you have to do
the same for every ERP you want to assess. Is it a practical
proposition?
The only realistic method to assess the right ERP for you is to talk to the “guy next door”
i.e. some other similar company who has implemented the ERP.
This is probably one of the reasons for “consolidation” in ERP product space with not
many people willing to bet on a new untested ERP vendor.

23. Is ERP a Software Product?
Thursday, February 26, 2015 23
NO! Even the best of breed ERPs are far from being a software product in its true sense.
Unlike software products like MS Office, Lotus Notes, etc., ERP is not a “productised
software” (though there has been attempts to do so) that can be installed and made to
support your business processes almost instantaneously (like you install an MS Word and
can start using it almost immediately).
ERP is a “parameterised integrated software” which can be made to support your business
processes in a standardised form with relative ease of effort, compared to custom
software.

24. Can I Custom Develop an ERP?
Thursday, February 26, 2015 24
You CAN, but it is HARD!
First, it may be hugely expensive to build a real custom developed ERP
Second, it may integrate your business processes but may not meet other qualifying
criteria of integrating different types of businesses, parameterisation and standardisation
of business processes.

25. Future of ERP: The Disruptive Forces
Thursday, February 26, 2015 25
Volume of
transactions
Business Processes
Core Processes
under an
integrated ERP
Long tail of non
core processes
At the turn of the millennium, with the advent of E-Commerce, leading
ERPs tried to expand into the “long tail”, but were mostly unsuccessful.

26. Thursday, February 26, 2015 26
The “islands of automation” are back, but this time with technology to build
comfortable bridges between islands quickly and efficiently.
Where would you like to live? The place to your left or that to your right?
Service Oriented Architecture (SoA) disrupted the ERP Theory of Integration
The Disruptive Forces: SOA

27. Thursday, February 26, 2015 27
Cloud made software available at low cost, sometimes free. Investments in
Software became an Opex expenditure from Capex. Organisations could build
software infrastructure “as they grew” and not necessarily upfront.
The Whack from SMAC!
Infrastructure
as a Service
(IaaS)
Software as a
Service (SaaS)
Platform as a
Service
(PaaS)

28. Thursday, February 26, 2015 28
ERP will continue to be the primary software for enterprise core processes.
Some ERPs are proactively adopting SMAC either organically or inorganically
to keep pace with the new age technology. Most ERPs are yet to demonstrate
strong success stories, though.
The New ERP: Example SAP