Why Some ERP Strategies are Better than Others - IBM

Why Some ERP Strategies are Better than Others Nick Castellina, Research Analyst at the Aberdeen Group, spends a lot of his time thinking about ERP. In his role at Aberdeen, Castellina studies how ERP technologies are employed across a wide range of companies and industries and reports back on the latest trends. He recently authored a report, “A Guide for a Successful ERP Strategy in the Midmarket,” that examined the common characteristics or behavior that is inherent in companies successfully using ERP technology. The report was based on an extensive survey of midmarket companies (defined as employing between 100 and 1,000 employees) and illustrated the differences between what he called the “best in class” organizations and the “industry laggards.” We spoke with Castellina about what distinguishes the ERP successes from the failures and where ERP technology is headed next. Following are highlights from our interview. Forward View: Your report “A Guide for a Successful ERP Strategy in the Midmarket” takes a look at what you call “best in class” organizations. What is the common denominator that makes these companies successful?

“It’s about ensuring that you are providing your employees with the functionality they need to really support the business, and also ensuring that your employees are able to use ERP effectively through training.”

Nick Castellina: Well, if you don’t know, the way Aberdeen defines our Best in Class

they using it for software customization, system implementation

is we take every single one of our survey responses and we rate

configuration, system integration, ongoing support?

them on a set of four different capabilities. In the case of this report specifically, our best in class organizations are doing things that are

What we like to see is that they’re more likely to be standardizing

indicative of a successful ERP implementation. They are using ERP

processes across their organization. You know, when you

to actually drive performance improvements in their organizations.

standardize processes, you’re ensuring that everybody in the organization is using best practices, and then providing a united

There are a lot of different things (that the best in class are doing)

front to customers. They’re streamlining processes. They’re doing

and that’s what all my reports are about. In this report, we talk a

this through ERP. They’re identifying places where they could be

lot about third-party support for ERP implementations. Do these

more efficient and cutting costs that way. They’re more likely to be

companies have third-party support? How are they using it? Are

using ERP to link different parts of the organization and form cross-

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functional continuous improvement teams.

that the ERP strategy is taking hold. Sometimes it’s that the system is not a good fit for them. Again, like I said, it’s the lack of this functionality.

So it’s those types of things and, of course, using the technology

There could be multiple obstacles, such as it’s not a solution that fits

to provide visibility to decision-makers. These are all things that the

their industry and it’s not a solution that fits their company size or

best in class are doing at a more consistent rate than all others.

their processes.

Forward View:

They really have to be able to commit to making the ERP solution a

What do you think are the most common reasons why some ERP

success, because without that commitment, of course, anything is

strategies fail?

going to fail. It’s the project plan, getting it up and running on a concrete timeline. Some organizations have a three-year-long implementation

Nick Castellina:

process, and that’s just not going to be effective. You need to get it up

Well, I think number one would be not enough buy-in from the actual

and running as quickly and efficiently as possible to ensure that you

employees that are using it, and then they’re not adopting it as well, and

reach that return on investment.

they’re not being trained as well. They’re not integrating it into their daily lives. A lot of my research has found that you really have to commit to

Forward View:

employee training on an ongoing basis to continue to keep them in the

How do you recommend midsize companies go about designing and

loop on how to actually get the most out of ERP.

implementing ERP strategy?

Beyond employee buy-in, another reason would be that the ERP

Nick Castellina:

system that was selected doesn’t have sufficient functionality to

Well, there’s a lot of research around that talks about the top things to

actually support the business, and it doesn’t really give employees a

look for when you’re selecting an ERP. And best in class organizations

reason to use it and it doesn’t support the business fully. One of the

that are successful with their ERP implementations aren’t basing them

ways companies can avoid this is by selecting an ERP that fits their

solely on cost – which might surprise you. There are two things that

organization. There are a lot of organizations using third-party services

always come in above that, and we’ve mentioned functionality already

to help identify the most important selection criteria for their ERP and

— making sure that the ERP system actually can effectively support

ensure that they’re getting the most useful functionality at the best price.

your business processes, your products and your people.

It’s about ensuring that you are providing your employees with the

Also, it’s about ease of use. If an employee can’t use the ERP, they’re

functionality they need to really support the business, and also ensuring

not going to make the most out of its functionality. And then, of course,

that your employees are able to use ERP effectively through training.

it’s also about the ability to integrate with some legacy systems, other technologies such as business intelligence, that are hugely essential

Forward View:

when you’re selecting an ERP solution.

In your report, you talk about companies that have already implemented ERP but are not deriving full value from it. Can you talk a little bit about

So really, as you’re looking for a solution, you have to ensure that the

the obstacles that these companies face? Is it the lack of buy in, is it

system is specific to your organization. Whether it’s industry-specific or

insufficient functionality, or is it something deeper?

process-specific, you have to have that functionality.

Nick Castellina:

Forward View:

It’s both of those things, and it’s also the lack of support from their ERP

If we look ahead a bit, what changes do you suspect we’ll see in terms of

vendors and the lack of support from their executives to really ensure

ERP in the midmarket?


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Nick Castellina: I write a lot of things about the impact of social, mobile and cloud technology on ERP strategies. I’d say it’s those types of things. You’re going to see more and more social collaboration-type functionality integrated into ERP. What I’m talking about here is anything that’s similar to Twitter or Facebook functionality, but also blogs, wikis, forums and enhanced collaboration capabilities within ERP. Of course, we’re seeing more and more people adopting ERP through mobile devices. And then, the third would be cloud, of course. I do a yearly report on Cloud and SaaS ERP. And what we’ve been finding over the last five years, when we ask [organizations] what deployment options would you be willing to consider for your ERP solution, is a year-over-year increase in the percentage of people that would be willing to consider a cloud solution, while at the same time we’re seeing a year-over-year decrease in the number of people that would be willing, or organizations that would be willing, to consider a traditional on-premise solution. So you’re going to see more cloud-hosted and SaaS ERP solutions being deployed, especially in smaller organizations that don’t have the internal IT resources to support an on-premise solution.

Learn more by going to: ibm.com/forwardview


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