ERP is Only Part of a Business Solution
November 16, 2010 29 Comments
Back in the 80s Enterprise Resource Planning (ERP) was deemed the panacea for business pains caused by operational inefficiencies and disjointed applications. Then came the realization that ERP was not the final solution but just one piece of the puzzle. In addition we learned that change was not just a software issue, that implementation is not the same as installation, and that the cost of ERP is not a one-time expense. Above all we learned that ERP is only part of a business solution.
Business Solution Defined
I like to view a business solution as three components:
- Processes (business processes)
- Technology (software & technical infrastructure)
What is the most important component of a business solution?
Now here is something interesting to consider, “Do we need all three components to have a solution for business?” Let me rephrase it this way “Do we need software in order to conduct business?” I am persuaded to say that the answer is no. Business was being conducted before the invention of the computer. However, I am quite aware that not having software a part of your business is impractical given today’s competitive marketplace. I do want to demonstrate that software only supports and therefore can only have a certain level of benefit to a business. ERP software does not have the capability to make key business decisions. It is key business decisions that drive business results. Business software like ERP can provide information and data to assist people in making business key decisions. Seen in this light we can conclude that people are the most important component of a business solution and people have the greatest impact on the success of a business solution. Funny how it is interesting to note that the majority of ERP implementations mostly focus on products and technology. Let’s dig a little deeper and spend some time speaking about each business solution component.
Business Solution Component: People
People are the single most important factor that will determine whether a business solution is a success or a failure. People can also be the most challenging component to deal with in a business solution. Let’s be honest, you can hardcode software to do exactly what you want that product to perform, people are a different story. The upside to keep in mind is that people have the potential of generating the greatest value in the context of a business solution.
Business Solution Component: Business Processes
What is a business process? I have seen many definitions but I like the definition provided by Howard Smith and Peter Fingar in their book Business Process Management – The Third Wave (Meghan-Kiffer Press – 2002).
A business process is the complete and dynamically coordinated set of collaborated and transactional activities that deliver value to customers.
Let us look at the some of the characteristics of business processes that is highlighted in the above definition:
- Complete: there is a beginning and end to a business process.
- Dynamic: responding to changing customer demands and market conditions.
- Result-Oriented: value is generated to your external customer.
These basic characteristics must be addressed during business solution implementations in terms of needs assessment, requirements management, and validation (testing) of a business solution. We should not be surprised when business requirements change during an ERP implementation and we should plan for it accordingly.
Business Solution Component: Software and Technology
Software and technology encompasses the technical infrastructure, networking resources, and ERP software that will support the business solution. With ERP software there are inherent advantages and disadvantages as listed below.
An effective ERP implementation strategy will maximize the inherent advantages of ERP while addressing or minimizing the inherent challenges.
ERP is only one component of a holistic business solution. ERP can be a great platform for addressing business challenges as long as the technology is correctly applied. At the end of the day it is People, Business Processes, and Technology working together in unison to generate business results. Only when these components are judiciously utilized are business results maximized.