an experts guide to erp success chapter three

8/14/2019 An Experts Guide to ERP Success Chapter Three

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An Experts Guideto ERP Success

By Eric Kimberling, Managing PartnerPanorama Consulting Solutions


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3773 Cherry Creek North Drive - Suite 720 - Denver, CO 80209

720-515-1377 Panorama-Consulting.com

Copyright 2012 Eric Kimberling. All Rights Reserved.

Chapter 3. Analysis of Specific ERP Systems

One of the first steps in an effective ERP software selection process is to determine the type of enterprisesystem you're looking for. There are lots of buzzwords out there Tier I, Tier II, SaaS, cloud ERP, best-of-breed and so on. What does this all mean and how do you make sense of it all? And more importantly, which isthe right type of ERP software for your organization?

The answer is: it depends (my favorite answer as a consultant, by the way). It depends on a number of criteria,including initial versus ongoing costs, functionality of potential ERP systems relative to your businessrequirements, and your organization's want or need to manage its own IT infrastructure. Short-term vs. long-term costs are another important consideration. However, the complexities of this decision can be more simplynarrowed down to two main variables: complexity and control.

ControlAs outlined in the above table, companies that view technology as a competitive advantage have an increasedneed to control their IT infrastructures and are more likely to find that traditional on-premise ERP systems meettheir business needs. These types of systems provide the flexibility and control that such organizations arelooking for.

On the other hand, some companies view the IT function as a non-competitive nuisance. They want tooutsource it and get it out of the four walls of their organizations. For these types of companies, software as aservice (SaaS) or hosted ERP solutions often make more sense.


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ERP Solution: Software as a Service (SaaS)

There is much hype in the ERP marketplace regarding the strengths of SaaS relative to traditional on-premiseERP software solutions. Without question, several SaaS and cloud vendors are growing quickly and givingtraditional ERP vendors a run for their money. Salesforce, Workday and NetSuite are just some of the SaaSvendors receiving much attention and business success in recent years, and even on-premise heavyweightslike SAP and Oracle have stepped up their cloud offerings.

So implementing SaaS must be a slam-dunk no-brainer, right? Not even close. While there are some definiteadvantages, much of the hype fails to disclose the downside.

Five Important Aspects to Consider When Evaluating SaaS Options

Cost.The common perception is that SaaS is much cheaper than traditional big ERP systems. This issometimes true, but not always. For example, because SaaS does not require a complex internaltechnical infrastructure to support, it can reduce costs. In addition, one essentially leases thesoftware, so there is less of a big payment up front than with a traditional on-premise ERP system.However, the ongoing costs are most likely going to be significantly higher since an organization has topay to use the software annually, (whereas one only pays maintenance on a traditional on-premisesolution). So initial costs may be lower for SaaS, but will probably be higher on an ongoing basis. Keep

in mind that because SaaS solutions tend to get dollars off the balance sheet and optimize a companysreturn on assets, they can be of particular appeal to CFOs looking to minimize capital expenditures.

Flexibility. Because an organization doesnt own the software on its own servers, there is inherentlyless it can do to change the software to fit specific business needs. One can still configure and set-upthe software as desired to a point, but when it comes to hardcore workflow redesign or customization ofthe software, SaaS is much more limited in its capabilities. This may be a reasonable trade-off for asmall- to mid-size company, but many of our larger clients with well-defined business processesstruggle with the concept of not having as much control as they would prefer.

Simplicity.SaaS typically is simpler to deploy from a technical perspective. Because an organizationdoesnt need to purchase additional servers or physically install the software itself, it can be an easyand quick means of deployment. On the other hand, the high level of technical ease may createadditional business complexities that the company might not experience with traditional ERP.

Accessibility.Since SaaS is entirely accessed through the web, an organization is in a world of hurt ifthe Internet goes down. Alternatively, traditional ERP does not require Internet reliability provided usersare accessing the software from inside the companys network.

