Since the late 1990s enterprise resource planning
suppliers, analysts and CIOs have advocated a move to
single-instance ERP as a solution to data integration and reporting
problems. ERP suppliers have argued that the extended functionality
in workflow, purchasing automation and other areas offers a lower
total cost of ownership with superior functionality.
So why aren't chief financial officers buying? Why do they
continue to embrace best-of-breed tools across areas such as
reporting, business intelligence, work- flow and peer-to-peer
automation? And why do so many CIOs and CFOs have widely divergent
views on the ERP versus best of breed debate?
For CFOs the governing objective is shareholder value, not
superior technologies. Chief exec- utives and CFOs are increasingly
focusing on managing for value, and evaluate business
transformation initiatives (and associated IT investments) in terms
of how they enhance shareholder value. Specifically, they look at
whether investments support turnover growth, margin improvement,
working capital optimisation and reduce cost of capital through
compliance and lower risk.
Moving beyond TCO
The implication of this is that IT professionals need to move
beyond total cost of ownership and assess the technology sourcing
decision in the wider context of shareholder value. Many IT
investment decisions fail the key shareholder value test.
CFOs want robust solutions and effective execution rather than
elegant strategy. Our research suggests that CFOs and senior
finance executives prefer technology architectures that are robust
across a wider ranger of organisational circumstances. This allows
them to make acquisitions and restructure without compromising
costs and returns.
As such, they are willing to accept the reality of the
"messiness" of the multiple ERP/best of breed environment because
they believe future business decisions will derail any single ERP
strategy, however elegant it is.
For CFOs, functionality and ease of use are also key
considerations. Many of the users of so-called extended ERP
applications are based outside the traditional finance function and
may have had only limited exposure to finance systems. Our research
suggests that users tend to find ERP functionality cumbersome,
complicated and not in keeping with their established work
patterns. Although ERP systems may ultimately offer greater
functionality, it comes with a significant learning overhead which
CFOs are unwilling to carry.
The price of deadlines
For many firms in our study, going live with ERP was a false
finish. To meet deadlines for going live, firms had abandoned areas
of functionality and reduced the scope of their ERP projects.
Y2k pressures, skills shortages, a failure to redesign
processes, reluctance to address business change issues and other
factors saw many firms falling short. In addition to scope
reductions, global firms found the roll-out to other countries
required them to freeze the ERP implementations of the initial
sites until the full global roll-out was completed.
This caused even minor system changes to be postponed. As a
result, in most cases the organisational appetite for large-scale
technology investment was dented. CFOs in particular are sceptical
about making further investments in second wave ERP until payback
from the first wave of implementations is realised.
Currently, the technologies in place in many organisations
resemble spaghetti. Important data is locked away in closed systems
and inside people's heads, and many firms rely on the re-keying of
vital information. More specifically, firms fail to automate the
interface procedures between sub-systems and ERP master data, and
in many cases they have not even automated the generation of key
analytical information.
Although the technological merits of single instance ERP are
appealing, the shareholder value arguments in terms of improved
process integration and better information only stand up in a
limited number of cases.
For the foreseeable future single-instance ERP will be a popular
rhetoric, but a scarce reality.
Martin Fahy is a lecturer in management information systems
at the National University of Ireland, Galway. He prepared the
report Insights into Enterprise Purchase to Pay Automation and
Transformation