feb 19-jmm

CMB8035 – Business Technology ManagementTopic – ERP: Ensuring High-Integrity Transactions

February 19, 2008

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Agenda

Topic Time Leader

ERP Overview 6:00 – 6:45 Jim

Group Case Presentation – Cisco ERP 6:45 – 7:15 Group

Case Q&A / Discussion 7:15 – 7:45 Group

Break 7:45 – 8:00

Cisco ERP Wrap-up 8:00 – 8:15 Jim

ERP Final Thoughts 8:15 – 9:00 Jim

Benefits Realization

ERP Upgrades

ERP II

Next Case - LinkedIn 9:00 – 9:15 Jim

Group Planning Session 9:15 – 9:30 Groups


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Agenda

Topic Time Leader




Break 7:45 – 8:00




ERP Upgrades

ERP II




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Enterprise Resource Planning systems

ERP – Integrates business functions on a single software application

Manages “core business transactions” across Accounting, Finance, HR, Manufacturing, Logistics, etc.

Key vendors – SAP, Oracle, Lawson, Great Plains + industry-specific ERPs

Enables process-centric transition of the business

From post-War Industrial Organization model (“functional siloes”)

To post-Internet Networked Organization model (“end-to-end business process”)

Res

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From post-War

topost-Internet

Order-to-Cash process

Procure-to-Pay process

Etc.


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Enterprise Application Integration(Service-Oriented Architectures)

Enterprise Resource Planning(Finance / Supply Chain / HR)

E-BusinessB-to-C(CRM)

E-BusinessB-to-B

(Collaboration)

E-BusinessB-to-W(Portals)

Business Intelligence(Reporting / Querying / Dashboards)

Business Analytics(Real-time and Actionable Finding and Insights)

IT Infrastructure

ERP in the Tech. Stack

ERP


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ERP in the Business IT Arch.

ERP Finance& Accounting

Step 3 Step 4 Step 7 Step 9Step 1 Step 2 Step 5 Step 6 Step 8 Step 10 Step 11

Enterprise Application Integration Backbone Enterprise Application Integration Backbone

ERP HR ERP SCM

PartnerCollaboration

Domain-specificBI

CustomerCRM

Business Process Workflow

EmployeePortals

Domain-specificBI

Domain-specificBI

Third-Party

Research

Production

HR

Sales

Finance

Enterprise Business Analytics

Logistics

Enterprise IT InfrastructureEnterprise IT Infrastructure

Third-PartyThird-Party

ERP


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ERP Resource Requirements

ERP is a significant consumer of IT resources


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ERP Business Drivers

Why do companies adopt ERP? (from “ABC: An Intro to ERP”)

Creates a common business platform to:

Integrate financial info – “single version of the truth” – critical under SOX

Integrate customer order info – improves customer service

Standardize / speed-up business processes – improves cycle times and quality, increases productivity, leverages procurement, reduces h/c

Inventory reduction – by smoothing manufacturing processes and improving visibility into order fulfillment processes

Standardize HR information – Simplifies tracking of employees, the projects they’re working on, and communications about pay, benefits and services

Creates a common IT platform supporting:

A company-wide IT Architecture strategy – impacts IT cost-of-service by retiring non-standard systems

A shared IT support model – IT cost-of-service and resource management impacts

A common IT backbone support E-Business initiatives – supports credit, ATP, invoicing for web-based customers


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Optimizes end-to-end (vs. departmental) company activities

Drives a “process-centric” (vs. department-centric) view of business functions

“Order-to-Cash” vs. order management -> warehouse fulfillment -> shipping -> invoicing -> accounts receivable

Automatically routes the business documents through the end-to-end process

Drives efficiency and integrity of transactions

Drives commonality and coordination across departments

Drives commonality across systems landscape (potential for retirements)

Challenge – Departments must adopt an enterprise-wide perspective

Need to understand their impact on the end-to-end process

Need to be trained – change management is critical


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History: Traditional rationale for adoption of ERP


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Now: Today’s rationale for ERP – provide platform for ERP II

ERP II – Integration with differentiating processes / systems

Adds value to the ERP installation

Leverages high-integrity core business transactions

E-Business solutions

Customer Relationship Management

Suppy-Chain Management

Enterprise Portals

Product Lifecycle Management

RFID

Etc.