Ease of Implementation.A big selling point for SaaS is that an organization can have a system up andrunning in a matter of weeks. Technically this is true, but it is also true of traditional ERP software. Theproblem is that going live has less to do with getting the software up and running than it does withclearly defining business processes, configuring the system accordingly and ensuring people are welltrained in the new process workflows and transactions. In the case of SaaS, it often takes a great dealof time to change the processes of the business to fit the software, which is not reflected in the typicallyoptimistic implementation timeframe of a SaaS ERP sales rep.


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Questions to Ask When Considering SaaS ERP Solutions

Is there a need for a highly customized solution?

Is there a need to integrate with legacy apps?

How large is the planned deployment?

Are there features that are missing from software?

What is the timeline for deployment?

What is the IT staffs experience level? Is there a need to upgrade a significant portion of the IT infrastructure?

How big of a change will the software entail?

At Panorama, we often find that SaaS solutions are viable for our SMB clients. Conversely, our larger clientsgenerally find that SaaS does not adequately accommodate their enterprise software needs. Moreover, theSaaS delivery model is often more suited for vanilla and narrowly defined business functions, such ascustomer relationship management, human resource management or supply chain management; broader ormore differentiated functions can be more difficult to accommodate.

Choosing between SaaS and traditional ERP isn't easy. Many of the traditional software vendors are providinghybrid options that combine the best of both worlds by offering customers a single instance with the flexibility of

traditional ERP, but hosting those solutions externally to accommodate the desire to outsource their ERPinfrastructure.

ERP Hosting: Wheres the ROI?

Since hosting an ERP system is a major item that can significantly affect a projects ROI, it is a decision thatshould not be taken lightly. Whether or not a hosted ERP solution is right for your organization depends onyour unique situation. Though many readers may not like my it depends answer to the question, there are anumber of factors that should affect your final decision.

Advantages of a Hosted ERP Solution

Hosted solutions provide flexibility, which is good for companies that are going through officemoves, consolidations or closures. With hosted solutions, you dont need to worry about scaling thesoftware to meet your evolving requirements as your business changes. This is also advantageous tocompanies that have limited IT resources or are in the process of downsizing.

It provides strong disaster recovery processes,which is good for companies that are struggling withSarbanes-Oxley (SOX) compliance.

If an organization purchases the hosted solution from its ERP software vendor, it may be able tonegotiate more favorable terms on the software licenses and/or implementation services.Hosting represents a steady cash flow at a high profit margin for software companies; a company would

be wise to consider using this to its advantage.

Whether or not an organization chooses to host its solution depends on many factors. The best thing to do is todevelop at least two different scenarios as part of your business case justification: one for an internally hostedsolution and one for an external solution. After comparing both business cases, the most appropriate decisionwill become clear and you will be on your way to maximizing the ROI of the ERP project.

Specific Functions of ERP Software: Benefits and Drawbacks


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Accounting Software Considerations

In the world of enterprise solutions, accounting software provides one of the most visible impacts on anorganization. Staff members ranging from executives to front-line employees rely heavily on the data andreports provided by accounting software. Most accounting packages are able to provide basic chart of accountand period-end close processes, along with standard reports to help run a business.

However, not all accounting software is created equally. Just as with other modules and functions of ERP,some solutions handle accounting better than others. Below are five things to look for when evaluatingpotential accounting software:

Reporting and executive dashboards.Most companies have fairly unique reporting needs.Executives and employees may need to view profit and loss by product lines, work in progress or othervariations. In addition, different users have different needs for transparency into the internal day-to-dayworkings of the company. These needs should be clearly defined and compared to the functionality ofpotential accounting solutions.

Job and product costing.This can be one of the trickier aspects of reporting out of an enterpriseaccounting solution. Therefore it is important to closely examine the ability to gather this information.

Budgeting and forecasting.This may be one of the more challenging components of accountingsoftware. Rather than forcing users to manually forecast in Microsoft Excel and load data into an ERPor accounting system, more robust packages will provide tools to develop budgets and forecasts basedon historical trends, seasonality and other more sophisticated statistical models. Strong functionality inthis area can pay huge dividends in increased efficiencies and more accurate planning.

Integration with operations. Stand-alone accounting packages are even more powerful when theyintegrate into the core operations of a business. Drilling down from income statements to specificcustomer orders, for example, provides a great deal of visibility to employees. In addition, accountingdata is incredibly useful when it incorporates real-time data around inventory levels, production orders,and other critical business data.

