IT Should Move Up the ERP Value Chain

A key challenge in my role as an IT ERP Director was to maximize business value with a shrinking budget.  It was quite an education for a person with the majority of his experience in Tier I ERP Consulting.  There are many options competing against IT organizations in providing ERP services (SaaS, Cloud, Off-shore and Near-Shore support models).  Two key battlegrounds are ERP software development for customizations and ERP support.

Show me an IT organization whose key competitive advantage is that they are internal and I will show you a shrinking IT department!  There must be a major shift in IT’s value proposition for ERP support.  In the next sections we will discuss some of the shifts IT ERP shops need to make to stay competitive and relevant.

IT ERP Support Can Be Done Cheaper

For the purpose of this blog discussion let’s broadly assume that there are three tiers of ERP support.

ERP System Support Model

Levels of ERP Support

There has been much discussion regarding outsourcing IT support along with noted advantages and disadvantages.  I will not join the debate on one side or the other but I do consider myself a realist.  Generally speaking, you are looking between 30% to 50% reduction in costs (depending on the study) which just can’t be ignored.  Instead of fighting the change I prefer to control the change in such a manner as to enable my ERP IT support team to generate greater value for our customers. 

Also, consider that there are just some activities you should not outsource.  Referring to above model I have been very cautious with outsourcing Tier I support.  Nothing is more reassuring to a business user with a critical issue than to see their IT support partner face to face and have a real-time discussion.  Cost cannot be the only consideration – just like Dell learned the hard way.    If the activity is not strategic and highly valued by your customer then look for a cheap and competent (not world-class) option that will free your IT resources for greater value-add activities.

Trend:  Competitive Advantage for ERP is Configuration over Customization

With the initial release of ERP, one of the key “game changers” was the ability of business users to access data and generate reports without direct IT involvement.  This empowerment of the business user had a significant impact on business agility.  Today, we continue to see ERP vendors focus on providing business-friendly tools for reporting and analysis.

Yet, I can see a new evolution brewing in the ERP industry what I like to call “Adaptive ERP” where business users will be able to perform on-demand configurations to meet business changes real-time.  This would go way beyond simple user preference configurations.  Adaptive ERP would enable business users to configure, simulate, test, and implement business technology changes with limited traditional IT services (ex. software development).    Today, some Tier I ERP vendors provide some limited capabilities of Configurable ERP but these capabilities are spread across multiple software products and OS platforms.  It’s a great topic for discussion (and future blog) but not what I would consider a sustainable, viable solution for today. 

Key Evolutions of ERP

Major ERP Development Milestones

 

Advice for ERP IT Departments – Focus on Moving up the Value Chain

In my previous experience, I had an opportunity to work for a Tier I ERP vendor developing new service offerings and consulting practices.  A key lesson I learned the hard way was when a service offering is facing significant commodity pressures either you can (a) reduce the cost or (b) move up the value chain where you can generate a strategic competitive advantage. 

Service Categories for ERP Support

ERP Service Categories

In order to move up the value chain not only will include training but more importantly a fundamental change in what IT considers their strategic business value. Remember that a key value proposition for ERP is to reduce software development.  Therefore, software development should not be the key IT value proposition for the IT ERP team.  Many perceptions and expectations must be carefully managed through this organizational transition.  The goal is to evolve IT software developers into IT business technology advisors.  One only needs to look at the ERP professional services industry to observe what the market will bear for software development roles versus technology advisory roles to confirm the above recommendation.  With this move, internal IT organizations will be able to support more advisory and consultative roles once reserved for external consulting organizations.  Just think of the potential cost savings and knowledge retention to your business.

Summary

Is this the end for internal IT support for ERP?  Hardly! However, more will be asked of internal ERP support teams with limited resources.  This may result in a more challenging and stressful work environment.  What use to be considered valuable has become generally accepted and expected from business users.   To remain a strategic partner, IT ERP support teams should look for opportunities to free up their staff to focus higher up the value chain.       

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About Brett Beaubouef
For the past twenty years Brett has helped customers select, implement, and manage ERP solutions across five industries (manufacturing, professional services, staffing, retail, and telecommunications). Business process knowledge and experience includes human resources, benefits, compensation, recruiting, time & attendance, finance, resource scheduling, contract administration, services procurement, sales, billings, project accounting, and project/portfolio management. Software selection experience includes evaluation of both ERP software and proposed implementation services. Brett has recently authored a book on leading ERP/COTS implementation strategies.

7 Responses to IT Should Move Up the ERP Value Chain

  1. knowiterp says:

    I really appreciate a wonderful effort to provide wide and very comprehensive information on complete ERP Software from Evolution of ERP upto ERP value chain. want to read more on ERP.

  2. Very well written post, my time spend to read this post is worth as I got very good knowledge about ERP, I have read many blogs and articles but never got this type of detailed information about ERP.

  3. Pingback: IT Should Move Up the ERP Value Chain | Pardaan.com

  4. Cactus Kid says:

    Good Article, My primary role over the years has been in engineering, however the last 20 plus years in manufacturing enviroments has put me into ERP situations as well.

    I would like to find products that “Adaptive ERP” is a central driving force for. We are a company filled with people that are independant thinkers that have built a company based on not following the rules. So we need a tool that they can easily form around themselves rather than try and train people to use a process they don’t want. Since we are in 2012 and not 1992 I think it can be done, where do I go for information?

  5. Pingback: The Next Evolution of ERP: Adaptive ERP « ERP the Right Way!

  6. Pingback: Building a Business-Aware Cloud Solution « ERP the Right Way!

  7. Pingback: SaaS ERP is not a push button solution | ERP the Right Way!

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