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11/24/2004
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ERP Rest in Peace

Commoditization of ERP transitions focus to performance management.

VentanaView™

The majority of enterprises today have established an operations baseline for human resources, finance, and other core enterprise resource applications with their ERP systems from providers like Lawson, Oracle, Peoplesoft, SAP, and others. Unfortunately, many ERP providers and implementation consultants believe a continuous path of upgrading these systems will result in more efficiency and performance improvement. Ventana Research recommends that you examine an alternative approach, focused on effectiveness and the imperative to improve financial and workforce performance through the decoupling of your ERP systems. These operational and efficient ERP systems should rest in peace (RIP) while your focus and critical investments center around compliance, profitability, and innovation imperatives that directly link to performance management.

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Since Y2K, organizations have achieved a state of stability and efficiency in their financial, HR, and other resource-specific applications that comprise ERP systems. Unfortunately, many organizations are being enticed to upgrade their underlying ERP systems in order to adopt new compliance, process, and performance-centric applications. Purchasing or upgrading your ERP systems to gain access to new applications involves significant risks including cost, impact, and resources.

ERP systems have reached a stable level of competency and functionality, as provided by vendors such as Lawson, Oracle, PeopleSoft, SAP, SSA, and others. The maturity of the process and systems for ERP has stabilized, and now the market is transforming to the commoditization of these systems. This has resulted in ERP providers focusing on maintaining and improving their large maintenance revenue streams and acquisitions in order to consolidate and reduce costs of supporting applications. This is evident in recent SSA acquisitions and the last year of battles with Oracle and their bid to acquire PeopleSoft.

While your ERP suppliers try to entice you to purchase new systems or upgrade existing ones through their new applications, application platform, performance management, and BI solutions, these tactics must be examined closely to ensure you are not required to modify and upgrade existing systems that are operational and do not need to be changed to meet new business requirements. The marketing of new capabilities for further efficiency improvements in ERP systems should be examined and weighed against alternative effectiveness and performance-centric approaches.

The performance-centric mindset, along with financial and workforce performance approaches, bring new opportunities to transition your organization into driving alignment and accountability. This performance management approach can help you decide where improvement-to-processes need to occur in the context of critical imperatives like compliance, profitability, and other business improvement initiatives. Advancements in financial and workforce performance management suites, available as either enterprise software suites or hosted services, are helping organizations gain a new competitive foothold on business.

Assessment

Organizations that do not define business imperatives for compliance, profitability, performance, revenue,, and cost management in order to drive people, processes, and systems together for improving financial and operational performance are at a competitive disadvantage. The commoditization of ERP and the attempts of these providers to gain your trust that upgrading and purchasing new systems will improve performance and meet these imperatives should be closely scrutinized for alternative approaches. Your financial and human capital resources are precious. Continuing an inward operational efficiency path could be detrimental to your customer and market performance — which requires a performance-centric model for your business.

Mark Smith is CEO & Senior Vice President of Research at Ventana Research (www.ventanaresearch.com), a research and advisory services firm.

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