Internal business controls.Accounting is more than just reporting results it is also about providinginternal controls. Even if an organization is not required to be Sarbanes-Oxley (SOX) compliant, itsaccounting systems automated workflows, approvals and transaction security will ensure that thecompany is minimizing business risk and making its auditors happy.

CRM Software Selection

As with all enterprise software initiatives, the customer relationship management (CRM) software selectionprocess can be tricky. There are plenty of solutions to choose from, multiple delivery options, and largeamounts of software vendor hype. In addition, companies such as Salesforce, Microsoft CRM, NetSuite andOracle CRM are aggressively pursuing the market with competing messages.

CRM evaluations should consider elements inherent in effective ERP software selection processes. For

example, a CRM software selection process should include the following steps:


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Clearly define business requirements

Evaluate the technical fit of potential options

Assess vendor viability

Evaluate functional fit via a scripted demo process

Develop a business case

Negotiate with vendors

Create a realistic implementation plan

In addition to the above, there are five factors that are somewhat unique to CRM software evaluationprocesses:

1. Evaluate how the organization might extend CRM to ERP. It's short-sighted to choose a CRMsystem without defining a plan for integrating with other key functions such as order entry, productconfiguration, inventory management and financials. If the companys longer-term plan is to implementother enterprise software modules, it is important to have a sense of which will be the right fit beyondCRM so it doesnt become backed into a corner later on.

2. Clearly understand the organizations business and technical integration needs. CRM can be

powerful software with tangible benefits, but some of these benefits may be undermined if processesand data are not integrated with other enterprise modules. For example, sales reps need to seeinventory levels and order status and determine available-to-promise dates based on available capacityand production plans. Another example is the finance department, which may want to see how productcosts compare with sales pricing models. Needs such as these may be met via integration withadditional enterprise software modules or business intelligence and reporting solutions.

3. Don't forget that it's about the people, not the technology. The beauty (and curse) of CRM is thatthere are plenty of viable options with sophisticated functionality in the marketplace. Whether it's SaaSdeployment models, cool bells and whistles or other sexy functionality, it can be easy to get caught upin the technology. However, it's important to remember that as with any enterprise solution, CRMsuccess is more about people and processes than the technology itself. It is key to find and implement

a CRM solution that is a good fit for both the business and its organizational structure.

4. Understand the tradeoffs of SaaS vs. on-premise CRM delivery models. Before jumping straighton the SaaS bandwagon, it is important to carefully consider the pros, cons and trade-offs of differentdeployment models. As we have outlined in our annual ERP Reports (available at Panorama-Consulting.com), SaaS implementations are typically implemented in less time, at a lower initial costand with higher than average business benefits. On the other hand the likelihood of going over-budgetalso is higher. It is important to determine which CRM delivery option is best for your business.

5. Set realistic expectations for implementation cost and duration. One of the most common reasonsfor CRM failure is not allocating sufficient time and resources to the implementation. Whether one isimplementing CRM to one or 100 users, there are key project activities that need to be factored into theimplementation plan. Business process design, training and conference room pilots are just a fewexamples of key implementation activities that need to be included when budgeting the time andresources required.


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Web Portals in ERP Software Systems

Businesses from complex heavy duty manufacturing to wholesale distribution are realizing the value ofextending business data within their ERP software throughout the value chain. Smart companies havestreamlined their business processes to the point where changes in demand or supply have not resulted insignificant inventory overages or shortages. ERP systems are the centerpiece of those streamlined operations.Extending business data throughout the value chain however is difficult for SMBs because ERP softwaresolutions have not figured out a comfortable way to do so. Their solution is web portals. Their problem is

licensing.

Four Ways ERP Software Solutions Offer Web Portals

ERP software provides development tools that allow companies to create portals for suppliers,customers and employees.

ERP software restricts development to only customers and/or suppliers or employees.

ERP software provides creative ways to charge end-users (customers and/or suppliers). This includesenterprise-pricing models.

ERP software vendors have decided to integrate with SharePoint to expose customized pieces of theirsolution over the web.

