5 Ways to Optimize an ERP Solution for Business Processes

No business looks forward to selecting an enterprise resource planning (ERP) solution—or implementing one, for that matter. In fact, most decisions about the acquisition of an ERP solution are the result of the obsolescence of a company’s existing systems, hardware, and software. In addition, most of the focus of ERP is primarily on selection and implementation, not the actual use and optimization of the system, which would explain why most businesses never achieve any significant return on investment from acquiring an ERP solution.

Other reasons for a business never fully benefiting from an ERP solution include:

• The ERP system being set up to reflect outdated or inefficient business processes;
• Failure to adequately normalize and map data from the legacy system to new system;
• Too much focus on IT and technical requirements and not enough on business processes;
• Inability or unwillingness to adapt to industry best practices;
• The Implementation strategy not being fully understood or well defined;
• Lack of buy-in or resistance to change; and
• Inadequate training and preparation.

ERP is not the end-all, be-all or “set it and forget it” solution. For a business to achieve all the promises of ERP, decision makers should be focused on optimization. Some of the questions business leaders should ask themselves are:

• Is our ERP solution providing the metrics and data we need?
• Are our data usable and reliable?
• Is our ERP solution helping our business realize cost savings?
• Is our ERP solution helping our business maximize efficiencies?
• Is our ERP solution helping our business innovate?
• Is our ERP solution helping our business improve our product or service?
• Is our ERP solution helping us do what we do better or smarter?

To optimize an ERP solution for business processes, an organization must:

1. Perform a full bottom-up assessment of the business and system functionality;
2. Assess business processes in relation to best practices and the ERP’s out-of-the-box processes;
3. Interview users and assess their working knowledge of the ERP system;
4. Identify root problems and take corrective action; and
5. Establish a baseline of today’s business needs and a roadmap to tomorrow’s vision.

Obviously, the successful selection and implementation of an ERP solution is critical, but the essential goal of ERP is optimization. Business requirements change, whether because of growth, regulations, mergers, or new products and services; therefore, businesses need to periodically optimize their ERP systems to maintain their relevance in an ever-changing and competitive market.

ERP and Big Data for SMBs

Let’s just call big data what it is: the pile. It doesn’t have quite the same ring to it as the cloud, but it’s just as nebulous and ill defined. Besides, big data is a pejorative. It sounds sinister and scary, especially with all the news about privacy, the National Security Administration, metadata, and so on. We already have big business, big oil, big tobacco, big pharma, big government, big brother, and the big bad wolf: Do we really need another bogeyman?

The pile is simply the vast quantity of unstructured data that businesses and organizations collect and store. The data sets collected could be anything from consumer demographics and buying behavior to manufacturing and business processes. This information accumulates and grows because of the reduced size and expense of memory storage and the proliferation of ubiquitous data-sensing devices.

For perspective, think about all the data passively collected by everyone with a smartphone. The smartphone has as microphone, camera, global positioning system, Internet capability, and other sensors. Just the pictures on a smartphone alone accumulate quickly and become unmanageable. The photo collection keeps growing, because it’s easier to buy another microSD card than wipe and reuse memory after selecting and editing photos.

The pile has huge potential, but the issue is that not enough benefit has been realized from the effort required to manage and process the complexity. The gains have been incremental, and progress has been slow. The ability to store data has outgrown our ability to manage it, so it piles up faster that we can process it.

The processing of this complexity is often compared to mining for gold. Likewise, it’s worth noting that it’s seldom a gold vein is ever struck. Most gold comes from the tedious drudgery of extracting disparate gold dust, flakes, and nuggets from enormous amounts of earth. In much the same way, data have to be dredged, sluiced, and panned; because not all data are pay dirt, larger companies are better equipped to handle the volume than small and medium-sized businesses. Therefore, enterprises are more likely to reap the benefits.

However, the difference between gold mining and data mining is that we can control the content of the material being mined. For example, if we like a photo we take, we usually share it on social media in a specific album with information about the occasion, location, and identity of the people in the image. Likewise, we should diligently identify, classify, and organize our business data at its initial compilation so that we can more easily normalize, compare, perform analysis, and derive correlations.

Invariably, enterprise resource planning (ERP) is data centric. The whole point of ERP is optimization—maximizing efficiency by enhancing processes and improving visibility. The only way this is realized is through the collection and dissemination of accurate, reliable, and timely data. So, the focus on big data as with all of ERP should be, “How can we do this better and smarter?” For the pile, the focus should be on curating and quality rather than quantity.

