The ERP Renaissance

An interesting trend is developing among small and mid-sized companies around the use of information technology, the renaissance of enterprise resource planning (ERP) implementation, either as completely “green field” or as re-implementation of earlier attempts to gain value from this type of system.

It’s a redux of the pre-2000 era where companies were scrambling to get their systems ready for the change in Millennium. That period was marked with a scramble to jam systems in with significant lack of foresight as to the ramifications of such change within the organization. Frankly, it gave ERP a bad name, and there were a number of high-profile failures which cast a pall over the entire ERP genre for many years.

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What we see now is significantly different. We’re seeing a more reasoned approach to both the selection and the implementation, which minimizes the risk, and focuses the enterprise on creating some real value. In addition, we’re also seeing a significant number of companies reexamining their prior implementations with the goal of fixing a number of structural flaws made in their initial implementation. According to Scott Hamilton in his book Maximizing your ERP System: A Practical guide for Managers, (McGraw-Hill, 2003), “… most manufacturers do not effectively use their ERP system to run their businesses”

Why Now

Increasingly companies, particularly companies which have grown by acquisition over the past five-to-six years are having difficulties with reconciling both their financial data and their supply change across disparate multiple systems. In some cases, the original implementation of their ERP systems did not address the organizational changes necessary to create a “single-version-of-the-truth” and the original implementations took the route of “least resistance” and were implemented with multiple instances of the ERP system, or worse, multiple systems across the enterprise.

These organizations are now beginning to realize that a “single instance,” “monolithic” system based on the now ubiquitous browser-based interface would allow significant efficiencies to accrue to the organization, both in allowing for faster decisions based on accurate information, and in creating efficiencies in the supply chain.

Many CEOs are now asking their CIOs about ERP because they’re hearing about it from their peers and reading about it in the trades. They’re hearing about the ability of these systems to allow for faster decision making, and for reducing the costs across the enterprise.

The ERP landscape has also changed in the past decade, driven, in part, by the newer business practices and technologies, including a renewed focus on the customer satisfaction, lean manufacturing, computer integrated manufacturing, and supply chain management all of which are also influenced by the relentless move of manufacturing offshore.

Another factor influencing the redux of ERP is the simple fact that we simply know more about implementing these complex systems now. It’s now taught at many colleges and universities as part of their business or computer information technology curriculum, and the case studies of major ERP disasters are now all well circulated; and the lessons learned from these expensive failures are well ingrained into the both the teaching of ERP and the implementation methodologies.

How to Prepare

No project of the scope of an ERP system should be done without first building a sophisticated business case to justify the expense. In addition, most companies should work with a consulting organization without any ties to specific software vendors.