Before you decide on using any web portals to extend business data to suppliers and or customers though,your business must first consider the following points:

Business Requirements. Web portals can be used in a laundry list of ways. Companies must knowwho needs what and why. The companys business needs from external parties will shape the portalenvironment.

Technical Requirements. The web portal environment is a web development environment.Consequently, IT skills may need to be upgraded and or new resources may need to be incorporated.Additionally, current systems may or may not be able to support a portal environment thus technicalinfrastructure as well as strategic planning for the organization should be taken into account.

Implementation Strategy. The implementation strategy should not only include employees but alsocustomers and or suppliers. Some customer and/or suppliers may be reluctant to use the technologyand thus training and or incentives need to be provided for support.

Web portals are relatively simple for modern ERP systems and can help companies extend business data toincrease efficiency. Businesses, however, must understand their operational and technical requirements priorto considering web portals because their requirements will shape the web portal environment as well as theERP software that supports it.


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Industry-Specific Considerations: Manufacturing

The challenging state of the manufacturing sector during this economic downturn has received plenty of pressover the last several years. Recent news has been focused on the beginning of a sustainable recovery formanufacturers. Im no economist, but based on what were seeing, manufacturers may finally be looseningtheir purse strings to invest more in their operations and enterprise level manufacturing software.

Fourth quarter is usually the busiest time of year for Panoramas manufacturing enterprise, ERP and CRMsoftware selection services as companies plan and budget for purchasing and implementing software thefollowing year. However, fourth quarter 2011 seemed abnormally busy. Demand for our software selectionservices spiked dramatically a possible indicator of broader investment in manufacturing technologies.

So why is this? There seem to be a number of driving factors.

Misalignment Between Manufacturing Software and Operations

Before the recession officially began in late 2007, manufacturers were feeling the combined pains of globalcompetition, evolving manufacturing and production models, and significant merger and acquisition activity.During this time, many manufacturers faced competing priorities and neglected to assess their enterprisesoftware. Then the recession hit and IT budgets were put on hold, deferring necessary investments in ERP,CRM, warehouse management and other enterprise solutions.

In the meantime, manufacturers operations became more misaligned with their manufacturing software.Business models changed, supply chains became more complex and globalized, and companies wereacquired and their manufacturing enterprise software did not keep up. This misalignment is one key reason forthe current spike in demand for manufacturing software selection services.

Cost Pressures Can Be Addressed by Manufacturing SoftwareIt may sound counterintuitive, but the fact that sales are flat and costs are under pressure also are driving theneed for manufacturing software solutions. When the recession began, companies temporarily put enterprisesoftware investments on hold until things improved. Now that the recovery is proving not to be highly dramaticand costs will likely remain under pressure for the foreseeable future, manufacturers are leveraging enterprisesoftware as potential mechanisms to drive down long-term costs and increase revenue.

In addition, the recession forced many (if not most) manufacturing companies to shed employees. These newlylean organizations are exposing and magnifying the weaknesses and inefficiencies of supply chains sincethere are less people to run the operations. Here again, manufacturing ERP software is an opportunity tocreate efficiencies and act as a surrogate for displaced employees.

The result is pent-up demand for enterprise software solutions that will help manufacturers reduce costs, growrevenue and scale for potential merger and acquisition activity, which appears to be accelerating in moremature and competitive manufacturing verticals.

We are finding that this increasing demand for manufacturing enterprise software is widespread. Companiesranging from medical device to film equipment to consumer product manufacturers have expressed interest inPanoramas evaluation and selection services. Some are under $100 million in annual revenue and 100employees, while others are more than $500 million in annual revenue with several hundred employees.

Manufacturers have struggled to grow revenues and contain costs, but enterprise software may be a key tohelping them through stagnant economic growth. If this is indeed a trend, it would be a welcome improvementin the ERP software industry.


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Manufacturing ERP Software Selection

The good news for companies evaluating potential manufacturing software solutions is that there are plenty ofoptions to choose from. Several ERP and other enterprise software packages originally targeted themanufacturing industry and expanded functionality to other industries over time. In addition, a host of nichesoftware vendors focus exclusively on discrete, process, make-to-order, make-to-stock and other types ofmanufacturers.