ERP Solutions for High-speed Infrastructures

“For everything that rises must converge” is a quote from The Phenomenon of Man by the French philosopher Pierre Teilhard de Chardin. Teilhard theorizes that we are constantly evolving and at some point will reach an ultimate level of complexity and consciousness, called the Omega Point.

Clearly, business and technology are converging as they advance. As business functions, facilities, suppliers, and personnel become increasingly distributed, enterprise-level tools and services are likewise extended to those dispersed users. As a result, infrastructure becomes more complex to deliver network performance required forreal-time data exchange, communication, and collaboration.

Perhaps the title is a misnomer and should probably be, High-Speed Infrastructure Solutions for ERP, because service-oriented architecture tools such as enterprise resource planning (ERP) require that data be exchanged constantly to participate in real-time business processes. In addition to exchanging data, network infrastructuremust now provide additional services such as security, voice, and video that use to be separate. Without a secure, flexible network that’s always available, enterprise business operations would grind to a halt.

According to the Open Network Foundation (ONF), “Traditional network architectures are ill-suited to meet the requirements of today’s enterprises, carriers, and end users.” Fortunately, the ONF, which consists of industry leaders like Google,Microsoft, and Verizon, is pushing software-defined networking (SDN) as a solution. SDN is a new concept in the development, deployment, and sustainment of networks. The idea is to establish standards and protocols for network virtualization that would increase agility and flexibility. The ONF describes SDN as follows:

Software-Defined Networking (SDN) is an emerging architecture that is dynamic, manageable, cost-effective, and adaptable, making it ideal for the high-bandwidth, dynamic nature of today’s applications. This architecture decouples the network control and forwarding functions enabling the network control to become directly programmable and the underlying infrastructure to be abstracted for applications and network services. The OpenFlow protocol is a foundational element for building SDN solutions. The SDN architecture is:

• Directly programmable. Network control is directly programmable because it is decoupled from forwarding functions.
• Agile. Abstracting control from forwarding lets administrators dynamically adjust network-wide traffic flow to meet changing needs.
• Centrally managed. Network intelligence is (logically) centralized in software-based SDN controllers that maintain a global view of the network, which appears to applications and policy engines as a single, logical switch.
• Programmatically configured. SDN lets network managers configure, manage, secure, and optimize network resources very quickly via dynamic, automated SDN programs, which they can write themselves because the programs do not depend on proprietary software.
• Open standards-based and vendor-neutral. When implemented through open standards, SDN simplifies network design and operation because instructions are provided by SDN controllers instead of multiple, vendor-specific devices and protocols.

—Open Networking Foundation, 2012

Like everything that has risen to the cloud, the network will meet it there. High-speed infrastructure, virtualization, and service-oriented enterprise systems like ERP are the complexity that facilitates increased awareness. By rapidly managing data, automating processes, performing predictive analysis, and collaborating, organizations can decisively respond to market forces and maybe even reach their own Omega Point.

Right-sizing ERP for SMBs, Part 2: I Know This Because Tyler Knows This

“You had to give it to him. He had a plan, and it started to make sense in a Tyler sort of way. No fear, no distractions. The ability to let that which does not matter truly slide.” —Fight Club

Regardless of the movie, this quotes stands on its own. It’s the reason for deciding to acquire an enterprise resource planning(ERP) solution. A small to medium-sized business (SMB) recognizes that innovation happens by execution, by focusing on its core and not getting distracted by what doesn’t matter.

Tyler Durden is a character in the movie. He’s an innovator and runs a small business that quickly turns into a thriving organization. Tyler is able to remain focused on execution while accommodating the different functional needs of his growing organization because he has a system that is customizable, flexible, and scalable.

Just Run With It

During one of the dialogues in the movie, Tyler Durden tells the main character, Jack, “People do it every day, they talk to themselves . . . they see themselves as they’d like to be, they don’t have the courage you have, to just run with it.” Unfortunately, this statement holds true for many SMBs. The truth is, there are no longer barriers to such tools that once only larger organizations could afford. With cloud ERP, the only barrier is the fear of tackling the daunting task of selection and implementation.

