I'm joining a growing discussion -- a collective voice of dissent if you will -- against ERP vendors' "suites" approach. In other words, the countless modules that bolt on to the base system. Have you ever encountered an ERP sales or consulting rep and asked if your system could address a particular business issue only to hear that, in fact, you need a suite of modules to address that challenge? This is notorious in the supply chain management (SCM) space in particular.
The corporate landscape is littered with failed ERP-SCM projects. But recently, there have been signs of a change in the way the industry has traditionally approached ERP suites. Companies no longer have the IT budgets to support large implementations of complicated licensed solutions, nor the consulting engagements required to make all the pieces work, or the maintenance fees that accompany it. Taking these significant changes into account, I believe it's time to finally point out the elephant in the room: ERP suites are too complicated, too expensive and most importantly, they don't fulfill the real need. One CIO I was talking to said it best...he is having "suite fatigue."
Are You Sold on the Integration Story?
ERP suites are silo solutions. What I mean by that is historically organizations were set up with separate departments executing separate processes (demand planning, supply planning, supply chain execution) according to separate business models. As a result, the technology was developed in that way too. There is a lot of talk about breaking down the silos from an operations process perspective -- but the industry needs to see that on the technology front as well. This capability gap must be closed from a technology perspective to meet the challenges of today's supply chains.
Ultimately, the problem is complexity: the greater the scope of the ERP system, the greater the difficulty in unifying the various pieces together.
Gut check #1: Do you believe that because an ERP suite is considered one product, there will be seamless integration? For some ERP vendors, many of the modules are acquired products, so while they may all be sold under the same name, they certainly weren't originally designed and developed to easily integrate with other modules in the same suite.
I speak with CIOs of some of the world's leading companies on a regular basis, and more and more I am hearing that they're tired of adding modules and building an internal infrastructure for what is ultimately an incomplete and insufficient product.
And why do they consider these suites insufficient? Beyond the need to stitch the different modules together is the need to connect and leverage them with the outside world. ERP was originally designed for a single-site organization that operated within the confines of its four walls. And while the technology may have advanced, they have never come away from that founding architecture, which is ultimately incongruent with today's multi-enterprise organizations.
Gut Check #2: Can you use your ERP to connect with heterogeneous systems across your organization and among your external partners?
The supply chain data required to make effective decisions, which in an integrated company 20-30 years ago was accessible to everyone in the company, is now scattered among the different participants in the supply chain. In the majority of cases, the data will reside not only in several different ERP systems, but often key elements of the data will reside in Excel spreadsheets and other data sources. Even within a single ERP system, several modules may be used to reconcile demand and supply, while another will be used to collaborate with suppliers and customers, and yet another module will be used for reporting, and finally another module will be used for scenario management. The latency inherent in these islands of data, both external and internal to an organization, reduces greatly the timeliness and effectiveness of supply chain decision making, especially given the volatility of today's supply chains.
Where is the ROI?
Adding a suite of software modules to your ERP system, even if originally "free of charge," can translate into bloated implementation, consulting and maintenance costs, not to mention valuable time lost. Customers first must license each software module, then integrate the modules, and continually invest in IT support to satisfy users.
Gut Check #3: Is the cost of the module too good to be true? Selling suites of software is great for software vendors, but is bad (at best) for the customer.
It is common in the industry to find failed implementations of supply chain suites which resulted in multi-million dollar software, maintenance, and consulting costs. Worst yet, for many it took years to figure out these projects were never going to produce the ROI originally promised.
Is it Doomed from the Start?
Let's revisit the point that ERP supply chain modules are silo solutions. As a result, they pick off individual symptoms of a problem, but never quite solve the organizations' main challenges.
Gut check #4: Are the modules you have purchased not being used for the original intent, or worse, have ended up "on the shelf"?
Gut check #5: Are you using spreadsheets because you can't do everything you need to do in your ERP system?
If you are managing your supply chain on a daily basis through a collection of spreadsheets, that's a sign that you are not getting the capabilities you need to solve your problems.
So Now What?
What is needed in today's dispersed and loosely-coupled supply chains is more collaboration and less control, more coordination and less optimization. At the heart of delivering this is the technical architecture of the solution.
I would encourage you to stop facilitating a patchwork approach to achieving integrated supply chain management. Forget the point solutions and look for core technological capabilities that can provide a platform which can be applied to many applications. Bridge the divide between the siloed operations and partners with tools that truly deliver on the promise of integrating information, capabilities and people.
CIOs and supply chain executives deserve to have more confidence in the success of the solution, more accountability on the part of their vendor, and certainly better ROI -- this means looking at alternatives to the "suite." Whatever you chose, be aware of the options, aware of the risks, and avoid being seduced by the suite.
Doug Colbeth is CEO of Kinaxis, which delivers an on-demand supply chain management service. http://www.kinaxis.com/
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