This all equates to a broad range of software options. In addition to Tier I options such as SAP and OracleeBusiness Suite (EBS), there are dozens of viable Tier II manufacturing solutions, such as Epicor, Infor, QADand SYSPRO. They all have different strengths, weaknesses and sweet spots.

So what's the best way to navigate through this overwhelming number of options? The most important thing isto focus on both the aspects that are most important to your company and the differentiators between vendors.For instance, comprehensive G/L and accounts receivable processes may be important to a business, butmost enterprise software is fairly comparable in those areas.

Here are a few examples of some of the differentiators worth drilling into during your manufacturing softwareevaluation process:

Integrated manufacturing and shop floor processes.While most enterprise software at leastprovides third-party build-ons to address manufacturing processes, it is typically more effective and lesscomplicated to focus on a single system that addresses your operational needs. Processes rangingfrom engineering, bill of materials, order management, inventory management and kanban should beevaluated. In addition, not every manufacturing ERP system provides the functionality of manufacturingexecution systems or shop floor automation.

Material requirements planning (MRP).Believe it or not, manufacturing software doesnt alwayscontain robust MRP and planning tools. Given the complexity of many manufacturing products, it isimperative that your enterprise software support planning demand not only for finished products, butalso for components and parts. Effective MRP and planning tools can help significantly reduceinventory costs and increase revenue.

Product configuration.Since engineer-to-order (ETO) manufacturers create custom products with adizzying array of potential configurations, it is important to find software with a product configuratorrobust enough to handle your specific product line. This includes everything from defining businessrules when creating orders, all the way through manufacturing and assembly.

Customer relationship management (CRM).In general, CRM is one of the less mature moduleswithin manufacturing software. However, a robust offering can help your organization sell more withless people, cross-sell and up-sell to existing clients, and provide better information for your customerservice teams.

Product lifecycle management (PLM).For non-commodity manufacturers, new product developmentcan be the lifeblood of their businesses. New product designs should be integrated with yourengineering, purchasing and material management processes to drive down costs and decrease yourproduct development lifecycle. PLM is one of the less common modules within manufacturing software,so any evaluation should explore your needs in this area.


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Business intelligence.This is typically one of the biggest differentiators of manufacturing andenterprise software solutions. Employees and executives need to have broad visibility intomanufacturing operations, so it is important to ensure your potential software options provide thereporting and business intelligence you need. For example, you may want to carefully evaluate theability of the software's canned reports to provide information related to job costing, product costing andoverhead allocations.

These are just a few pointers to start an evaluation of manufacturing software solutions. An organizationshould clearly and thoroughly define its specific business processes and requirements to give you tangiblecriteria to base your evaluation and decision.

Below are some of additional factors we tend to focus on when evaluating ERP, MRP and other enterprisesoftware for our clients in the manufacturing and distribution industry:

Demand forecasting

Advanced material requirements planning (MRP)

Automatic scheduling

Standard costing

Product engineering

Product lifecycle management (PLM) Engineering change notices (ECNs)

Online product configurations

Inventory management

Consignment inventory

Quality control

Chemical Products Manufacturing ERP Selection

Based on our experience with chemical products manufacturing companies, this industry has unique needsthat are not effectively addressed by all enterprise software vendors. Units of measure, lot traceability and

shipping in multiple forms (e.g., liquid vs. gas) are just a few of the challenges that make the chemicals andprocess manufacturing industry unique.

Below are some of the factors we tend to focus on when evaluating ERP, MRP and other enterprise softwarefor our clients in the chemical products manufacturing industry:

Laboratory management

Formulations and recipes

Scalable batches

Strong inventory management

Certificate of analysis (COA) generation

Bi-directional lot tracking

Expiration date tracking Recall management

Audit trails and reporting

Not all enterprise software solutions are able to handle these complex requirements, so it is important toconduct an enterprise software evaluation that objectively compares potential vendors' ability to meet theseneeds. Companies that fail to select software that can handle some of these complexities often end up


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spending significant amounts of money on software customization, manual process workarounds and sub-optimized business benefits.