Of course, the main reason for implementing cloud ERP is to maximize efficiency and visibility. However, SMBs that have the courage to just run with it aren’t implementing cloud ERP opposed to on-premises ERP just because it’s the more economical choice. They’re implementing cloud ERP because it’s part of an overall strategy. They want enterprise-level services across the board—e-mail, storage, communication, and collaboration. In addition, SMBs prefer the cloud’s rapid delivery of software updates, releases, and patches, so they can have increased functionality, ease of use, reliability, and security sooner.

I Say Never Be Complete...

Tyler Durden says, “I say never be complete, I say stop being perfect, I say let’s evolve, let the chips fall where they may.” We’ve all been raised to believe that ERP was just for manufacturing, but it’s not, and we’re slowly learning that. Services see themselves as enterprises that need enterprise solutions. Many cloud ERP providers recognize this and offer modules of software for different functional areas. So SMBs don’t have to buy a complete, integrated suite of ERP software if it isn’t needed. In addition, because many services operate on a project basis, the cloud ERP’s scalability allows SMBs to increase or decrease end users as needs change.

The Things You Own End Up Owning You

“The things you own end up owning you,” notes Tyler Durden. Many SMBs get this concept. Besides the required front-end investment of on-premises ERP, SMBs don’t want to be bound by constraints like location, facilities, staff, and infrastructure. The truly innovative SMBs aren’t concerned with being “big” or “growing”: They know that ego is a big expense. They’d rather be agile and profitable, focusing resources on innovation and productivity instead of maintenance.

Obviously, when broken down into its basic elements, the decision to implement a cloud ERP solution makes sense for most SMBs. To execute their vision, SMBs have to just run with it. No fear, no distractions, letting that which does not matter truly slide.

Right-sizing ERP for SMBs, Part 1: On-premises or Cloud?

While watching the National Football League playoffs recently, a new car commercial caught my attention. Footage of various period-specific garages played while the narrator read off a list of successful innovators, each followed by the words “ . . . started in a garage.” As I associated the names with their corresponding innovations, it occurred to me that their success as innovators weren’t the result of ideas but execution.

Likewise, the level of success a small to mid-sized business (SMB) achieves depends on its ability to execute—that is, its ability to gain a competitive advantage by means of product improvement, efficient processes, and increased visibility. In essence, it’s this insight into achieving success though execution that drives SMB adoption of enterprise resource planning (ERP) solutions.

The Inevitable

Like a garage that accumulates various tools, SMBs typically acquire various software products as needed. As the business grows, it becomes increasingly difficult to integrate and access data, reconcile financials, track inventory, fill orders, and satisfy customers. At first, decision makers may try to solve the various issues as they arise by throwing more people at the problem, but sooner or later, it becomes evident that end users are only as good as their tools. The fact is, the SMB’s entire toolbox of QuickBooks and assorted spreadsheets must be replaced by an ERP solution containing the right tools for the job.

The Decision

The decision to acquire an ERP solution should be seen as an opportunity to streamline all processes. To do this, the SMB’s declaration, “We can do this better/smarter,” has to become a question: “How can we do this better/smarter?” With that in mind, a preliminary assessment of the SMB’s core products and services must be undertaken. This assessment establishes functional and scalability requirements. The SMB’s functional and scalability needs determine its ERP options in terms of feasibility and affordability. From there, ERP product selection is more or less a question of where, on-premises ERP, or cloud ERP.

On-Premise or Cloud?

On-premises systems have traditionally been used by larger operations because of the substantial initial capital investment. Also, because of economies of scale, larger companies prefer on-premises ERP because their total cost of ownership is usually less over the long term compared with a fee-based service—the same reasons SMBs have been shut out of ERP. The expense of procuring new infrastructure or employing IT staff for on-premises ERP is simply cost prohibitive.

Cloud ERP removes the barrier of access to technology that once only larger companies could afford. Cloud ERP is ERP software that is hosted in the cloud—in other words, Software as a Service. By centralizing IT infrastructure and staff, providers can pool resources and offer ERP services to subscribers for a low monthly or annual fee.

It’s worth noting the security concerns with cloud ERP compared with on-premises ERP. Business data is intrinsically sensitive. It’s understandable that most businesses prefer their data to be closely held, but the risk of losing control of that data has been largely mitigated. Most SMBs already outsource part of their business operations and are used to the idea.

Potential for Innovation

Undoubtedly, SMBs’ newfound ability to execute with affordable cloud ERP will drive innovation. As more businesses implement ERP solutions and processes are optimized, success will not be determined by how well the organization executes but how soon it innovates.