InformationWeek
Defining The Business Value Of Technology
May 24, 1999
 Print this story |
continued...page 4 of 4
| Related links: |
|
|
| And from our sister publications: |
|
|
Finally, the company could see for the first time which suppliers it was dealing with most frequently across the entire company, and was thus better able to negotiate bulk discounts and sourcing deals. None of these benefits are a surprise; the company targeted these specific areas for improvement as part of its initial ROI calculations. But they took a long time to pay off.
Few companies can expect quick payback on their enterprise systems. Many companies realize that ERP-type applications are merely the "road"; it's what they drive over that road that determines the benefit. "There's a general understanding today that ERP is the investment you have to make just to get into the game," says Josh Greenbaum, a principal analyst with Enterprise Applications Consulting. "First you have to get ERP installed, and then you can take a look around and see where major ROI can be achieved." It's the so-called second-wave applications, such as business intelligence, supply-chain management, and online procurement, that can leverage the ERP backbone and offer the highest return, says Greenbaum.
Implementing ERP alone is no longer considered a strategic advantage; it's the second-wave tools that will fully leverage ERP systems and let users get the most out of their investments. At least, that's the newest selling point for ERP vendors, which have started pitching users on the idea that "You can't get there without starting here." As a result, more companies are factoring such calculations into their ERP-driven business cases from the beginning.
Toro's Hansen agrees that ERP is the first of many steps. He says SAP gives Toro a substantially better platform from which to conduct E-business activities.
By extending SAP onto the Internet, Toro plans to share inventory information with business partners around-the-clock, so they can see in real time which products are available and which have been committed to other partners. "From a strategic position, we have spent the last three years on nonglorious plumbing," Hansen says. "But that's allowed us to set the table for new supply-chain and E-business efficiencies that will yield substantial benefits for this company."
Tim Graumann, CIO of E-Tek Dynamics Inc., a $107 million maker of components for optical networks in San Jose, Calif., also sees the value in these second-wave deployments. "You can't expect to see much immediate benefit out of ERP," he says. "It's after you put third-party applications on top of the ERP building blocks that you start mining ROI out of the system."
The company spent less than $1 million to implement Oracle's suite of applications a year ago. It's now building its own set of business-intelligence applications that drill down directly into the ERP system and pull out highly relevant, high-priority information--such as same-day sales per region--that can be delivered directly to the desktops of managers. E-Tek is also looking at supply-chain applications from i2 Technologies Inc. to reduce its cycle times and streamline its procurement of raw materials.
"We can't do any of this without ERP," Graumann says. "It's the key to our business growth."
That may not be the type of hard ROI analysis CEOs and financial managers like to see. But for many companies approaching the year 2000, it's enough to hang a business case on.
return to page 1, 2, 3
Back to This Week's Issue
Send Us Your Feedback
Top of the Page
Featured Microsite