ERP Software For Make-to-Order and Engineer-to-Order Manufacturers

Make-to-order (MTO) and engineer-to-order (ETO) manufacturers face a number of additional challengesunique to their industry. Based on our research and client experience with manufacturing software, below are

five common pitfalls in selecting MTO and ETO ERP software:

Product configuration.Since ETO manufacturers create custom products with a dizzying array ofpotential configurations, it is important to find software with a product configurator robust enough tohandle your specific product line. This includes everything from defining business rules when creatingorders, all the way through manufacturing and assembly.

Material requirements planning (MRP).Believe it or not, not all enterprise software contains robustMRP and planning tools. Given the complexity of MTO and ETO products, it is imperative that yourenterprise software support planning demand for not only finished products, but also for componentsand parts. Effective MRP and planning tools can help significantly reduce inventory costs and increaserevenue.

Project management.Organizations that manufacture complex, low-volume, high-dollar items (e.g.,aerospace and defense) can benefit from an integrated project management tool to manage largeprojects. This tool should also integrate project data regarding resources, parts and labor with corefinancial ERP data.

Product costing.Given the relatively high levels of labor costs, MTO and ETO manufacturers need tohave a good grasp on their product costs. Therefore, it is important to drill down into product costingfunctionality during the ERP software evaluation process.

Serialization and returns.Since many MTO and ETO large-ticket items are serialized at both thefinished product and component levels, it is critical to understand how any potential ERP softwarehandles serialization, returns and warranties. Panorama experience shows this area to be a commonpitfall for complex manufacturing software.

Manufacturing ERP and the Cloud: An Idea Whose Time Has Come?

In September 2011, Salesforce hosted Dreamforce, its annual conference for cloud ERP vendors. The eventdrew over 45,000 participants this year, underscoring the significance of the company in the ERP space, andmore importantly, the significance of cloud and SaaS-based ERP solutions.

Dreamforce also featured the launch of Kenandy, a Silicon Valley startup focused on SaaS ERP solutions forthe manufacturing industry vertical. While ERP vendors such as Salesforce, Plex, and Epicor already provideSaaS manufacturing ERP systems, this particular industry has been sorely lacking the software optionsrequired to give most manufacturing executives the choice and comfort required to fully embrace the SaaSmodel. Kenandys launch, which is backed by over $10 million in venture capital funding, helps mitigate theseconcerns.


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Dont get me wrong: the SaaS and cloud trends are very real and are quickly changing the game for ERPvendors and their customers. In addition, ERP vendors such as Salesforce and Workday are providing best-of-breed point solutions in the CRM and HR arenas, which are more likely to be embraced by manufacturingexecutives. However, when it comes to fully integrated solutions that tie together a manufacturers data andbusiness processes ranging from financials to inventory to manufacturing workflows into a single system,SaaS ERP systems have been lacking, with only a handful of solutions providing the truly integrated processesdesired by most manufacturing and distribution companies. With each new company like Kenandy and Plex,executives in this industry vertical will become more comfortable and more likely to adapt the SaaS model. So

does this mean that traditional manufacturing ERP systems are obsolete, only to be replaced by SaaS optionslike Kenandy? Not quite yet. Although many industry analysts strongly disagree with my lukewarm opinion ofSaaS solutions, Panorama analysts still feel as if we are still three to five years from seeing widespreadadoption of SaaS enterprise solutions in the manufacturing industry. Despite the hype and long-term potential,the fact of the matter is that SaaS and the cloud have not yet quite killed traditional enterprise software.

In addition to more options, here are a handful of things that need to happen before manufacturing executivesfully embrace the SaaS model:

1. More breadth and integration. The complexity of most manufacturing companies makes SaaSadoption more difficult, resulting in a lower adoption rate here than in other industries.While SaaS CRMor HR options from Salesforce or Workday can be effective solutions to address specific and relatively

vanilla functional areas, most SaaS ERP systems do not provide the breadth of functionality andbusiness processes that are required to address manufacturers business requirements. Companiessuch as NetSuite and Plex are changing this, but the maturity and breadth of fully integratedmanufacturing ERP processes are not quite there yet.

