Can ERP transform your business?

Let’s be honest – Enterprise Resource Planning (ERP) systems have traditionally not been known as the most exciting area of the business. But now that may change. According to an IDC survey, CIOs see implementing an ERP system as a key business transformation initiative. While the big ERP vendors are still dominating the local market, cloud-based and on-demand offerings continue to make inroads into the SMB sector.

Vanilla flavoured ERP

Whichever ERP solution you get, implement ‘vanilla’, says Roger Rennie, CIO of PGG Wrightson. “Change your business to match the solution. Don’t customise.”

PGG Wrightson, a provider of products and services to the agricultural sector, has been using Oracle’s JDE EnterpriseOne since 2008 and is just about to upgrade to the latest version of it, 9.1.

As part of the technical upgrade the plan is to de-customise as much as possible and implement standard, out-of-the-box business processes, Rennie says.

While there “have certainly been challenges along the way”, JDE has been a good functional fit for the organisation, he says.

The main challenges have centred around maintaining customisations, Rennie says. “Therefore, the lesson learnt for us in the upgrade process is to de-customise as much as possible.”

Identify the areas of your business that can adopt standard business processes, he says. Areas such as accounts receivable and accounts payable are not unique.

“You should only consider customisation in the areas where you’ve got a unique business process that is not supported by the solution – unique from the perspective of value in the marketplace, not because ‘we do it differently around here’,” he says.

If you do have an offering that is unique in the marketplace there could be an add-on package that you could implement and this would obviate the need to customise, he adds. There is a balance to consider there – whether you implement and support customisations or implement and support an add-on package, he says.

Rennie used to work for a large organisation that had a methodology called “packaged-enabled business process re-engineering”.

“Essentially, what it means is, take a solution, ERP for example, and modify your business processes to adapt to what the solution is built for, rather than the other way around.”

This could help you get a lot more value out of the solution and your people – if they are using the standard business processes, that eliminates manual intervention and referencing other systems, he says.

PGG Wrightson evaluated a number of systems before choosing JDE. SAP and Microsoft Dynamics AX were the other main contenders, he says. Rennie anticipates the upgrade project will be completed in 12-15 months.

The main benefit of the system is having an integrated solution where key business processes use the same data, he says.

“You get the data right once and it’s right through everything.”

Before JDE, the company had a solution from Intech. Intech is still running in PGG Wrightson’s Wool division and the organisation is in the process of moving that division on to EnterpriseOne as well.

IDC: Shift towards on-demand

When IDC recently asked CIOs what they are planning on investing in in the near future, ERP came out as the second most important packaged software solution after database management. CIOs see ERP as “a key business transformation initiative”, says Vern Hue, senior market analyst at IDC Australia.

“These two also go hand in hand as organisations are really seeing the value in better data warehousing, and in the future, better analytics functions,” he says. “We’re clearly seeing an increase in spending in the ERP market, and this is also largely driven by cloud-based solutions. Xero and Saasu are two vendors that are trailblazing the cloud-based ERP market in New Zealand.”

The allure of cloud-based ERP solutions lies in the lower capex, which encourages both the larger enterprises and the SMBs to experiment with it, says Hue. A cloud-based solution also allows organisations to scale up and down when needed. IDC says a lot of SMBs are now moving away from their spreadsheets and are adopting cloud-based ERP as it is, for them, the perfect scenario – an enterprise-grade solution at a lower start-up cost, he says.

“So we are seeing a shift towards on-demand solutions, though the majority of the market still uses on-premise solutions.”

The New Zealand ERP market is still dominated by giants SAP, Microsoft and Oracle. However, the likes of Sage, MYOB and, increasingly, Xero are stronger in the mid-market level, says Hue.

Among the trends that are influencing buyers today are cloud, mobility and “socialytics”, Hue says. Key examples of these consumer technologies in the workplace include using internal social platforms for employee collaboration; using web portals and social networks to automate recruiting and social project management; and accessing ERP applications via tablets and smartphones.

“Organisations are seeking to better understand customers and to drive the business based on the insights from the derived data,” he says. “This is why we are seeing an increase in co-innovation, where organisations are working in tandem with vendors to build and customise applications to suit their business needs and the changing technology landscape.”

Tomorrow Computerworld considers ERP solutions that are in the cloud, and checks in with Fulton Hogan's CIO Brian Northern to find out about the construction company's project to upgrade to JD Edwards 9.0.