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Big Bang – replace all legacy systems with a single ERP

Challenging – few people have the end-to-end view

Risky – a lot of change to attempt at one time

Costly – can be very distracting from the core business

Franchise Approach – install on a BU basis and link company-common processes

Less challenging – scope is constrained to the BU undertaking the effort

Less risky – not attempting enterprise-wide change

Less costly – impact on other BUs is limited

Less beneficial – does nothing for the other BUs

Slam Dunk – Focus on fewer processes – i.e., Finance, HR, SCM

Can be done at a BU-wide or company-wide manner

Less challenging and costly – focus is on a single / few process(es)

Less risky – get up and running quickly on the “canned” ERP processes

Less beneficial – it’s end-to-end for the process at-hand, but not for interfacing processes – limits BPR opportunities

Implementing ERP


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Implementing ERP

A Key Issue – To Customize or Not to Customize

“Fit the Company to the Software ?”

“Fit the Software to the Company ?”

Fit the Company to the Software

Change company to adopt the ERP processes as-is

Can do so when Company processes have little impact on competitive position

Downside – requires lots of change management

Risk mitigation – involve users early-on in design activities and develop robust training approach

Fit the Software to the Company

Change the software to adopt the Company processes as-is

Must do so when Company processes facilitate competitive advantage

Downside – complicates the ERP migration path

Risk mitigation – use standard ERP software with “bolt-on” systems – enables easier migration of core ERP systems (see ERP II)


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ERP Lessons Learned

Training – most important item, usually overlooked / underbudgeted

Few users have the end-to-end view of company activities

Integration and Testing – ERP is be linked to other applications

E-Business, tax, bar code, RFID, treasury, commisions, etc. systems

Use real company data and involve users in testing activities

Customization – needed to support unique company processes

Avoid it as an “ERP Guiding Principle”

Make customization require executive approval

BI / BA – turning transactions into information

ERP cannot support heavy decision support / analytical requirements

Develop a complementary Decision Support / Data Warehouse program

Consultants – need for specialized expertise

Avoid dependency and develop a ramp-down plan


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ERP Lessons Learned

Retention – your project team members become very valuable

They are among the few with the end-to-end perspective

Preserve this expertise with retention bonuses

Develop a plan for backfilling their “day jobs”

Implementation Planning – ensuring continuity of the ERP program

Take a multi-generational ERP release approach

Roll the project team into a “Center of Excellence”

Supports team member retention by engaging them in the future of the business

Project ROI – plan to realize benefits incrementally over time

Benefits are realized as new processes become institutionalized

Post-ERP Depression – plan for a let-down

New processes must be learned and are intimidating

People just need a break after “running the marathon”


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Common Reasons for ERP Failure

Lack of buy-in to new company-wide processes

Failure to involve users in future-state process designs

Failure to properly train users

Political fights over ERP standard / ERP customized

Extensive customization consuming massive time and money

Lack of executive sponsorship

Poor expectation-setting with the user community

Failure to manage project scope

Lack of a multi-generational release perspective


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Agenda

Topic Time Leader




Break 7:45 – 8:00




ERP Upgrades

ERP II




February 19, 2008

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Agenda

Topic Time Leader




Break 7:45 – 8:00




ERP Upgrades

ERP II




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Cisco ERP Wrap-up

What are your thoughts?

What had gone right?

What had gone wrong?

What did they do right?

What did they do wrong?

Where had they been smart?

Where had they been lucky?

What should they do differently next time?

Should Solvik pay the $200k bonuses?