2. More robust development and integration tools. One of the shortcomings of the SaaS model is therelative lack of flexibility compared to traditional, on-premise solutions. Since SaaS options typicallyentail multi-tenant delivery models, they are inherently less flexible to customize. Granted, they still doallow tailored changes to basic configuration and set-up, but they do not allow heavy customizations.While customization is generally viewed as a negative thing, it is often required to help organizationsmaintain and automate their competitive advantages. In fact, according to our research, only 15-percenof ERP implementations involve no customization, so it is something that is clearly desired by the

market. Until SaaS solutions further develop their tools to allow the flexibility that most executives arelooking for, they will always play second fiddle to traditional ERP solutions.

3. Concerns with security and data ownership. During a recent presentation at a manufacturingconference, executives at the event demonstrated common concerns with security and data ownership.The reality is that SaaS and cloud providers build their entire companies around providing securesolutions while manufacturers arent generally focused on doing so so they can quite frankly providemore security and stability than any internal IT department would ever be able to. Similarly,manufacturing companies that service aerospace and defense, food and government sectors haveconcerns about controlling or owning the data, which are addressed by most effectively negotiatedsoftware contracts. However, SaaS ERP vendors dont seem to be doing enough to address theseconcerns. Until software companies do a better job of selling their capabilities in these areas,

manufacturing executives are going to remain skeptical.

Once these three areas are addressed, manufacturing companies will more fully embrace the SaaS model. Inthe meantime, executives are going for a sort of hybrid approach, where they purchase traditional ERPsolutions while having them hosted in the cloud. This often provides companies with the potential benefits ofSaaS while maintaining the flexibility they are looking for in their ERP systems.


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distribution. For example, most food manufacturing and distribution companies need flexible units ofmeasure and the ability to track the recipes of their products within the bill of materials.

3. Sales and financial reporting. Companies within the food industry often have more complex reportingrequirements than other distribution companies. Sales and financial results often need to be sliced anddiced in a number of ways, such as by region, product line, brand, etc. Not all enterprise software canhandle this reporting complexity.

Industry-Specific Considerations: Government and Public Sector

There is no question that the government and public sector have unique needs that are not effectivelyaddressed by all enterprise software vendors. Fund accounting, license tracking and tax revenue tracking arejust a few of the challenges that make government and nonprofit enterprise software unique.

Below are some of the factors we tend to focus on when evaluating enterprise, financial management andaccounting software for Panoramas government and nonprofit clients:

Fund accounting

Budgeting Account allocation

Fixed asset tracking

Recurring billings

Permit tracking

License renewals

Human resources and payroll

Reporting

Our experience with non-profits, federal, state and local entities have shown us that certain challenges areespecially pronounced in the public sector. Public sector ERP systems face unique obstacles related to peoplebusiness processes, and complexities. It's not that public sector ERP implementations are necessarily more

difficult than those in the private sector, but there are things that make them unique.

Here are a few distinct challenges to consider before embarking on an ERP implementation for a public sectororganization:

Organizational change management.Change is hard for employees at most organizations, but it canbe even more difficult to manage in the public sector. Employees in the public sector haven'ttraditionally been motivated by a fear of having to outperform peers to keep their jobs (although this ischanging in recent years), so performance-based incentives may not be as effective. In addition,because government organizations often do not feel the same external market pressures to changequickly, employees may not be used to the large changes entailed by an ERP implementation. Forthese reasons, organizational change management plans need to pay particular attention to "selling"

the changes and positively impacting the culture of the organization.

Communications.In addition to the cultural change enabled by an organizational changemanagement plan, general communications can be especially challenging with public sector entities.Not only is it important for the project team and executive sponsors to communicate major process andorganizational changes to employees, but there are typically a complex series of stakeholders thatneed to be communicated to as well. Constituents such as internal customers, external taxpayers and


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external "customers" all have a vested interest in ensuring the project is successful. It is for this reasonthat public ERP systems often take so long and cost so much to implement.

Complexity.Another challenge for government organizations is that they are generally larger, morecomplex and impact people more than those in the commercial space. It's rare to find a small, nimbleand simple government organization - no matter how relatively small it may seem compared to othergovernment entities - so the complexities can be material. Business processes, systems, people andorganizational structures all can be more complex than what you might see in the commercial space.

