ERP SaaS 101: Services Trump Software

How many ERP SaaS offerings are in the market today?  The number depends on who you ask but it is a fair statement to say that all Tier I and the majority of Tier II ERP vendors have a SaaS offering.  A majority of the market and many ERP analysts still take an on-premise approach to evaluating ERP SaaS offerings.  Services, not software, will have the greatest impact on ERP SaaS success.  The purpose of this article is to examine the impact services will have in a SaaS model.

Installation Is Not an Implementation

Ah, the battle cry of ERP SaaS “You can be up and running in a matter of minutes!”  Now, it is a fair statement you will have a running system but it is a far cry from a configured business solution.  Consider the key activities required for this transformation:

SaaS Implementation Services

SaaS Technical Services

Even though ERP software and infrastructure can be provided in an accelerated fashion, the business value realization of an ERP SaaS model can only be achieved through the effective delivery of technology services.   SaaS ERP is not a push-button solution.  I submit that technology services should have an equal or greater emphasis on ERP SaaS selection than ERP SaaS software. 

Great Services Can Cover a Multitude of Software Gaps

ERP SaaS software installation is a very small step in ERP SaaS experience.  Consider the following illustration:

ERP SaaS Solution Lifecycle

ERP SaaS Lifecycle

Following are a few points I would like to elaborate.  First, installed ERP software does not provide any business value own its own.  Business value is only realized when software is configured and implemented in a production environment.   Second, let’s not forget that an ERP SaaS model is outsourcing technical services to the ERP vendor.   Third, ERP SaaS software release cycles will be at least three times faster than traditional on-premise ERP software.  That means that a SaaS software model will address gaps in a shorter term.  As more customers look at SaaS ERP I believe that services not software will be the emerging competitive differentiator. 

Majority of ERP SaaS Offerings are Non-Competitive Differentiators

For purposes of this discussion please allow me to broadly categorize business processes into three areas:

ERP supporting business models

ERP supporting key business process groups

There are some key concepts that should factor in the ERP SaaS selection process.  First, competitive advantage only comes from revenue-generating business processes.  For example, would having the best of breed solution for SOX compliance enable you to gain market share?  Also consider if you would highlight your Payroll system as a competitive advantage to your customers. A best practice is not a competitive practice.  Organizations, just like individuals, cannot be the best in everything but it makes sense to be the best in your revenue generating activities.  A best-of-breed SaaS solution is of little value if the ERP SaaS provider does not provide competent technical services for reliable integration across multiple environments.

Summary

Too often we focus on the cart before the horse.  I believe that we are experiencing this misalignment with the emerging ERP SaaS market.  The best ERP software is of little value if you cannot implement a viable, manageable solution.  Technical services provided by the ERP vendor’s SaaS operations will have the greatest, long-term impact for business success.  Pick an ERP vendor that will focus on improving both their ERP software and SaaS technical services.

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ERP Project 101: Deployment vs Requirements Gathering

Customers, System implementers and ERP vendors are always looking for ways to accelerate ERP implementations.  One popular approach is to take a phased deployment approach based upon criteria such as location, ERP module or feature set.   Requirements are gathered, validated, and tested based upon a limited scope.  Unfortunately, many ERP projects utilizing this approach result in failure given requirements conflict and misaligned expectations.  In the following blog posting we will discuss how to minimize challenges associated with phased ERP deployments.

Reality Check!  There will be ERP requirements conflicts

A reality with any cross-functional or multi-site deployment is that there will be requirement conflicts as part of an ERP implementation.  In our focus for rapid results and simplifying ERP deployments we forget the fundamental result – an ERP implementation is the implementation of a business solution.  Consider the following illustration:

ERP REquirements Conflict

Example of Requirements Conflict for ERP

Let’s assume that we want to accelerate an ERP HR implementation by deploying ERP solution by region.   To further streamline our efforts the project only gather requirements from the North America HR stakeholders (Phase I). The above approach appears to work for the initial ERP deployment; however; these short-sighted decisions can have a negative impact to future deployments.   Remember that correcting problems and limitations are more costly once an ERP system is deployed in a production environment. 

With the above said, I appreciate that ERP vendors are evolving their ERP software to provide additional flexibility in configurations to allow variances based upon industry, line of business, country and even user preferences.  However, we should understand that all ERP solutions leverage a common data model with specific data dependencies.  We can address this constraint in one of two methods.  Either we take a risky approach of gathering requirements in silos hoping that we clearly define all ERP configuration dependencies or take the practical approach of gathering requirements across all HR operational areas. In the next section we discuss several practical steps to ensure requirements conflicts are minimize.

Practical Steps to Minimize ERP Requirements Conflict

Let’s brief speak to some common-sense approaches to deal with the reality of ERP requirements conflicts.

How to address ERP requirements conflicts

Practical approaches to address requirements conflicts

The first step of requirements management is to perform a stakeholder analysis to identify the appropriate business owners and subject matter experts in include in requirements gathering.  It is important to note that we always implement to a business process not simply to the software (ex. module, feature). Utilize solution modeling to analyze business requirements from multiple perspectives.  Too often I observe ERP projects spend more time on defining exceptions to standard business scenarios versus defining a common requirements set that can be leverage to isolate and manage unique requirement criteria.  Consider the following illustration:

 

Logical Business Requirements Model

Logical progression of gathering ERP requirements

There should be a logical progression of business requirements from the global level to the specific user level.  Isolate requirement exceptions to effectively quantify frequency, impact, and cost.  Utilizing this approach will provide the customer with greater insight for an informed decision.   Finally, let’s not forget the Lean principle that states process efficiency is gained when variability (exceptions) is minimized.

Summary & Conclusion

The ERP industry is hyper-competitive where every ERP vendor and System Implementer is looking for an edge to accelerate and reduce the costs associated with ERP implementations.  This desire is intensified by the entrance of ERP SaaS offerings with lower entry costs for a growing target market.  The challenge is to identify competent options for accelerating ERP implementations without putting long-term customer success at significant risk.  Requirements management (gathering, validating, and testing) is the critical discipline that impacts all downstream implementation activities.  Taking a technology-oriented approach results in (a) unclear requirements, (b) requirements conflicts, and (c) additional rework to support future deployments.  Making the right investments in requirements management will be the best chance to accelerate downstream activities including deployments.                    

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