February 19, 2008

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Agenda

Topic Time Leader




Break 7:45 – 8:00




ERP Upgrades

ERP II




February 19, 2008

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ERP Benefits Realization

ERP alone does not drive Business Benefits

When basic ERP implementation was the final objective, few companies reported that they realized much benefit

When implementation was a foundation for future process and IT fine-tuning, 42% of reporting companies achieved the majority of expected benefits

Source: Accenture, Author’s analysis

From “ERP Shows Results”


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Benefits Capture requires sustained commitment

Need to allow for ERP stabilization, process stabilization and user learning curve

Build value-enhancing extensions (ERP II) when comfortable

Realizing Value from ERP

Source: Accenture, Author’s analysis


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Allow time for results to begin to show

Key – Manage stakeholder expectations of benefits timing

Prioritize benefits and create a plan

Formalize ways to measure and track benefits

Make B/R tracking a primary responsibility of the PMO

Manage ERP as an ongoing program

Take a multi-generational approach

Big payback comes from:

Integration with legacy and best-of-breed applications

Fine-tuning business processes to take advantage of ERP

Converting ERP transactions into enterprise knowledge that supports management information, enhanced analysis and decision-making

These should be specified in the ERP MGPP

Realizing ERP Value – key takeaways


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ERP Upgrades

ERP Upgrades are Common

SAP / Larsen Reports 2003 survey – 45% are considering upgrades

Key Reasons:

Organizational Push – Leverage ERP investments to achieve additional business value

Vendor Pull – Vendors regularly upgrade product capabilities (18-24 months), companies risk losing support for earlier versions

Upgrade Best Practices

Build business case on the new functionality offered

Focus on business benefits vs. cost savings

Treat upgrade like a new project

Underestimation of effort is common

Studies estimate average cost is 18% ─ 30% of original implementation cost

Leverage the original team

Taking advantage of original knowledge and experience is critical

From “Best Practices in ERP”


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ERP Upgrade Best Practices

Treat it as a business, vs. IT, project

Original project are generally IT-focused

Once IT issues from original project are fixed, ownership transfers to the business

Business owners need to assess the impact to operations

Be alert for hidden infrastructure costs

Additional IT infrastructure investments may be needed to leverage the new capabilities of the upgraded ERP

Minimize or eliminate customizations

Take the opportunity to “retire” customizations from the original project

Test, test, and test again

Deeply examine upgrade’s impact on established business processes

Don’t skimp on training

Make sure users are trained to perform new job functions

Make sure users are trained to use new functionality

On-going training and education are critical


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ERP II is the goal – drives greater value via Collaborative Commerce

Enable close collaboration between a company and its customers and partners

ERP II

Source: BearingPoint, Inc.


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Enterprise Application Integration(Service-Oriented Architectures)

Enterprise Resource Planning(Finance / Supply Chain / HR)

E-BusinessB-to-C(CRM)

E-BusinessB-to-B

(Collaboration)

E-BusinessB-to-W(Portals)

Business Intelligence(Reporting / Querying / Dashboards)

Business Analytics(Real-time and Actionable Finding and Insights)

IT Infrastructure

ERP II in the Tech. Stack

ERP

ERP II


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ERP II in the Business IT Arch.

ERP Finance& Accounting

Step 3 Step 4 Step 7 Step 9Step 1 Step 2 Step 5 Step 6 Step 8 Step 10 Step 11

Enterprise Application Integration Backbone Enterprise Application Integration Backbone

ERP HR ERP SCM

PartnerCollaboration

Domain-specificBI

CustomerCRM

Business Process Workflow

EmployeePortals

Domain-specificBI

Domain-specificBI

Third-Party

Research

Production

HR

Sales

Finance

Enterprise Business Analytics

Logistics

Enterprise IT InfrastructureEnterprise IT Infrastructure

Third-PartyThird-Party

ERP

ERP II


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ERP II

0% 20% 40% 60% 80% 100%

CRM

Mobile Capabilities

External Partners/Apps

Business Analytics

Procurement (Web

based)

Procurement (Non-web)

E-commerce

Internet/Intranet

Databases/Warehouses

Most Important Elements of ERP Software Integration Plans

ERP II – most common solutions

Source: Gartner


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Agenda

Topic Time Leader




Break 7:45 – 8:00




ERP II

ERP Upgrades




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LinkedIn

How do they accelerate their path-to-profitability?

Roll-out new features bundle for $15 monthly fee?

Change a key design feature and introduce a fee-based feature that allows members to contact each other without intermediaries?

Something else?

Need to decide now (Summer 2005)

Run out of cash in March 2006

Need to know by October 2005 if new VC funding will be needed (takes six months to raise new capital)

New business model needs to prove viable between now and October 2005

feb 19-jmm

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