For this reason, you want to make sure you have a software solution and ERP implementation partnerthat is accustomed to these complexities.

Public sector ERP implementations are difficult but not impossible if managed effectively and with the rightimplementation partner. However, getting there is easier said than done. The above three variables are threekey complexities to consider as you begin your organization's ERP initiative.

Industry-Specific Considerations: Energy, Utilities, Oil and Gas Industry

ERP software is always complex, but especially so in the energy, utilities, oil and gas industry. With all the talkof clean and renewable energy, it's interesting that not as much has been said about how these new energycompanies, along with existing firms, are going to handle the changes and shifting complexities of theirbusiness.

Energy companies have unique and diverse requirements when compared to other industries. Fixed assetmanagement, work management, field service management, geographical information systems, CRM andtrouble management are just some of the varying needs that somehow need to be integrated together. It canbe a challenge finding an ERP system that can effectively handle all of these areas.

So where is an energy company to start when evaluating potential enterprise systems? Below are six of thekey areas to explore when choosing and implementing an ERP system:

1. Enterprise asset management.Energy companies are extremely asset-intensive. Whether it'sbuilding a new power plant or performing maintenance on an energy substation, ERP software needs tobe able to track construction, maintenance and cost of these assets.

2. Support geospatial data.Another unique factor within the energy industry is the reliance on geospatiadata. Relatively straight forward data such as assets, inventory, exploration, field service crews andmaintenance need to be managed spatially, which increases the data complexities of enterprisesoftware. This is one of the more difficult challenges for many ERP solutions, which is a key reasonwhy energy companies commonly add separate GIS solutions to their core enterprise software.

3. Engineering and graphical work design.When building and maintaining the plants and other fixedassets required to run energy companies, an opportunity for efficiency lies in leveraging enterprisesoftware to better manage engineering processes. Engineering designs for fixed assets require carefultracking of work orders, materials management and other critical points in the supply chain.

4. Trouble and outage management.One of the biggest headaches for energy companies is aninfrastructure outage. Therefore, they need to not only track trouble tickets, but also track those ordersto assets and other geospatial data elements.


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5. Work management and field service management.As is the case with telecommunicationcompanies, energy organizations need to manage work orders for building new assets, conductingperiodic maintenance, and establishing new service for customers. These work orders need to tie to theasset management, geospatial, mobile workforce management and customer systems, which makesthe process that much more complex.

6. CRM, customer service and billing.Energy companies typically have different classifications ofcustomers, ranging from other distribution companies to consumers. In addition to basic customer

relationship information, such as customer service, billing and account management, these functionsneed to integrate with outage management and work management processes.

Industry-Specific Considerations: Life Sciences

FDA compliance, product configuration and lot traceability are just a few of the challenges that make the lifesciences industry unique.

Following are some of the unique factors Panorama consultants hone in on when evaluating ERP, MRP andother enterprise software for our clients in the life sciences industry:

Multi-level bill of materials

Recipe and formula management

Yielding

Lot tracking and lot property management

Serial number tracking

Warranty tracking

Recall management

Business intelligence

Ad hoc reporting

Electronic signatures

Audit control


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About the Author

After 15 years of ERP consulting at large firms including PricewaterhouseCoopers and SchlumbergerSema,Eric Kimberling realized the need for an independent consulting firm that really understands both ERP and thebusiness benefits it can enable. He currently serves as the managing partner of Panorama ConsultingSolutions, the worlds leading independent ERP consultant.

Eric began his career as an ERP organizational change management consultant and eventually broadened hisbackground to include implementation project management and software selection. Erics background includesextensive ERP software selection, ERP organizational change, and ERP implementation project managementexperience.

Throughout his career, Eric has helped dozens of high-profile and global companies with their ERP initiatives,including Kodak, Samsonite, Coors, Duke Energy, and Lucent Technologies to name a few. In addition toextensive ERP experience, Eric has also helped clients with business process re-engineering, merger andacquisition integration, strategic planning, and Six Sigma. Eric holds an MBA from Daniels College of Businessat the University of Denver.

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