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October 12, 1998

ERP: The Corporate Ecosystem

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Illustration by Matsu

Decision-Maker
ERP affects other, more mundane technology decisions. A customer often will choose an operating system or a server based on its ability to power a company's application package. R/3 is driving Sacramento Municipal's server and network architecture, Pooler says.

Conversely, ERP systems can also narrow a company's product choices, says Sensormatic CIO Dennis Torrell. For example, Baan didn't address Sensormatic's needs for lease financing and export-compliance software. But for the company to consider third-party vendors for those products, the vendors had to be Baan partners.

Even more critically, ERP can alter decisions about who a company chooses as a partner. Some companies will require--or least favor--suppliers that use the same ERP technology. "We would look for the most seamless way to transfer data," says Al Willard, Sensormatic's VP of ERP. "If a supplier can do things more smoothly by running on a Baan system, we would give it the edge."

Comfort Factor
The influence of ERP as a corporate ecosystem can be measured by how readily IT and business executives subvert their own business processes to those dictated by the application. Elizabethtown Water adopted SAP's best practices--the methods that guide how it handles ordering, financial reporting, payroll, and other business tasks--and requires its acquisitions to adopt them as well.

In particular, the utility uses one of SAP's project management methods, particularly important to the utility in managing its 200 simultaneous construction projects, ranging from fire hydrant repair to a $100 million water treatment plant. SAP's process provides specific steps for each kind of project, then enters the projects as assets in the general ledger and automatically starts to depreciate them.

Helping to keep ERP systems entrenched at many companies are negative factors: the twin demons of high cost and long implementation times. Once companies commit to a package, they don't want to go through the learning and implementation curve again. So they're locked in for years--or at least until their memories fade. "It becomes very difficult to leave," says Doll, Elizabethtown Water's controller. "You really become a slave to it."

Even companies that have eagerly committed to an ERP platform have problems as they try to grow their systems and integrate other application components. The interconnections between disparate application modules--so useful for automating business processes--is also a trouble spot, says Dan Wark, CIO of Pericom Semiconductor, a fabless semiconductor vendor that uses the J.D. Edwards platform. "These things are so integrated that a change in one module could have multiple ramifications in other areas," he says.

Adopting ERP as a businesswide platform isn't easy. But the companies that have done so say it's worth the effort. Enterprise applications afford a single entry point for data access across a corporation. And while an ERP system might limit the technology choices a company makes, it can also broaden its business horizons. ERP systems are helping companies make better and faster business decisions--and that's an environment in which most managers can live and prosper.